LANXESS to divest textile processing chemicals

31 May 2006

LANXESS plan to divest their Textile Processing Chemicals business unit. 'Recent global market developments mean that further action is needed with regard to this business', said LANXESS management board chairman Dr Axel C. Heitmann at the company's annual stockholders' meeting in Düsseldorf. 'The management board has therefore decided to divest these activities. We are confident that we will complete this process by the end of the year.' Heitmann had already announced at the beginning of April that strategic options for this business were being explored in order to safeguard its long-term future. Successful restructuring has been carried out over the past two years to make the business more competitive. LANXESS are now looking for an investor who seeks to participate in the ongoing consolidation of the textile processing chemicals industry and would like to build on the business unit's good market position. The Textile Processing Chemicals business unit employs about 380 people. It forms part of the Performance Chemicals segment, which had sales of €1.98 billion in 2005. As well as announcing this portfolio decision, Heitmann also spoke about the progress made so far in implementing the Group's strategy. He said the company's performance has improved operationally and in other crucial respects, putting LANXESS today in a much better position than at the beginning of last year. The numbers published on May 18 for the first quarter of 2006 'also clearly show that we are on track for a further steady improvement in performance.' The LANXESS CEO expressed his confidence that the company can again achieve all its key earnings targets this year. As previously stated, LANXESS expect to achieve moderate growth in sales in 2006 and EBITDA pre exceptionals of between 640-680 million euros. This guidance is within the upper half of the 9-10% margin range, calculated on 2004 sales, that was communicated in 2004. Another goal for the full year 2006 is to achieve positive net earnings. 'That would open up the possibility of letting you, our stockholders, participate in the company's success in the form of a dividend payment, quite apart from the increase in the share price', explained Heitmann, adding that the conditions for this would of course have to be right. Heitmann pointed out the need for the company to further increase their relevance and their value. And LANXESS must redouble efforts and open up new potential in order to close the earnings gap that exists between the company and their competitors. According to Heitmann, it will therefore also be important in the future to find partners or businesses that enable LANXESS to create additional value in what are already its key competency areas. The company's decision to aim for strategic growth as well in the future is supported by global market trends, explained Heitmann in reference to consolidation in the chemical industry. 'We cannot afford to simply stand by and watch consolidation take place. On the contrary, we intend to be among the people shaping this development. We will drive it forward at a pace that is right for us', Heitmann stressed. In Heitmann's words, LANXESS have achieved a great deal since they were spun off from Bayer AG and have laid a solid, independent foundation on which to continue building the new company. Despite all that has been achieved thus far, however, the company must not slacken the pace, Heitmann warned, saying that 'the new house is still far from finished.' The LANXESS CEO had reassuring words for the company's stockholders: 'We will continue to rigorously implement our corporate strategy and realize our plans as announced.' The LANXESS chairman underscored the company's commitment to Germany as a chemicals location, explaining that LANXESS also represent a contribution to safeguarding and expanding the chemical industry's production base in Germany. 'The chemical industry has been and remains the fourth pillar of our national economy, after the automotive, electrotechnology and mechanical engineering industries. I believe things should stay that way in the future.' For that reason, he added, a sell-out of the German chemical industry must be prevented, and chemical production there must not be allowed to become unprofitable. Heitmann said the industry itself must tread new paths so that the history of the German chemical industry does not become a dead end. Concluded Heitmann: 'LANXESS is just such a new path, and I am certain it is a path with a future.'

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