Industry News

Degussa focusing on profitable growth - streamlines organization

Published on 2005-12-15. Author : SpecialChem

Degussa AG, Dusseldorf, is stepping up its pursuit of profitable growth, and streamlining its management organization. This brings the "Strategy & Organization" project of the world's leading specialty chemicals company to a successful conclusion. Having completed its start-up phase (2001 to 2004), Degussa has used the project to scrutinize its business portfolio and structures over the past six months. Degussa's Supervisory Board approved the strategic concept. No operational redundancies are planned in connection with the organizational changes. The new management structure will come into effect from January 1, 2006.

Prof. Utz-Hellmuth Felcht, Management Board Chairman of Degussa, comments: "Going forward, we are now positioned even closer to the market and leaner in the global specialty chemicals markets. This lays the foundation on which we can successfully implement our performance enhancement program Degussa 2008, the program that will enable us to achieve our demanding profitability and growth targets for the long term.

In future the Degussa Management Board will take on a significantly more operational role. Two new members will join the Board, taking the number to six. The Supervisory Board has appointed Dr. Bernhard Hofmann - at present responsible for the Fine & Industrial Chemicals Division - and Dr. Manfred Spindler, who currently heads the Specialty Polymers Division, as new members of the Management Board.

The five divisions will be eliminated as a management level of Degussa, while the business units will report in future directly to the Management Board. Degussa is thereby reinforcing its basic principle of a de-centralized corporate structure, and as a result accelerating its decision-making processes and further increasing its flexibility in the market.

The number of business units will decrease from 20 to 17 in future. Similar activities have been integrated even tighter together to enable them to compete in the global markets and be in a better position to exploit growth opportunities.

Starting 2006, Degussa's external reporting will be done on the basis of four reporting segments, namely Technology Specialties, Construction Chemicals, Consumer Solutions and Specialty Materials. These reporting segments represent the strong competence platforms of Degussa, and each pools activities with comparable business models and strategic success factors.

The Corporate Center in Dusseldorf, the Services and the regional organization will be organized more effectively.

Consistent focus on growth

The results of the "Strategy & Organization" project show that by focusing its portfolio, by restructuring activities and by strengthening its core businesses over the past few years, Degussa has established a solid foundation as the leading specialty chemicals company. Never-theless, corporate strategy, the portfolio and management organization must continue to be consistently developed so that the company can achieve the financial targets it has set itself.

In future Degussa will focus even more on sustained profitable growth. The "Strategy & Organization" project identified high-return businesses with growth potentials that have not yet been fully exploited. These businesses are to be carefully and selectively expanded in future. Important core growth areas in the portfolio include anorganic specialties, special applications for coatings and adhesives, solutions for the cosmetics industry and high-performance plastics. Over the next few months the Degussa Management Board will determine priorities and the specific action needed to implement this growth strategy.

In addition to the core growth areas, Degussa has profitable businesses making steady contributions to earnings, and these are expected tofinance future growth. These businesses have to secure their strong profitability for the long-term.

Activities that operate in a tough market environment will also need to achieve a profitable position. Over the medium term, other solutions will be found for those businesses that cannot achieve their profitability targets despite extensive restructuring.

This means that in future the strategic goals and the capital allocation will also reflect the different roles of the businesses in the portfolio to a greater extent.

Four reporting segments

External reporting will be carried out in future on the level of four re-porting segments. Unlike the former divisions, the reporting segments are not organizational units with own structures.

The Technology Specialties reporting segment comprises business units that are based on special technologies successfully developed by Degussa over decades: Building Blocks, Exclusive Synthesis, C4-Chemistry, Aerosil & Silanes and Advanced Fillers & Pigments. So for example, synthetic building blocks for the pharmaceuticals industry and biodiesel catalysts are the results of Degussa's technology and process expertise - ranging from synthesis development in laboratory volumes through to large-scale production, including upstream integration of essential raw materials. And with its physical/chemical expertise in particle technology, Degussa has achieved a leading position in rubber reinforcement and in polishing processes for optical data media.

The Construction Chemicals reporting segment comprises chemical systems and formulations for customers in the construction industry. In the process, Degussa can, as a global market leader, build on a strong distribution network and enormous experience in application development. The business units are Admixture Systems Europe, Admixture Systems North America, Admixture Systems Asia/Pacific, Construction Systems Europe and Construction Systems Americas.

The Consumer Solutions reporting segment combines those businesses in which Degussa functions as a global supplier of tailor-made ingredients used in manufacturing consumer products and materials. Development partnerships connect Degussa closely with leading end producers. The Superabsorber, Care & Surface Specialties and Feed Additives Business Units are all assigned to this reporting segment.

The Specialty Materials reporting segment comprises Degussa's high-performance material businesses, which enjoy leading positions as a result of superior material, processing and application expertise. Many of the products are manufactured from methyl methacrylate (MMA) in a Verbund, an integrated production network. This reporting segment includes the Coatings & Colorants, High Performance Polymers, Methacrylates and Specialty Acrylics Business Units. The competitive advantages of the integrated production network, the Verbund, enable these units to systematically tap into application markets in specialty areas such as pharmaceutical polymers and optical electronics.

Leaner management structures and more effective leadership

As Chairman of the Management Board of Degussa AG, Prof. Utz-Hellmuth Felcht has responsibility for the Group's strategy.Dr. Bernhard Hofmann will be in charge of the operating businesses in the Technology Specialties and Construction Chemicals reporting segment. Dr. Manfred Spindler will manage the businesses in the Consumer Solutions and Specialty Materials reporting segment. There are no major changes to the responsibilities of Management Board Members Dr. Alfred Oberholz, Dr. Thomas Schoeneberg and Heinz-Joachim Wagner.

The Corporate Center and Services, both of which will be organized more effectively, will support the Management Board in its management duties. The Corporate Center will take on a stronger leadership role in the Group. The Services that operate globally will in future report directly to the individual Management Board Member responsible, while all other services will report to the appropriate Corporate Center units. This will reduce the number of interfaces and achieve more efficient management of the Services.

Moreover, Degussa is streamlining its international organization. Seven regions (North America, South America, Western Europe, Eastern Europe, India, China, Japan) will in future be represented by Regional Heads, who will report directly to the Management Board Members. The other countries will be assigned to the business units that have the strongest sales locally.

Degussa is the global market leader in specialty chemicals. Our innovative products and system solutions make an indispensable contribution to our customers' success. It's an approach it sums up in its claim of "creating essentials". In fiscal 2004 Degussa's 45,000 employees worldwide generated sales of 11.2 billion euros and operating profits (EBIT) of 965 million euros.

Source: Degussa

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