Internally, Lanxess is preparing for a recession in the coming year.
(Photo: IMAGO/sepp spiegl)
Dusseldorf The chemical company Lanxess will initially not invest any more money in the expansion of its German plants. CEO Matthias Zachert announced this on Wednesday and referred to the declining competitiveness of the domestic locations, which he sees in danger primarily due to high energy prices.
“I’ve always said: Our core is in Germany and we want to defend it. But given the current situation and the existing framework conditions, we have to be careful,” explained the CEO. As long as the location factors in Germany do not improve, Lanxess will refrain from expanding.
In recent years, the group has regularly expanded the domestic plants, which are mainly located on the Lower Rhine. Now Lanxess will only invest in the maintenance of existing systems and their sustainability. The exact amounts are unclear. Group-wide, Lanxess has recently invested between 150 and 200 million euros annually in the expansion.
Zachert warned against deindustrialization of German chemistry; “If the conditions here do not improve substantially, production will migrate to other regions of the world.” Germany and Europe would thus become dependent on new things, for example when it comes to the procurement of important chemical precursors. “If we don’t remain competitive, we won’t be able to keep the jobs here either.”
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According to the CEO, China is not the beneficiary of the current situation in Europe. Because there, too, Lanxess will initially not put any money into new systems or expansion. Because of the strict Covid-19 policy, the further development of the country is too uncertain and makes new projects difficult.
Lanxess manager van Baarle moves up to the board
Lanxess is now focusing more on the USA. There, Zachert is observing a “reindustrialization” that is becoming more dynamic due to the comparatively low energy prices. The group has recently strengthened itself with several takeovers in North America. The next investments could mainly flow there.
The US business has recently proved to be an important pillar in Lanxess’ operational business.
(Photo: dpa)
The fact that the USA will play a greater role at Lanxess in the future is also shown by a change of personnel announced on Wednesday: at the beginning of 2023, Lanxess manager Frederique van Baarle will move up to the board as the new labor director.
In mid-2023, the 51-year-old will have overall responsibility for Lanxess’ North and South America business and will be moving to the USA. Board member Anno Borkowsky will retire at the end of 2023 due to age.
The US business has recently proved to be an important pillar in Lanxess’ operational business. Sales increased in the third quarter by 38 percent to 2.19 billion euros, adjusted profit (Ebitda) by 4.8 percent to 240 million euros.
This was mainly due to the fact that Lanxess passed on the increased costs for raw materials and energy through price increases. However, this is becoming increasingly difficult because, from the Lanxess boss’s point of view, the economy has “now left growth mode”.
>> Read here: Recession could slow down the chemical industry’s green transition
The third quarter is a transition phase for the chemical industry. Because the quantities in demand are now falling, a significant drop in sales is to be expected in the industry. Lanxess wants to close the year with a profit of between 900 and 950 million euros.
Internally, Lanxess is preparing for a recession in the coming year. The waiver of expansion investments in Germany should also be seen from this point of view. The Executive Board checked all projects for necessity and partially extended or canceled them.
The focus is also on operational costs. In addition, Lanxess has secured a liquidity cushion of 1.8 billion euros. “We are well prepared for possible hard times,” said Zachert.
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