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Structure of the statement of financial position

Total assets of the LANXESS Group amounted to €7,519 million as of December 31, 2012, an increase of €641 million, or 9.3%, on the prior-year figure. This was primarily due to capital expenditures for property, plant and equipment made during the year, the increase in cash and cash equivalents, and the rise in working capital. The ratio of non-current assets to total assets decreased from 50.7% to 49.8%. On the equity and liabilities side, non-current liabilities especially were higher due to the bonds issued during 2012. At the end of 2012, the equity ratio was 31.0%, after 30.2% in the previous year.

Structure of the Statement of Financial Position – Assets
Chart: Structure of the Statement of Financial Position – Assets

Non-current assets rose by €258 million, or 7.4%, to €3,747 million. Intangible assets and property, plant and equipment increased by €332 million to €3,384 million, above all due to capital expenditures and acquisitions. Cash outflows for purchases of property, plant, equipment and intangible assets, at €696 million, were above the prior-year figure of €679 million. Depreciation and amortization totaled €378 million, against €325 million in the previous year. The carrying amount of investments accounted for using the equity method decreased by €4 million, or 33.3%, to €8 million. The change resulted mainly from the net asset-driven adjustment to the carrying amount in Currenta GmbH & Co. OHG. The earnings performance of the joint venture company LANXESS-TSRC (Nantong) Chemical Industrial Co. Ltd., China, was also a factor. The change in investments in other affiliated companies was mostly influenced by the purchase of a strategic minority interest in BioAmber, Inc., Minneapolis, United States, and a compensating effect from the fair-value adjustment of the investment in Gevo Inc., Englewood, United States, in light of that company’s recent share price development. Other non-current financial assets declined by €74 million, or 90.2%, to €8 million due especially to the sale of other securities.

Current assets increased by €383 million, or 11.3%, against the prior year, to €3,772 million. The ratio of current assets to total assets rose to 50.2% from 49.3% in the previous year. Inventories grew by €141 million to €1,527 million. With the currency effect slightly negative, this was primarily due to a modest increase in inventory levels, in part to prepare for a technology conversion in early 2013 at our site in Geleen, Netherlands. Days of sales in inventories (DSI) increased to 64.7 from 60.1 in 2011. Trade receivables decreased by €29 million to €1,117 million against the previous year, mainly due to slightly negative currency effects. Days of sales outstanding (DSO) came in at 47.4, compared with 49.9 in the previous year. Minimal portfolio effects from the acquisitions made during the reporting year had no significant influence on working capital. As a result of the financing measures undertaken in 2012, the total of cash, cash equivalents and near-cash assets increased by €269 million against the end of 2011, to €797 million.

The LANXESS Group has significant internally generated intangible assets that are not reflected in the statement of financial position due to accounting rules. These include the brand equity of LANXESS and the value of the Group’s other brands. A variety of measures was deployed in the reporting period to continually enhance these assets, which contributed to our continued success in positioning our business units in the market.

Our established relationships with customers and suppliers also constitute a significant intangible asset. These long-standing, trust-based partnerships with customers and suppliers, underpinned by consistent service quality, have made it possible for us to systematically apply our price-before-volume strategy. Our specific competence in technology and innovation, also a valuable asset, is rooted in our expertise in the areas of research and development and custom manufacturing. It enables us to generate added value for our customers.

The know-how and experience of our employees are central pillars of our corporate success. In addition, we have sophisticated production and business processes that create competitive advantages for us in the relevant markets.

Structure of the Statement of Financial Position – Equity and Liabilities
Chart: Structure of the Statement of Financial Position – Equity and Liabilities

Equity, including non-controlling interests, amounted to €2,331 million, up from €2,074 million in the previous year. The equity ratio was 31.0% after 30.2% at the end of 2011. A prominent factor in the equity increase was the high net income for the year. This was partly offset by negative currency translation adjustments in other equity components and by the dividend payout of €71 million to LANXESS AG stockholders in May 2012.

Non-current liabilities rose by €843 million to €3,558 million as of December 31, 2012. This resulted mainly from the other non-current financial liabilities, which were €702 million higher than the previous year at €2,167 million. The increase was due to the issue of a €500 million Eurobond in November 2012. In addition to a three-year CNH 500 million (roughly €60 million) Chinese off-shore renminbi bond, we issued two further bonds with a volume of €100 million each and maturities of 10 and 15 years, respectively. Provisions for pensions and other post-employment benefits increased by €213 million as against the end of 2011, to €892 million. This was mainly due to a decrease in the interest rates used to measure the provisions. The ratio of non-current liabilities to total assets was 47.3%, up substantially from 39.5% at the end of 2011.

Current liabilities decreased by €459 million, or 22.0%, to €1,630 million against December 31, 2011. This was due primarily to the scheduled redemption of the Eurobond issued in 2005. At €795 million, trade payables were slightly higher than the €766 million reported at year end 2011 due to a small increase in purchasing volumes. The ratio of current liabilities to total assets was 21.7% as of December 31, 2012, down from 30.3% at year end 2011.

Net financial liabilities decreased by €32 million from the previous year to €1,483 million. High cash inflows from operating activities more than offset the cash outflows for capital expenditures, interest and dividends as well as the working capital.

The Group's key ratios developed as follows:

Ratios            
             
%   2008 2009 2010 2011 2012
             
Equity ratio Equity1) 29.2 28.5 31.1 30.2 31.0
Total assets
Non-current asset ratio Non-current assets 47.2 47.0 48.3 50.7 49.8
Total assets
Asset coverage I Equity1) 61.7 60.7 64.3 59.4 62.2
Non-current assets
Asset coverage II Equity1) and non-current liabilities 151.8 165.8 153.9 137.3 157.2
Non-current assets
Funding structure Current liabilities 40.0 30.9 37.2 43.5 31.4
Total liabilities
1) Including non-controlling interests

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