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Lanxess talking with potential partners for SR business

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COLOGNE, Germany—A Lanxess A.G. spokesman has confirmed the company is in talks with potential partners regarding the formation of alliances or joint ventures for its synthetic rubber business.

The spokesman said the firm is evaluating different strategic options for its synthetic rubber business in conjunction with its three-stage program “Let's Lanxess Again.” This phase is aimed at improving the competiveness of its business portfolio and will focus on horizontal and vertical cooperations in the rubber business, Lanxess said.

This stage will include the examination of competitive alliances to improve access to raw materials and will be executed in 2015 and 2016.

While it has been reported that a number of parties are interested in cooperating with Lanxess, including a report that the firm is considering selling a portion of its synthetic rubber business in a strategic alliance, the spokesman said the company would not comment on potential partners or “market rumors.”

The spokesman said Lanxess does not release financials for its individual business units, but sales in its Performance Polymers segment—which includes its synthetic rubber business—declined 13 percent to $6.28 billion for 2013. At the time, Lanxess said it expected the market environment for synthetic rubber to remain challenging in 2014.

The segment's sales for third quarter 2014 dropped 4.3 percent to about $1.31 billion.

Lanxess will release its 2014 financials on March 19. The firm said in January it projects its EBITDA for the full year and fourth quarter to increase compared to 2013, to about $917 million and $174.8 million.

The first phase of Lanxess' realignment plan includes reducing its work force by 1,000 and consolidating the number of business units from 14 to 10. It formed a new Tire & Specialty Rubbers unit, combining Butyl Rubber and Performance Butadiene Rubbers; it rolled Keltan Elastomers into its High Performance Elastomers unit; and it formed Rhein Chemie Additives out of Functional Chemicals, its Rhein Chemie subsidiary and its specialty chemicals product line.

The Performance Polymers segment consolidated from five business units to three, now housing Tire & Specialty Rubbers, High Performance Elastomers and High Performance Materials.

The company also transferred its antioxidants and accelerators product lines to the Advanced Industrial Intermediates business unit from its Rubber Chemicals business unit after examining strategic options for both lines. This caused its antioxidants and accelerators unit to move from the Performance Polymers segment to the Advanced Intermediates segment, the only entity that switched segments.

Lanxess will begin adding capacity to its EPDM plant in Changzhou, China, and to its Nd-PBR plant in Singapore. The EPDM facility has annual capacity of 160 kilotons and the Nd-PBR plant 140 kilotons, but neither will operate at full capacity initially.

The spokesman said the firm decided to increase both capacities gradually to avoid further pressure on the supply-demand balance. As a result, the spokesman said, Lanxess will have to incur idle costs for both 2015 and 2016.

Lanxess already had incurred about $11.3 million in ramp-up costs for the EPDM plant in the fourth quarter of 2014, with about $11.3 million more to be incurred in the first quarter of 2015. The firm will report about $17 million in ramp-up costs for the Nd-PBR plant in the first quarter of 2015, the spokesman said.

Lanxess is a worldwide specialty chemicals company with sales of about $10.4 billion in 2013. It currently employs about 16,700 in 29 countries with 52 production sites.