10/15/2013

Lanxess assessing non-core businesses, including rubber

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By Chris Sweeney Follow Author

COLOGNE, Germany—Lanxess A.G. is restructuring to reduce costs and jobs by 2015, and its rubber business is a primary focus of its efforts.

Lanxess will pursue "strategic options" for some of its non-core businesses. The company said those include its rubber chemicals' accelerators and antioxidants lines, nitrile-butadiene rubber business, and Perlon-Monofil polyamid and polyester monofilament products.

The company also is aiming to save $135.3 million by 2015 and beyond by eliminating 1,000 jobs worldwide.

"The environment has been challenging for Lanxess," a company spokeswoman said in an email. "Some of our operations are encountering significant challenges. Especially the synthetic rubber activities are experiencing a temporary weakness in demand, increased competition in the market and volatile raw materials prices."

Lanxess said it will phase out the positions through early retirement packages and severance pay. In addition, the variable compensation for the current business year will be reduced for those who are eligible, including the board of management.

Its non-core activities combine for approximately $674.1 million in sales and consist of approximately 1,000 employees, according to the company. The affected sites include Bushy Park, S.C.; Brunsbuettel and Dormagen, Germany; Kallo, Belgium; Jhagadia, India; La Wantzenau, France; and Nantong, China.

Lanxess said the restructuring efforts are all part of reaching the company's mid-term earnings goal of $2.42 billion EBITDA pre-exceptionals in 2018.

The company will maintain its current structure of 14 business units under its three established segments, according to the spokeswoman.

Chairman Axel Heitmann said the firm must take action because of the current economic situation.

Cost of restructuring

The company will spend approximately $202.1 million in one-off charges to cover its restructuring efforts, $107.8 million in 2013 and $94.3 million in 2014.

About $53.9 million of the 2013 allocation was incurred when Lanxess restructured its rubber chemicals business unit in the second quarter. The company closed its facility in KwaZulu-Natal, South Africa, affecting 40 employees. It also downsized operations in Beveren, Belgium, and shuffled production between the Beveren site and its Bushy Park Industrial Complex in Goose Creek, S.C., near Charleston.

Lanxess said it is predominantly targeting acquisitions that will strengthen its advanced intermediates and performance chemicals segments to diversify the group's structure further.

China EPDM plant on schedule

The construction of Lanxess' EPDM plant in Chang-zhou, China is on schedule, the company said.

Lanxess is investing approximately $317 million, the largest capital spending the company has made in China to date. It said about 45 percent of the investment will be spent by 2013.

The factory will have a capacity of 160,000 metric tons per year and create 200 new jobs. Lanxess said it will be completed at the end of 2014 and begin selling products to customers in 2015.

The plant will be equipped with Lanxess' Keltan ACE technology and produce 10 premium grades of EPDM tailored to Chinese customer needs.

Torsten Derr, head of the Keltan Elastomers business unit, said the company is very happy with the progress made so far and that the facility clearly underlines Lanxess' commitment to being closer to its customers and supplying them with premium products.

Lanxess operates EPDM production sites in Orange, Texas; Geleen, Netherlands; Marl, Germany; and Triunfo, Brazil.