The downgrade is due to the ongoing destocking in the chemicals sector, which has led to a significantly weaker Scope-adjusted EBITDA in 2023 compared to LANXESS' guidance.

Following the recent affirmation of the BBB+ and the change of outlook to Negative on the issuer rating, Scope has updated its analytical report on Lanxess AG.

The Outlook change is driven by LANXESS reducing its forecasted FY 2023 EBITDA to EUR 600m-650m from previous estimate of EUR 900m due to slower-than-expected demand recovery.

The rating continues to reflect the company’s strong position in medium-sized chemicals markets with considerable barriers to entry and a conservative financial policy.

LANXESS will transfer its High Performance Materials line into a joint venture, receiving a payment of least EUR 1.1bn and acquiring DSM’s Engineering Materials with Advent International. LANXESS will use the funds for reducing debt and share buybacks.

Despite the relatively large size of the transaction, Scope expects key credit metrics to remain in line with its requirements for a BBB+/Stable issuer rating.

The rating still reflects the company’s strong position in medium-sized markets with considerable barriers to entry, together with its conservative financial policy.

LANXESS published its financial results for FY 2020. While results were compromised by Covid-19 related impacts, the proceeds from the Currenta transaction, ample parked cash, as well as cost and cash containment measures had a balancing effect.

Given LANXESS’ solid credit metrics and ample liquidity, Scope expects only a moderate impact on key credit metrics. Metrics should continue to be in line with Scope’s rating case for LANXESS’ BBB+/Stable issuer rating.

The rating still reflects the company’s strong position in medium-sized markets with considerable barriers to entry, together with its conservative financial policy.