Interim Report as of 31 March 2008

Transcription

1 Interim Report as of 31 March 2008

2 2 Performance of H&R WASAG AG The H&R WASAG group in figures (IFRS) 01/01 to 31/03/ /01 to 31/03/2007 Sales D m Operating income (EBITDA) D m EBIT D m Pre-tax earnings D m Net income before before minoritiy interests D m Net profit/loss to shareholders of H&R WASAG AG D m Consolidated earnings per ordinary share (basic) D Operating cash flow D m /01 to 31/03/ /01 to 31/03/2007 Adjusted sales D m Adjusted operating income (EBITDA) D m Adjusted EBIT D m Adjusted pre-tax earnings D m ) 1) 1) 1) 31/03/ /12/2007 Balance sheet total D m Equity D m Equity ratio % Employees absolute 1,260 1,227 1) Adjusted for the discontinued Explosives Division The divisions in figures (IFRS) 01/01 to 31/03/ /01 to 31/03/2007 Sales Chemical-Pharmaceutical Raw Materials D m Plastics D m Explosives D m Operating income (EBITDA) Chemical-Pharmaceutical Raw Materials D m Plastics D m Explosives D m

3 3 To our shareholders > Letter from the Executive Board Interim Management Report Interim consolidated financial statements Letter from the Executive Board Dear shareholders, Ladies and Gentlemen, A month ago, in our business report for the financial year 2007, our prognosis report announced that the year 2008 would be good from an operational perspective. Despite a difficult 1 st quarter of the financial year 2008, this expectation remains unchanged. Also our share price has recovered a little, which pleases us particularly for the many shareholders who have been associated with us for a long time. We see this development as the beginning of what will hopefully be a long-term recovery, and simultaneously as the necessary correction of the exaggeratedly negative movement in share price at the beginning of 2008, which must be viewed as a consequence of the prognosis adjustments that had unfortunately become necessary. As announced in the business report, results in the 1 st quarter of 2008 were somewhat lower than in the previous year due to downtime at our Hamburg-Neuhof and Salzbergen refineries, which became necessary during the course of the expansion investments. Furthermore, margins continued to be under pressure in the 1 st quarter, as our raw material costs increased significantly due to the higher crude oil price. The base oil margins in particular, still exceptional in the 1 st quarter of the previous year, have now normalised again as predicted. We initiated a further price increase in April in order to pass on these increased costs. The stated operative earnings before tax (EBITDA) amounting to D21.2 million (1 st quarter of 2007: D24.9 million) do not fully reflect these developments, as due to the considerably higher price quotations as per 31 March 2008, the stock valuation end quarter under IAS 2 contributed a positive results effect of around D10 million. A significant result of these price rises is the considerably increased working capital that results directly from the higher price levels. Nevertheless we are well prepared for this challenge, both now and in the future, given the healthy financial structure of the company and the syndicated loan agreement concluded at the start of April. In this context, however, we consider it more important that we have been able to compensate for the price increases overall by correspondingly raising the prices of our products, even at current levels, and that we can continue to do so. These increases may at times require a number of weeks or months to implement due to longer-term contracts, but it must be remembered that the quality of our products and our position in the market allow us to pass on the higher costs. The windfall losses resulting from the time delay are offset in the medium and long term by the windfall profits that occur in phases of falling prices.

4 4 To our shareholders > Letter from the Executive Board Interim Management Report Interim consolidated financial statements It is also important that our capacity expansion measures are taking effect as expected, meaning that in the current evaluation the major investments necessary in connection with Project 40 will still result in the anticipated positive effect on an EBT basis of D9 million this year. This should increase to around D14 million in 2009 and to around D20 million in Overall, we are sticking to our forecast, and expect earnings before tax (EBT) in an order of magnitude between D50 million and D60 million, and a turnover of around a billion euros for the financial year The dividend of D0.80 per ordinary share proposed for the general shareholder meeting, is the result of last years s very good performance and as we believe, is taking into account the interests of our shareholders. The projects and measures under way will enable continuing solid growth in the coming years which provides the basis for a future appropriate and attractive dividend policy. It is also important to us to remain in contact with our shareholders. The next opportunity for which will be the general shareholder meeting in Hamburg on 24 June We would be delighted to welcome you there! Best regards, Salzbergen, 9 May 2008 The Executive Board G. Wendroth N. H. Hansen A. Keil

