Degussa Takes $1 Billion Charge

Citing unsatisfactory business trends and a sharp reduction in earnings prospects, Degussa is taking third-quarter charges of nearly $1 billion on its fine chemicals activities. The company is also stepping up restructuring of these operations.

Involved are three fine chemicals businesses—building blocks, exclusive synthesis and catalysts, and peroxygen chemicals. Some 85% of the charge relates to goodwill and the balance to other assets. A large proportion of the charge stems from the British fine chemicals firm Laporte, which was acquired in 2001.

The company says that, contrary to previous assessments, the business situation and market prospects for fine chemicals “have deteriorated steadily this year in the wake of considerable overcapacity in the sector. At the same time, there has been a further increase in competitive pressure, especially from Asian suppliers.”

Degussa will step up restructuring in fine chemicals “significantly,” resulting in an additional expense of roughly $25 million this year, bringing total restructuring costs for fine chemicals in 2004 and 2005 to just over $120 million.