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Bulls, bears and a huge challenge

LANXESS is celebrating five years on the trading floor. On January 31, 2010 it is five years since the company was listed on the Stock Exchange. January 31, 2005 was an extraordinary day, and not just because of the special atmosphere created at the Frankfurt Stock Exchange by the large posters and screens drawing attention to the new company. The truly memorable moment was when LANXESS’s name lit up on the quotation board for the first time – with an opening price of EUR 15.75! The company’s split from the Bayer Group became official at 10 a.m. sharp when the first shares were traded, marking the successful completion of one of Germany’s largest flotations of recent years.
LANXESS’ path to going public was not one of the usual growth stories, though – and the group had been very open about this from the beginning on. In those early days, the talk was much more of restructuring, and that determined the strategy for the subsequent months.

Right from the start, along with a rich tradition, LANXESS took on huge debts and operations with poor margins. When it was decided in November 2003 to carve out large parts of Bayer’s chemical activities and around a third of its polymer business as an independent company, it was clear that the areas of business that were being divested were not the profitable ones, but rather the ones with poor margins or where the product cycle had reached the “mature” phase. If the new group was to have a future on the global market, a great many things needed to improve – and sooner rather than later. Systematic restructuring was therefore required while business operations continued. The group approached the targeted reorganization of its chemical business in four phases. From the outset, short-, medium- and long-term measures interlinked as smoothly as the cogs of a clock. Important immediate measures, targeted transformation, active portfolio management and – as a medium-term goal – acquisitions and specific purchases laid the foundation for the success being enjoyed today. In order to optimize the company’s portfolio, business accounting for around 25 percent of sales was divested.

In its first two years after being listed for the first time, LANXESS already surprised many capital market specialists, media representatives and chemical industry experts. The group listed on the MDAX since June 2005 produced some impressive results. Its restructuring measures quickly took effect and the group’s performance improved significantly. As a result, LANXESS recorded positive results from its first fiscal year. In addition, the Central Works Council and company management soon agreed a solidarity package and the group established a completely new corporate culture. LANXESS also focused on future markets and possible growth areas. In the spring of 2006, it stepped up its activities in Asia by opening a new plant for high-tech plastics in China and systematically investing in India. This led to LANXESS achieving the success to which its name aspires sooner than planned.

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LANXESS drives growth forward

Just two years after going public, LANXESS started concentrating on phase four of its corporate strategy – profitable growth! Accordingly, the Group successfully completed its first acquisition in mid-December 2006, taking over the chrome ore activities of the Dow Group in South Africa that had previously been operated as a joint venture together with LANXESS. This strategy also paid off for stockholders, who received their first dividend for the 2006 fiscal year.

LANXESS continued on its growth trajectory. In mid-2007, it increased the butyl rubber production capacity at its Sarnia plant in Canada by more than 40 percent. In Singapore, LANXESS announced firm plans for a new butyl rubber plant in Asia. Representing an investment of around EUR 400 million, this is the largest capital expenditure to date in LANXESS’s short history. From 2013, up to 100,000 metric tons of butyl rubber will be produced each year in Singapore – primarily for the tire industry – at the most state-of-the-art plant of its kind in Asia.

The largest acquisition to date followed in December 2007 when LANXESS bought Brazilian chemicals group Petroflex, a leading global manufacturer of synthetic rubber. The listed company based in Rio de Janeiro represented the ideal complement to the LANXESS portfolio. The acquisition also strengthened LANXESS’s position on one of the world’s key growth markets. The Petroflex takeover was completed in the space of a year, in November 2008. The company now trades as LANXESS Elastomeros do Brasil S.A. LANXESS is also successfully pursuing its growth strategy in other parts of the world. In mid-2009 for example, it took over the business and facilities of the chemical companies Gwalior Industries in India and Jiangsu Polyols Chemical Co. Ltd. in China. These acquisitions underline that LANXESS is a key player on the world’s major markets and in areas of business that have a promising future. Far from being in need of serious restructuring, LANXESS is now a profitable, cutting-edge specialty chemicals group.

Another key growth market in addition to Asia is Central and Eastern Europe. Since the beginning of 2008, LANXESS has also been focusing on this region, setting up its own sales company with 40 employees. The new company is headquartered in the Slovakian capital of Bratislava, with branches in Warsaw and Budapest. The next step in the process of moving into Central and Eastern Europe came at the beginning of 2009. LANXESS established a significant presence on the markets in Russia and the CIS, opening a new sales office for Russia in the brand new Federation Tower in Moscow. This essentially rounds off the group’s move into the BRIC states. Following significant investments in Brazil, India and China, LANXESS is now also firmly established on the fourth key growth market – Russia.

Focus on innovations and research

In order to remain competitive, LANXESS is therefore focusing first and foremost on innovations and research. This places great demands on its in-house research and development team, but it is also one of the factors behind the company’s success.   LANXESS has become a technological pioneer and many of its products now enjoy leading positions in their respective fields because LANXESS looks to the future – responsibly, emphatically and, above all, always seeking to lead the way!

Looking to the future with strong products

LANXESS is looking to the future, but is not forgetting its long and rich tradition either. As a young company, LANXESS trusts in its strong roots – roots like those of synthetic rubber, which was invented by Professor Fritz Hofmann in 1909. In September 2009, LANXESS honored this great invention by organizing a scientific symposium with high-profile speakers. The invention gave the world mobility and has become part of the fabric of everyday life.  With a portfolio of more than 100 grades of synthetic rubber, LANXESS is successfully perpetuating Hofmann’s legacy. This, too, brings with it a certain responsibility – one that the company takes very seriously.

LANXESS is now one of the world’s most successful specialty chemical groups – and Germany’s largest such group to be listed on the Stock Exchange. Its EBITDA margin – one of the most important KPIs for a company – has increased from 6.6 percent in 2004 to an impressive 11.0 percent in 2008, thus matching the average margin of its competitors. In 2010, LANXESS has customers virtually everywhere – from the automotive, construction and electronics sectors to the agricultural, pharmaceutical and clothing industries. What’s more, the value that LANXESS has created for its stockholders in the first five years of its existence – a value that the group will continue to increase – is as sustainable as its extremely diverse range of products is impressive.

Responsible and sustainable – in every respect

LANXESS is not just a proudly profitable specialty chemicals group, though. The company’s commercial success is intrinsically linked to its impressive environmental and social commitment. As part of a systematic strategy to ensure sustainable business practices, LANXESS invests throughout the world in ideas, products and technologies that, in addition to strengthening the company’s market position, also lessen the strain on the environment and improve people’s quality of life. Numerous projects and awards around the globe bear witness to this enduring commitment. In November 2009, for example, the new nitrous oxide reduction unit at the Krefeld-Uerdingen site was named one of the “Selected Landmarks for 2010” in the “365 Landmarks in the Land of Ideas” initiative under the patronage of German President Horst Köhler. This ultimately demonstrates that sustainable development, creativity and profitable growth are perfect bedfellows!