Annual Stockholders Meeting Friday, May 28, Chairman of the Board of Management

Transcription

1 Annual Stockholders Meeting Friday, May 28, 2010 LANXESS AG Contact: Daniel Smith Financial and Business Media Leverkusen Germany Phone Fax lanxess.com Speech by Dr. Axel C. Heitmann Chairman of the Board of Management (Please check against delivery) ( e)

2 Page 2 of 21 Panta rhei everything flows. From ancient times, people have been fascinated by the idea that the water flowing down the rivers is always new water. But change is the essence of all things, and that applies to the Rhine river not far from here as it does to companies. Some stretches of the river are calmer than others, and the water level varies. Last year our water level fell considerably in fact much more than originally feared. Yet LANXESS did NOT spring a leak, we did NOT run aground and we did NOT run dry. On the contrary: we held up well and we stayed on course. And what s more, we are already steering toward new and attractive destinations. Valued stockholders, members of the Supervisory Board, ladies and gentlemen, representatives of the media: good morning and welcome to the 2010 Annual Stockholders Meeting of LANXESS AG; welcome to LANXESS arena in Cologne and incidentally, welcome to LANXESS Water Year! Some of you may already have been aware of it, and you just learned more about it from our film: for us the year 2010 centers on this element. We have declared a global LANXESS Water Year because water is not just

3 of supreme importance ecologically, it is also another key to our commercial success. Page 3 of 21 Just four months ago we began constructing a new chemical plant in Bitterfeld. By the end of 2010, we expect this facility to be developing and manufacturing products for the water treatment technology known as membrane filtration. Such products are as important for drinking water supplies as they are for high-tech production processes in the semiconductor or pharmaceutical industries. It is among the most modern facilities of its kind anywhere in the world and its construction sends a clear signal in terms of both Germany s viability as an industrial base and LANXESS global involvement with water treatment. An especially positive aspect is that we will invest some EUR 30 million in Bitterfeld, creating about 200 new jobs in the long term. I believe this is good news in what are still difficult economic times.

4 Page 4 of 21 I also have good news to report today regarding the first quarter of this year: Our sales rose by more than 50 percent compared with the same period of last year, to EUR 1.6 billion. The increase was driven mainly by demand for our rubber products in Asia and Latin America. EBITDA pre exceptionals more than tripled to EUR 233 million. Our EBITDA margin pre exceptionals therefore rose substantially to 14.4 percent, compared with 6.3 percent a year ago. Net income also advanced considerably to EUR 104 million after a loss of EUR 14 million in the prior-year period. Net debt rose to EUR 851 million, from EUR 794 million at the end of 2009, due to a higher level of working capital. However, this effect was mainly due to the tremendous growth in our business activity.

5 Page 5 of 21 Despite the increase in net debt, we believe we are now very well equipped to face the challenges of the current business year. The rating agencies obviously share this view, and have maintained our stable ratings during the crisis. Ladies and gentlemen, this positive performance would have been unthinkable without the numerous steps we immediately took in January 2009 to stabilize our business as part of our extensive crisis management program. Following the spin-off five and a half years ago, we first had to overcome our own internal crisis. You may remember that back then, two thirds of our businesses were unprofitable. And that s how we know what really matters in such situations solidarity and cooperation. These are among our virtues, and that has helped us. There s one thing I d like to do before I present the figures for 2009: and that is to say thank you to our employees. As in the period just after LANXESS was established, it has again been the attitude of our employees and their representatives at the negotiating table that have saved our company from serious damage.

6 That attitude is that when everything is at stake, each and every one of us has to make a contribution. And I know that kind of attitude cannot be taken for granted. Rather, it testifies to an extraordinary corporate culture. Page 6 of 21 And for this I would like to sincerely thank all of our employees both personally and on behalf of my colleagues on the Board of Management and the Supervisory Board. This applies particularly in connection with our Challenge programs. As you know, all employee groups worldwide, including the Board of Management, showed their solidarity and are bearing their share of the necessary cost cuts. This meant pay reductions, the postponement of annual salary adjustments, or forgoing a significant part of their variable compensation. But it wasn t only this program that helped us master the crisis. There was also our flexible asset and cost management. We have managed our global capacities flexibly. As a result, we have avoided surplus production and thus reduced our costs for raw materials, energy, infrastructure and logistics. But above all, we have avoided unnecessary inventories that would otherwise have led to lower prices. This flexible asset and cost management and the personnel measures I mentioned yielded total savings of EUR 170 million in 2009 which is already almost half of the total of EUR 360 million that we aim to save by 2012.

