London/Leverkusen - LANXESS AG, Leverkusen, will now position itself as a specialty chemicals group following the divestment of its Lustran Polymers business unit. “Our place is as a specialty chemicals group at the core of the chemical industry,” declared Management Board Chairman Axel C. Heitmann at this year’s Investor and Media Day in London. As part of a systematic market orientation, LANXESS will organize its 13 business units into three segments starting in October 2007 following the divestment of the commodity plastics activities. The new segments are named Performance Polymers, Advanced Intermediates and Performance Chemicals.

Three cornerstones of new business model

Heitmann pointed out that LANXESS is now a more profitable and a more competitive enterprise than at the time of its spin-off and establishment as an independent company. Earnings have improved significantly, with the EBITDA margin pre exceptionals coming in at 12.5 percent for the first half of 2007. LANXESS has also sharpened its business focus after divesting a total of four business units. Said Heitmann: “LANXESS will continue to establish itself as a leading specialty chemicals group. That’s the way for us to make the best use of our expertise and our applications know-how. All units have to meet three criteria in future: they must offer premium products, processes and services, promote business stability and help to reinforce LANXESS’s leading role in this industry sector.”

The company plans to invest about EUR 1 billion over the next three years to further strengthen its businesses. “The focus of the investment program through 2009 will be on the ‘LANXESS goes Asia’ initiative,” the LANXESS CEO explained, with some 60 percent of planned capital expenditures going for capacity expansions. LANXESS’s capex budget for the current year is just over EUR 300 million.

Only acquisitions that create value

Heitmann defined the company’s future acquisition strategy: “We don’t plan on following in the footsteps of some of our competitors, who made overpriced acquisitions years ago and have since paid dearly for their mistakes in the form of low margins and declining competitiveness. Let me be quite clear about this: acquisitions are not a matter of urgency.” A central criterion for an acquisition, said Heitmann, is that it must be accretive to earnings per share within three years at the latest. LANXESS is well prepared for acquisitions, he went on, but “we will never pursue an acquisition simply for the sake of size. We will act only when the time is right.”

New three-segment structure

In light of LANXESS’s systematic market orientation and consistent portfolio management, the divestment of Lustran Polymers made it necessary to modify the segment structure. All the polymer-based businesses – in other words, the former Performance Rubber segment and the Semi-Crystalline Products business unit – are being grouped together to form the new Performance Polymers segment. The Chemical Intermediates segment is renamed “Advanced Intermediates.” And the Inorganic Pigments business unit becomes part of the Performance Chemicals segment, reflecting the specialty nature of this business. The Engineering Plastics segment therefore ceases to exist.

Profitability greatly improved

Chief Financial Officer Matthias Zachert emphasized LANXESS’s greatly increased profitability, citing the improvement in the return on capital employed (ROCE). In the space of four years this indicator moved out of negative territory to reach 15.9 percent in 2006. And regarding financial constancy, LANXESS has a clear edge over major competitors in terms of improving its margin from year to year. For that reason, said Zachert, LANXESS will now reach its 2009 earnings targets a year early.