Degussa strives to cut costs, outlines expansions

08 November 2005 13:38  [Source: ICIS news]

DUSSELDORF, Germany (ICIS news)--German specialty chemicals group Degussa on Tuesday outlined its expansion plans and internal programmes aimed at streamlining the organisation to improve profitability.

It said the new Strategy & Organisation scheme, expected to involve expenditure of Euro50m ($59m) and be booked to accounts in 2006, will be directed by company chairman Utz-Hellmuth Felcht and supported by Boston Consulting.

This scheme, which also included inputs from major shareholders RAG and Eon, will complement the more operatively oriented "Degussa 2008" enhancement programme, Felcht said at a press conference following announcement of the group's third quarter financial results.

The new scheme could result in big job losses but he declined to quantify the number of potential staff cuts, adding only that the group hoped to avoid compulsory redundancies.

"Major structural and personnel changes cannot be ruled out," Felcht said, but at the same time sought to play down any dramatic elements in the scheme which was expected to be concluded by the end of 2005.

The Degussa 2008 programme sought to achieve gains of Euro300m in operating profit (EBIT) by 2008 and was going according to plan, he said. The project, which will cost Euro150m, averaged over 2006 and 2007, also included expansion programmes for China and eastern Europe.

In China, Felcht said, the new Chinese joint venture Jida to produce polyether ether ketone (PEEK) was expected to be finalised in the coming days.

Plans to build a 100,00 tonne/year methyl methacrylate (MMA) plant in China will be presented to the Degussa supervisory board in December. He declined to comment on possible plans for expansion of the fine chemicals business in China - the group's building blocks business unit is already active in the mainland.

On customer synthesis, Felcht said that if Degussa decided to expand in that area it will be on a worldwide basis. As part of a restructuring plan for the loss-making fine chemicals activities, the group was currently reducing the European workforce by 700 people - including 200 jobs in services which were not previously announced.

In eastern Europe, the group planned to work closely with academic institutions to identify existing technology that Degussa could help to commercialise - mirroring what it is already doing in China. Felcht said the dynamics of the Chinese market make it essential to invest in new capacity but new plants will only be built in Eastern Europe after those in Germany were fully utilised.

By: Dede Williams
+44 20 8652 3214

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