Lanxess to slash 6 pct of workforce to counter overcapacity

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* Equal to about 6 pct of global workforce

* grapples with growing competition in Asia

* To take 150 mln eur in one-off charges, 100 mln of which this yr

* Shares down 1.8 pct as cutbacks fall short of expectations (Adds shares, analyst comment)

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By Ludwig Burger

COLOGNE, Germany, Nov 6 (Reuters) – Lanxess, the world’s No.1 maker of rubber, said it would cut about 1,000 jobs, or 6 percent of its global workforce, to counter overcapacity in the industry but its shares fell on disappointment over projected cost savings.

As part of its restructuring programme the German chemicals maker aims to slash annual costs by 150 million euros ($188 million) from the end of 2016 and take exceptional charges of 150 million euros by end of that year. About 100 million of those charges are to be taken this year, it said on Thursday.

Lanxess shares dropped 3.7 percent at 0900 GMT in a marginally lower German market as the targeted savings fell short of what some market participants had hoped for.

“As consensus expectations for cost savings were between 130-200 million euros, we think the market might be disappointed,” said Baader Bank analyst Markus Mayer.

Mayer said analysts were also taken off guard by the costs of starting up two new sites that had been planned under Chief Executive Matthias Zachert’s predecessor.

Lanxess said in presentation slides that these costs would amount to 85 million euros over the next few quarters.

Lanxess, which also makes ingredients for pesticides, construction pigments and leather chemicals, has crimped research expenses as well as investment budgets under Zachert, who took over in April and is on the lookout for strategic partners.

Its main business is suffering from weak demand and Asian rivals are challenging its dominant position in that market segment, planning to bring more capacity on stream next year.

Rivals expected to boost their rubber capacity include a joint venture of Mitsui Chemicals and as well as Sabic, Dow Chemical and Eni’s chemicals arm Versalis, according to analysts.

Third-quarter adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) rose 12.3 percent to 210 million euros, just ahead of the 208 million euro average analyst estimate in a Reuters poll.

The group confirmed its full-year target range for adjusted EBITDA of 780-820 million euros, up from 735 million last year.

The company is aiming to cut 1,000 jobs by the end of 2016. Severance packages have been offered to staff in Germany, which will be hit by about half of the targeted cutbacks, but forced redundancies cannot be ruled out. The group is making “country-specific arrangements” at sites abroad, it added.

The Cologne-based group, formerly part of synthetic-rubber inventor Bayer, depends on demand from makers of tyres, door sealants, windscreen wipers and tubes for about 40 percent of its revenues. (1 US dollar = 0.7987 euro) (Reporting by Ludwig Burger; Editing by Victoria Bryan)

 

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