LANXESS in­tends ac­cel­er­at­ing growth

Chemical Industry Digest - - News & Views -

Spe­cialty

chem­i­cals com­pany LANXESS in­tends to ac­cel­er­ate mea­sures for prof­itable growth. The com­pany plans to fur­ther im­prove its sta­bil­ity and prof­itabil­ity over the next years and has set new medium-term fi­nan­cial targets ac­cord­ingly. From 2021, the oper­at­ing mar­gin – mea­sured in terms of EBITDA pre ex­cep­tion­als – is ex­pected to be be­tween 14 and 18 per­cent. In terms of vol­ume, LANXESS in­tends to con­sis­tently grow above global gross do­mes­tic prod­uct.

“LANXESS is back on solid foot­ing and has em­barked on a prof­itable growth path. In the com­ing years, we in­tend to reach our full potential and trans­form LANXESS into an even stronger com­pany with a highly balanced and sta­ble plat­form, in­creased prof­itabil­ity and, last but not least, a com­pany team-cul­ture based on ded­i­ca­tion and mo­ti­va­tion,” says Matthias Zachert, CEO of LANXESS AG.

In order to achieve these new targets, LANXESS will con­tinue to de­velop its cur­rent port­fo­lio based on clear cri­te­ria. The Group will only in­clude busi­ness op­er­a­tions in its port­fo­lio that can achieve lead­ing mar­ket po­si­tions and gen­er­ate at­trac­tive mar­gins sus­tain­ably. Or­ganic in­vest­ments – around EUR 400 mil­lion be­tween 2016 and 2020 – in­volve projects that gen­er­ate an av­er­age re­turn on cap­i­tal em­ployed (ROCE) of 20 per­cent. In ad­di­tion, LANXESS is pur­su­ing re­gional and in­dus­try-based bal­anc­ing to fur­ther re­duce the ef­fects of mar­ket volatil­i­ties. This in­cludes an in­creased share of sales in growth mar­kets such as Asia and North Amer­ica and an ex­panded pres­ence in at- trac­tive cus­tomer in­dus­tries such as elec­tri­cal/elec­tron­ics or en­ergy with in­no­va­tive prod­uct ap­pli­ca­tions.

A key fac­tor in achiev­ing the new fi­nan­cial targets in­cludes syn­er­gies stem­ming from the ac­qui­si­tion of Chem­tura, which is the com­pany’s largest ac­qui­si­tion till date. The com­pany ex­pects about EUR 100 mil­lion in an­nual cost sav­ings by 2020. Cost sav­ings for fis­cal 2017 are al­ready ex­pected to amount to ap­prox. EUR 25 mil­lion. An es­ti­mated EUR 140 mil­lion in as­so­ci­ated one-time costs will be in­curred for this.

Ap­prox­i­mately half of the ex­pected EUR 100 mil­lion in syn­er­gies are at­trib­ut­able to pro­duc­tion and pro­cure­ment. For in­stance, LANXESS will be ex­pand­ing its “Man­u­fac­tur­ing Ex­cel­lence” ini­tia­tive to the pre­vi­ous Chem­tura pro­duc­tion sites to fur­ther op­ti­mize their pro­cesses and tech­nolo­gies. Fur­ther­more, the com­bined pur­chase vol­ume of both com­pa­nies for raw ma­te­ri­als of about EUR 2.5 bil­lion can be re­duced by har­mo­niz­ing sup­ply con­tracts and in­creas­ing backward in­te­gra­tion. Ad­di­tional sav­ings can be re­al­ized in the area of trans­porta­tion and logistics.

Group-wide dig­i­tal­iza­tion ini­tia­tive

LANXESS is pro­mot­ing its growth with a Group­wide dig­i­tal­iza­tion ini­tia­tive and has es­tab­lished a depart­ment with an ini­tial 30 ex­perts in this area. Key ar­eas of the ini­tia­tive in­clude the dig­i­tal­iza­tion of the value chain, the use of big data, the de­vel­op­ment of dig­i­tal busi­ness mod­els and em­bed­ding dig­i­tal ex­per­tise among em­ploy­ees.

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