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The specialty chemicals company Lanxess is reducing its headcount and cutting costs to improve competitiveness following poor performance mainly in its rubber business. The Group, which has a strong leather chemicals business plans to make total annual savings of €150 million as of the end of 2016. Leather chemicals was highlighted as a business unit that is performing well.
Lanxess already expects savings of about €20 million in the current year. The first phase of the realignment will result in a reduction of total headcount by about 1,000 positions worldwide by the end of 2016 – roughly half of which will be in Germany. The affected jobs will be mainly in the administrative and service units, marketing and sales, as well as in research and development. The headcount reduction will result in exceptional charges of €150 million being incurred through to the end of 2016 – including around €100 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 of Lanxess AG. The Group has agreed with the employee representatives on a severance program in order to implement the personnel measures at its German sites.
"These job reductions are tough. However, we have reached a fair agreement with the employee representatives in Germany after a series of constructive negotiations," said Rainier van Roessel, Member of the Board of Management and Labour Relations Director of Lanxess AG.
At its sites outside of Germany, too, the Group said it will implement the headcount reduction responsibly under country-specific arrangements. At the beginning of November 2014, Lanxess initiated the second phase of the realignment program, which is aimed at increasing its 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. "We can then start thinking cautiously about growth again – with the focus on our Advanced Intermediates and Performance Chemicals segments”, said Zachert.
Solid third quarter 2014
Sales in the third quarter of 2014 were on the level of the prior-year quarter, at €2.04 billion, with marginally higher volumes compensating slightly lower prices. EBITDA pre-exceptionals rose by 12.3% from €187 million in the prior-year quarter to €210 million. The increase was attributable among others to savings in administration, higher plant utilisation rates and the absence of inventory write-downs. Net income rose to €35 million in the reporting period, against €11 million in the prior-year quarter. Net financial liabilities declined, mainly on account of the capital increase, to around €1.4 billion, compared with €1.7 billion at the end of 2013.
The Performance Chemicals segment, which includes the leather chemicals business unit, increased turnover by 2.7% to €561 million, with the Leather and Inorganic Pigments business units benefiting from an increase in volumes. EBITDA pre-exceptionals rose by 5.6% to €76 million particularly as a result of higher prices and volumes.