Lanxess' rubber business returns to profit

By David Shaw, ERJ staff

Dusseldorf - Lanxess says its performance rubber segment has returned to profit, but is nevertheless restructuring its polybutadiene and butyl rubber activities.

By the end of 2007, the company will close one of  its four BR manufacturing lines at Orange, Texas, reducing capacity from the nominal 180 kt per year at present with the loss of around 80 jobs. The company said it is improving efficiency at the unit, and since markets are near static, it expects to continue to supply the market from the reduced capacity.

For the 12 months to December 2005, Lanxess said its performance rubber business unit reported EBITDA of 12.8 percent, up from 8.6 percent a year ago. The company is aiming for an average EBITDA of 9 to 10 percent across its whole operations, putting the rubber sector as one of the company's most profitable.

Selling prices across the Performance Rubber unit increased by 18.1 percent over the year. The company said this improvement came as a result of its 'Price before volume' strategy, in which the company chose to decline contracts at less than profitable prices. Overall, said Axel Heitmann, chairman, rubber volumes declined by 1.5 percent over the year. As a result, sales grew by 17.3 percent over the year to Euro 1678m, compared with Euro 1431 million in 2004.

Despite this strong performance, the company said it expects to lose about 80 jobs with the closure of one line at its BR plant in Orange Texas and to implement efficiency savings at its unit in Port Jerome, France. Heitmann said the company always looks to improve efficiencies where it can, even in its more profitable activities.

Lanxess has also undertaken to achieve savings of Euro 20 million annually at its butyl rubber unit in Zwijndrecht, Belgium. The company said these would be achieved through structural measures such as asset consolidation and process optimisation, but did not expand on the measures nor did the company mention any job losses at Zwijndrecht.

Overall, Lanxess reported a net loss of Euro 63 million for the year, down from a loss of Euro 12 million a year earlier. The figures are strongly misleading, however, since the company reduced net indebtedness by Euro 455 million in the year, and intends to pay a dividend to shareholders for the first time.