Publication of the second quarter 2011 results Conference Call Thursday, August 11, 2011 LANXESS AG Contact: Daniel Smith Financial and Business Media 51369 Leverkusen Germany Phone +49 214 30-75179 Fax +49 214 30-50691 daniel-alexander.smith@ lanxess.com Speech by Dr. Axel C. Heitmann Chairman of the Board of Management of LANXESS AG (Please check against delivery) (2011-00008e)
Ladies and gentlemen, on behalf of the Board of Management of LANXESS AG, I would also like to welcome you to this conference call now that we have released our figures for the second quarter of 2011. Page 2 of 8 Let me start with a summary of the comments I will make today: Following an excellent start to the year, we also ended the second quarter with record earnings. We are raising the full-year forecast that we gave in May, and now expect to improve EBITDA pre exceptionals by approximately 20 percent year on year. That means 2011 will be another record year for our company. And LANXESS is on a sustainable path of growth. Ladies and gentlemen, We saw another gratifying improvement in our operational business in the reporting period: Driven mainly by continued high demand for our high-tech rubber and plastics materials, sales climbed by 23 percent year on year to more than EUR 2.2 billion. This is the highest quarterly sales figure that LANXESS has ever achieved. EBITDA pre exceptionals grew even faster than sales, rising by 26 percent to EUR 339 million. That, too, is an all-time record for LANXESS. Our EBITDA margin pre exceptionals thus improved by 0.4 percentage points to 15.1 percent. And net income rose by an even more substantial 38 percent to EUR 181 million again, more than we have ever earned before in a quarter. This pushed up earnings per share to a highly satisfactory EUR 2.17.
Ladies and gentlemen, Thanks to our strict alignment toward innovative premium products and the strategic growth markets coupled with our proven pricebefore-volume strategy we once again achieved outstanding results. Our synthetic rubber and high-end plastics businesses, particularly, benefited from the megatrend of mobility. Page 3 of 8 Higher raw material prices, especially in the Performance Polymers segment, were quickly passed on to the market. Selling prices across the Group rose by 19 percent compared with the prior-year period. Capacity utilization again showed another slight increase compared to the already good level of the prior-year quarter, with excellent levels achieved by the business units in the Performance Polymers segment. All the business units in this segment which combines our activities in the fields of synthetic rubbers and plastics benefited from persistent high demand in the principal customer industries. As in the first quarter, Performance Polymers therefore posted the strongest growth once again, with sales advancing by 37 percent year on year to EUR 1.3 billion. The acquisition of the DSM elastomers business in May already boosted segment sales by 9 percent or some EUR 80 million. EBITDA pre exceptionals improved by an even more substantial 40 percent to EUR 229 million, yielding a margin of 17.9 percent compared to 17.5 percent a year earlier. The DSM elastomers business was already accretive to earnings. The Advanced Intermediates segment saw sales rise by 14 percent to EUR 395 million. EBITDA pre exceptionals was virtually flat with the previous year at EUR 65 million. The margin therefore came to 16.5 percent, against 19.3 percent a year ago. The prior-year figure was higher due to timing differences between certain one-time effects.
The recovery in demand for agrochemicals led to considerably higher volumes. Both of the segment s business units benefited from this trend, with Saltigo gaining ground particularly with its precursors for fungicides. Page 4 of 8 The Advanced Industrial Intermediates business unit also continued to grow sales, especially to the dyes and coatings and automotiverelated industries. The Performance Chemicals segment raised sales of its applicationsbased process and functional chemicals by nearly 5 percent to EUR 561 million. EBITDA pre exceptionals expanded by 13 percent to EUR 95 million. The margin came in at 16.9 percent, compared with 15.6 percent in the second quarter of 2010. Since the beginning of the year, this segment has integrated the Darmex group and the materials protection business of Syngenta, both of which had a positive impact on sales and earnings. Another acquisition was realized just after the end of the second quarter: At the beginning of July we purchased the tire release agents business of Wacker Chemie AG, thus further expanding the portfolio of our Rhein Chemie business unit. Ladies and gentlemen, We increased sales by double-digit percentages in all regional markets. The largest increases this time were in Germany and Latin America. To give you more detail on this: Our biggest regional market, with sales of EUR 665 million, was the EMEA region (which is Europe excluding Germany, plus the Middle East and Africa). This figure was 25 percent above the prior-year period. The currency- and portfolio-adjusted increase came to
20 percent. The Performance Polymers segment was the cornerstone of our business in the region. Page 5 of 8 In Asia-Pacific, our second-biggest regional market, sales rose by 22 percent or 24 percent on a currency- and portfolio-adjusted basis to EUR 492 million. Here too, growth was driven by the Performance Polymers segment. The largest increase was achieved in our home market of Germany, our third-largest sales region, where business was up by more than 26 percent to EUR 411 million. The portfolio-adjusted increase amounted to 24 percent. Noteworthy was the sales growth of more than 50 percent in the Performance Polymers segment. This segment also showed the strongest growth in the North America region, where Group sales expanded by nearly 18 percent to EUR 368 million. Operationally in other words, adjusted for the effects of shifts in exchange rates and portfolio changes our businesses there in fact improved by 27 percent. Finally, in the Latin America region we generated sales of EUR 307 million in the reporting period. This was a year-on-year increase of 25 percent, while sales climbed by a significant 32 percent on an adjusted basis. As in all other regions, the Performance Polymers segment developed particularly well. Our sales in the five so-called BRICS countries, a group that was recently expanded to include South Africa, grew by 22 percent to EUR 522 million clearly dominated of course by BIC, in other words Brazil, India and China. This plainly shows that we are right to focus on these emerging economies and the megatrends of mobility, urbanization, agriculture and water treatment that are so important there.
