Statement of financial position
- Reduction in total assets, mainly due to a decrease in working capital and impairment charges in the Performance Polymers and Performance Chemicals segments
- Equity ratio below prior year, primarily due to net loss
- Net financial liabilities above prior year at €1,731 million
|Structure of the Statement of Financial Position|
|Dec. 31, 2012||Dec. 31, 2013||Change|
|€ million||%||€ million||%||%|
|Equity and liabilities|
|Equity (including non-controlling interests)||2,330||31.0||1,900||27.9||(18.5)|
|Total equity and liabilities||7,519||100.0||6,811||100.0||(9.4)|
|2012 figures restated|
Structure of the Statement of Financial Position
Total assets of the LANXESS Group amounted to €6,811 million as of December 31, 2013, a decrease of €708 million, or 9.4%, on the prior-year figure. This was primarily due to the decline in near-cash assets, the reduction of working capital and write-downs. The latter mainly impacted the Keltan Elastomers, High Performance Elastomers and Rubber Chemicals business units. The sum of depreciation, amortization and write-downs exceeded capital expenditures for property, plant and equipment. The ratio of non-current assets to total assets increased from 49.8% to 52.7%. On the equity and liabilities side, equity decreased due to negative currency translation adjustments in other equity components and to the net loss recorded. At the end of 2013, the equity ratio was 27.9%, after 31.0% in the previous year.
Structure of the Statement of Financial Position – Assets
Non-current assets fell by €155 million, or 4.1%, to €3,592 million. Additions from capital expenditures for intangible assets and property, plant and equipment totaled €676 million, against the prior-year figure of €734 million. They were offset primarily by depreciation and amortization of €438 million, against €374 million in the previous year, and by write-downs on intangible assets and property, plant and equipment of €279 million, against €4 million in 2012. Cash outflows for purchases of property, plant, equipment and intangible assets, at €624 million, were below the prior-year figure of €696 million on account of our stringent project prioritization. The first-time full consolidation of LANXESS-TSRC (Nantong) Chemical Industrial Co., Ltd., Nantong, China, previously accounted for as an associate, and the first-time consolidation of PCTS Specialty Chemicals Pte. Ltd., Singapore, which was acquired in April 2013, led to additions in the mid-double-digit million euro range. The carrying amount of investments accounted for using the equity method increased by €4 million to €12 million. This change resulted mainly from the net-asset driven adjustment to the carrying amount of the interest in Currenta GmbH & Co. OHG, Leverkusen, Germany, and to the change in the accounting for LANXESS-TSRC (Nantong) Chemical Industrial Co., Ltd., Nantong, China, in the consolidated financial statements. By contrast, the decline in investments in other affiliated companies was mostly influenced by the fair-value remeasurement of the strategic minority interest in BioAmber Inc., Minneapolis, United States, in light of that company’s recent share performance. At €55 million, other non-current financial assets were substantially below the prior-year level, primarily due to the decrease in receivables associated with pension obligations. The ratio of non-current assets to total assets was 52.7%, up from 49.8% on December 31, 2012.
Current assets decreased by €553 million, or 14.7%, against the prior-year value of €3,772 million, to €3,219 million. The ratio of current assets to total assets declined to 47.3% from 50.2% in the previous year. On account of lower raw material prices and targeted inventory reductions, also supported by exchange rate development, inventories decreased by €228 million, or 14.9%, to €1,299 million. Days of sales in inventories (DSI) improved from 64.7 to 58.0. Trade receivables decreased by €47 million to €1,070 million against the previous year, mainly due to negative currency effects. Days of sales outstanding (DSO) were virtually unchanged at 47.8. Minimal portfolio effects from the acquisitions made during the reporting year had no significant influence on net working capital. Near-cash assets decreased by €305 million to €106 million following the sale of shares in money market funds. Cash and cash equivalents rose by €41 million compared to the end of 2012, to €427 million. This development was also influenced by the sale of money market paper.
