Engineering News

FACTBOX-Bayer's Lanxess chemicals and polymers spin-off
Tue Jan 25, 2005 10:33 AM ET

FRANKFURT, Jan 25 (Reuters) - German drugs and chemicals group Bayer will list its Lanxess chemicals and polymers unit on Monday, marking the culmination of the biggest restructuring in its 141-year history.

Here are some facts about Lanxess, the newest major name in European chemicals.

WHAT IT DOES: Lanxess contains a third of Bayer's polymer business and most of its chemicals operations. It makes performance rubbers (used in tyres and to modify plastics), engineering plastics, chemicals intermediates and performance chemicals (disinfectants, corrosion inhibitors, textile chemicals).

FIGURES: Lanxess had sales of around 6.3 billion euros ($8.22 billion) in 2003, which it says makes it the sixth-largest publicly listed chemicals company in Europe. It employed some 19,600 people as of September. It runs production sites in 50 locations in 18 countries. It made a net loss of 8 million euros in the nine months to September 2004 on sales of 5.05 billion.

It has net debt of 1.1 billion euros. The company has a rating of BBB- from Standard & Poor's.

MANAGEMENT: Chief Executive Axel Claus Heitmann (45), an old Bayer hand; Chief Financial Officer Matthias Zachert (37).

THE SPIN OFF: Bayer shareholders get one share in Lanxess for every 10 they hold in Bayer.

STRENGTHS: Lanxess's product portfolio is heavily dependent on general economic conditions, and many analysts expect a chemicals sector upswing to continue in 2005.

WEAKNESSES: Analysts say a large part of its business has low profit margins. A large part of its production is in costly Germany. Its fortunes could take a downturn when the chemical sector upswing ends. On job cuts, Lanxess' hands are tied by a Bayer-union deal which rules out compulsory redundancies until late 2007.

WHAT TO EXPECT: Analysts see significant restructuring ahead. The company has some 17 operating units, and a sale of styrenics, fibres and fine chemicals could fetch the company 4-5 euros per share, analysts say.

Lanxess expects 7 percent core profit margins before one-offs in 2004, far below the sector average.

Source: Lanxess Web site, Lanxess statements, analysts' reports.

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