The joint venture marks the third and final stage of Lanxess' three-phased realignment program “Let's Lanxess Again,” which was implemented in August 2014.
“We have established a completely new strategic starting point for our company in just over a year,” Zachert said.
The firm said it plans to use about $446 million of the proceeds from its transaction with Aramco to invest in the growth of its Advanced Intermediates and Performance Chemicals segments, which Lanxess said are well-positioned and less cyclical.
Lanxess' Performance Chemicals segment includes the Rhein Chemie Additives, Inorganic Pigments, Ion Exchange Resins, Leather and Material Protection Products units. Advanced Intermediates includes the Advanced Industrial Intermediates and Saltigo units.
Lanxess said it will use another $446 million for further reduction of its financial debt position with another $223 million planned to be used for a share buyback program.
Lanxess' realignment consisted of three phases—business and administration structure competitiveness; operations competitiveness; and portfolio competitiveness—the first of which resulted in about 1,000 layoffs to its work force and the restructuring to 10 business units from 14. Lanxess confirmed in its first quarter results that this phase is complete.
The second phase involved 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 with one in North America, one in South America, one in Europe and one in Asia/China.
Lanxess said the Marl facility will be shuttered in the first quarter of 2016 and, after five months of negotiating, has reached a reconciliation and social plan with the 118 employees at the site. The Marl site produces synthetic EPDM for a wide rage of applications, with automotive and construction the two biggest end markets.
During the presentation of its 2014 financials, Lanxess said production from Marl will be transferred to its facilities in Changzhou, China; and Geleen, Netherlands, to limit the loss of sales.
The firm said during its 2014 financials presentation that it anticipates exceptional charges of about $58.7 million associated with the reorganization of its EPDM and Nd-PBR production network along with annual savings of about $21.3 million from the end of 2016.
Lanxess is seeing results from these moves as net income for the second quarter increased by 58.2 percent to about $94.7 million. The firm cited operational development and proceeds from the sale of noncurrent assets as reasons for the increase.
“Not only have we streamlined our administrative functions and already made many of our production structures and processes more efficient, but with this joint venture in the rubber business we are delivering one the most important phase of our realignment, with the best partner possible in a very short period of time,” Zachert said.
“The resulting financial headroom will allow us to return to growth sooner than expected.”