7 Ladies and gentlemen, our key financial data also confirm that our stability strategy was correct and our crisis management has been successful. Page 7 of 21 After all, in 2009 we achieved EBITDA pre exceptionals of EUR 465 million. This figure was much lower than in Yet I feel that this is a truly remarkable earnings level. After all, our sales in the crisis year 2009 fell by 23 percent to EUR 5.1 billion. The decline was due to a massive drop in demand for all industrial products in all regions in the world. And this combination worldwide, across all sectors and such an abrupt decline was quite unprecedented. It caused our capacity utilization to drop to only about 70 percent in Nonetheless, we achieved an EBITDA margin of 9.2 percent, down just 1.8 percentage points from This too is proof of our remarkable productivity, which resulted in positive net income of EUR 40 million even in the crisis year 2009.

8 Page 8 of 21 Ladies and gentlemen, you know that our dividend policy is based on continuity. The Board of Management and the Supervisory Board are therefore proposing the payment of a level dividend of 50 cents per share despite the very challenging business year we had in Because what I just said about our employees also applies to you, ladies and gentlemen: our stockholders too have remained loyal to their company during the crisis. In this way you have demonstrated your confidence in our management and our performance potential particularly in these difficult circumstances. That is also not something to be taken for granted, and I promise you that everyone who holds responsibility at LANXESS appreciates your trust, for which we thank you most sincerely.

9 Page 9 of 21 Your trust was rewarded particularly by the gratifying performance of our stock compared to the principal indices: The price of our shares climbed by 92 percent last year. By way of comparison, our reference index for the chemical industry, the Dow Jones Chemicals 600, rose by just 44 percent in the same period. Ladies and gentlemen, strategic factors of course were also partly responsible for our relative success last year: Of particular significance here was our focus on the fast-growing BRIC countries

10 Brazil, Russia, India and China. The Asia/Pacific region, above all, has provided a tailwind for our business during the crisis. Page 10 of 21 The drop in sales there was relatively small, at 1.3 percent. Following a steep decline at the beginning of the year, business recovered quickly as time went on. Today our sales in many cases are already well above pre-crisis levels. China, South Korea and India sent out especially positive signals with what in some cases were double-digit growth rates. And this was very significant for the entire Group, with the Asia- Pacific region now accounting for just under 23 percent, or almost a quarter, of total Group sales. Compared with 2008, this represents what could well be a recordbreaking gain of five percentage points. This region is therefore growing in importance for the Group and is closing in on our largest sales region, which is EMEA (excluding Germany): The Asia/Pacific region now ranks second, ahead of Germany and North America and this is a good thing, as we expect that this region will continue to provide the greatest stimulus to growth in the future. Here our strategy of consistently exploiting additional growth opportunities in Asia is proving effective. In this connection, we are focusing particularly on the Performance Polymers segment, which raised operational sales by 2 percent in Asia/Pacific in This proves once again that even 100 years after the invention of the first synthetic rubber, high-quality synthetic rubber is more important than ever and especially in Asia.

11 Page 11 of 21 That s why Asia these days is a focus of our investment activity. There, as in other growth regions of the world, we are laying the foundations for further expansion and driving that growth forward: At the beginning of March we started up production of rubber additives at our new site in Jaghadia, India. The production of ion exchange resins for water treatment will also begin at this site in the fourth quarter of this year. At the beginning of May we established a new joint venture in China for the production of nitrile rubber. By the middle of next year, our capacity for high-tech plastics in Wuxi, China, will be expanded by nearly 50 percent. In Russia, our subsidiary RheinChemie broke ground for a new plant. This means LANXESS now has production facilities of its own in all the BRIC countries and is firmly focused on growth.