5 Interim Management Report for the 1 st quarter of 2008

6 6 To our shareholders Interim Management Report > Economic environment and important events Interim consolidated financial statements Economic environment and important events Economic environment Macroeconomic boundary conditions In the 1 st quarter of 2008, the real property and financial crisis originating from the USA continued to precipitate a cooling of the global economic climate. The development of the global economy nevertheless remained robust, primarily due to the continuing rapid growth of the national economies in China and the developing countries of South and East Asia, in Latin America and in Central and Eastern Europe. The warning signs of recession in the USA have intensified, despite the fiscal measures initiated. Growth has also slowed in Japan and Western Europe, although especially in Western Europe the slowdown has been considerably less dramatic than in the USA. In Western Europe, the impact on the German economy of the downturn in the global economic climate has been comparatively light. Exports in particular have once again shown themselves to be a major pillar of the economy here, in contrast to which private consumption has not been performing at all well. Despite strong exports, however, Germany too was unable to achieve the growth rates of the previous year. Oil price development 01/01/2005 to 30/04/2008 US$ D in US$/barrel Brent in D/barrel Brent

7 7 Interim Management Report > Economic environment and important events The US dollar suffered a considerable loss of value, recording a new record low against the euro in the 1 st quarter of Conversely, the prices on the crude oil markets rose further. After a record high of US$108.02/barrel for the North Sea variety Brent in March 2008, a new high was reached at the end of April with a price of US$ The monthly average per barrel of Brent, which was still at US$92.00 in January 2008, rose in March to US$103.66, and in April to US$ Due to the strength of the euro, however, this price increase worked out considerably lower compared to the previous year. Division-specific boundary conditions The rise in crude oil prices led to increased division turnovers, irrespective of the quantities of speciality products produced. Due to the continuous price increases seen in the first months of 2008, the profitability of the divisions was especially dependent on the speed with which the price increases at the procurement end could be converted into higher sale prices for the speciality products. As fixed prices for the finished products are invariably effective over an extended period of time, these phases of increasing crude oil prices lead to windfall losses, which are followed by phases of windfall profits when crude oil prices fall again. Experience has shown that these balance out in the medium and long term. The margin for base oils, which in the 1 st quarter of 2007 was still well above the long-term average due to special market constellations, normalised again in the 1 st quarter of 2008 as predicted. Due to the increased crude oil prices recorded and the resultant higher expenses for plastic granulate, the profit margins of the Plastics Division remain under pressure, especially in the field of automotive industry supply. Important events On 28 February 2008, H&R WASAG AG announced a long-term production partnership for business with label-free plasticizers for the tyre and rubber industries. With the Southeast Asian partner, which was already a member of the H&R WASAG production network before the agreement was concluded, the capacities available in future for manufacturing this high-growth product category can be significantly increased, thus guaranteeing the supply of the Asian market. Production is already beginning this year, and will be further expanded in the years to come.

8 8 To our shareholders Interim Management Report > Assets, finance and earnings situation Interim consolidated financial statements Assets, finance and earnings situation Profit situation Profit development The H&R WASAG group closed the 1 st quarter of 2008 with an operating result (EBITDA: earnings before interest, tax, depreciation and amortisation) amounting to D21.2 million (1 st quarter of 2007: D24.9 million). The result for the 1 st quarter of 2008 was influenced by a number of special factors, however. Within the framework of the Project 40 expansion investments, six weeks of production downtime were required at the Hamburg refinery and two at the refinery in Salzbergen, meaning that no value creation took place in these periods. Due to the considerably higher prices recorded on the reporting date, the stock valuation provided for under IAS 2 resulted in a positive balance effect of around D10 million. For comparison with the corresponding quarter of the previous year, it must be taken into consideration that the higher base oil margin resulting from an especially favourable market constellation in the 1 st quarter of 2007 created additional Result of the H&R WASAG Group (in D m) 01/01 to 01/01 to Changes 31/03/ /03/2007 in % Operating result (EBITDA) EBIT Earning before income taxes Annual surplus (before minority holdings) Annual surplus (after minority holdings) Result per ordinary share in D

