Annual Stockholders Meeting Wednesday, May 18, Chairman of the Board of Management

Transcription

1 Annual Stockholders Meeting Wednesday, May 18, 2011 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 23 As you saw in the film, 2011 is The Year of High-Tech Plastics at LANXESS. And the United Nations has also declared 2011 to be the Year of Chemistry because it was exactly 100 years ago that Marie Curie received the Nobel Prize for her outstanding research. This year, numerous events will be held to recall both the history of chemistry and the benefits it offers today. Because however much our industry may depend on energy, MORE climate protection isn t possible WITHOUT the chemical industry. Electromobility without chemistry? Unthinkable. Solar cells and wind power without chemistry? Inconceivable. Building insulation without chemistry? Impossible. LANXESS makes important contributions to climate protection with advanced rubber products for green tires and high-tech plastics for reduced weight.

3 However, not only the products of the German chemical industry but also the production processes themselves contribute to environmental protection. Every ton of climate gas generated today in the production of chemicals at our plants helps to reduce our customers emissions by up to two-and-a-half tons. Page 3 of 23 In addition to our business data, which of course will be the focus today, these too are numbers we can be proud of. Good morning, esteemed stockholders, members of the Supervisory Board, representatives of the media, Ladies and gentlemen, Welcome to the 2011 Annual Stockholders Meeting of LANXESS AG. Welcome to Cologne and of course welcome to the LANXESS arena. The link between our name and this unique arena is now taken for granted. We are obviously very pleased about this, and it shows that commitment to the region pays off. I ll come back to that later. First, however, I d like to say a few words about the Year of High- Tech Plastics. The film already addressed the importance of these

4 products, and here in the lobby you can see for yourselves the extraordinary properties of these innovative materials. And outside this arena as well, we are drawing the public s attention to the new plastics with numerous events and publications this year. Page 4 of 23 High-tech plastics have enormous potential: they make our lives easier. They create more flexibility. And last but not least, they make an important contribution to protecting the environment and the climate. As the film showed, they are used increasingly in cars. Their share of automotive materials has increased from 7 to nearly 20 percent over the past three decades, and continues to rise. The car of the future will be made almost entirely of plastics. And best of all, LANXESS is exploiting the opportunities these materials offer. With our patented hybrid technology, for example, we have succeeded in combining metal with high-tech plastics for the first time. The use of this technology in more than 100 mass-produced models from leading vehicle manufacturers shows we got it right. This topic is a good example of how systematically we at LANXESS are implementing our strategy: We are focusing on sustainability, innovation and intelligent technologies. We are focusing on the right products. And we are already investing in tomorrow s growth markets. This strategy pays off and it is already doing so today, particularly for you, our stockholders.

5 Page 5 of 23 Our sales grew to nearly EUR 2.1 billion just in the first quarter of this year. That s a 29 percent increase on the same period of last year. We also saw a considerable jump in our operating result. EBITDA pre exceptionals rose by nearly 40 percent compared with the prior-year period, to EUR 322 million. And net income came to EUR 166 million or two euros per share. This was a year-on-year improvement of 60 percent. Very importantly, our earnings grew faster than sales, and we achieved an EBITDA margin of 15.5 percent. This means that we are operating efficiently and profitably, we are correctly positioned, and we are on exactly the right track with our growth strategy.

6 Page 6 of 23 That applies both to our alignment toward the megatrends and to our focus on the dynamic BRICS countries. It also applies to our German operations. In this country, sales grew by 29 percent year on year in the first quarter to EUR 398 million. This was nearly one fifth of the Group total. The EMEA region which means Europe without Germany, plus the Middle East and Africa accounted for 31 percent of Group sales in the first quarter, and was our company s strongest region with sales of EUR 642 million. This region also posted the highest rate of growth, with sales up by 33 percent year on year. That underlines once again where LANXESS has what you might call its power center : here in Germany and in Europe. Our domestic sites form the basis of our innovative capability, the basis of our technological expertise and therefore the basis of our competitiveness. And that s something we mustn t jeopardize. On the contrary, we must resolutely strengthen and expand it. Because it s here in

7 Germany and in Europe that we hold the key to making our products more efficient and even better in the future. Page 7 of 23 Ladies and gentlemen, I am confident that we will be successful in this endeavor. And I am also confident that we will already surpass an important growth threshold this year: I expect that our EBITDA pre exceptionals will increase by a further 10 to 15 percent in 2011 compared with the record year That would take it above EUR 1 billion for the first time. We also intend to exploit opportunities for both organic growth and acquisitions in order to reach our medium-term EBITDA target of roughly EUR 1.4 billion. As you all know, the acquisitions we made so far have proven that we have the expertise to quickly and smoothly integrate new businesses. We will make good use of this expertise for future acquisitions as well. LANXESS will actively participate in the consolidation currently taking place in our industry, as it has done in recent years. Thanks to our product and technological competencies and the financial health we have achieved, we are now in a position to consider larger acquisitions. I don t mean projects of a transformational nature, but

