Lanxess Shareholder Meeting Lanxess: Still a Long Way to go for Realignment Strategy
Lanxess' new chairman Matthias Zachert committed the shareholders to a tiresome restructuring process: Although the capital increase could be completed successfully, the company still has a long way to go.
Cologne/Germany – After a disappointing performance in 2013 and a modest start of 2014, the company's realignment strategy yet has to bear results. “We are currently facing major challenges – especially as the competitive environment for our business with synthetic rubber has changed. And this is clearly reflected in our results for fiscal 2013,” Lanxess' chairman Matthias Zachert said at the company's shareholder meeting.
In 2013, sales fell by 8.7 percent against the prior year to € 8.3 billion. EBITDA decreased by 39.9 percent to € 735 million. In total, Lanxess had to book net losses of € 159 million, though mostly attributable to impairment charges. Despite these figures, the company still wants to pay a dividend of € 0.50, accounting for total payouts of around € 46 million.
A Rocky Start in 2014 - Will plant Closures Follow?
Also the start of 2014 was rocky for the company: First-quarter sales were down by 2.5 percent year-on-year to € 2 billion. “We were able to increase our operating result, but business still remains at a rather low level,” said Zachert.
Now, with a successful increase of shareholder capital by 10 percent, the company wants to continue its realignment strategy: Administrative structures are to be optimized and decision-making processes streamlined, the company said. But also plant closures are not ruled out: The firm will analyse the profitability of its sites with consideration to temporary or permanent shutdowns of plants.
Investments Reduced: Expenditures Down to € 400 Million?
After a decade of focussing on the emerging markets, Lanxess now hopes for the established economic regions to provide the impetus for future growth. Synthetic rubbers, the company's problem child, will continue to face strong competition. In the second quarter of 2014, Lanxess anticipates EBITDA pre exceptionals to come in at between € 220 million and € 240 million.
With megaprojects in Asia underway, the company now plans to reduce its investments: Cash outflows for capital expenditures will be at the level of the previous year, when Lanxess spent € 624 million. After the completion of the major growth projects in Singapore and China, the Group plans to reduce capital expenditures clearly below € 600 million in 2015. In 2016, Lanxess expects to invest between € 400 million and € 450 million.
“I would like to already prepare you today for the fact that the next two to three years won’t be easy. But I am sure that Lanxess as a company will emerge from the realignment stronger than before,” Zachert said.