The LANXESS Group has significant internally generated intangible assets that are not reflected in the statement of financial position due to accounting rules. These include the brand equity of LANXESS and the value of other brands of the Group. A variety of measures was deployed in the reporting period to continually enhance these assets, which helped us to maintain our business units’ sound market positions.
Our established relationships with customers and suppliers also constitute a significant intangible asset. These long-standing, trust-based partnerships with customers and suppliers, underpinned by consistent service quality, have made it possible for us to compete successfully – also in a more challenging business environment. Our specific competence in technology and innovation, also a valuable asset, is rooted in our expertise in the areas of research and development and custom manufacturing. It enables us to generate added value for our customers.
The know-how and experience of our employees are central pillars of our corporate success. In addition, we have sophisticated production and business processes that create competitive advantages for us in the relevant markets.
Structure of the Statement of Financial Position – Equity and Liabilities
Equity, including non-controlling interests, amounted to €1,900 million, down from €2,330 million in the previous year. The equity ratio was 27.9% after 31.0% at the end of 2012. Prominent factors in the equity decrease were negative currency translation adjustments in other equity components and the net loss recorded. The dividend payout of €83 million to LANXESS AG stockholders in May 2013 also had an effect.
Non-current liabilities decreased by €530 million to €3,029 million as of December 31, 2013. This resulted mainly from the other non-current financial liabilities, which were €518 million lower than the previous year at €1,649 million. The decrease was largely due to the reclassification into other current financial liabilities of the €500 million Eurobond maturing in April 2014. By contrast, provisions for pensions and other post-employment benefits increased by €50 million as against the end of 2012, to €943 million. This increase mainly related to the Advance program and additional vested rights established in the reporting period. Other long-term provisions decreased by a similar magnitude for reasons that include a decline in long-term personnel-related commitments. The ratio of non-current liabilities to total assets was 44.5%, slightly down from 47.3% at the end of 2012.
Current liabilities increased by a substantial €252 million, or 15.5%, to €1,882 million against December 31, 2012. This was largely the result of the aforementioned reclassification into other current financial liabilities of the €500 million Eurobond. At €690 million, trade payables were down substantially on the €795 million reported at the end of 2012 due to a slight decrease in purchasing volumes and lower prices for our strategic raw materials. The increase in current liabilities was also curtailed by the decrease in other current provisions, primarily due to their utilization for bonus payments to employees for fiscal 2012 and to lower allocations in the reporting year. The ratio of current liabilities to total assets was 27.6% at December 31, 2013, compared with 21.7% at the end of 2012.
Net financial liabilities increased by €248 million from the previous year to €1,731 million. Cash outflows for capital expenditures, interest and dividends exceeded cash inflows from operating activities.
The Group’s key ratios developed as follows:
|Non-current asset ratio||Non-current assets||47.0||48.3||50.7||49.8||52.7|
|Asset coverage I||Equity1)||60.7||64.3||59.4||62.2||52.9|
|Asset coverage II||Equity1) and non-current liabilities||165.8||153.9||137.3||157.2||137.2|
|Funding structure||Current liabilities||30.9||37.2||43.5||31.4||38.3|
|1) Including non-controlling interests|
In 2013, capital expenditures for property, plant and equipment and intangible assets came to €676 million, compared with €734 million the year before, and led to cash outflows of €624 million (2012: €696 million). Depreciation and amortization totaled €717 million in the same period (2012: €378 million). This figure included €270 million in write-downs reported as exceptional items (2012: €2 million). Adjusted for these write-downs, capital expenditures in support of our growth strategy exceeded depreciation and amortization by a substantial 51% (2012: 95%).
Cash Outflows for Capital Expenditures vs Depreciation and Amortization
In the reporting year, capital expenditures focused on the following areas:
- construction of new facilities, expansion and maintenance
of existing facilities;
- measures to increase plant availability;
- projects to improve plant safety, enhance quality and comply with environmental protection requirements.
Less than two-thirds of the capital expenditures in 2013 went toward expansion or efficiency improvement measures, while the rest went to maintain existing facilities. This underlines our goal of generating further organic growth through investment, as described under “Earnings strategy” in the “Strategy” section of this combined management report.