8 acquisitions that could add more than 500 million or even up to one billion euros in sales. Page 8 of 23 Of course, any such transactions would still be subject to the condition that they pay off within three years at the latest, and that they either strengthen our existing portfolio or expand it within our field of expertise. Making acquisitions at any price has never been our policy and will not be in the future. Maintaining our financial health remains key to all decision-making at LANXESS. Because we know that it s the combination of operational strength and a sound financial basis that allows us to continually set new and ambitious targets. This applies both to the financial headroom we have created for ourselves, and to accompanying measures. For example, the medium-term growth strategy of LANXESS is supported in part by a euro benchmark bond that was successfully placed on the European capital market only two days ago. The issue, which was nine times oversubscribed, has a volume of EUR 500 million and a term of seven years. The bond has a percent coupon. These financial foundations, and of course all the other factors I mentioned, give us grounds for optimism. The right products at the right time, the best technologies and our rigorous cost discipline these are the three factors that have given us this room to maneuver and enabled us now to have the money at our disposal to invest in our facilities. We expect our capital expenditures to reach an all-time high of between EUR 550 million and EUR 600 million in That s how we are laying the foundations for achieving our ambitious goals.

9 Page 9 of 23 Ladies and gentlemen, an important basis for this confident outlook was and remains our tremendous success in Let me say straight away that it was the best year in LANXESS s history. That was not only because of the general upswing following the crisis year 2009, but more especially because we achieved the goals we had set ourselves. We intended to use the crisis as an opportunity and emerge from it stronger than before. And that s exactly what we did. After all, we have created a platform of strength at LANXESS in recent years. We completely realigned the enterprise and focused on the right issues from the very beginning. As a result, we not only passed the stress test of the recent crisis with flying colors. The action we took during the crisis is now paying off. It has put us in an ideal position to achieve further growth, both organically and externally. For example, the groundbreaking on our new butyl rubber plant in Singapore was among the highlights of 2010 and a further step on the road to growth. The new facility, which will go on stream in 2013

10 and in which we are investing a total of about EUR 400 million, is the biggest project of its kind since LANXESS was founded. Page 10 of 23 And our EUR 310 million acquisition of the EPDM business of Dutchbased DSM, which we announced at the end of 2010 and completed at the beginning of this month, represents another major step forward. This rubber business is an ideal fit for our growth strategy, and it strengthens our position in the key growth market for high-tech synthetic rubbers. This transaction is the second-biggest purchase in our company s history, after the acquisition of Brazilian-based Petroflex in In addition to acquisitions and organic growth, we also continue to focus on the emerging economies of the so-called BRICS countries especially Brazil, China and India. It is in these countries that the economy continues to grow fastest, and LANXESS is a part of this dynamic development. Ladies and gentlemen, The successful development of our company is also reflected in our figures for fiscal They demonstrate that our strategy is correct and successful in all respects.

11 In 2010 we achieved record figures for both EBITDA pre exceptionals and net income. These are results we can be proud of. Page 11 of 23 Group sales came in at EUR 7.1 billion in 2010 up 41 percent from the preceding year. After adjusting for portfolio and currency effects, sales grew by 36 percent. EBITDA pre exceptionals amounted to EUR 918 million in Thus our earnings nearly doubled compared with 2009 an unprecedented success. In 2010 we also posted a record figure for net income, which increased nearly ten-fold compared with the prior-year period, to EUR 379 million. Our productivity is also demonstrated by the increase in the EBITDA margin, which climbed from 9.2 percent in 2009 to 12.9 percent last year. This achievement was the result of the unique dedication of our employees. As in the past years, they have outstanding achievements to their credit in 2010 both here in Germany and at our other sites around the world. That s why today we would especially like to thank our employees.

12 Page 12 of 23 It goes without saying that we want you, our stockholders, to benefit from the success of our company. The Board of Management and the Supervisory Board are therefore proposing to you today that the dividend for fiscal 2010 be raised to 70 cents. This gives a total payout of EUR 58.2 million and an increase of 40 percent compared with That alone shows that LANXESS remains a worthwhile investment. Yet an even more gratifying development last year was the performance of our stock. The price of our shares rose by 124 percent clear evidence of the confidence in our performance potential. We are pleased that we recently surpassed the EUR 60 mark, and would like to thank everyone who placed their trust in us. But at LANXESS too, of course, a good past doesn t necessarily guarantee a good future. Although we are doing everything to ensure that LANXESS will continue to grow, we are also aware that there are risks we must keep a close eye on and manage skillfully.