9 9 Interim Management Report > Assets, finance and earnings situation profits in the mid-single digit million range. By comparison, this margin returned to the long-term average in the 1 st quarter of Operating result by divisions (EBITDA in D m) The remuneration of the Executive Board was also significantly reduced, by D1.1 million compared to the previous year, as were other operational expenses. These were reduced by D1.6 million, which can be attributed to the expenses included in 1 st quarter of 2007 for consultancy and comparable services in connection with the sale of the Explosives Division that took place in Due to higher depreciation of D4.0 million (1 st quarter of 2007: D2.9 million), the earnings before interest and tax (EBIT) were reduced to D17.3 million from D22.1 million in the 1 st quarter of The earnings before tax (EBT) fell accordingly from D20.3 million to D15.5 million Chemical-Pharmaceutical Raw Materials Plastics Due to considerably reduced tax expenses of D4.7 million (1 st quarter of 2007: D8.6 million), the consolidated surplus before minorities fell only slightly from D11.8 million to D10.9 million, while the consolidated surplus after minorities amounted to D11.0 million, compared to D12.2 million in the 1 st quarter of The earnings per ordinary share (undiluted) are correspondingly reduced from D0.40 to D0.36. Chemical-Pharmaceutical Raw Materials Division. The majority of the operating result (EBITDA), at D20.1 million (1 st quarter of 2007: D25.9 million), was also earned in the 1 st quarter of 2008 by the Chemical-Pharmaceutical Raw Materials Division. The downtime mentioned and the re-normalisation of the base oil margin have made themselves especially apparent here. A significant effect can also be attributed to the windfall losses from the increased expenses for raw materials, because, as described in the section on Division-specific boundary conditions, there is an inevitable time delay in passing on price increases to the buyers of the end products. This effect was partially compensated for by the stock revaluation that had to be carried out. The earnings of the foreign subsidiaries developed as planned, such that it was possible to achieve a positive or at least balanced operating result (EBITDA) in every country.

10 10 To our shareholders Interim Management Report > Assets, finance and earnings situation Interim consolidated financial statements Group sales by region (in %) 1 st quarter of st quarter of Germany Rest of Europe Rest of world Plastics Division. The contribution to profits of the Plastics Division, with an operating result (EBITDA) of D1.2 million, is in the same order of magnitude as in the 1 st quarter of 2007 (D1.4 million), and as such corresponded largely to expectations. It was possible to pass on the higher raw material costs to the end buyers, albeit with a certain degree of time delay, meaning that the extent of the resultant loss of earnings remained limited. The joint venture in Wuxi, China, also developed as expected. With the proportion of the deficit (EBT) payable by H&R WASAG AG amounting to D0.2 million, and after the approval by the Chinese authorities on 1 April 2008 of the takeover of the external shareholding in GAUDLITZ Green Point Precision Technology (Wuxi) Co., Ltd., the conditions have been created for improved profit development in the coming years. Sales and business development With a turnover of D229.1 million, the company has increased the consolidated turnover by 10.5% relative to the same quarter of the previous year (D207.3 million). If the value from the previous year is adjusted to take into account the sale of the Explosives Division, giving D192.1 million, the increase in turnover actually comes to 19.3%. These increases, achieved despite the loss of production due to downtime at the Hamburg-Neuhof and Salzbergen refineries, can primarily be attributed to the increased sales prices relative to the previous year due to crude oil prices, and also to a lesser extent to the higher sales quantities resulting from the capacity expansion.

11 11 Interim Management Report > Assets, finance and earnings situation Sales by division (in %) 1 st quarter of st quarter of Chemical-Pharmaceutical Raw Materials Plastics Explosives Chemical-Pharmaceutical Raw Materials Division. Revenue in the Chemical- Pharmaceutical Division grew 20.1% to D216.1 million (1 st quarter of 2007: D179.9 million). Although a significant component of this increase can be attributed to the price development due to the rising crude oil price, the strategic capacity expansion programmes have also already been making themselves felt in a positive way. At the Hamburg-Neuhof refinery, the expansion investments for the Project 40 capacity expansion project led to a total of six weeks of production downtime. This downtime was ultimately longer than originally planned, due to a further temporary unplanned stoppage of a distillation system during the recommissioning of the plant. After this interruption, the newly commissioned plant components in particular started up with excellent results. To the best of our knowledge so far, the new production capacities which the investments set out to achieve can easily be reached. The modification work within the framework of Project 40 at the Salzbergen refinery went according to plan, such that no impairment beyond the anticipated downtime of two weeks occurred in the solvent refinement processes. After problem-free commissioning, the expectations for the planned capacity increase were entirely fulfilled. In the 1 st quarter of 2008, the company also began the installation of a tank with a volume of 20,000 m 3.

