German fine chemicals company Saltigo is benefiting from a cash injection from its parent company, Lanxess. The German firm is earmarking €30m for plant modernisation at its subsidiary, and a €10m brand new multi-purpose facility is already under construction.
The move comes in a bid to increase profitability at Saltigo, which Lanxess believes is still underachieving despite substantial moves to improve its business in the fine chemicals sector.
Saltigo provides custom synthesis and manufacturing services to the pharmaceutical, agrochemical and specialty chemicals industries. Although there has been a steady increase in earnings and higher utilisation capacity at the site, Lanxess is taking further action to strengthen their position in the industry.
"We want to secure our share of the growing demand in the fine chemicals market," said Saltigo MD Axel Westerhaus.
"The most important condition for that is an appropriate, state-of-the-art plant structure."
The €10m investment project is already underway, and involves converting existing plants in Leverkusen to produce active pharmaceutical ingredients (APIs) or intermediates.
In addition to investing in new and improved facilities, the company is also implementing a revised human resources package which involves increasing working hours and negotiating new rosters with employee representatives.
Saltigo spun out from parent company Lanxess in 2005 as part of a major restructuring by the parent company.
At the time, fine chemicals was the biggest loss-making unit at Lanxess, reporting a net loss of €12m in 2004 - an improvement on the €997m loss posted in 2003. The move to hive off the unit to form a discrete subsidiary was intended to increase the company's competitiveness in the pharmaceutical and agricultural chemicals industry, whilst ensuring the survival of both business units.
European fine chemicals firms have had a tough time over the last few years, struggling with overcapacity, competition from emerging Asian markets and regulatory burdens. However, a recent report by market analysts Frost and Sullivan suggested the outlook could be somewhat brighter, with the European fine chemicals market predicted to achieve revenues of $13bn (€10bn) by 2009, up from $10bn in 2005.
According to Saltigo, making these investments in its facilities is part of an ongoing strategy to make the company more attractive as a potential contract manufacturing partner in the recovering fine chemicals market.