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UPDATE 1-Lanxess targets rising profitability with new mid-term goals
September 5, 2017 / 9:06 AM / 16 days ago

UPDATE 1-Lanxess targets rising profitability with new mid-term goals

* Aims for operating margin of 14-18 pct from 2021

* Aims to reduce earnings volatility

* Will only invest in projects with avg ROCE of 20 pct

* Sees 100 mln euros of synergies from Chemtura by 2020

* Shares slip to bottom of MDAX index (Adds further details on new targets)

FRANKFURT, Sept 5 (Reuters) - Lanxess, the world’s largest synthetic rubber maker, aims to lift its profits over the next four years by focusing on businesses with market-leading potential and cutting costs, it said as it unveiled new medium-term guidance on Tuesday.

The German group last year transferred a business that makes synthetic rubber for tyres into a joint venture with Saudi Aramco to reduce its exposure to tough competition in the sector.

It also branched out with the purchases of Chemours’ hygiene product ingredients business and of Chemtura, a U.S. maker of additives for lubricants and flame retardants.

It said on Tuesday it now aimed to achieve an operating margin of 14 to 18 percent from 2021 and to reduce earnings volatility. That compares with 12.9 percent in 2016, although Lanxess said the new target, unlike last year’s figure, would not include the contribution from the rubber joint venture.

Lanxess, which also makes engineering plastics as well as leather-tanning and water treatment chemicals, said it would only keep businesses in its portfolio that could achieve leading market positions and generate sustainable, attractive margins.

It will invest only in projects with high returns, targeting an average return on capital employed (ROCE) of 20 percent, and increase its share of sales in growth markets such as Asia and North America, it said.

Margin improvement will also come from cutbacks in the wake of the acquisition of Chemtura, with a reduction in annual costs by around 100 million euros ($119 million) by 2020, a quarter of which will already be achieved this year.

Shares in Lanxess slipped 2.3 percent to 62.60 euros by 0821 GMT, making them the worst performers on Germany’s mid-cap index .

$1 = 0.8418 euros Reporting by Maria Sheahan; Editing by Edward Taylor and Mark Potter

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