12 12 To our shareholders Interim Management Report > Assets, finance and earnings situation Interim consolidated financial statements Sales by region in the Chemicals-Pharmaceutical Raw Materials Division (in %) 1 st quarter of st quarter of Germany Rest of Europe Rest of world In the field of lubricants, construction work also began on an additive store and a new filling point for motor oils and bitumen. Within the framework of a project started the previous year for modifying the mixing operation, the other optimisation measures have been running according to plan since their successful commissioning. The first positive effects of the modification work can be seen in the form of filling quantities around 20% higher than in the same quarter of the previous year, and handling of around 10% more lubricants supplied as general cargo. Pleasingly, foreign activities are developing slightly better than originally planned. Overall, the turnover of the foreign companies increased by 35.1% from D29.9 million to D40.4 million. The majority of this growth was achieved by the Asian subsidiaries, but higher turnovers were also achieved in Great Britain, the Benelux countries, South Africa and Australia. The company acquired in Malaysia the previous year also achieved the planned turnover objectives. Plastics Division. The Plastics Division also developed according to plan, increasing its turnover by 6.6% from D12.2 million to D13.0 million. Boosted by high levels of orders for plastic parts and tools, growth was achieved both at the Coburg location and by the subsidiary in Wuxi, China. Components of an electric parking brake have already been successfully sampled in China. Significant turnover with these new products is expected for the year 2009.

13 13 Interim Management Report > Assets, finance and earnings situation Sales by region in the Plastics Division (in %) 1 st quarter of st quarter of Germany Rest of Europe Rest of world Finance and assets situation The sharp rise in the crude oil prices recorded in the first months of the year led to a significant increase of the working capital (sum of all stocks and receivables for deliveries and services) from D179.1 million at the end of 2007 to D204.6 million in the 1 st quarter of There was a corresponding increase in the net working capital (working capital minus liabilities for deliveries and services), amounting to an increase to D158.6 million from D133.4 million on 31 December This development led to a negative cash flow from the current business activities amounting to D 13.4 million, whereas in the 1 st quarter of 2007 the value was still positive at D3.6 million, or D2.3 million when adjusted to take into account the sale of the Explosives Division. The investments that were increased to D9.2 million (1 st quarter of 2007: D8.5 million, adjusted for the sale of Divisions: D7.3 million) led to a cash flow due to the investment activities of D 8.8 million (previous year: D 8.0 million, adjusted: D6.9 million). To finance the related assets, bank loans were taken out amounting to D18.9 million, and repayments made for a total of D3.5 million. The cash flow from the financing activities consequently reached D15.4 million (1 st quarter of 2007: D2.0 million). The stock of financial assets at the end of the 1 st quarter balanced out at D6.6 million (31 March 2007: D11.2 million).

14 14 To our shareholders Interim Management Report > Assets, finance and earnings situation Interim consolidated financial statements In particular due to the described increase in the working capital, the balance sum of D398.3 million at the end of 2007 increased to D426.9 million on 31 March The increase in short-term financial assets to D234.7 million (31 December 2007: D210.0 million) can likewise be attributed to the increase in the working capital. The proportion of the balance sum for which it accounts increased correspondingly from 53% to 55% at the end of the 1 st quarter of On the liabilities side, the bank loans in particular were increased from a total of D56.9 million to D77.7 million. Despite an overall increase in short-term liabilities to D108.3 million (31 December 2007: D104.2 million), the proportion of the balance for which they account fell from 26% to 25%. The increase is primarily attributable to higher short-term bank loans that were increased by D4.7 million, and other short-term liabilities that were increased by D6.4 million, whereas the short-term provisions were reduced by D5.1 million. The increase in long-term liabilities from D120.8 million to D136.8 million corresponds to the increase in long-term bank borrowing from D46.9 million to D63.1 million, and results in the proportion of the balance sum rising to 32% (31 December 2007: 30%). An excellent and unchanged equity quota of 43% underpins the healthy balance structure of H&R WASAG AG. Within the equity calculation, the strong euro resulted in a negative difference due to currency conversion amounting to D3.2 million, which was more than compensated for by the increase in the consolidated unappropriated retained earnings. Opportunities and risks In the Business Report 2007 submitted a month ago, H&R WASAG AG reported extensively on the opportunities and risks arising from the business activities and other sources. No significant changes have occurred since that time. Taken as a whole, the overall risk resulting from the sum of all the individual risks remains in a healthy ratio to the opportunities, which the Executive Board believes far outweigh the risks. The existence of the company therefore remains secure. As such, the statements expressed in the risk report contained in the consolidated annual financial statements for 2007 continue to apply.

