Germany’s LANXESS boosts profit target on ‘green mobility’ - CEO

19 September 2012 19:16  [Source: ICIS news]

NEW YORK (ICIS)--LANXESS is raising profit targets on growth by high-performance synthetic rubber and lightweight plastics, known as “green mobility,” to cut vehicle fuel consumption, its chief said on Wednesday.

“In 2011, products related to green mobility accounted for 17%, or €1.5bn [$2bn] of our total sales, and that figure is growing. We aim to nearly double our total revenue in this field to €2.7bn by 2015,” said CEO Axel Heitmann at the company’s media day in New York.

The Germany-based company set a goal of generating €1.8bn in underlying earnings before interest, tax, depreciation and amortisation (EBITDA) by 2018.

LANXESS added that it is on track to achieve its earlier target of €1.4bn in EBITDA by 2014 - a year earlier than scheduled. For 2012, the company maintained its projection of a 5-10% gain in EBITDA to between €1.2-1.26bn.

LANXESS plans to ramp up sales in green tyres and lightweight plastics for the automotive sector – an area it calls “green mobility”.

Tyres on a car are responsible for about 30% of the vehicle’s fuel bill, and LANXESS claims that its new synthetic rubbers can reduce fuel consumption of a tyre by 25%.

The world personal vehicle fleet is projected to grow from 951m units in 2012 to 1.157bn units in 2017 and 1.554bn units by 2027, said the CEO.

“If this growth continues unchecked at the same level of technology we use today, our planet will collapse. Mother nature will not tolerate these levels of CO2 emissions,” said Heitmann.

“There is simply not enough fuel to power all those engines,” he added.

New European rules in November 2012 for tyre labelling for fuel efficiency and brake performance will provide “unprecedented transparency” for consumers to make informed decisions, he noted.

LANXESS is investing heavily in new world-scale facilities to produce high-performance synthetic rubbers for these tyres.

Earlier this month, the company began construction of a €200m neodymium-based performance rubber (Nd-PBR) plant at Jurong Island in Singapore. The 140,000 tonne/year plant is expected to start up in the first half of 2015.

LANXESS expects the facility to generate annual sales of €300m-350m as of 2017.

The plant will get the majority of its butadiene (BD) feedstock from Petrochemical Corporation of Singapore through a long-term supply agreement.

And LANXESS’s new 100,000 tonne/year butyl rubber unit is on track to be started up in the first quarter of 2013.

The butyl rubber plant, LANXESS' single-largest investment at €400m, is next to the new Nd-PBR unit on Jurong Island.

Heitmann said he is confident LANXESS will have enough supply of key feedstock BD for its synthetic rubber expansion plans.

“As the largest buyer of BD in the world, we are confident we will find enough BD for our high-end products. There will always be more BD availability for our high-performance products than for the ABS [acrylonitrile butadiene styrene] market,” said Heitmann.

In addition, the long-term trend of increasing BD prices will bring more capacity into the market, including from on-purpose BD, he said.

“When the price goes up, there are tons of opportunities to increase capacity,” he added.

The CEO also ruled out any interest in back integrating to BD production.

“Our core competency is making high-performance products. We will not go into manufacturing BD,” he said.

Additional reporting by Nurluqman Suratman in Singapore

($1 = €0.76)

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