Although there are some signs of an economic recovery that should help its business, the European chemical and pharmaceutical industry can expect to have another difficult year in 2004.
Akzo Nobel chief executive Hans Wijers said in his New Year statement that there are signs that the economy is picking up, particularly in the US, while some forecasters are also predicting some recovery in Europe.
However, he cautioned: "It is far from certain that we are going to experience a robust economic upswing." Akzo and its peers in the industry have suffered from the weakness of the US dollar, a tough economic climate and increased competition in the market from companies in Asia.
Yesterday, the company revealed that its UK subsidiary Diosynth Ltd, which specialises in the manufacture of active pharmaceutical ingredients (APIs) would have to lay off 70 of its staff because of the difficulties in securing new contracts in the face of competition from Asia.
This was just the latest in a series of staffing reductions and restructuring efforts across the European pharmachem sector in 2003, with some of the biggest names in the industry - including BASF, Bayer, Rhodia, and Degussa - affected. By October, Akzo had already reduced its employee numbers by several hundred in a bid to bring its staffing levels in the pharma business below 21,000. Overall, it employs 65,000 people worldwide.
Wijers said that the company will have to cut costs even further in 2004, with the knife poised over the group's Arnhem headquarters. He noted that the company has been scrutinising the 'efficiency and effectiveness' of the HQ over the last few months, and can see significant potential to make savings.
Meanwhile, the group has already taken steps to fix its ailing pharmaceutical unit, which suffered the blow last year of the patent expiry in the US on its big-selling Remeron (mirtazepine) antidepressant.
In a deal announced yesterday, Akzo sold its entire stake in its antithrombotics portfolio to Sanofi-Synthelabo, its development partner for the project, in return for a royalty stream.
The agreement covers Arixtra (fondaparinux sodium), first launched in 2002 but showing snail-like sales growth, as well as follow-up compounds. Analysts at Merrill Lynch welcomed the move, noting that it frees up R&DFunds for other projects and should help improve margins at the group.