Lanxess today announced its third-quarter results and confirmed that as part of its realignment program it plans to cut about 1,000 jobs worldwide by end 2016, accounting for 6% of Lanxess’s global total of 16,700. About half the cuts will be in Germany, accounting for 7% of the workforce in the country. The company says it is making rapid progress with its three-phase realignment program and that the first phase will result in annualized savings of €150 million ($187.8 million) as of the end of 2016. Lanxess expects savings of about €20 million already this year.
The job cuts will be mainly in administrative and service units, marketing and sales, as well as in R&D. “The realignment lays the foundation for Lanxess to return to sustainable growth in the midterm. Downsizing the workforce is a necessary measure to improve our competitiveness,” said Matthias Zachert, chairman. The company has agreed with employee representatives on a severance program at its German sites. The affected employees will be offered severance payments, advisory services and support in finding new jobs.
“These job reductions are tough. However, we have reached a fair agreement with the employee representatives in Germany after a series of constructive negotiations,” said Rainier van Roessel, board member/labor relations. Solutions have already been found for more than half of the roughly 500 employees affected in Germany and the company says that if the targeted number of job cuts is not fully met when the severance program expires in a few weeks’ time, Lanxess does not rule out dismissals for operational reasons.
The second phase of the realignment program, which starts this month, aims to increase the company’s operational competitiveness. It focuses on the optimization of sales and supply chains and of production processes and facilities. These realignment measures will be implemented in 2015 and 2016. The third phase, which aims to improve the competitiveness of the business portfolio, will focus on “horizontal and vertical cooperations in the rubber business” and will also be implemented in 2015 and 2016, the company says. “As of 2016, we will fully benefit from the savings made as a result of the realignment. We can then start thinking cautiously about growth again—with focus on our advanced intermediates and performance chemicals segments,” Zachert said.
Lanxess, meanwhile, reported a rise in third-quarter net income to €35 million from €11 million in the prior-year quarter. Sales were flat at €2.04 billion with marginally higher volumes compensating slightly lower prices. Ebitda pre-exceptionals rose 12.3% to €210 million. The Ebitda margin pre-exceptionals advanced to 10.3% from 9.1% in the year-earlier period.
The performance polymers business was affected by falling prices and lower volumes. Sales declined 4.3% to €1.05 billion. Ebitda pre-exceptionals was 10.7% higher at €93 million. Advanced intermediates recorded a 5.2% rise in sales to €424 million, driven mainly by strong demand for agrochemicals. Ebitda pre-exceptionals rose 4.2% to €74 million. Sales of performance chemicals were 2.7% higher at €561 million with leather and inorganic pigments benefiting from higher volumes. Ebitda pre-exceptionals rose 5.6% to €76 million on higher prices and volumes.
Lanxess has confirmed its guidance for the full year and continues to expect Ebitda pre-exceptionals in the range of €780-820 million. Initial savings of €20 million generated from the realignment program will mitigate some burdens expected in the fourth quarter, the company says.
Lanxess, the world’s largest producer of synthetic rubber, is restructuring its operations following a major downturn in the global rubber industry. Oversupply and a downturn in its markets led to the termination of Axel Heitmann’s contract as CEO earlier this year and the appointment of Zachert, former CFO of Lanxess in his place.
By Natasha Alperowicz