Lanxess CEO-designate says to end trend of lavish cash outflows

Thu Mar 6, 2014 9:53am EST

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* Sees need to start afresh after cash discipline "abandoned"

* Says to "play on the broad spectrum of change" at Lanxess

By Ludwig Burger

DARMSTADT, Germany, March 6 (Reuters) - The CEO-designate of Lanxess said he would have to reverse a trend of lavish cash outflows on investments at the world's largest maker of synthetic rubber for tyres, when he takes the helm on April 1.

"The cash discipline was basically abandoned," over the last two to three years, CEO-designate Matthias Zachert said on the sidelines of a press conference at drugs and chemicals maker Merck KGaA, where Zachert will quit as finance chief at the end of the month to return to his old employer.

"Despite high profitability, there was no cash generation any more because everything was expensed, or 'capex-ed', which for chemical companies is something that you shouldn't do and for that very reason you have to start afresh now."

Shares in Lanxess jumped almost 9 percent on Jan. 27 after news that the German synthetic rubber specialist had attracted its former finance director Zachert back from Merck to be its CEO.

In the first nine months of 2013, Lanxess incurred 87 million euros ($120 million) more in capital expenditures on plant and equipment, or 'capex', than what it had in cash inflows from operations. Full year figures are due to be published on March 20.

The cash flow after deducting investment expenses was a positive 164 million in 2012 and minus 251 million in 2011, the year Zachert quit as chief financial officer at Lanxess to take the same job at Merck.

Zachert also said the stock market in general tended to welcome companies that pursue takeovers at the moment, because the costs of borrowing were below the additional earnings that can be reaped from many takeovers, leading to an immediate topping-up of earnings per share. ($1 = 0.7278 euros) (Reporting by Ludwig Burger; Editing by Hugh Lawson)

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