Nearly two years after the company was formed, LANXESS are increasingly aiming for organic and also external growth. ‘We plan to grow into the role of a pro-active player on the global chemicals market. We have laid the foundations for this over the past two years’, said LANXESS Management Board Chairman Axel C Heitmann at an international media and investor conference in Leverkusen.

Heitmann said that through a package of measures, the company have succeeded in mitigating the effects of cyclical fluctuations in the chemical industry. Non-core businesses have been divested to strategic investors.

The results of the four restructuring programs so far launched show that the company is on track for a sustained increase in profitability. LANXESS anticipate total savings of €260 million in 2009 compared with today. The group’s key controlling parameter, EBITDA pre exceptionals, rose by 30% in 2005 and by 18% in the first half of 2006.

New earnings target from 2009

In light of the steady earnings improvement, the Leverkusen-based chemicals group is setting itself new targets. By 2009, the EBITDA margin pre exceptionals is planned to reach the peer group average, which in 2005 was between 12-14%. In their report for the second quarter of 2006, LANXESS narrowed their earnings guidance for the current year as a whole, forecasting EBITDA pre exceptionals of between €660-680 million.

Clear profitability targets for the business units

By 2009, all business units should be earning an EBITDA margin pre exceptionals of at least 5%. For the full year 2006, LANXESS expect 55% of their businesses to generate a margin of over 10%, which would be almost twice as many as in 2004. A quarter of the businesses are expected to report a 5-10% margin, while one-fifth are likely to be below that level.

Further enhanced business model

At the conference, Heitmann presented details of LANXESS’s further enhanced business model: efficiency improvements are to be energetically driven forward through rigorous cost management, competitive pricing and profit-oriented resource allocation. LANXESS will exploit all the opportunities offered by growth markets. In addition, the company plan to take up new market and industry trends and grow organically on the basis of this business model.

Heitmann sees possibilities for external growth, including adding to existing businesses by acquiring small to medium-sized activities. Entering new and attractive markets with new products is also conceivable in order to broaden the portfolio. However, in view of the success they have already experienced in improving low-margin activities, LANXESS are also looking at companies or businesses with potential for value creation. ‘Our acquisitions must create new value and sustainably boost the Group’s profitability. We will only commit ourselves where we can make use of our expertise and create additional value for the company as a whole. The selection process will be strict and financially disciplined. We’re not going to put ourselves under pressure’, explained the LANXESS CEO.

Financial headroom for acquisitions

Chief Financial Officer Matthias Zachert emphasised the Group’s greatly increased financial strength. ‘We have sufficient financial headroom to continue our development’, he said. Equity has been strengthened, loans placed on a solid foundation and debt reduced. ‘Today, we could draw on additional funding of between €0.5-1.5 billion without jeopardising our creditworthiness.’

Zachert said other financial instruments could also come into play that would lift the headroom to well above €1.5 billion. Specifically he mentioned additional debt securities that partly count as equity, the proceeds of possible divestments, the raising of additional equity, cooperation with a partner, or a combination of all these things.

In the afternoon, presentations were given by some of the business units in LANXESS’s four segments, with the management team explaining its strategy for further profitable growth.