12 At the same time, we will spend EUR 20 million to expand our capacities for high-performance NDBR rubber at the sites in Dormagen, Orange and Cabo. Page 12 of 21 And, ladies and gentlemen, just a few days ago we broke ground on our new butyl rubber plant in Singapore with a record capital expenditure volume of some EUR 400 million. This will be the world s most modern facility, and it will be built in record time. And yet, ladies and gentlemen, we are not just investing in Singapore. We are continuing to invest in Germany too: firstly, as already mentioned, in Bitterfeld; and also at Krefeld-Uerdingen, where we are building a new high-tech plant for formalin production at a cost of EUR 18 million. We have invested EUR 35 million at our Leverkusen headquarters to expand our capacities for aromatics, giving LANXESS up to 60 percent higher capacities for these globally important building blocks for chemical synthesis.

13 To strengthen the agrochemicals business of Saltigo, we have also signed a major cooperation agreement: Syngenta of Switzerland, a long-standing customer of Saltigo and one of the world s leading manufacturers of crop protection products, will invest EUR 50 million in the construction of a new production plant for our subsidiary Saltigo in Leverkusen. Page 13 of 21 This year some EUR 150 million will be spent to build or expand facilities at our German sites. That will be about one third of our global capital expenditures. And we are focusing quite deliberately on Germany, ladies and gentlemen, because LANXESS belongs to Germany. This is where we have our roots. More than 100 years ago in Wuppertal, the ingenious chemist Professor Fritz Hofmann made a major invention: he discovered how to produce the first synthetic rubber. In so doing he laid the foundation for one of our most important products. Over the decades, employees in Leverkusen and Dormagen have continually developed new high-performance synthetic rubbers. These high-performance rubbers remain successful to this day, and are exported from Germany throughout the world. That gives us faith in Germany s innovative potential. And in the future as well, be it high-performance synthetic rubbers or products for high-tech water treatment, such as those to be produced in Bitterfeld: Innovations from Germany are of central importance for the global competitiveness of LANXESS. That s the way it has been in the past, the way it is today and the way it will be in the future. Ladies and gentlemen, these developments and our results in 2009 show that we have correctly positioned LANXESS in recent years: at the core of the chemical industry.

14 They show that with our stability strategy of the past few years, we chose exactly the right course. And that we have very good reasons to be optimistic about the future. Page 14 of 21 At the same time, as crisis managers, we know that it is especially important right now to strengthen the positive trends experienced in the first quarter of LANXESS is therefore adhering to our Challenge programs. However, sustained success requires more than just economy measures. To be successful, you have to set tomorrow s course today and align to the right trends. And that s what we re doing at LANXESS: Our entire strategy for the coming years is focused on three megatrends. These trends are: Mobility Urbanization and Water treatment

15 We are convinced that these will be the most important drivers of global growth in the medium and long term. And for each of these megatrends, we have the right products and the right ideas in our portfolio. Page 15 of 21 In the field of mobility, for example, new legislation will make tire labeling mandatory in the European Union for the first time. Of critical importance here apart from excellent braking behavior will be ecological criteria such as fuel efficiency or noise emissions. The manufacture of these modern tires will require new high-performance rubbers such as those that LANXESS already produces or is developing for the future. And with precursor products for the construction industry or our modern water treatment technologies, we also offer solutions for tomorrow s most pressing challenges. After all, the world population is growing, more and more people want or need to be mobile, more and more people need a functioning infrastructure and functioning cities, and more and more people require clean drinking water. Satisfying these needs presents us with major challenges, because in the first instance it creates additional environmental problems. Yet it doesn t always have to be this way. The technologies and products exist to enable us to combine growth with sustainability. These are the technologies and products of the future including, and especially in the chemical industry. That s why we should support them. At LANXESS we call this green chemistry.