15 15 Interim Management Report > Assets, finance and earnings situation Key events following the reporting date On 7 April 2008, H&R WASAG AG concluded a new syndicated loan agreement with a consortium consisting of 11 banks, under the leadership of DZ BANK AG Deutsche Zentral-Genossenschaftsbank, HSH Nordbank AG, and WestLB AG, for a total volume of D300 million. This new agreement replaces the old syndicated loan agreement and was concluded under significantly improved terms and conditions, and for the first time without collateral. The option of flexible drawdown during the agreed term of five years allows solid financing of the major investments planned for the core business. The agreement also provides the necessary leeway to cover any financing requirements that may arise due to increases in the working capital resulting from raw material price rises. Outlook The developments in the 1 st quarter of 2008 underline the correctness of the long-term strategy of concentrating on crude oil-based speciality products. The steep rise in the crude oil price has indeed led to a considerably higher working capital, but given the healthy balance structure and taking into account the new syndicated loan concluded on 7 April 2008, the burden this creates will be well under control whenever it arises. It has furthermore been seen in the 1 st quarter of 2008 and in the period up until the creation of this report that H&R WASAG AG remains capable of compensating for the burden of increased raw material costs, transferring these to the customer by raising prices. The delays occurring in the course of these negotiation processes lead to windfall losses, but these are generally balanced out in the medium and long-term by the corresponding windfall profits that occur in phases of falling crude oil prices. The continuing work on the Project 40 capacity expansion project will remain in the foreground of operations in the financial year The Executive Board expects this project to contibute earnings on an EBT basis of D9 million in the current financial year. These are expected to increase to around D14 million in 2009 and around D20 million in Also still in focus is the internationalisation that has already been driven forwards in the last few years. In addition to the organic growth aspired to, acquisition projects are also continuously being examined. In this, as in all activities of the

16 16 To our shareholders Interim Management Report > Assets, finance and earnings situation Interim consolidated financial statements company, the constant focus in every action is on the requirement that its implementation sustainably increases the value of the company, and hence of every share. In the Plastics Division the emphasis is on healthy growth, with a focus on increasing internationalisation. The takeover of the external shareholdings in the former joint venture in Wuxi, China, approved by the Chinese authorities on 1 April 2008, allows more effective control; this in turn facilitates the desired expansion of the turnover and the improvement of the profit situation over the next few years. The near future should also see an increase in the previous shareholding in the Czech company Gaudlitz Precision s.r.o. Dačice from 52% to almost 88%. In total, the Plastics Division is expected to expand its turnover and achieve a profit in the range of the previous year. The Executive Board is sticking to its prognosis, and is expecting operational earnings before tax (EBT) for 2008 in an order of magnitude between D50 million and D60 million, and a turnover of around a billion euros.

17 Interim consolidated financial statements of H&R WASAG AG, Salzbergen, as of 31 March 2008

18 18 To our shareholders Interim Management Report Interim consolidated financial statements > Consolidated balance sheet Consolidated balance sheet as of 31 March 2008 Assets 31/03/ /12/2007 thousand D Short-term assets Cash and cash equivalents 13,588 15,952 Marketable securities Trade accounts receivable 75,311 61,032 Receivables from companies with which a participation relationship exists 2,453 1,207 Income tax claims 1,844 1,013 Inventories 129, ,050 Short-term prepaid expenses and other short-term assets 11,717 12,232 Short-term assets 234, ,002 Long-term assets Fixed assets 137, ,951 Goodwill 35,087 35,121 Other intangible assets 4,725 4,977 Shares in at-equity reported shareholdings Other financial assets 5,618 6,088 Long-term prepaid expenses and other long-term assets 4,417 4,445 Deferred taxes 4,444 4,690 Long-term assets 192, ,302 Total Assets 426, ,304

19 19 Interim consolidated financial statements > Consolidated balance sheet Liabilities 31/03/ /12/2007 thousand D Short-term liabilities Short-term borrowing and current portion of long-term borrowing 14,629 9,939 Trade accounts payable 45,994 45,696 Liabilities due to companies in which a participating interest is held 1,436 3,087 Advance payments received Tax provisions 2,811 3,074 Short-term provisions 30,277 35,416 Other short-term liabilities 12,813 6,440 Short-term accrued expenses and deferred income Short-term liabilities 108, ,202 Long-term liabilities Financial debt 63,104 46,917 Pension provisions 48,434 48,278 Other long-term provisions 7,917 7,967 Other long-term liabilities 14,690 14,832 Long-term accrued expenses and deferred income Deferred taxes 2,422 2,591 Long-term liabilities 136, ,847 Shareholders equity Subscribed capital 76,625 76,625 Capital reserve 16,399 16,399 Other reserves 8,600 8,676 Consolidated retained earnings 82,543 71,573 Foreign currency translation adjustments 3,219 1,019 Minority interests 810 1,001 Shareholders equity 181, ,255 Total Liabilities 426, ,304

