Degussa supervisory board okays streamlining plans

13 December 2005 18:01  [Source: ICIS news]

FRANKFURT (ICIS news)--Degussa's supervisory board on Tuesday approved plans to streamline the group’s operational structure and evaluate the sale of its construction chemicals division, the German speciality chemicals producer said.

The Boston Consulting recommendations, which emerged from the recently concluded Degussa “Strategy & Organisation” project supported by the consulting group, include expanding the managing board, while largely eliminating middle management.

However, “no operational redundancies are planned in connection with the organisational changes,” Degussa said.

The supervisory board authorised management to study a sale of the construction chemicals division, which in 2004 reported annual sales of around Euro1.8bn ($2.13bn) and earnings before interest and taxes (EBIT) of Euro201m.

In future, said Degussa chairman Utz-Hellmuth Felcht, the managing board will “take on a significantly more operational role”.

Effective 1 January, the board will be expanded from four members to six, and at the same time the existing five divisions – in addition to construction chemicals this includes fine and industrial chemicals, performance materials, coatings and advanced fillers, along with specialty polymers – will be dismantled.

The number of business units will decrease to 17 from the current 20, and their heads will then report directly to the managing board.  Current fine and industrial chemicals division head Bernhard Hofmann and specialty polymers chief Manfred Spindler will take seats on the managing board.

From 2006, external reporting will be done on the basis of four reporting segments, to include Technology Specialties, Construction Chemicals (reporting to Hofmann) and Consumer Solutions and Specialty Materials (reporting to Spindler). The responsibilities of board members Alfred Oberholz, Thomas Schoeneberg and chief financial officer Heinz-Joachim Wagner will remain unchanged.

According to Degussa, the Strategy & Organisation scheme, which Felcht in November said would involve expenditure of Euro50m and be booked to accounts in 2006, has identified “high return businesses with growth potentials that have not been fully exploited”, including inorganic specialities, special applications for coatings and adhesives, solutions for the cosmetics industry, and high performance plastics.

Over the medium term, the group said it would find “other solutions” for businesses not achieving profitability targets despite extensive restructuring.

Degussa also plans to streamline its international organisation. The seven regions North America, Western Europe, Eastern Europe, India, China and Japan, in future will report directly to the managing board.

Earlier, Degussa – commenting on leaked reports – had said a sale of the construction chemicals activities was “never a topic”. Felcht is believed to want to keep the business, while Werner Muller, head of the speciality chemicals group’s majority owner (50.1%) RAG, reportedly wants to sell it to raise funds for an acquisition of energy conglomerate Eon’s 43% stake in Degussa.

Degussa has described its construction chemicals division as the “global market and technology leader”. 

By: Dede Williams
+44 20 8652 3214

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