Management’s summary of the fiscal year

Business development in 2013 was unfavorable and largely characterized by declining raw material prices, especially for our key raw material butadiene, and the resulting adjustment of selling prices. In all regions, sales were below the prior-year level, although to a differing degree.

Overall, sales were down 8.7% compared to the previous year. Adjusted for currency and portfolio effects, operational sales decreased by 6.9%, which impacted the Performance Polymers segment especially in nearly all regions. The Advanced Intermediates segment benefited from predominantly solid demand in the agrochemicals area, while coatings trended downward. In the Performance Chemicals segment in particular, business performance was hampered by exchange rate movements.

EBITDA pre exceptionals in 2013 came in at €735 million, almost 40% below the prior-year level. The EBITDA margin declined to 8.9% from 13.4% in 2012. Exceptional charges relating to the Advance program and impairment charges in the Performance Polymers and Performance Chemicals segments had a negative impact on net income and drove earnings per share substantially below the prior-year value.

We upheld our conservative accounting and financing policy. In accordance with the consistency principle, we essentially applied the same measurement methods and exercised the same discretion as in the previous year. Our equity ratio stood at 27.9%. Total assets decreased mainly due to the decline in near-cash assets, the reduction of working capital and write-downs. For further information about the write-downs, please see the explanations under “Estimation uncertainties and exercise of discretion” in the notes to the consolidated financial statements as of December 31, 2013.

Our statement of financial position shows that our liquidity position remains solid. Additional substantial liquidity reserves in the form of undrawn credit lines are also available. Of the total financial liabilities, some 98% bear a fixed interest rate over the term of the financing, which is comparable to the previous year. Interest rate changes do not have a material effect on the LANXESS Group’s financial condition considering the current financing structure. Our financial liabilities are free of financial covenants.

Net financial liabilities are above the prior-year level at €1,731 million and, combined with the weaker earnings performance, result in a net debt ratio of 2.4, which is outside the target range of 1.0 to 1.5 for a normal business cycle. In fiscal 2013, the rating agencies reconfirmed the LANXESS Group’s creditworthiness with ratings of BBB and Baa2. However, in light of the company’s currently weaker financial data, the outlook has been changed to negative.

We made appropriate corrections to our assets affected by the risks associated with the changed competitive situation resulting from growing capacities, lower selling prices and less favorable prices for raw materials and energy, especially compared to competitors with access to less expensive shale gas. Despite the outflow of liquid and near-cash assets in fiscal 2013, we believe that our company’s business situation remains positive on account of its balanced financing position in the long term and the intactness of the megatrends in the medium term.

Key Business Data – Multi-Period Overview
 
€ million 2009 2010 2011 2012 2013
           
Earnings performance          
Sales 5,057 7,120 8,775 9,094 8,300
EBITDA pre exceptionals 465 918 1,146 1,223 735
EBITDA margin pre exceptionals 9.2% 12.9% 13.1% 13.4% 8.9%
EBITDA 422 890 1,101 1,186 624
Operating result (EBIT) pre exceptionals 204 635 826 847 288
Operating result (EBIT) 149 607 776 808 (93)
EBIT margin 2.9% 8.5% 8.8% 8.9% (1.1)%
Net income (loss) 40 379 506 508 (159)
Earnings per share (€) 0.48 4.56 6.08 6.11 (1.91)
           
Liquidity          
Cash flow from operating activities 565 430 672 838 641
Depreciation and amortization 273 283 325 378 717
Cash outflows for capital expenditures 275 501 679 696 624
Net financial liabilities 794 913 1,515 1,483 1,731
           
Assets and liabilities          
Total assets 5,068 5,666 6,878 7,519 6,811
Non-current assets 2,382 2,738 3,489 3,747 3,592
Current assets 2,686 2,928 3,389 3,772 3,219
Net working capital 1,096 1,372 1,766 1,849 1,679
Equity (including non-controlling interests) 1,445 1,761 2,074 2,330 1,900
Pension provisions 569 605 679 893 943
           
Indicators          
ROCE 5.9% 17.0% 17.2% 15.6% 5.8%
Equity ratio 28.5% 31.1% 30.2% 31.0% 27.9%
Non-current asset ratio 47.0 48.3 50.7 49.8 52.7
Asset coverage I 60.7 64.3 59.4 62.2 52.9
Net working capital/sales 21.7% 19.3% 20.1% 20.3% 20.2%
Employees (as of December 31) 14,338 14,648 16,390 17,177 17,343
2012 figures restated