US Hexion to slash 15% of workforce on long recession fears

12 March 2009 16:21  [Source: ICIS news]

HOUSTON (ICIS news)--US producer Hexion Specialty Chemicals plans to cut about 15% of its workforce this year on expectations that the global recession will last through 2009 and potentially beyond, the company said on Thursday.

Hexion currently employs 7,000 workers, according to its website.

The news came a week after the company posted a $921m (€718.4m) fourth-quarter net loss, primarily due to expenses incurred to terminate its merger deal with Huntsman.

The company said during an earnings conference call it hopes to save $100m through the layoffs, which is up from the $60m in savings discussed after the previous quarter.

Additionally, the company said it plans to cut around $50m more through plant closures and utility and wastewater reduction projects.

Details of the cost-savings plan have not yet been finalised, the company said.

“These actions are always difficult, but necessary in this environment,” said Craig Morrison, Hexion president and CEO. “We are planning for the recessionary trends we experienced in the fourth quarter to continue into the first quarter.

“After the first quarter, we are expecting improving trends throughout the year, but that the overall economic environment will remain challenging.”

To that end, Hexion said it reduced its planned capital expenditures for fiscal 2009 to about $110m, an 18% reduction from the $134m it spent in 2008.

Only Hexion’s performance products segment reported improved fourth-quarter earnings, compared with the year-earlier period. The company attributed the rise to strong oil field demand and favourable pricing.

The other segments - epoxy and phenolic resins, formaldehyde and forest products resins, and coatings and inks - all reported lower sales and profits.

However, the formaldehyde and forest products resins segments were experiencing better volumes in Latin America and parts of eastern Europe, the company said.

“Despite the challenging economic trends, we are also working to position Hexion for long-term success through selective modest investments in high-growth regions, such as Latin America, Asia and Russia,” Morrison said.

“We anticipate bringing on two new sites in these regions in the coming year.”

The company cited the recent $200m investment made by an affiliate of parent company Apollo as a leading factor in the company’s ability to fund any new projects.

($1 = €0.78)

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By: Ben DuBose
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