Degussa reviews organization

14 November 2005 00:01  [Source: ICB Americas]

Four years after the merger of Degussa-Hüls with SKW Trostberg into a leading speciality chemicals group, Degussa is juggling several internal projects to review its forward strategy and improve its organization.

At the autumn press conference in Düsseldorf, Germany, last week, chairman Utz-Hellmuth Felcht said the €50 million Strategy & Organization scheme, supported by Boston Consulting, is being conducted under his “personal direction.”

Reports had suggested the review was being imposed on the group by major shareholders RAG (50.1 percent) and Eon (43 percent), who were disappointed in particular by Degussa’s poor fine chemicals performance. The firm’s net results were hurt by a total impairment charge of €836 million on three of its business units: building blocks; exclusive synthesis and catalysts; and peroxygen chemicals, leading to a net loss of €710 million from €76 million in July-September last year.

The new project supplements the “more operatively oriented” €150 million Degussa 2008 program—devised by McKinsey and aimed at improving operating profit (EBIT) by €300 million.

“Major structural and personnel changes” are not being ruled out; however, Felcht sought to play down any dramatic elements in the 2008 plan. While this is likely to involve unspecified job losses, he said management hopes to avoid compulsory redundancies.

In the loss-making fine chemicals activities, Degussa is currently reducing the European workforce by 700 people—including 200 administrative jobs. Some 390 positions already have gone, without compulsory redundancies.

The group is looking at further expansion in China and Eastern Europe.

In China, the new 80:20 polyether ether ketone (PEEK) joint venture with Jilin University, JIDA Degussa High Performance Polymers, is expected to be finalized “any day now,” said Felcht. Plans to build a 100,000 metric ton per year methyl methacrylate (MMA) plant in China are to be presented to the Degussa supervisory board in December.

In Eastern Europe, Degussa wants to work closely with academic institutions to identify existing technology it could help to commercialize—mirroring what it is already doing in China.

But while Felcht said the dynamics of China make it essential to invest in new capacity there, new plants will be built in Eastern Europe only when the German plants are fully utilized.

One exception could be the construction chemicals. This “is mostly a local business,” he said.

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