16 At LANXESS modern production facilities, this is already a reality. It spares resources in two ways: during production and in the use of the products themselves.our customers and their customers can conserve resources with the help of chemistry and ease the burden on the environment. Page 16 of 21 For example, the theme of lightweight construction in the automotive industry is ever-present, and has gained more momentum through the current trend toward the electric car. A prominent example is the plastic-metal composite technology we have developed, also known as hybrid technology. Its performance potential is far from exhausted. On the contrary, it is still at the beginning of its evolution. Because it means that steel and aluminum sheet can now be replaced by much lighter organic sheets of highperformance plastics. This technology makes cars even lighter and more stable. Built into the new Audi A8, for example, is the first hybrid front end in series production, made from our materials. Our company is also increasingly breaking new ground not only with products, but also in the production of raw materials. In the United States, for example, we just acquired an interest in the biofuels company Gevo. Together with the experts from Gevo, we plan to test alternative methods for producing isobutene the principal raw material for the production of butyl rubber. Isobutene is traditionally obtained from petroleum derivatives. Gevo has developed a process by which the isobutene precursor isobutanol can be obtained from corn using an environmentally friendly, biological fermentation process, for example. Isobutene is then produced in the second stage of the process by dehydration. If this combined biological and chemical synthesis can be carried out economically on an industrial scale, we could become less dependent on oil as a raw material. However, ladies and gentlemen,

17 we depend on the politicians to create the necessary conditions for making optimum use of green chemistry. Page 17 of 21 That in turn means that we need an innovation-friendly climate. We can only drive forward our green innovations if the necessary legal flexibility is in place. At the same time, of course, we feel obligated to openly and transparently communicate our innovation projects so that the politicians can respond to them accordingly. After all, we can only maintain Germany s reputation as a land of innovation if politics and industry work hand in hand.

18 Page 18 of 21 Ladies and gentlemen, it goes without saying that other factors besides sustainability and education are crucial to our company s success. And three are especially important. The first is premium products and services. This means that we will continue to focus on a strong product portfolio, premium services and premium quality, because only then can we maintain our price before volume strategy even in times of crisis. The second factor for success is a prudent growth strategy. Last year this included our acquisitions in China and India, both of which are part of our long-term growth strategy in the BRIC countries. In other words, they will strengthen our position in the two most important growth markets in the world. The third stability factor is innovation. Particularly during the crisis, LANXESS has continued to invest in the future, spending over EUR 100 million on research and development in The number of employees working in research and development climbed by 15 percent to more than 500.

19 And our patent portfolio of approximately 1,000 patent families and nearly 6,000 individual patents shows that the research and development culture at LANXESS is more lively than ever. Page 19 of 21 All of this shows: We have passed the stress test! LANXESS got off to a very good start to 2010, laying the foundation for a significant improvement in our operating result. Growing in line with the megatrends and in the markets of the future makes us crisis-resistant. We are optimistic about our future business prospects and currently expect EBITDA pre exceptionals for the full year to come in at between EUR 650 and 700 million. After all, the second quarter is also going very well. Our forecast is based on the expectation that the overall economic environment will continue to improve. However, there are likely to be regional variations. The Asia-Pacific and Latin America regions, and especially China, India and Brazil, will maintain the growth trend of

20 the first quarter. North America and Europe will also continue to recover, but not as quickly. Page 20 of 21 There are also particular risks inherent in the excessive financial debt of some eurozone countries, the ending of governments economic stimulus programs and the volatility of raw material prices. In the current environment, and based on the gratifying first quarter, we expect further increasing demand in our most important sales markets, driven mainly by the automotive and tire sectors. All in all, LANXESS is facing the rest of the year with confidence but also with respect. We are certain that the crisis has not yet been overcome. The situation remains in flux, and the signs point to further change in the chemical industry as well. At the moment we do not yet know how high the water level will be next year, or how strong the current will be. But we know that we are making good progress, and we will remain on course. And we will continue to make the most of our strengths: foresighted crisis management, investment in fast-growing regions and future market trends, the right business structure with an excellent product portfolio and a culture of sustainability, cooperation and solidarity among individuals for the sake of the whole. Thank you very much.

21 Page 21 of 21 Forward-Looking Statements. This news release may contain forward-looking statements based on current assumptions and forecasts made by LANXESS AG management. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual future results, financial situation, development or performance of the company and the estimates given here. The company assumes no liability whatsoever to update these forward-looking statements or to conform them to future events or developments.