MG exits chemicals business

Related tags Technology

MG Technologies has decided to sell off its chemicals businessesand
concentrate on process technology and components.

German manufacturing firm MG Technologies has set aside its 'twin-track' strategy of tackling both the engineering and speciality chemicals sectors. The company said it will divest its chemical additives business in order to focus on mechanical and plant engineering, with its 'process technology and components businesses at the core'.

The company said that it does not have the resources to develop both these businesses, and will use its exit from the chemicals sector - carried out via the sale of Dymanit Nobel and Solvadis units - to fund its engineering activities. At the heart of the group will be GEA, which supplies process technology and components for the pharmaceutical, food and petrochemical industries.

"We are convinced that a clear focus on process technology and components offers the best platform for sustainable profitable growth,"​ said Udo Stark, MG's chief executive. He said he expected to receive about €2 billion from the sale of the chemicals subsidiaries, which will help fund organic growth as well as possible acquisitions.

The new company will comprise of GEA and the three businesses in the industrial plant engineering industry: Lurgi, Lurgi Lentjes and Zimmer. MG said that GEA can claim technological and market leadership positions in the supply of process technology and components, backed by R&D expenditure of twice the industry average. Products developed in the past three years account for 50 to 70 per cent of total current sales, depending on the individual business units.

A streamlining of industrial plant engineering at Lurgi, Zimmer and Lurgi Lentjes will be implemented to return all of the industrial plant engineering activities rapidly to profitability, said MG. This will necessitate a reduction in total capacity and break-even levels will in particular be lowered at Lurgi Lentjes and Lurgi.

Discussing the financial implications of the restructuring, MG noted that 2003 will see one-time effects of approximately €415 million, resulting in a full-year net loss of €150-€170 million. Pre-tax earnings will drop by around €240 million without the contribution of the chemicals units, but this will largely be compensated for by cost savings.

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