Lanxess to cut 1,000 jobs by 2016; EUR20 mn savings in 2014

Speciality chemicals company Lanxess is planning on reducing 1,000 jobs worldwide by the end of 2016, with half in Germany, it said recently in its release of its financials. This represents about 6% of its total global workforce.

Furthermore, the German synthetic rubber supplier says it is making progress with its three-phase realignment programme, aimed at improving the competitiveness of the business, to make total annual savings of EUR150 million at the end of 2016. It already expects savings of about EUR20 million in the current year.

Meanwhile, the headcount reduction will be mainly in the administrative and service units, marketing and sales, as well as in R&D. It will result in exceptional charges of EUR150 million being incurred in 2016 – including around EUR100 million already in 2014.

"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 Board of Management.

The company has agreed with the employee representatives on a severance programme in order to implement the personnel measures at its German sites, with affected employees to be offered severance payments, advisory services and support in finding new jobs.

As of today, solutions have already been found for more than half of the roughly 500 employees affected in Germany. If the targeted number of job cuts has not been fully achieved when the severance programme expires in a few weeks’ time, the group cannot currently rule out dismissals for operational reasons.

At its sites outside of Germany, too, the group will implement the headcount reduction responsibly under country-specific arrangements.

Seeking alliances to reduce dependence on rubber sector

Lanxess has already started the second phase of the realignment programme, which is focusing on the optimisation of sales and supply chains and of production processes and facilities and will be implemented in 2015/2016.

The final phase of the programme will focus on horizontal and vertical cooperations in the rubber business. This phase is also to be implemented in 2015 and 2016. Zachert, who has been Chairman for seven months, is combining units and seeking alliances to reduce the company’s dependence on the automotive and tyre industries. The company could enter a joint venture with another synthetic rubber producer or tie-up with a raw-material supplier.

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

Meanwhile, earnings before interest, taxes, depreciation, amortisation and exceptional items (EBITDA) rose 12.3% from the previous year’s EUR187 million to EUR210 million in the third quarter. Sales dropped by 0.5% from EUR2.05 last year to EUR2.04 billion this quarter.

Lanxess confirms its guidance for the full year 2014 and continues to expect EBITDA pre exceptionals in the range of EUR780 million to EUR820 million. Initial savings of EUR20 million generated from the realignment programme will mitigate some burdens expected in the fourth quarter.


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