18 March 2009 20:41 [Source: ICIS news]
DUSSELDORF (ICIS news)--LANXESS has cut its global spending budget by €100m ($130m) in 2009, delaying several projects and capacity expansions until demand for key products picks up, the German chemical group's CEO told ICIS news on Wednesday.
Axel Heitmann said that the company would delay larger projects such its new butyl rubber plant in Singapore, high performance plastics plants in Antwerp, Belgium, and a number of capacity expansions at sites in Germany and other countries.
“If there is no demand, we will adjust accordingly,” said Heitmann. “We can adhere to our price-before-volumes strategy even during the crisis.”
LANXESS said it would also delay the planned relocation of its headquarters from Leverkusen to Cologne.
The group has been hit by a large drop in demand from end-use markets since the start of the economic crisis and was not expecting a boost in the first quarter from the weak levels of fourth-quarter 2008.
“The sheer volume has stabilised on the level of the fourth quarter. We expect in the first quarter a result which will not improve on an operational level... and a stock devaluation at the end of the quarter of at least €50m,” said Heitmann.
“[The biggest decrease in demand] has been in anything related to automotive or construction and mainly in the performance polymers business segment, which declined 32% in the fourth quarter year-on-year.
“However, using our price-before-volume strategy, we managed to pass on raw materials prices and increase prices by 10%.”
Industries hit hard by the downturn make up a large part of LANXESS' end-use markets. The tyre industry represents 25%, while other automotive applications account for another 13-15%.
“[The tyre industry] may produce a dip this year because consumers will drive less to save money right now, but it will soon pick up again and will be driven by Asian markets in the longer term,” Heitmann said.
He said that LANXESS was predominantly focused on the high-performance tyre markets, which are growing at a faster rate than general-purpose tyres.
“Our intermediates segment, which is a quarter of the company, the building blocks for the pharmaceuticals and agro-chemicals industries, wasn't involved in the decline and is pretty safe,” he added optimistically.
LANXESS said it will save €250m over two years through wage and production cuts as it battles the downturn, with €130m to be realised in 2009.
“[Short-time working] allows me to keep well-trained people in the job. When things pick up, I have them still involved and we can accelerate,” Heitmann said.
The company reported a fourth-quarter 2008 net loss of €41m, compared to a €5m profit for the same period the previous year.
(€1 = $1.30)
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