Lanxess Seeks 150 Million-Euro Savings Boost Amid Jobs Cut

Lanxess AG is seeking 150 million euros ($188 million) in annual savings from the end of 2016 as Chief Executive Officer Matthias Zachert puts the chemical maker through the most extensive revamp since its inception a decade ago.

In a first step, 1,000 jobs equal to 6 percent of the workforce will be cut in administration, marketing and research by the end of 2016, the Cologne, Germany-based company said today. A second phase starting this month will look for savings in sales and supply chains as well as production over the next two years.

Zachert, who has been in the top job for seven months, is combining units and seeking alliances to reduce the company’s dependence on the auto and tire industries. The producer of synthetic rubber is making “rapid” progress with its restructuring program and expects savings of 20 million euros as soon as this year, it said today.

“Downsizing the workforce is a necessary measure to improve our competitiveness,” Zachert said in today’s statement. About half of jobs pared will be in Germany.

The shares dropped 2.2 percent to 41.03 euros in Frankfurt trading. The stock has lost 15 percent this year, cutting the company’s market value to 3.74 billion euros.

Alliances Sought

The final phase of the restructuring program will focus on alliances in the rubber business, to be implemented in 2015 and 2016, Lanxess said today. The company could enter a joint venture with another synthetic-rubber producer or tie-up with a raw-material supplier, it said.

LyondellBasell Industries NV would be the most obvious partner for an alliance because it has all the key raw materials that Lanxess needs for synthetic rubber, Jaideep Pandya, an analyst at Berenberg Bank, said in a note to investors earlier this week.

A commercial alliance with an Asian company such as South Korea’s LG Chem Ltd. or Sinopec, whose full name is China Petroleum & Chemical Corp., would give Lanxess the flexibility to close capacity in Europe and cut costs, Pandya said.

Earnings before interest, taxes, depreciation, amortization and exceptional items rose 12 percent to 210 million euros in the third quarter, Lanxess said today. Sales declined 0.5 percent to 2.04 billion euros. Both figures are in line with analyst estimates.

Exceptional charges of 150 million euros are expected through the end of 2016 for the revamp. Lanxess is sticking to a full-year profit goal of 780 million euros to 820 million euros, it said today.

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