Lanxess reports higher Q3 profits as second phase of realignment begins

Talk of a “three-phase realignment” and workforce downsizing dominated the release of Lanxess AG’s third quarter 2014 results this month. The specialty chemicals company says it is making “rapid progress” with its realignment programme and aims to achieve annual savings of €150 million by the end of 2016 via the implementation of the first realignment phase, which culls the company’s global headcount by around 1,000. Half these reductions will occur in Germany, where Lanxess is based, and mainly affect the company’s administrative and service units, marketing and sales, along with research and development.

“The realignment lays the foundation for Lanxess to return to sustainable growth in the mid-term. Downsizing the workforce is a necessary measure to improve our competitiveness,” said Matthias Zachert, chairman of the Lanxess AG Board of Management. The second phase of the realignment programme commenced in November 2014 and aims to increase Lanxess’ operational competitiveness. This phase focuses on the optimisation of sales and supply chains and of production processes and facilities; the relevant measures will be implemented in 2015 and 2016. The third phase of the programme, which aims to improve the competitiveness of the company’s business portfolio, will focus on horizontal and vertical co-operations in the rubber business. This phase is also to be implemented in 2015 and 2016.

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

Sales in the third quarter of 2014 amounted to €2.04 billion, 0.5 per cent lower than a year earlier; marginally higher volumes compensated for slightly lower prices. EBITDA pre-exceptionals rose 12.3 per cent year-on-year to €210 million, the increase in part attributable to savings in administration, higher plant utilisation rates and the absence of inventory write-downs. The EBITDA margin improved from 9.1 per cent to 10.3 per cent. Net income rose from €11 million a year earlier to €35 million in the reporting period. The company’s net financial liabilities declined from €1.7 billion to around €1.4 billion.