07.11.2014 • NewsLanxessMatthias ZachertRheinische Post

Lanxess CEO Confirms Plans for Substantial Job Cuts

Lanxess CEO Matthias Zachert has confirmed plans for substantial job cuts leaked days earlier by a German newspaper, announcing plans to slash 6% of its 16,700-member workforce up to 2016.

The headcount reduction of 1,000 positions is slightly below the 1,200 reported by the daily Rheinische Post, which quoted internal sources. It is the first step of the three-phase realignment project initiated in May. Dubbed Let's Lanxess Again, it is aimed at restoring profitability, especially in the rubber segment, which constitutes the bulk of the German chemical producer's portfolio.

Lanxess has leading positions in such high performance specialties as EPDM, S-SBR, Nd-PBR and butyl rubber, but its earnings have been hit by oversupply and low-cost competitors entering the market.

Zachert said the realignment "lays the foundation" for Lanxess to return to sustainable growth in the mid-term. The CEO, in office since April of this year, forecasts total annual savings of €150 million up to the end of 2016. Savings of about €20 million are targeted during 2014.

Downsizing the workforce "is a necessary measure to improve our competitiveness," Zachert stressed. A redundancy package agreed with workers at German production sites includes severance payments, advisory services and support in finding new jobs.

As of the first week in November, "solutions" had been found for more than half of the roughly 500 German-based employees, said managing board member and labor relations director Rainier van Roessel.

If the targeted number of job cuts has not been fully achieved when the severance program expires by the end of the year, van Roessel said Lanxess "cannot currently rule out dismissals for operational reasons."

At group sites outside Germany, the headcount reduction will be achieved under country-specific arrangements.

The second phase of Let's Lanxess Again, begun this month, will be implemented mainly during 2015 and 2016. Aimed at increasing operational competitiveness, it will focus on optimizing sales and supply chains as well as production processes and production facilities.

In the third realignment phase, also to be implemented in 2015 and 2016, the competitiveness of individual businesses in the portfolio will be examined. This phase will focus in particular on horizontal and vertical cooperation with other players in the rubber chain.

"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."

Presenting financial results for the third quarter, the CEO said group sales of €2 billion were flat at the prior year level, with "marginally higher" volumes compensating "slightly lower" selling prices.

EBITDA pre-exceptionals rose by 12% to €210 million, with the EBITDA margin pre-exceptionals improving to 10.3% from 9.1% a year earlier. For full year 2014 Lanxess has confirmed guidance, targeting EBITDA pre-exceptionals of around €780-820 million.

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