an important milestone in the transformation Petroflex, meanwhile, has given Lanxess
program, Heitmann says. “It has allowed us a significant position in fast-growing Latin
to divorce ourselves from a cyclical, raw mate- American markets and widened Lanxess’s
rial-intensive business,” he says. Lanxess’s portfolio, Heine says. The company was
purchases of petrochemical raw materials will “not very strong before in emulsion styrene
drop by 30% following the Lustran divest- butadiene rubber,” he says.
ment. Last year these accounted for 53% of Lanxess has also announced the biggest
the company’s € 3 billion raw materials bill. capital investment in the company’s history,
Analysts welcomed the divest ments. “They a €400-million project to build a world-scale
were very important steps in the butyl rubber plant in Singapore.
company’s restructuring because, Lanxess’s capital expenditure in
not only were these businesses low the three years ending December
margin, they made losses in the last 2009 is expected to reach a com-
downturn,” says Andreas Heine, bined € 1 billion, of which about
analyst at Unicredit (Munich). 40% will be used at the company’s
Lanxess has also cut staffing lev- German sites.
els and its number of sites. “We China and the rest of Asia feature
started life with about 20,000 peo- strongly in Lanxess’s growth plans.
ple, and today we are operating a Zachert: strong Asia accounted for more than 18%
much stronger company with about ^{demand for agchems.} of Lanxess’s 2007 sales, and the
15,200,” Heitmann says. The number of sites company’s sales there are growing at double-
has dropped from more than 50, to 44. digit rates. Chinese projects include a nylon
Meanwhile, Lanxess has regrouped its 13 engineering plastics compounding plant at
business units, following the divestment of Wuxi, and a lubricant additives plant to be
Lustran, under three segments: performance built by Lanxess’s Rhein Chemie subsidiary at
polymers, advanced intermediates, and perfor- Qingdao. Lanxess has opened a development
mance chemicals. Lanxess says it ranks among laboratory for high-performance rubbers at
the top-three global players in 70% of its prod- Wuxi and plans to establish a rubber research
ucts. The company is the leading producer of center at Qingdao.
polybutadiene rubber, second largest after “China is our fastest-growing market and
ExxonMobil Chemical in butyl rubber, and accounted for 6% of Lanxess’s global sales in
among the top three in ion exchange resins, 2007,” Heitmann says. He expects 9% sales
leather chemicals, and inorganic pigments. growth in China this year.
First acquisition. Lanxess’s focus is
on growth. It completed its first major
acquisition recently, buying a 70% stake
in Petroflex (Rio de Janeiro) for €200 mil- _{SALES BY REGION:}
lion. The rest of Petroflex is listed on the
stock exchange, and Lanxess says it will
make a mandatory offer for those shares in ^Asia _18.4% Europe,
Mideatst

the second half of the year. Petroflex had ^Performance and Africa₁

polymers

2007 sales of €535 million, Ebitda margin ^33.2% 41% Americas

24%

above 10%, and it is Latin America’s lead- ^Performance Germany chemicals

24.4%

ing producer of synthetic rubber. Lanxess’s ^30% first acquisition was the 2007 purchase

*ABS business sold to Ineos, consolidated until third-quarter 2007.

of Dow Chemical’s 50% stake in the 1) Excluding Germany. Source: Lanxess. companies’ Chrome International South

Africa (CISA; Newcastle) joint venture. The business produces sodium dichromate, used mainly to make tanning materials for leather. CISA sources its raw materials from Lanxess’s chromium mine at Rustenburg, South Africa, where 80 million m.t. of additional chrome ore reserves were discovered last year.

“Buying Dow out of CISA gave Lanxess a full grip on the whole chromium-to-tanning chemicals value chain,” Heine says. The deal also strengthened Lanxess’s position among the leading suppliers of leather chemicals.

LANXESS’S WORLD*

2007 sales: � 6. 6 Billion

SALES BY PRODUCT GROUP: Others 1%

Engineering plastics

10% Advanced intermediates

18%

 

All of Lanxess’s 13 business units are represented in Asia. Five of the company’s eight Asian manufacturing sites are in China. The company produces inorganic pigments at Jinshan, near Shanghai; semi-crystalline products and leather chemicals at Wuxi; basic chemicals at Weifang; and rubber chemicals at Tongling. The latter recently started producing the antioxidant Vulkanox in cooperation with two local partners. Rhein Chemie has production at Qingdao.

In India, Lanxess is investing €50 mil-

lion, including € 30 million to build an ion exchange resin plant at Jhagadia. The company is also relocating a rubber chemicals manufacturing plant from Thane to Jhagadia, which will become the larger of Lanxess’s two manufacturing sites in India. Rhein Chemie and Lanxess’s leather chemicals unit have production facilities at Madurai.

The Singapore butyl rubber plant will have a capacity of 100,000 m.t./year and is due onstream in 2011. It will produce regular and bromo butyl rubbers, and raise Lanxess’s overall butyl rubber capacity to 380,000 m.t./year. The project will help Lanxess to make up ground on ExxonMobil Chemical, which has about 50% of the world’s estimated 900,000-m.t./year butyl rubber capacity. Lanxess’s existing butyl rubber capacity is split about equally between sites at Sarnia, ON and Zwijndrecht, near Antwerp. Halo butyl rubber, used mainly in tubeless tires, is one of the company’s most profitable products and a key value driver.

Lanxess selected Singapore for the project to be closer to the company’s tire-manufacturing customers in Asia. “We expect there to be an increase in demand for halo butyl rubber due to increased demand for radial tires and the constantly growing automobile market in Asia,” Heitmann says. Singapore also has raw material availability, infrastructure, and qualified staff, he says.

The Singapore project will improve margins in Lanxess’s synthetic rubber business, analysts say. “Butyl rubber is the fastest-growing rubber and the highest margin product, so, by strengthening this segment, over time Lanxess will have a higher share of more profitable rubbers in its portfolio,” Heine says.

Rubber forms part of Lanxess’s performance polymers segment, the largest of the company’s three segments, with 2007 sales of € 2. 7 billion and an Ebitda margin of

14%. The segment’s products include butyl and polybutadiene rubbers, technical rubber products, Pocan polybutylene terephthalate resins, and Durethan nylon resins. Durethan manufacture is back-integrated to Lanxess’s production of caprolactam, a product in which the company is among the top players.

“We have a world-class caprolactam facility at Antwerp, which supplies our captive demand, accounting for just more than half of the total capacity, as well as the merchant market,” Heitmann says. The plant has capacity for 200,000 m.t./year of caprolactam, industry sources say. Ammonium sulfate, a by-product from the Antwerp caprolactam