Lanxess seeks government support for chemical industry after profit decline.

Lanxess seeks government support for chemical industry after profit decline.

Lanxess Calls on German Politicians for Support After Quarterly Profit Decline

Lanxess

Chemicals group Lanxess recently announced plans to trim costs, including job cuts, and called on German politicians to support the struggling industry. This comes after their quarterly profit fell by over half. Lanxess, known for producing high-end specialty chemicals such as additives, lubricants, flame retardants, and plastics, had previously managed to pass rising raw material and power costs onto customers. However, the company, along with several other German chemical firms, had to revise their forecasts due to persistently high energy prices and weak demand.

CEO Matthias Zachert emphasized the urgent need for sustainable framework conditions, particularly an internationally competitive electricity tariff for the industry. In an official statement, Zachert stated, “We urgently need sustainable framework conditions – above all an internationally competitive electricity tariff for the industry.” He further called for reduced bureaucracy and faster approval procedures to make Germany more competitive.

To address the current challenges, Lanxess has implemented cost-saving measures that aim to save €100 million ($110 million) this year through strict cost discipline and a Europe-wide hiring freeze. In addition, the company plans to review its energy-intensive operations and streamline administrative structures, enabling annual savings of around €150 million from 2025.

Although Lanxess did not provide specific details about the number of job cuts, Zachert confirmed that the measures would include workforce reductions. The implementation of these measures is estimated to cost around €100 million.

As part of their cost-cutting strategy, Lanxess intends to shut down the hexane oxidation facility and the chromium oxide production facility at their Krefeld-Uerdingen site in Germany. The closure of these sites, along with the overall cost-cutting program, initially triggered a negative reaction in the stock market. Baader Helvea analyst Konstantin Wiechert mentioned in an email, “The closure of sites, even if expected, tends to trigger a negative first reaction.” However, some expectations of a cost-cutting program were already factored into the stock price.

Lanxess aims to support its remaining 51 sites in Germany through the cost-cutting measures. However, the company highlights the need to reassess the viability of these sites if conditions worsen. To further optimize their business model and unlock the full potential of recent acquisitions, Lanxess plans to refine its approach.

In terms of financial performance, Lanxess reported a 57.7% decline in its second-quarter core earnings (EBITDA) pre-exceptionals, amounting to €107 million. This result aligns with the company’s forecast from June. Furthermore, Lanxess announced that its finance chief Michael Pontzen would be leaving by the end of August.

Lanxess shares traded down 1.75% at 1035 GMT as the market reacted to the news of the cost-cutting measures and German politicians’ support.

In conclusion, Lanxess is taking proactive steps to address the challenges faced by the chemical industry. With cost-cutting measures and a call for support from German politicians, the company is striving to maintain profitability and secure its future. By implementing these measures and refining its business model, Lanxess aims to weather the current crisis and continue to grow. However, external factors such as energy prices and demand levels will play a significant role in determining the success of these efforts.

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