Lanxess initiates change for rubber business

COLOGNE, Germany—Lanxess A.G. revealed in its second quarter financials that it has initiated a process that will transfer its rubber business to a legally independent business entity within the Lanxess Group.

The plan is for the new entity to comprise its Tire & Specialty Rubbers and High Performance Elastomers business units. The two combine to operate 20 production facilities with about 3,700 employees.

A company spokesman said the creation of a legally independent business entity facilitates the reporting of key financial figures, such as sales or EBITDA (earnings before interest, taxes, depreciation and amortization), making it easier to bring the rubber business into a potential alliance.

The process is part of Lanxess' three-phased realignment program, which CEO Matthias Zachert said is on schedule. The third phase is focused on improving the competitiveness of the business portfolio through potential alliances in the rubber business.

Zachert said in an Aug. 6 news release detailing the firm's financials that Lanxess is “currently engaged in very constructive discussions and assumes that it will achieve concrete results in the course of the second half of the year.”

Lanxess confirmed in the release that the first phase of realignment has been implemented successfully. It resulted in about 1,000 job cuts worldwide and the consolidation to 10 business units from 14. A recent development in the realignment included U.S.-based Rhein Chemie Corp. merging into Lanxess Corp.'s Rhein Chemie Additives unit, no longer operating as a separate legal entity, the firm said.

Lanxess has initiated measures of the second phase, which involves the restructuring of its EPDM and neodymium-based performance butadiene rubber production, affecting about 140 employees worldwide. The firm will halt EPDM rubber production at its facility in Marl, Germany, and will realign its EPDM and Nd-PBR production to four strategic regional facilities.

Lanxess reported increased sales and net income for the second quarter, causing it to increase its guidance for 2015. Sales improved by 4.3 percent to about $2.29 billion. The firm cited higher volumes and positive currency effects offsetting raw material induced lower selling prices.

Net income also increased by 58.2 percent to about $94.7 million, thanks to operational development and proceeds from the sale of noncurrent assets.

Lanxess projects its EBITDA pre-exceptionals to come in between about $914 million and $958 million compared to its original projection of about $893 million and $936 million.

“Lanxess is returning more and more to the right course,” Zachert said. “In the second quarter of this year, we posted a very good operating result to which all segments of our company contributed. On the basis of these strong figures and the rapid implementation of our realignment program, we assume that our annual result will be higher than previously anticipated.”

The spokesman said the firm's increase in EBITDA pre-exceptionals by 13 percent to about $299 million and a 4 percent savings in general administration expenses were examples of savings generated by its realignment.

Higher volumes, positive currency effects and raw material induced lower prices helped its Performance Polymers segment achieve increased sales of 3.5 percent to about $1.2 billion.

Lanxess cited good demand in almost all customer markets for the Advanced Intermediates segment, which resulted in increased sales of 3.1 percent to about $509 million.

Its Performance Chemicals segment experienced a 6.8 percent increase in sales to about $601.9 million for the quarter.

The company cited low raw material prices, positive currency effects and savings contributed to the increase.

Lanxess is a specialty chemicals manufacturer that employs about 16,300 in 29 countries with 52 production sites worldwide. It reported 2014 sales of about $9.6 billion.