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(32) Contingent liabilities and other financial commitments

Contingent liabilities as of December 31, 2012 amounted to €28 million (2011: €12 million). They include contingent liabilities to investments accounted for using the equity method totaling €22 million (2011: €7 million). Contingent liabilities result from guarantees and similar instruments assumed on behalf of third parties. They represent potential future commitments in cases where the occurrence of certain events would create an obligation that was uncertain at the closing date. An obligation to perform under such contingent liabilities arises in the event of delayed settlement or insolvency on the part of the debtor.

As a personally liable partner in Currenta GmbH & Co. OHG, Leverkusen, Germany, LANXESS may be required to inject further capital into this company in the future.

Apart from provisions, liabilities and contingent liabilities, financial commitments also exist under operating leases.

As explained in the section on recognition and valuation principles, operating leases are those which – unlike finance leases – do not transfer substantially all risks and rewards incidental to the ownership of the leased assets to the lessee. In the LANXESS Group, operating leases are mainly used for operational reasons and not as a means of financing.

The minimum non-discounted future payments pertaining to operating leases total €496 million (2011: €418 million). The increase in the amount of these future payments compared with 2011 mainly relates to construction of a new site in Singapore and to the Group’s new headquarters in Cologne.

The respective payment obligations mature as follows:

Maturity Structure of Lease and Rental Payments
€ million Dec. 31, 2011 Dec. 31, 2012
Up to 1 year 39 54
1 to 2 years 41 53
2 to 3 years 39 47
3 to 4 years 35 41
4 to 5 years 29 35
More than 5 years 235 266
  418 496

Payments under operating leases amounted to €48 million in 2012 (2011: €39 million). The year-on-year increase was mainly due to the expansion of the operational business.

Financial commitments resulting from orders already placed under purchase agreements relating to planned or ongoing capital expenditure projects in the area of property, plant and equipment and intangible assets total €261 million (2011: €284 million). Of the respective payments, €131 million are due in 2013 and €130 million are due in 2014.

Description of the master agreement

Under the master agreement that was concluded between Bayer AG and LANXESS AG together with the Spin-Off and Takeover Agreement, Bayer AG and LANXESS AG agreed, among other things, on commitments regarding mutual indemnification for liabilities in line with the respective asset allocation and on special arrangements allocating responsibility to deal with claims in the areas of product liability, environmental contamination and antitrust violations. The master agreement also contains arrangements for the allocation of tax effects relating to the spin-off and to the preceding measures to create the subgroup that was subsequently spun off.


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