20 20 To our shareholders Interim Management Report Interim consolidated financial statements > Consolidated profit and loss account Profit and loss account: entire Group for the period from 1 January to 31 March 2008 Group Continuing activities Discontinued activities Group thousand D 01/01 to 01/01 to 01/01 to 01/01 to 31/03/ /03/ /03/ /03/2007 Sales 229, ,133 15, ,332 Changes in inventories of finished goods and work in progress 9,784 15, ,960 Other operating income 4,392 3, ,438 Material costs 181, ,817 7, ,869 a) Expenditure on raw materials and supplies and for all merchandise 174, ,706 6, ,355 b) Purchased services 7,302 6, ,514 Personnel expenses 15,946 17,504 5,173 22,677 a) Wages and salaries 13,564 15,207 4,222 19,429 b) Social security payments and expenses for pensions and for support 2,382 2, ,248 Depreciation and amortisation 3,957 2,877 2,877 Other operating expenses 24,798 22,933 3,399 26,332 Income from operations 17,251 21, ,055 Net interest result 1,708 1, ,743 Other financial result Earnings before taxes (EBT) 15,549 20, ,321 Taxes on earnings and income 4,696 8, ,570 Income before minority interests 10,853 12, ,751 Minority interests Net profit/loss to shareholders of H&R WASAG AG 10,970 12, ,180 Profit per ordinary share (basic) in D Profit per preferential share (basic) in D

21 21 Interim consolidated financial statements > Consolidated cash flow statement Consolidated cash flow statement for the period from 1 January to 31 March 2008 thousand D 01/01 to 31/03/ /01 to 31/03/2007 Continuing Discontinued Group activities activities Group 1 Income before income taxes, minority interests and interest result 17,251 21, , / Depreciation/write-ups of fixed assets 3,953 2,876 2, / Changes in long-term provisions / Interest received/paid 1,910 1, , / Income tax received/paid 5,713 4, , / Other non-cash expenses and income / Changes in short-term provisions 5,139 5, ,418 8 /+ Profit/loss from sale of fixed assets /+ Changes in inventories and trade receivables as well as other assets not attributable to investing or financing activities 26,205 7,900 1,993 9, / Changes in trade payables and other liabilities not attributable to investing or financing activities 4,662 13,214 3,273 9, = Cash flow from operating activities (sum of 1 to 10) 13,393 2,343 1,237 3, Income from sale of companies 13 Capital expenditures for the acquisition of companies 14 + Income from sale of tangible assets Capital expenditures for investments in tangible assets 9,072 7,162 1,187 8, Income from sale of intangible assets Capital expenditures for investments in intangible assets Income from sale of financial assets Capital expenditures for investments in financial assets / Currency fluctuations = Cash flow from investment activities (sum of 12 to 20) 8,778 6,851 1,162 8, Dividend 23 + Capital increase 19,831 19, / Income/expenditure relating to minority shareholders Repayment of financial liabilities 3,531 22,615 22, Proceeds from financial liabilities 18,944 4, , = Cash flow from financing activities (sum of 22 to 26) 15,413 1, , / Net change in financial resources (sum of rows 11, 21, 27) 6,758 2, , Financial resources at the beginning of period 14,835 12,600 1,103 13, / Changes due to currency conversion 1, Change to cash and equivalents from changes to group of consolidated companies 32 = Financial resources at the end of period 6,588 9,665 1,569 11,234 Short-term financial resources 13,588 13,897 1,569 15,466 Overdraft 7,000 4,232 4,232 Financial resources 6,588 9,665 1,569 11,234

22 22 To our shareholders Interim Management Report Interim consolidated financial statements > Consolidated statement of changes in shareholders equity Consolidated statement of changes in shareholders equity for the period from 1 January to 31 March Foreign Sub- Valuation Consolidated currency scribed Capital of financial Cash flow Other retained conversion Minority capital reserve assets hedges reserves earnings adjustments interests Total thousand D Other reserves Status as of 01/01/ ,625 16, ,517 71,573 1,019 1, ,255 Capital increase Dividends Valuation of financial assets Currency conversions 2, ,311 Net income 10, ,853 First-time consolidation and disposals Status as of 31/03/ ,625 16, ,517 82,543 3, , Foreign Sub- Valuation Consolidated currency scribed Capital of financial Cash flow Other retained conversion Minority capital reserve assets hedges reserves earnings adjustments interests Total thousand D Other reserves Status as of 01/01/ ,739 2, , , ,447 Capital increase, December ,111 3,720 19,831 Dividends Valuation of financial assets Currency conversions Net income 12, ,751 First-time consolidation and disposals Status as of 31/03/ ,850 6, , , ,241

