Adapting to economic change

Global chemicals company, Arkema, has announced that it will reduce production at 40 global sites in response to falling orders and difficult financial conditions.

The company’s shares have declined rapidly since September, with a significant number of orders cancelled in the automotive and construction markets.

Several product lines, including PVC, PMMA and functional additives, have also seen considerable cutbacks.

Despite a resilient performance by several divisions, sales in the fourth quarter are estimated to fall by 15 per cent compared with the same period last year, while earnings before tax are forecast to remain at nine per cent.

The company’s latest cost reduction programme involves the temporary shutdown of a number of its global operations, and the strict use of its cash in controlling administrative costs.

Arkema hopes to reduce its costs by €500m (£450m) between 2005 and 2010, of which more than €330m is expected to be cut by the end of this year.

In addition, the company plans to implement a further programme to reduce variable and fixed costs by €50m by the end of 2010.

Thierry Le Hénaff, chief executive of Arkema, said: ‘Taking into account the economic environment at the end of 2008 and the lack of visibility on 2009 outlook, Arkema’s teams are preparing the company for tough market conditions expected for next year.

‘The main priority is to manage cash very strictly in order to maintain the quality of the balance sheet through optimisation of working capital requirements and a selective approach in approving capital expenditure.

‘Moreover, the variable and fixed cost savings programme will be even more stringent.

'In the meantime, we will actively continue to transform the company and we are convinced that Arkema has the requirements to adapt to changes in the economic environment.’