13 These include currency risks particularly as regards the exchange rate for the U.S. dollar, the geopolitical changes in North Africa and the Middle East, and the situation in Japan. We are also keeping a very close watch on the rise in raw material and energy prices and turning our attention to how energy supplies can be safeguarded in the future. Page 13 of 23 For an energy-dependent sector such as the chemical industry, it is obviously of paramount importance to remain globally competitive and thus safeguard employees jobs over the long term. This is much easier to achieve if costs on the production side such as energy costs are not significantly higher than those of our competitors in other regions of the world. In other words, in a highly industrialized country such as Germany, energy must not only be clean and reliable it must also be available on competitive terms. This must be part of the political framework. Internally, meanwhile, we are adhering to our strategy of steadily improving energy and resource efficiency. For a long time now, this

14 has been a central goal for us and a matter of course from a business perspective: Page 14 of 23 For example, in 2010 we invested EUR 80 million just in sustainable energy production projects and inaugurated four new environmentally friendly heat and power co-generation plants at our sites. Two of these facilities are even CO 2 -neutral because they use biowaste. We cut specific greenhouse gas emissions by more than 50 percent compared with 2007 in just two years. And by 2012 we will introduce a new energy management system with the aim of reducing specific energy consumption by 10 percent in each segment by This shows that we are not waiting for things to happen. We are taking action. Just as you have come to expect from LANXESS in other areas as well. LANXESS is a reliable and dedicated partner for its customers and suppliers, its employees, and not least for you, our stockholders. In particular, as I already said, we believe that with our worldwide GOFOR 1.4 initiative we are on track to achieve EBITDA pre exceptionals of roughly EUR 1.4 billion by 2015.

15 Page 15 of 23 And ladies and gentlemen, you know us by now: When we say it like that, it means we will do everything possible to achieve the target. And we ll be doing it for you! We expect that we will again outperform the markets in In the Performance Polymers segment, we expect the tire and high-tech plastics industries to continue boosting demand in 2011 although the growth rates in these sectors will no longer be quite as high as in And in the Advanced Intermediates segment, too, we anticipate a positive trend especially because demand from our customers in the agrochemicals sector will continue to rise. Last but not least, the perspectives for the Performance Chemicals segment are very promising partly because the construction industry is gradually recovering in both the United States and Europe, and partly because steady growth is predicted for the automotive industry as well.

16 However, the outlook for LANXESS doesn t end on December 31, 2011 nor in As we set our course today, we also need to keep in mind our company s future as a whole. Page 16 of 23 What we mean above all by sustainability is that we concentrate on the development and manufacture of products that make valuable contributions to mastering the great challenges faced by the growing global population. At the 2010 Annual Stockholders Meeting, I briefly mentioned one example of how serious we are about this, and that s our venture into biobased chemistry. At that time I also told you about our investment in the bioresource producer Gevo. And now, to illustrate what this investment means to us, I d like to show a short film we have prepared for you. Ladies and gentlemen, thank you to Dr. Chernyshova! She s brought us the new butyl rubber, straight from our laboratory. Ladies and gentlemen, this is what the first bio-rubber looks like. This is a world first, an invention that one day could put the business of LANXESS on a completely new foundation. This ball made of butyl rubber is a high-tech product of the kind needed for the best tires. It

17 was made from a raw material grown in a field. In other words: this is a high-tech product based not on petroleum but on renewable resources. Page 17 of 23 Just imagine, if someday we succeed in manufacturing bio-rubber like this on a large scale, we would have an excellent alternative to oil as a raw material. And it would earn us money too. But above all, we would have succeeded in turning a bioresource into rubber rather than burning it as fuel as is often done today. At LANXESS we have the necessary expertise and innovative capability, and we are no longer all that far from our goal. We could be in a position to manufacture tens of thousands of tons of biorubber in less than five years time. As you can see, ladies and gentlemen, Green Chemistry isn t just a catchphrase. LANXESS is already serious about it. We are aligning our entire growth strategy to the principle of sustainability. It is the foundation for the three pillars of our success.

