UPDATE 1-Lanxess warns of economic challenges, keeps outlook

Tue Aug 7, 2012 2:44am EDT

* Says adj EBITDA likely to be flat in H2 on weakness in Europe

* Q2 adj EBITDA above consensus helped by pricing power

* Q2 Net income below poll avg on restructuring charges (Recasts, adds details on outlook)

FRANKFURT, Aug 7 (Reuters) - Germany's Lanxess, the world's largest maker of synthetic rubber, p redicted flat earnings in the second half on weakness in Europe and slower growth in Asia but stopped short of curtailing its full-year outlook.

Lanxess, which competes with Exxon Mobil in the rubber market, said it continues to expect 2012 earnings before interest, taxes, depreciation and amortisation (EBITDA), adjusted for special items, to rise 5-10 percent, bas ed on expectations of flat earnings for the remainder of the year.

"In view of increasing economic challenges, Lanxess does not expect to see any further momentum in the second half of the year," said company, which makes sy nthetic rubber used in tyres, tubes and window seals.

It cited weak economic development in Europe, which accounts for almost half of group sales, moderate growth in Asia and Latin America and a slowing expansion of the U.S. economy.

The shares were indicated 0.6 percent lower in pre-market indications provided by brokerage Lang & Schwarz, slightly worse than the overall German market.

Second-quarter earnings before interest, taxes, depreciation and amortisation (EBITDA), adjusted for special items, gained 6.8 percent to 362 million euros ($449.4 million) more than the 355 million euros expected on average in a Reuters poll of 11 analysts.

That was mainly thanks to currency effects and to pricing power that allowed Lanxess to pass higher feedstock prices along to customers.

Quarterly net income of 176 million euros came in about 5 percent below the average estimate, mainly hurt by one-off charges from closing a German rubber chemicals facility. ($1 = 0.8056 euros) (Reporting by Ludwig Burger and Frank Siebelt)