Lanxess will spend at least €1bn through 2009

11 March 2008 12:33  [Source: ICIS news]

LONDON (ICIS news)--Lanxess plans to spend €1bn ($1.5bn) on new plant and equipment between 2007 and 2009 and will be disciplined in its approach to acquisitions, executive board chairman Axel Heitmann said on Tuesday.

Between €330m and €350m of the planned capital expenditure will be spent this year, he added in a news conference following the release of the company’s 2007 and fourth-quarter results.

“We are investing wherever it makes sense for our business in the long term and wherever our position can be sustainably strengthened – not just in the world’s key growth regions, but also here in Germany,” he said.

The company plans to invest €400m in its German sites in the next two years, Heitmann said.

“Of course, we will also increase our funding for research and development in order to further improve our company’s innovative capability,” he added.

“As part of our Lanxess goes Asia initiative, we will invest up to €400m in Singapore in the coming years and expect to be producing up to 100,000 tonnes of butyl rubber there by 2011.”

The company's largest ever single investment will lift its total butyl rubber capacity to 380,000 tonnes/year.

Heitmann said that last year Lanxess had been urged to acquire companies to grow but had not taken that advice.

“We knew then, and we know now, exactly what we want and what we don’t want. And we’re certainly not interested in expensive compromises,” he said.

Lanxess in 2007 was linked with the possible acquisition of the RAG Degussa chemicals business now folded into the planned Evonik spin-off.

It agreed in December to spend €198m to acquire a 70% stake in the Brazilian rubber maker Petroflex.

No possible acquisitions were discussed but Heitmann said any deal must create new value; improve the utilisation of Lanxess's expertise and not distract it from its financial discipline.

Like other chemical companies, Lanxess has not started to see the impact of a US slowdown.

“As far as Lanxess is concerned, we experienced a good start to 2008, with demand for our products remaining at a high level. Plant availability and utilisation are good, and we are confident of implementing the price increases we have announced,” Heitmann said. 

"Like our competitors, we are cautiously optimistic about the performance of the global chemicals market in the current financial year. We expect the economic downswing in the United States to be offset by the higher pace of exansion in our customer industries in Asia."

Citigroup said in a report that Lanxess’s results were solid despite higher costs.

The improved financial position meant the company was in a good position to weather the potential weakening of growth and intensification of price pressures in 2008, the bank said.

Lanxess’s share price was up 1.58% at €23.10 in morning trading on the Xetra Dax exchange.

($1 = €0.65)

By: Lucy Craymer
+44 20 8652 3214

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