In regional terms, 34% of our capital expenditures in the reporting period were made in Germany, 20% in the EMEA region (excluding Germany), 7% in North America, 7% in Latin America and 32% in Asia-Pacific. Capital expenditures in Germany mostly comprised our investments to increase capacities and modernize facilities in all segments, especially capacity improvements for the Advanced Industrial Intermediates business unit and the expansion of several plants for the High Performance Elastomers business unit. The continued large share of capital expenditures made in the Asia-Pacific region in the reporting year is due primarily to the construction of a new production plant for high-performance neodymium-based performance butadiene rubber (Nd-PBR) for the Performance Butadiene Rubbers business unit in Singapore and the construction of a new production plant for EPDM rubber for the Keltan Elastomers business unit in Changzou, China.
Cash Outflows for Capital Expenditures by Segment
In the Performance Polymers segment, capital expenditures amounted to €405 million (2012: €455 million), €385 million (2012: €434 million) of which were cash outflows. Depreciation and amortization amounted to €489 million (2012: €209 million). The major capital expenditures in this segment were made in the Performance Butadiene Rubbers business unit. Capital expenditures in the Advanced Intermediates segment amounted to €113 million (2012: €104 million). Cash outflows came to €96 million (2012: €92 million), exceeding the depreciation and amortization of €77 million (2012: €67 million). This figure includes capital expenditures in the Advanced Industrial Intermediates business unit for expansion of the cresol plant in Leverkusen, Germany. In the Performance Chemicals segment, capital expenditures came to €117 million (2012: €139 million), €111 million (2012: €135 million) of which were cash outflows. Depreciation and amortization stood at €127 million (2012: €87 million). Key capital expenditures were the construction of a new CO2 concentration unit in Newcastle, South Africa, for the Leather business unit and the construction of a state-of-the-art plant for iron oxide red pigments in Ningbo, China, for the Inorganic Pigments business unit.
The following table shows major capital expenditure projects in the LANXESS Group.
|Selected Capital Expenditure Projects 2013|
|Butyl Rubber||Singapore||Construction of a new butyl rubber plant, start-up in the first quarter of 2013|
|Performance Butadiene Rubbers||Singapore||Construction of a new neodymium polybutadiene rubber plant, start-up in the first half of 2015|
|High Performance Elastomers||Dormagen, Germany||Expansion of production capacities for chloroprene rubbers|
|Keltan Elastomers||Geleen, Netherlands||Investment to convert EPDM rubber production to the innovative Keltan® ACETM technology, completion in 2013|
|Keltan Elastomers||Changzhou, China||Construction of an EPDM rubber plant, start-up in 2015|
|High Performance Materials||Porto Feliz, Brazil||Construction of a new compounding plant for high-tech plastics, completion in 2014|
|High Performance Materials||Antwerp, Belgium||Expansion of glass fiber capacities|
|High Performance Materials||Antwerp, Belgium||Construction of a new polyamide plastics plant, completion in 2014|
|Advanced Industrial Intermediates||Leverkusen, Germany||Expansion of cresol production, completion mid-2013|
|Rhein Chemie||Porto Feliz, Brazil||Construction of a plant for curing bladders, start-up in 2013|
|Rhein Chemie||Lipetsk, Russia||Construction of a new plant for rubber additives and release agents, start-up in 2013|
|Liquid Purification Technologies||Leverkusen, Germany||Construction of a production line for weekly acidic cation exchange resins, completion mid-2014|
|Inorganic Pigments||Ningbo, China||Construction of a state of-the-art production facility for iron oxide red pigments|
|Leather||Changzhou, China||Construction of a new plant for leather chemicals, start-up in April 2013|
|Leather||Newcastle, South Africa||Construction of a CO2 concentration unit, start-up in the fourth quarter of 2013|
Expansion of the Group portfolio
Please see “Additions to the Group portfolio” in this combined management report for more information on the subsidiaries and affiliates added to our portfolio in fiscal 2013.