· LANXESS announces the merger of the business unit and promotes the restructuring plan

On August 8, 2014, Cologne – Special Chemicals Group LANXESS announced that it is systematically advancing the restructuring plan and establishing a three-phase plan for the “Let's LANXESS again” project. The plan addresses the following three areas:
· Competitiveness of business and management structure · Competitiveness in operations · Competitiveness of product portfolio The Group's overall restructuring plan, launched by the Board of Directors on July 24, 2014, began to improve the competitiveness of its business and management structure. Preparations for the other two areas have also begun.
LANXESS will merge some of its business units, and the number of business units will be reduced from 14 to 10, effective January 1, 2015. In addition, the company is streamlining its global administration, cutting cross-functional staff and consolidating specific areas of work. Employee representatives in the areas involved will be involved in the streamlining process.
A more efficient organizational structure is designed to strengthen LANXESS' services to key markets and key customers, and to cut costs. In addition, LANXESS plans to reduce all cost types.
“We have worked hard over the past few months to lay the foundation for restructuring. We will be a team to systematically implement our plans and greatly enhance our competitiveness. We have started to negotiate with the employee representatives to implement the process (according to the laws and regulations of the company’s location) ), we expect to be able to quickly reach a constructive solution," said Matthias Zachert, chairman of the management board of LANXESS Group.
LANXESS will present further details of the restructuring in the “Investors and Media Day” event on November 6, 2014.
More efficient business unit structure Considering the overlap of customers and regional architectures in mature markets and the complementary advantages in emerging markets, LANXESS will merge butyl rubber (BTR) and high performance butadiene rubber (PBR) business units to create tires and specialties. Rubber (TSR) Business Unit. The business unit will be headed by Jorge Nogueira.
In addition, due to customer structure overlap, LANXESS will recombine the two business units of High Performance Elastomer (HPE) and Keltan Elastomer (KEL) into a new High Performance Elastomer (HPE) business unit. Jan Paul de Vries will lead this new business unit.
The specialty chemicals product line, the functional chemicals (FCC) business unit and the Rhein Chemie (RCH) business unit of the Rubber Chemicals (RUC) business unit will be merged to form the new Rhein Chemical Additives (ADD) business unit. The merger of the additive business will open up new markets for new blooms and attract new customers. The head of the new business unit will be Anno Borkowsky.
LANXESS has announced in September 2013 that it is investigating a strategic plan for the Rubber Chemicals Business Unit's antioxidant and accelerator product line. At the same time, the company is also considering merging these product lines into the High Quality Industrial Intermediates Business Unit (AII). LANXESS will make decisions from both options at the end of the third quarter of 2014.
Streamlining administrative department LANXESS will merge the three group functions of Aliseca (ASC), Industrial and Environmental Affairs (IEA) and Innovation and Technology (INN) to form a new group function, namely production, technology, safety and environment (PTSE) )unit. Par Singh will be the head of this new department. In the future, part of the maintenance work will be moved to the business unit to improve efficiency.
The Group's Internal Audit Department (IA) and Group Security will be integrated into the Group's Legal and Intellectual Property (LIP) Department. The head of the new Legal and Compliance (LEX) department will be led by Jochen Schroer.
Claus Zemke will be the head of the LANS Corporate Communications (COM) division, which is expected to take up before January 1, 2015. Zemke is the head of Corporate Communications at TRUMPF, a manufacturer of machine tools.
Further steps in the restructuring plan in the second phase – to enhance operational competitiveness – will implement the “Operational Excellence Plan” to assess whether all production facilities meet market requirements and create synergies. Par Singh will lead the implementation of this project. Torsten Derr will be responsible for the “Marketing Excellence and Marketing Program” to assess the effectiveness and efficiency of the LANXESS International Distribution Network.
In addition, LANXESS has taken initial steps in the third area – product mix competitiveness.
LANXESS will provide regular information on the restructuring process from 2015 onwards.
The profitability situation improved in the second quarter of 2014. The demand for agrochemicals in the second quarter of 2014 was good, and the development of the construction industry was positive. However, the synthetic rubber business continues to face difficult competition and the exchange rate factor has a negative impact. Compared with the same period last year, LANXESS achieved sales growth in all regions except Latin America. The Group's total sales volume increased by 2%, but the increase in sales did not fully offset the impact of a 5% drop in sales prices. Overall, LANXESS Group's total sales fell 5.7% to approximately 2 billion euros.
During the reporting period, profit before interest, taxes, depreciation and amortization increased by 20.7% year-on-year to 239 million euros. This growth is attributable to increased sales, increased capacity utilization and cost savings from the Advance efficiency program. LANXESS’s actual operating results for the second quarter were close to the previous forecast of €220 million to €240 million. The profit margin before interest, taxes, depreciation and amortization in the regular business range increased to 11.8%, up from 9.2% in the same period last year.
“Revenue continues to be at a low level, and competition is becoming increasingly fierce, indicating that it is imperative to take measures to further enhance competitiveness.” Chang Mutian said.
Thanks in part to the improvement in financial results and the reduction in special expenses, LANXESS's net profit in the second quarter increased significantly to 55 million euros, compared to 9 million euros in the same period last year. In the same period last year, the restructuring of the high-performance chemicals sector resulted in a spending of 40 million euros.
The net financial liabilities of financial data decreased from approximately 1.7 billion euros on December 31, 2013 to approximately 1.5 billion euros on June 30, 2014, mainly due to the successful capital increase in May 2014. Operating cash flow increased significantly to 178 million euros due to improved performance and a decrease in year-end bonuses for fiscal year 2013.
Performance in various sectors In the continuing market environment, sales of high-performance polymer segments fell 12.1% to approximately 1 billion euros. The main reason for the decline was that the sales prices of all rubber businesses continued to fall. Earnings before interest, taxes, depreciation and amortization in the regular business of the segment increased by 28 million euros to 122 million euros, mainly due to the increase in capacity utilization.
Sales of high-quality intermediates increased 2.5% to 403 million euros due to continued strong demand for agrochemicals and aromatics products. The Saltigo business unit benefits from new projects in the agrochemical industry. Earnings before interest, taxes, depreciation and amortization for the regular business of the segment were essentially flat compared to the same period last year, at EUR 73 million.
Driven by sales growth, sales of the Performance Chemicals segment increased by 1.4% to 569 million Euros. The growth drivers are mainly driven by materials protection products, leather chemicals and pigments. The profit before interest, taxes, depreciation and amortization for the regular business of the segment was 86 million euros, a significant increase of 28.4% from the 67 million euros in the same period last year.
Clear profit target LANXESS expects the global economy to continue to recover slowly in the second half of this year. For the synthetic rubber business closely related to the automotive and tire industries, the company is expected to face difficult competitive environment and price pressures. LANXESS expects demand for agrochemicals to continue to improve in the second half of the year. The growth of the construction industry is expected to provide further positive incentives for the pigment business in the high performance chemicals sector.
The company still expects its 2014 profit to increase year-on-year. This expectation has taken into account the start-up costs of China's EPDM plant in the fourth quarter of approximately €10 million and possible shutdown maintenance measures.
“We have narrowed our profit target range from 770 million euros to 830 million euros. Now we expect the profit before interest, taxes, depreciation and amortization in the regular business in 2014 to be between 780 million euros and 820 million euros.” Chang Mutian said.

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