Leverkusen, Germany, December 21--Bayer is to spin off its chemicals operation Lanxess on the stock market early in 2005. It is hoped this will lift both Bayer's own market capitalization and create a basis for a reasonable share price for the new company.
But analysts are skeptical over just how much Bayer's share price will rise, especially as there remain concerns over the strength of the drugs business.
Lanxess will have sales of over EUR 6 bn and a workforce of 20,000. It will be Europe's sixth largest listed chemical company. Senior managers at Lanxess concede the company will have to move quickly to deal with weak and money-losing businesses.
Just two-thirds of activities are profitable at the moment, though the EBITDA margins is over 10%. 60% of sales have EBITDA margins exceeding 5%. Lanxess' EBITDA rose 25% to EUR 331 M in Jan-Sep 2004, on sales up 4% at EUR 4.5 bn. This is a margin of 7.6%.
Full-year margin is expected to be 7% (2003: 4.9%). It is hoped that cost-cutting and restructuring will lift EBITDA margins to 9-10% in 2006. There have already been some restructuring measures, including closing down of a polybutadiene unit and a fibre-blending unit. A hydrazine hydrate plant is to be moved from the US to China. ABS and fine chemicals have been marked down as areas posing major problems.
