Welcome to LANXESS Annual Report 2012!

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Strategy

The LANXESS Group is a globally operating chemicals enterprise with a portfolio ranging from polymers to industrial, specialty and fine chemicals. All of the conditions are in place for long-term success in our businesses. These include a flexible asset structure, a diversified customer base, a global presence with regional flexibility and an entrepreneurial management structure.

Through innovations and selective additions to our product portfolio, we have positioned ourselves as a reliable high-tech supplier of premium products that actively supports its customers’ innovation processes and thereby adds measurable value for them. This enables us to strengthen customer loyalty, clearly set ourselves apart from our competitors, and remain highly competitive even in economically challenging times.

LANXESS has a Presence Throughout the World
Chart: LANXESS has a Presence Throughout the World

Sustained megatrends offer potential for future success

The future development we anticipate is shaped by four megatrends:

  • The growing demand for mobility, particularly in China, India and other large emerging economies, and the simultaneous need to make mobility more environmentally friendly.
  • Agriculture, which will have to satisfy the sharp increase in global food requirements due to a rapidly growing world population.
  • Urbanization resulting worldwide in the migration of people from rural areas to cities. All these people will need living space, offices and a robust infrastructure. According to current forecasts, nearly 70% of the world population will be city-dwellers in 2050.
  • The rising demand for water due to population growth and climate change will result in water becoming a commodity as valuable as oil in the not-too-distant future.

With the customized products and services offered by their business units, our segments make a valuable social and economic contribution to mastering the challenges presented by these megatrends in everyday life.

Earnings strategy

Against this backdrop, we are consistently aligning our product portfolio with markets that promise steady, above-average growth in the coming years. Accordingly, our regional focus is mainly on expanding our businesses and production capacities in the faster-growing BRICS countries, especially Brazil, India and China. We have always safeguarded our profitability with our price-before-volume strategy, which involves passing the volatility in raw material prices on to the market.

In September 2012, we announced a new mid-term corporate target. We aim to raise our key controlling parameter – EBITDA pre exceptionals – to €1.8 billion in 2018. Our previous target of €1.4 billion in 2014 is to be achieved one year earlier than originally planned. We intend to achieve our mid-term targets through organic growth as well as through targeted acquisitions, with our focus on organic growth.

Capital expenditure strategy

We make capital expenditures to increase our international competitiveness, focusing on attractive growth opportunities in profitable markets. The following principles guide our capital expenditure policy:

  • The focus is on expanding our portfolio of premium products that set us apart from our competitors.
  • We invest in sustainably growing markets that are the strategic focus for our operating segments.
  • Capital expenditures must satisfy clear financial criteria that, at a minimum, preserve the Group’s average return on capital employed and incorporate an adequate risk premium.
  • Most capital expenditures are financed out of the cash flow from operating activities or, if that is insufficient, from other available liquidity or credit lines.

Financing strategy

Our conservative, sustainability-based financing policy prepares the ground for long-term dynamic business activity. The cornerstones of this policy are accessing international financial markets and securing long-term financial flexibility.

In respect of capital requirements and capital coverage, we work to optimally reconcile competing requirements for profitability, liquidity, security and autonomy. The debt level is aligned to the ratio systems used by the leading rating agencies for investment-grade companies.

Our company is able to grow as a result of its business operations and by means of specific financing measures. Our goal is to generate positive cash flow along with a positive contribution to earnings.

Service

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