23 23 Interim consolidated financial statements > Notes Notes on the consolidated financial statements as of 31 March 2008 (IFRS) Principles and methods The interim consolidated financial statements of H&R WASAG Aktiengesellschaft as of 31 March 2008 have been published in accordance with the International Financial Reporting Standards (IFRS) applicable and mandatory on the reporting date, as were the annual consolidated financial statements for 31 December 2007; in particular the regulations of IAS 34 on interim reporting were applied. All interim financial statements of the companies included in the interim consolidated financial statements were drawn up on the basis of uniform balancing and evaluation principles, which were also used as the basis for the annual consolidated financial statements of 31 December Taking into consideration the meaning and purpose of the interim reporting as an informative instrument based on the consolidated financial statements, we refer to the appendix to the annual consolidated financial statements. The balancing, evaluation and consolidation methods used, and the exercise of the voting rights contained in the IFRS, are comprehensively explained. The balancing and evaluation principles, and the consolidation methods used, were retained from the financial year Seasonal and business cycle influences Seasonal and business cycle influences are described in detail in the sections of the interim management report entitled Economic environment and Assets, finance and earnings situation. Group of consolidated companies The group of consolidated companies as of 31 March 2008, including H&R WASAG Aktiengesellschaft, covers 38 companies, 20 domestic and 17 foreign companies of which are included in the interim financial statements within the context of the total consolidation.

24 24 To our shareholders Interim Management Report Interim consolidated financial statements > Notes Profit per share In accordance with IAS 33, the profit per share is calculated by dividing the consolidated profit by the average number of shares. At H&R WASAG AG, a distinction is made between two kinds of shares. The average weighted number of ordinary shares amounted to 27,323,112 shares, while that of the preferential shares amounted to 2,650,000. There is no dilution effect in the reporting period and/or the period in the previous year. In the annual consolidated financial statements, the provision for the preferential shares is described in detail under explanatory notes (22) Subscribed capital. The profit per share is calculated under the income statement. Income statement, balance sheet and capital flow calculation Detailed explanatory notes on the income statement, balance sheet and capital flow calculation can be found in the sections of the interim management report entitled Earnings situation and Finance and assets situation. Calculation of changes in equity The consolidated annual surplus as of 31 March 2008 amounting to D11.0 million increased the equity. A reduction amounting to D2.4 million resulted from currency changes and alterations in financial instruments that were not taken into consideration in the annual profit and loss calculation. Events after the reporting date The major events after the reporting date are described in the section of the interim management report entitled Key events following the reporting date. Other than these, no major events have occurred since the reporting date for the interim financial statements. Employees Throughout the company as of 31 March 2008, 1,260 (31 March 2007: 1,899) personnel were employed, 275 of whom (31 March 2007: 595) were employed in foreign group companies. Details on H&R WASAG Aktiengesellschaft H&R WASAG AG has no operational business of its own, but is responsible as a holding company for the strategic leadership of the group companies organised in the business sectors, and decides on the efficient distribution of funds within the group. The holding company also performs central administrative functions and provides management resources. On 31 March 2008, H&R WASAG Aktiengesellschaft employed 9 staff (31 December 2007: 9 staff).

25 25 Interim consolidated financial statements > Notes Reporting by segment (1 January to 31 March 2008) Relative to 31 December 2007, there has been no change in the delineation of the segments or the way in which segment profit and loss are determined. D m Chemical-Pharma- H&R WASAG ceutical Raw Materials Plastics Explosives Other activities Consolidations group Sales of which in discontinued sector (0.0) (0.0) of which in discontinued sector (15.2) (15.2) EBIT of which in discontinued sector (0.0) (0.0) of which in discontinued sector (0.3) (0.3) EBITDA of which in discontinued sector (0.0) (0.0) of which in discontinued sector (0.3) (0.3) When examining the different segments, it should be noted that the Chemical-Pharmaceutical Raw Materials Division is affected by an intra-group purchase of activities performed in 2002, which resulted in its being burdened by depreciation charges that are neutralised as part of consolidation at Group level. These totalled D750k in the reporting period (previous year: D750k).

