Lanxess AG's restructuring efforts are starting to pay off.
Net income for 2016 increased 16.4% to €192m, despite a 2.6% decrease in sales to €7.7bn, and EBITDA increased by 12.4% to about €995m the firm said during its financial presentation for 2016.
"Lanxess is back on track for success," CEO Matthias Zachert said in a 15 March news release. "We have achieved key milestones in our reorganization to make Lanxess a more stable and profitable enterprise and we have progressed a good way on our course for growth."
It's been a busy year for Lanxess as it emerges from multi-stage restructuring effort, which Zachert established when he took over as CEO in 2014. The firm consolidated to 10 business units, from 14, and realigned its EPDM and neodymium-based performance butadiene rubber portfolio into strategically placed global sites. The combined moves reduced employment by more than 1,000.
The final piece was establishing a 50-50 synthetic rubber joint venture with Saudi Aramco, who paid €1.2bn for its stake of Lanxess' synthetic rubber-related business units – tire & speciality rubbers and high performance elastomers. Arlanxeo went operational 1 April and reported sales of €2.71bn, a 5.2% decrease compared to 2015. That was due to what Lanxess described as a "persistently difficult competitive environment." Reduced selling prices outweighed cost relief gained from lower raw material prices.
The firm used proceeds from the sale to help reduce its debt. It reported net financial liabilities at €269m for the end of 2016, decreasing by €931m compared to the end of 2015.
Lanxess also is in the process of acquiring Chemtura Corp., a US-based flame retardants and lubricant additives producer, for about €2.4bn. Chemtura's shareholders approved the deal in February and Financial authorities in South Korea approved the deal at the beginning of March. Authorities in the US and Brazil approved the acquisition earlier. Lanxess said the acquisition is on track to close by mid-2017.
"We again significantly strengthened our balance sheet in 2016 and are continuing along this path of financial stability," Chief Financial Officer Michael Pontzen said in a statement. "We secured the financing for the planned acquisition of Chemtura quickly and at attractive conditions while at the same time maintaining our investment-grade rating."
Segment-wise, Lanxess' Advanced Intermediates and High Performance Materials segments each saw decreased sales, by 4.6% (€1.74bn) and 2.7% (€1.06bn), respectively.
Its Performance Chemicals segment improved by 2.7% to €2.14bn. Lanxess attributed the growth to volume growth and better capacity utilization. This segment also houses the firm's Rhein Chemie Additives business, which is set to triple in sales once combined with the incoming Chemtura business.
Lanxess employs about 16,700 in 25 countries with 54 production sites.