Ladies and gentlemen, With this focus, our dual-track strategy of organic and external growth, our technological and innovative expertise and our global competitiveness, we are well positioned to sustain our path of growth. Page 6 of 8 The foundation for this is provided by our outstanding portfolio of innovative premium products, our high level of technological expertise and our positioning in the emerging markets. Only recently, for example, we agreed to expand our partnership with Triangle Group, one of China s biggest tire producers. We also dedicated a new production line for the high-tech plastics Durethan and Pocan at the site in Wuxi, China. These plastics play a key role in lightweight construction in the automotive industry. I just mentioned the further improvement in our capacity utilization, the numbers for the Performance Polymers segment being particularly good in this respect. This illustrates how important it is for us to build new facilities and expand existing ones are if we are to continue gaining the maximum benefit from the expected growth in our customer industries. We again embarked on numerous new projects in several business units in the second quarter. Of these, I ll just mention the most important one, and that s the construction of our new plant for high-performance Nd-PBR rubber in Singapore. When it comes on stream in the first half of 2015 with an annual capacity of 140,000 tons, it will be the world s biggest facility of its kind. This facility represents the second-biggest capital expenditure project in our company s history, after the butyl rubber plant also being built in Singapore. Ladies and gentlemen, I said at the beginning that we are raising the full-year forecast we gave in May and that we expect to achieve record earnings. We have laid a good foundation for this so far and also got off to a promising start in the third quarter.
We basically expect the growth trend in the end markets relevant to us to continue for the remainder of the year. Demand for our products remains strong, and our capacity utilization is at a very high level, although we should note that the usual seasonality is resuming. That means the first half of the year accounts for about 60 percent of annual earnings and the second half for the rest. To offset the further price increases predicted for raw materials and energies, we are adhering to our proven price-before-volume strategy, which means passing on the higher costs to the market. Page 7 of 8 We therefore expect to improve EBITDA pre exceptionals by roughly 20 percent compared to last year. Previously we had forecast an improvement of between 10 and 15 percent. We are, of course, watching current developments on the financial markets and the growing anxiety among investors. The situation is also causing increased uncertainty regarding future macroeconomic developments. But as you know, ladies and gentlemen, in past years we have demonstrated our ability to respond quickly and efficiently to special challenges thanks to our excellent strategic positioning and our dedicated workforce. Ladies and gentlemen, At LANXESS the principle still applies that we do not rest on our laurels. On the contrary: we want to be even better. To this end, we are pressing ahead with the growth strategy that we call GoFor 1.4 with the aim of achieving EBITDA pre exceptionals of EUR 1.4 billion in 2015. To achieve this, we will pursue acquisition opportunities as well as organic growth. From the acquisitions we have made so far, we have a proven track record of integrating new businesses quickly and smoothly. We will make effective use of this expertise with future purchases as well.
Ladies and gentlemen, In conclusion I d like to express a personal point of view in light of current developments on the international financial markets: I firmly believe that German industry is in a very strong, competitive position that will enable it to overcome challenges in the fields of economy, energy or demography. It proved that in the crisis year 2009. It holds top positions globally in terms of innovative potential and technological leadership. That applies particularly to our sector, the chemical industry. And it s often our products that make innovations possible in other sectors. Page 8 of 8 Thank you for your interest. 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.