Lanxess to Combine Units as CEO Zachert Pushes Overhaul

Lanxess AG will merge four divisions as Chief Executive Officer Matthias Zachert forges ahead with simplifying the German maker of synthetic rubber to cut costs and accelerate decision making.

To reduce the number of business units to 10 from 14, a tire- and specialty-rubbers division will be created from overlapping operations in these markets, the Cologne-based company said in a statement today. Similar moves will take place in elastomers and rubber chemicals.

Four months into the CEO role, Zachert is budgeting for an improvement in earnings this year as savings from an efficiency program add to higher demand for agrochemicals and construction-related materials. Synthetic rubbers, used in tires and other car parts, are facing a “persistently difficult competitive situation,” pushing second-quarter sales down 5.7 percent to 2.02 billion euros ($2.7 billion), according to the company.

“The continuing low earnings level and increasing competition show the need for further action to improve competitiveness,” Zachert said. “We have been working at full steam over the past few months to create the foundation for our realignment.”

Profit Forecast

Earnings before interest, taxes, depreciation and amortization totaled 239 million euros, excluding one-time items. Analysts in a Bloomberg survey predicted 231.6 million euros, on average. Lanxess forecast full-year Ebitda on that basis will be in a range of 780 million euros to 820 million euros.

Lanxess rose as much as 3.3 percent and was trading up 0.2 percent at 46.23 euros as of 11:39 a.m. in Frankfurt. The stock has declined 4.5 percent this year, valuing the manufacturer at 4.24 billion euros.

Lanxess will appoint a new leader for its performance polymers and advanced intermediates division, which houses the synthetic-rubber operations, after the exit of management-board member Werner Breuers, the company said separately. Zachert will oversee the division in the interim period, and Breuers will remain in an advisory role until he leaves the company next May.

Any workforce cuts will mostly affect employees abroad, with reductions in administrative jobs affecting Germany sites more, Zachert said on a conference call. He declined to specify the number of jobs to be eliminated.

The reorganization extends to seeking alliances in areas such as synthetic rubber to strengthen the supply chain and gain access to cheaper raw materials, Zachert said. Lanxess, which is struggling with depressed global synthetic-rubber prices, will give more details on potential tie-ups with other companies in 2015, he said.

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