Lanxess to cut 1,000 jobs, projects $188 million savings

COLOGNE, Germany—Lanxess A.G. will eliminate 1,000 jobs worldwide by the end of 2016 as part of its three-phase realignment program, “Let's Lanxess Again,” the firm said Nov. 6 as it released its financials for third quarter 2014.

The firm reported sales of about $2.55 billion for the third quarter, a decrease of less than a percent compared to 2013. Net income increased to about $43.8 million, up 318 percent from 2013.

Lanxess said about half of the positions will be eliminated in Germany, mainly in the administrative and service, marketing and sales, and research and development units.

The firm projects total annual savings of about $187.8 million by the end of 2016, with expected savings of about $25 million in 2014. Lanxess said it expects exceptional charges of about $187.8 million through the end of 2016, with about $125.2 million already being incurred in 2014.

“The realignment lays the foundation for Lanxess to return to sustainable growth in the mid-term,” CEO Matthias Zachert said in a statement. “Downsizing the work force is a necessary measure to improve our competitiveness.”

Lanxess and its employee representatives have agreed on a severance program in order to implement personnel measures at its German sites. Lanxess said the affected employees will be offered severance payments, advisory services and support in finding new jobs outside the company.

As of Nov. 6, solutions have been found for more than half of the projected 500 employees affected in Germany. The firm said if the targeted number of job cuts has not been achieved fully when the severance program expires in a few weeks, it cannot rule out separations for operational reasons.

“These job reductions are tough. However, we have reached a fair agreement with the employee representatives in Germany after a series of constructive negotiations,” Rainier van Roessel, member of the board of management and labor relations director, said in a statement.

“Let's Lanxess Again” is the second series of layoffs the firm has implemented in the last year. Lanxess just completed its “Advance” program, which a spokeswoman confirmed resulted in the reduction of 875 jobs worldwide.

Lanxess initiated the second phase of its realignment program in November. The program is aimed at increasing its operational competitiveness, optimizing its sales and supply chains, production processes and facilities.

In the firm's presentation, it said this phase will include evaluating whether or not to shut down temporarily or close facilities.

The third phase of the program, aimed at improving the competitiveness of the business portfolio, 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.

Both phases will be implemented in 2015 and 2016, Lanxess said.

“As of 2016, we will fully benefit from the savings made as a result of the realignment,” Zachert said in a statement. “We can then start thinking cautiously about growth again, with the focus on our Advanced Intermediates and Performance Chemicals segments.”

Lanxess reconfirmed it will reduce the number of business units in its portfolio to 10 from 14. It will combine the Butyl Rubber and Performance Butadiene Rubbers into a new unit—Tire & Specialty Rubbers; combine High Performance Elastomers and Keltan Elastomers into High Performance Elastomers; and combine its specialty chemicals product line, Functional Chemicals business unit, and Rhein Chemie subsidiary into Rhein Chemie Additives business.

Anno Borokowsky will lead the new Rhein Chemie Additives unit; Jorge Nogueira will lead Tire & Specialty Rubbers; and Jan Paul de Vries will lead the new High Performance Elastomers.

The firm 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.

Lanxess said the new structure will take effect Jan. 1. None of the business units will move from their respective business segments; however the transfer of its antioxidants and accelerators product lines shifts them from the Performance Polymers segment to its Advanced Intermediates segment.

Segment results

Sales in Lanxess' Performance Polymers segment dropped 4.3 percent to about $1.31 billion. The firm said falling prices and lower volumes affected all business units in the segment. Earnings improved by lower manufacturing costs, reduced spending on research and development, and the absence of inventory write-downs.

Lanxess said the Advanced Intermediates and Performance Chemicals segments increased by 5.2 percent and 2.7 percent, respectively. Advanced Intermediates reported sales of about $530.8 million, with Performance Chemicals at about $702.3 million.

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.