Akzo cuts staff at Diosynth unit

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Related tags: Akzo nobel, Netherlands

Dutch chemical company Akzo Nobel followed through on its plans to
cut costs at its pressured Diosynth subsidiary by slashing staff at
the unit, which has been hit by a deteriorating market for its
manufacturing services in both chemical and biological active
pharmaceutical ingredients (APIs).

The company said that "overcapacity in the chemical synthesis business is too high to ignore,"​ as it announced 350 job cuts and a restructuring of Diosynth's worldwide operations. Last month a start was already made with a reduction of production capacity at the company's Buckhaven site in Scotland, with the loss of 75 jobs.

Diosynth is facing a significant rise in overcapacity as a result of a severe decline in demand for APIs. Third party customers are destocking to reduce working capital and there is general overcapacity in the chemical API sector. Moreover, captive demand from Akzo Nobel's human pharmaceutical business Organon is also shrinking, as a result of destocking and lower sales for some products.

In the face of declining demand, Diosynth is reducing its worldwide chemical synthesis capacity by closing its production site in Mexico and scaling back facilities in the Netherlands.

"We have decided to reduce capacity at sites focused on producing starting materials or intermediate products,"​ commented Johan Evers, Diosynth's general manager. The Mexico City facility produced starting materials, while at Buckhaven Diosynth manufactures pharmaceutical intermediates.

Virtually all the 175 workers at the Mexico City plant will lose their jobs, and a further 100 positions will go in the Netherlands, said Akzo. It will transfer the manufacturing of API products to multi-purpose chemical sites in the Dutch towns of Apeldoorn and Oss, but warned that overproduction remained a problem at those sites as well.

The move sees the company's ongoing programme to 'fix pharma' extended to include its pharmachem operations. Akzo has already shed 4,080 staff across the group in 2003 in order to cut costs and lessen the impact of a patent expiry on Remeron (mirtazepine), its top-selling antidepressant drug.

"Cost cutting is one of the pillars of our strategy to fix pharma,"​ said the company, which has also stated it expects to complete several important divestments in its chemicals portfolio before the summer.

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