Press Conference: "Technology @ Work" July 1, 2013 Düsseldorf LANXESS AG Contact: Udo Erbstößer Market Communications Trade and Technical Press 51369 Leverkusen Germany Phone: +49 214 30-54529 Fax: +49 214 30-44865 udo.erbstoesser@lanxess.com From the presentation by Dr. Torsten Derr Head of the Keltan Elastomers business unit of LANXESS AG "'EPDM 2.0' with LANXESS success strategies for a highly competitive market" (Please check against delivery) (2013-00010e)
Page 2 of 10 Ladies and gentlemen, LANXESS is the world s leading supplier of high-performance ethylene-propylene-elastomers, or EPDM for short. Since the beginning of the year, the EPDM business of LANXESS has been managed in a separate business unit, Keltan Elastomers. In this way we account for among other factors the fact that EPDM has become a significantly more important part of the LANXESS portfolio through the acquisition of DSM's Keltan business in 2011.
The new Keltan Elastomers business unit of LANXESS currently operates production facilities with a total capacity of 362,000 metric tons per year at sites in The Netherlands, Germany, Brazil and the United States. The business unit employs some 700 employees worldwide, including 270 at our main site in Geleen in the Netherlands. Page 3 of 10 In the next minutes, I would like to explain what opportunities result for us and our customers from our new size and focus as well as how we see the future of the exciting material EPDM. Let me start off by saying a few words about the market environment in which we have to assert ourselves. EPDM is a unique material in many respects. Unlike many other elastomers, this rubber is heat- and ozone-resistant due to its saturated molecular backbone. It is also resistant to many media that can attack other rubber materials. For these reasons, our customers can cover a spectrum of applications with our Keltan elastomers that is unusually broad for special-purpose rubber. The most important individual applications for EPDM are lightweight, weatherproof seals and foamed profiles. Around 60 percent of our products are used in the automotive industry. This is followed by the building and construction sector, the motor oil industry, which uses
EPDM as an additive, consumer goods and the cable and electrical sector. In many of these products, it is unlikely that a better option to this rubber will be found in the foreseeable future. Page 4 of 10 So what does that mean for us? The answer is simple: if we aim to continue leading and growing this field in the future, we must combine all of our expertise and marketing ability. This requires all the attention of a dedicated team. By establishing the new Keltan Elastomers business unit, we have in the mean time the conditions for this: now both the unit's management and our account managers can optimally concentrate on Keltan. One of our most important objectives is to generate growth by capturing new market share with Keltan. So, we want to grow and increase our presence in all EPDM-applications. We are supported in this endeavor by our innovative, highperformance ACE technology, for example. This enables us to improve the sustainability of EPDM production and produce an extraordinarily broad range of proven, high-quality EPM and EPDM grades chlorine-free and with high degrees of purity.
In April this year, we converted the largest EPDM production line at our Geleen site to ACE technology. This line has now a capacity of 95,000 metric tons per year which is more than half of the total capacity at that plant. Page 5 of 10 A very important point for our customers: ACE technology is backwards compatible. Wherever our ACE Keltan grades have counterparts in conventional Ziegler-Natta varieties, they demonstrate largely identical properties according to our studies and also in the vulcanized end-materials, of course. Thanks to our Keltan ACE technology we can diversify our global EPDM portfolio to produce unique, novel, products.
Page 6 of 10 Our "green" elastomer Keltan Eco, which is manufactured using Ethylene made from renewable resources at our site in Triunfo, Brazil, also demonstrates outstanding performance. The rubber industry welcomes the fact that there is now also a bio-based, environmentally friendly high-performance synthetic rubber available. Our experience from many conversations with customers has been that the market wants more such solutions. Until now, we only had an "all-purpose" grade in our product range. This July we will launch five additional grades onto the market. The focus here is on amorphous grades with high molecular weight and high diene content for rapid vulcanization, as well as a low- Mooney variant with especially good flow properties. Keltan Eco 6950 and Keltan Eco 9950 are suitable, for example, for the manufacture of solid and foamed automotive glazing seals. Keltan Eco 8550 is the appropriate rubber for a broad set of applications including window seals; Keltan Eco 3050 and Keltan Eco 0500R are special-purpose grades for oil additives. Keltan Eco 0500R can also be used as additive instead of synthetic oils in conventional rubber compounds. And these are not "me too" products, but rather high-end rubber grades for more environmentally friendly production that other suppliers do not offer.
Page 7 of 10 As you can see, we have a lot up our sleeve to optimally support our customers in their markets. And we have more things planned for the future. Nonetheless, we must keep our portfolio manageable. We are therefore currently finalizing the optimization of our product portfolio and market it with a standardized, simpler coding system for easier orientation. In connection with this optimization, we have already streamlined our product range in recent months from 75 to around 50 grades which is still the broadest portfolio in the industry. The primary objective is to remove so-called "lookalikes" from our program. Here, too, we remain in constant close contact with our customers and provide the required, desired support.
Page 8 of 10 EPDM is characterized by strong competition, meaning investing to maintain and expand our technological advantage on the production side, too. We are also doing that. Overall we are investing in our EPDM business. The biggest share of this money, around EUR 235 million, is going into our new EPDM plant in Changzhou, China. We are right on schedule, we have obtained all the required permits. The plant will start-up in 2015 with ACE-technology! With a capacity of 160 metric tons per year, it will be the largest in China and globally. One detail that is very important to me is that we are the first foreign EPDM supplier in China that does not operate under the umbrella of a joint venture, but rather with its own production facility and under its own name. After all, we plan to be the first major globally operating EPDM producer in this extremely exciting emerging market. Driven above all by rising need for cars, demand for EPDM in China is currently growing. By comparison, we expect global EPDM growth around 4 percent. China is already the biggest net importer of this rubber material. Over
the medium term, Chinese users will likely consume some 250 to 300 kilotons of this high-performance elastomer every year. Page 9 of 10 We will be able to satisfy a large share of this demand with our new facility. And not just in China: after all, the new plant is a perfect fit for our global production network. We already produce most of our products at two or three sites worldwide. That is why it goes without saying that we apply the same high standards in Changzhou as at our other sites not just as regards safety, environmental protection and health, but also with respect to the implemented technology: our Chinese plant will be a state-of-theart production plant like in Geleen both including a high-end ACE production line. Summing up: LANXESS is not only the leading global EPDM supplier. We are continuing our efforts to supply the premium quality materials, the best service and sustainable innovations. We invest in fast growing markets keyword: China! and advanced technology keyword: ACE. We are truly your global partner in EPDM. I hope I was able to convince you: We are ready for an ongoing success story. That means: EPDM has an exciting future too with LANXESS.
Thank you for your attention. Page 10 of 10 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.