Lanxess calls for government help for chemical industry after profit slump

The headquarters of chemicals maker Lanxess are seen in Cologne, Germany November 15, 2018. REUTERS/Wolfgang Rattay/File Photo

Aug 4 (Reuters) - Chemicals group Lanxess (LXSG.DE) on Friday set out plans to trim costs, including job cuts, and called on German politicians to support the struggling industry after its quarterly profit fell by more than half.

Lanxess, which until recently had managed to pass rising raw material and power costs onto customers, was one of several German chemical firms that have trimmed their forecasts in the past weeks due to still high energy prices and weak demand.

"We urgently need sustainable framework conditions – above all an internationally competitive electricity tariff for the industry," CEO Matthias Zachert said in a statement.

Lanxess, which makes high-end speciality chemicals such as additives, lubricants, flame retardants and plastics, said it would save 100 million euros ($110 million) this year through strict cost discipline and a Europe-wide hiring freeze.

Further measures focusing on reviewing its energy-intensive operations and streamlining administrative structures will result in annual savings of around 150 million from 2025, Lanxess said.

Zachert added in a call these will include job cuts but did not elaborate on the number. The company said implementing these measures would cost around 100 million euros.

The Cologne-based group plans to shut down the hexane oxidation facility with 61 staff at its Krefeld-Uerdingen site in Germany by 2026. The chromium oxide production facility with 52 employees at the same location would be sold or shut down.

Lanxess shares traded down 1.75% at 1035 GMT.

"The closure of sites, even if expected, tends to trigger a negative first reaction," Baader Helvea analyst Konstantin Wiechert said in an e-mail, adding that some expectations of a cost-cutting program were already priced in the stock.

Lanxess aims to help its remaining 51 sites in Germany get through the crisis thanks to the cost cuts, but said it would have to reconsider their viability if conditions were to worsen.

Lanxess also aims to further refine its business model to realize the full potential of recent acquisitions.

"But that is not enough. Politicians need to finally wake up," said Zachert, calling for reduced bureaucracy and faster approval procedures to make Germany more competitive.

The group's second quarter core earnings (EBITDA) pre-exceptionals fell 57.7% to 107 million euros, in line with its forecast from June.

In a separate statement, Lanxess said its finance chief Michael Pontzen would leave by the end of August.

($1 = 0.9132 euros)

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