18 Page 18 of 23 The first of these is focusing our businesses on megatrends of the future. Those trends are mobility, agriculture, urbanization and water. The mobility trend, for example, already account for our ten bestselling products. All of these are modern rubbers and plastics including especially those that help to lower fuel consumption, such as products for lightweight plastic components and systems, or socalled green tires with improved rolling properties. After all, the megatrend toward climate-friendly mobility is more dependent on tires than many people realize. The potential for reductions in fuel consumption and emissions will be strengthened by a new E.U. regulation that has been in preparation for years. Let me tell you what this is about. By the end of next year, a new classification system for car tires will be introduced throughout Europe. Based on the successful classification of household appliances according to their electricity consumption, all new tires will be classified according to their fuel consumption characteristics and resulting CO 2 efficiency so that consumers can see how green their new tires really are when they

19 buy them. That s when high-tech tires made of high-tech rubber will really hit the road. Page 19 of 23 The demand for low-emission tires will increase significantly. The European Union s tire classification system will further accelerate the use of high-tech synthetic rubber from LANXESS and represents a milestone in the E.U. s climate policy. The second pillar of our success is our focus on premium products. We live up to this claim not just in our rubber business, but also in all other areas of our product portfolio: from modern ion exchange resins and adsorbent resins for water treatment through premium- and high-performance pigments for the colorants and coatings industry to new products for leather finishing. The third pillar of our success is our focus on innovation, and thus on research and development. After all, premium products are the result of continuous and intensive innovation work. In 2010 alone, we invested EUR 116 million in this area 15 percent more than in 2009.

20 This year our R+D expenditures will rise by about another 15 percent to an expected total of more than EUR 130 million. Page 20 of 23 However, we also realize that successful innovation through marketoriented research and development is not a task that companies can master alone in the long term. We depend on schools and universities to lay the foundations for such success. Young people must be encouraged to study scientific subjects at all of our company s locations be it here in Germany or in China, Brazil or South Africa. That s why LANXESS is committed to help improve science teaching in schools. And that s why we are continuing our education initiative here in Germany, as well as expanding it internationally. We will invest some EUR 2.5 million in modern equipment for science classrooms by the end of In addition, LANXESS has organized numerous laboratory days and workshops attended by more than 300 schoolchildren to date. Such events give children insight into both business practices and modern chemistry.

21 And in the process, they discover an enthusiasm for chemistry: in a survey conducted in December 2010, nearly 80 percent of participating schoolchildren said they thought they would pursue careers in science following their experience at the LANXESS workshops. 21 percent of the students saw their grades improve. Further results of our education initiative that make us optimistic are youngsters deciding to major in chemistry at school and study the subject at university, their participation in school competitions and, last but not least, their heightened awareness for topical issues related to chemistry. Page 21 of 23 After all, ladies and gentlemen, we can t complain about a lack of specialists and about unsuitable applicants on the one hand while at the same time leaving schools to deal with their problems on their own. That s why we are working together with schools and education authorities to improve conditions. The same applies to the subject of women in the chemical industry. While we don t believe that a statutory quota for women in management positions would solve the problem, it is quite clear that we need more women in the chemical industry. And this topic also starts with support for young people. Because that is exactly our problem: there are already too few qualified applicants for jobs in the chemical industry. And certainly not enough women. The natural sciences are still viewed as a male domain which is of course absolutely wrong, as a glance at the history of chemistry shows. Today I already referred to Madame Curie, for example, who won two Nobel prizes. That s why we are committed to supporting motivated women with scientific talent. And I am confident that we will steadily increase the proportion of women in our workforce including managerial staff in the coming years.

22 Page 22 of 23 Ladies and gentlemen, when I welcomed you to the LANXESS arena today, I said how pleased we are that the link between our name and this arena is now taken for granted, because it shows that our commitment to the region is paying off. And we demonstrate in this way that we see ourselves as part of something bigger for which we take our responsibility very seriously. And today I can tell you just how seriously in a little more detail than usual. This morning, the Supervisory Board of LANXESS approved the relocation of our company headquarters to the former Lufthansa building in Cologne-Deutz. After tough negotiations we opted for the best solution from an economic point of view. More than 1,000 employees will move into their new offices here in Deutz in the second half of The building is currently being extensively modernized and will then be one of the most energy-efficient buildings in Germany.

23 Here we will also have an optimum transport infrastructure, the drawing power of a major center of science and industry, and an attractive environment. Page 23 of 23 Both these factors together the efficiency of the new company headquarters and the advantage of being in Cologne will help us in the pursuit of our growth strategy. As you see, ladies and gentlemen, we have opted for Cologne, for North Rhine-Westphalia, and thus for Germany as a base for the chemical industry. Thank you very much! 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.