Speciality chemicals group Lanxess intends to stop EPDM rubber production at its Marl, Germany, site at the end of 2015. The German company says that within its EPDM production network, the Marl facility is the least competitive due to economy of scale limitations and comparatively high energy and raw material costs. The workforce in Marl currently totals around 120 people.
The closure is part of its three-phase realignment programme it presented last year. The first phase, focused on improving the competitiveness of the company’s business and administrative structure, including a reduction of around 1,000 positions worldwide, has largely been completed. The reduction of around 500 positions in Germany mainly affected administrative functions and was achieved without dismissals for operational reasons. A further 500 positions are being reduced outside Germany. To date, solutions have been found for about 70% of the employees affected. From the end of 2015, Lanxess will achieve savings of around EUR120 million due to the first-phase measures, rising to EUR150 million annually from the end of 2016.
The company has also initiated the first measures from the second phase, which is aimed at improving operational competitiveness. In light of current market overcapacities for synthetic rubbers, Lanxess is optimising its production networks for EPDM rubber and neodymium-based performance butadiene rubber (Nd-PBR).
During the course of 2016, LANXESS will be focusing Nd-PBR production at its sites in Dormagen, Germany, and Singapore. The Nd?PBR facilities at the sites in Orange, United States, and Cabo de Santo Agostinho, Brazil, will then exclusively serve the respective region. The capacities thus freed up at the facilities in Port-Jérôme, France, and Orange, will be used in the future to manufacture other butadiene rubber grades. In addition, Lanxess is reducing the capacity to use for butadiene rubbers in Orange as part of its flexible asset management, operating only three out of four production lines simultaneously.
Following the reorganisation, Lanxess would have one production facility each for EPDM and Nd-PBR rubber in North America, Latin America, Asia and Europe.
The company anticipates a reduction of around 140 positions as well as exceptional charges of some EUR55 million for the reorganisation of its production networks for EPDM and Nd-PBR. From the end of 2016, it expects to achieve annual savings of around EUR20 million.
Further measures in the second phase of the realignment are currently under development, including the optimisation of sales and supply chains and of production processes and facilities. The results of these activities should be visible in the second half of 2015.
The third phase of the program is aimed at improving the competitiveness of the business portfolio, particularly through cooperations in the rubber business. Lanxess is currently in talks with potential partners and will possibly report on these in the second half of 2015.
Sales declined in 2014
In fiscal 2014, sales declined slightly by 3.5% to around EUR8 billion, EBITDA pre exceptionals increased by 9.9% to EUR808 million. Net income improved by EUR206 million to EUR47 million – despite exceptional charges related to the company’s realignment program. At the same time, Lanxess significantly reduced its net indebtedness and tangibly increased operating cash flow.
“Particularly against the background of the persistently challenging business situation, the substantial improvement in earnings is gratifying. The figures also reflect the first benefits from our realignment program, which we are implementing on schedule,” said Matthias Zachert, Chairman of the Board of Management. “Nevertheless, a great deal of work still lies ahead of us if Lanxess is to return to the path of long-term success. In the current fiscal year, we will continue to systematically implement our program and set the course for Lanxess’s future.”
Outlook for 2015
For fiscal 2015, Lanxess is assuming a persistently challenging competitive environment, especially for synthetic rubbers. While the company anticipates a slight year-on-year improvement in demand from the automotive and tire industries for the Performance Polymers segment, it believes that price pressures will continue to impact EPDM and butyl rubber especially. Lanxess is assuming continued positive development for the business for lightweight plastics.
For the current fiscal year, Lanxess expects good demand from the key customer industries served by the Advanced Intermediates segment. However, rather slower growth is predicted for agrochemical products. LANXESS anticipates a slight improvement in the demand situation for the Performance Chemicals segment.
With the US dollar expected to remain strong and continue its volatile development, it will likely deliver positive momentum overall for business. Lanxess also expects volatility in raw material prices.