Investment

Lanxess to hike capex in Asia

By Li Xiang (China Daily)
Updated: 2010-09-17 07:46

DUSSELDORF, Germany - German chemical company Lanxess plans to boost investment substantially in the emerging markets in order to capitalize on booming local demand and robust growth, the company's chief executive officer said on Wednesday.

More than 38 percent of Lanxess' capital expenditure will have been directed toward Asia and Latin America by 2012, compared with less than 20 percent in 2005, according to Lanxess CEO Axel C. Heitmann.

"A key aspect of our strategy was to focus on the fastest-growing markets for our products, especially in the BRIC (Brazil, Russia, India and China) countries," he said. "This strategy has been validated by the fact that these nations were the first to emerge from the crisis and they are all now performing far better than the pre-crisis levels."

The BRIC nations currently account for 25 percent of Lanxess' global sales and Heitmann said that he expected the number to double by the end of this year.

Lanxess, which produces plastics, rubber, and specialty chemicals, has turned from a loss-making company to a highly profitable enterprise since it was spun off from the German chemical and pharmaceutical company Bayer AG in 2004.

Heitmann said that the company aims to increase its operating profit by 80 percent to 1.4 billion euros ($1.82 billion) in the next five years.

Synthetic rubber and high-tech plastic, key materials in tires and auto parts, are the strongest growth drivers of Lanxess' business globally, which has benefited from growing demand in countries such as China and India.

Half of Lanxess' sales of synthetic rubber come from China, the world's largest automobile and tire producer, according to Heitmann.

With the tire market being Lanxess' largest customer industry, the company expects the business to grow at an annual rate of 5 percent in the next five years.

"China plays an important role in our global business and we have seen a lot of growth coming out of China," Heitmann said.

"We are also going to expand our investment through acquisitions and we are open to all potential opportunities in China," he added.

Lanxess is also considering building a new plant in Asia for neodymium polybutadiene rubber - an essential material in the production of high-performance tires - with a capacity of 100,000 to 150,000 metric tons per year.

Heitmann said that the final decision on where in Asia the project would be located would be made within the next six months.

In the meantime, the growing demand for high-tech plastic, which helps make cars lighter and more fuel efficient, has also prompted Lanxess to expand its production in Wuxi, Jiangsu province in China. It will also build a new plant in Jhagadia, Gujarat province, India.

The company's Chief Financial Officer Matthias Zachert said that the company's current focus is on small- and medium-sized acquisitions, which will help Lanxess expand its footprint globally.

In 2008, Lanxess acquired Brazil's rubber company Petroflex for $291 million, a move that added significant strength to its position in the world's rubber market.

China Daily