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Chemtura Plans to Eliminate Stranded Costs from Sale of Agrochemicals Business
Nov. 14, 2014
Chemtura Corporation announced a restructuring plan to reduce manufacturing conversion costs by approximately $50 million, or about 10 percent annually, eliminate approximately $15 million of annual stranded costs arising from the previously announced sale of the Chemtura AgroSolutions business, and reduce selling, general and administrative costs ("SG&A") by at least $12 million annually.
"Excess industry capacity in bromine and certain organometallics combined with continuing volatility in certain markets we serve has restricted our ability to achieve the targeted improvement in results," said Craig A. Rogerson, Chemtura's Chairman, President and Chief Executive Officer. "To meet our expected performance improvement in 2015, we are taking steps to address these challenges by accelerating initiatives to reduce our manufacturing costs and SG&A expenses, in addition to the elimination of stranded costs arising from the sale of our agrochemicals business."
Despite the success of many of Chemtura's improvement initiatives, the Company faces continuing weak demand conditions in some of the market applications it serves, as well as excess capacity in bromine and certain organometallics. While the Company expects the bromine industry and electronics market to recover and grow to new heights, that growth may not occur in the coming year.
"However, it is our responsibility to create the committed value in 2015," Rogerson said. "We believe the combination of our cost reduction actions and the investments we have made will enable us to deliver progressive performance improvement in 2015 without having to rely on recovery in demand from markets such as electronics or an improvement in our pricing levels."
The Company expects to incur approximately $37 million in cash costs to implement the restructuring plan, recording the majority of this expense in the fourth quarter of 2014 and the first quarter of 2015. The cash expenditures associated with these actions will continue into the third quarter of 2015. The Company anticipates that the full run rate of the manufacturing and SG&A savings will be embedded in its performance by the third quarter of 2015, with annual savings of approximately $50 million for the calendar year of 2015. Of the $15 million of annual stranded costs, the Company anticipates having eliminated them by the second quarter of 2015 with approximately $3 million being incurred in the first quarter of 2015.
Source: Chemtura news release
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