26 26 To our shareholders Interim Management Report Interim consolidated financial statements > Notes Details of relationships with affiliated persons in accordance with IAS 24 The following supplies and services were provided for other affiliated companies and persons or were obtained from them. Provided to Hansen & Rosenthal Received from Hansen & Rosenthal Goods and services 01/01 to 31/03/ /01 to 31/03/ /01 to 31/03/ /01 to 31/03/2007 thousand D Supplies of chemical-pharmaceutical products 60,555 56, Salzbergen (44,703) (44,290) Hamburg (15,852) (12,328) Incidental expenses from the supply relationship (freight costs, toll charges etc.) ,011 2,795 Commission fees Other services and third party costs (IT services, personnel costs etc.) The supplies and the commission business are based on contractual agreements that regulate both the terms of supply as well as their processing. On 31 March 2008, the following receivables and liabilities were outstanding: Receivables from Hansen & Rosenthal Liabilities to Hansen & Rosenthal thousand D 31/03/ /12/ /03/ /12/2007 Goods and services 5,704 4, ,202 Others 8,102 7, Total 13,806 11, ,497 Other receivables concern receivables from the commission business where Hansen & Rosenthal, as commission agent, receives payments from customers and forwards them to H&R WASAG AG.

27 27 Interim consolidated financial statements > Notes The following supplies and services were provided for associated companies or were obtained from them: Services provided to associated companies Services received from associated companies Services 01/01 to 31/03/ /01 to 31/03/ /01 to 31/03/ /01 to 31/03/2007 thousand D Supply of explosives 230 Purchase of hydrogen and steam Interest income Rental income Services Total On 31 March 2008, the following receivables and liabilities were outstanding: Receivables from associated companies Liabilities to associated companies Services 31/03/ /12/ /03/ /12/2007 thousand D Goods and services Others Total 1, The following services were provided for members of management bodies or were obtained from them: Within the framework of consultancy contracts and for sales activities in 2008, the BOWAS group and BOHLEN Handel GmbH were paid a total of D53k (31 March 2007: D87k). On 31 March 2008, the following receivables and liabilities were outstanding: Receivables from members of management bodies Liabilities to members of management bodies Services 31/03/ /12/ /03/ /12/2007 thousand D Goods and services 52 Liabilities arising out of bonuses paid to members of the Management Board 44 1,267 Others Total 330 1,556

28 28 To our shareholders Interim Management Report Interim consolidated financial statements > Notes Contingent liabilities On 31 March 2008, the following contingent liabilities were outstanding: thousand D 31/03/ /12/2007 Guarantees Deposits for guarantees 1,187 1,187 Joint liability for pensions Other contingent liabilities Total 2,181 2,484 The demonstration of the liabilities from guarantees relates to a guarantee for the benefit of Westfalen Chemie GmbH & Co. KG regarding Commerzbank AG. The outstanding liability deposits relate to Westfalen Chemie GmbH & Co. KG. The joint liability for pensions concerns pension obligations transferred to WNC Nitrochemie Aschau GmbH, Aschau. Other financial obligations Financial obligations resulting from long-term rental and lease contracts as well as other obligations over multiple years are presented in the following table: thousand D 31/03/ /12/2007 Lease and rental obligations and other obligations over multiple years of which due within one year 10,508 12,745 of which due >1 year and <5 years 22,280 21,964 of which due >5 years Total 33,460 35,220 Order commitments Investments in tangible fixed assets 20,600 11,159 Investments in intangible assets Total 20,600 11,159

29 29 Interim consolidated financial statements > Notes Assurance of the legal representatives According to the best of our knowledge, we guarantee that, in accordance with the applicable accounting principles, the consolidated financial statements convey a true and fair view of the group's assets, financing, and earnings; that the development of business, including the company's earnings and the position of the group are presented in the group management report in such a way that a true and fair view of actual circumstances is conveyed; and that the significant opportunities and risks pertaining to the prospective development of the Group are described. Salzbergen, May 2008 The Executive Board

30 30 Financial calendar Financial calendar 24 June 2008 Annual Shareholder Meeting in Hamburg 14 August 2008 Q2 Report November 2008 Q3 Report 2008 Contact If you should have further questions concerning our company or if you would like to sign up for the company mailing list, please contact our Investor Relations Team: H&R WASAG AG Investor Relations Am Sandtorkai Hamburg Germany Christian Pokropp Tanja Hemker Phone: +49 (0) Phone: +49 (0) Fax: +49 (0) Fax: +49 (0)

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32 H&R WASAG AG Neuenkirchener Straße Salzbergen Germany Phone: +49 (0) Fax: +49 (0) investor.relations@hur-wasag.de Internet: