Strategy

The LANXESS Group is a globally operating chemicals enterprise with a portfolio ranging from polymers to industrial, specialty and fine chemicals. All of the conditions are in place for long-term success in our businesses. These include flexible asset structures, a diversified customer base, a global presence with regional flexibility and an entrepreneurial management structure.

Through innovations and selective additions to our product portfolio, we have positioned ourselves as a reliable high-tech supplier of premium-quality products that actively supports its customers’ innovation processes and thereby adds measurable value for them. This strengthens customer loyalty, sets us apart from our competitors and supports our efforts to generate adequate margins, even in highly competitive phases of the market cycle or segments.

LANXESS has a Presence Throughout the World
Grafik: Lanxess Presence Worldwide

Sustained megatrends offer potential for future success

Our strategy is aligned with four central megatrends:

  • The growing demand for mobility, particularly in China, India and other large emerging economies, and the simultaneous need to make mobility more environmentally friendly.
  • Agriculture, which will have to satisfy the sharp increase in global food requirements due to a rapidly growing world population.
  • Urbanization, resulting worldwide in the migration of people from rural areas to cities. All these people will need living space, offices and a robust infrastructure. According to current forecasts, nearly 70% of the world population will be city-dwellers in 2050.
  • The rising demand for water due to population growth and climate change will likely result in water becoming a commodity as valuable as oil in the not-too-distant future.

With the customized products and services offered by their business units, our segments make a valuable social and economic contribution to mastering the challenges presented by these megatrends in everyday life.

Earnings strategy

Against this backdrop, we are consistently aligning our product portfolio with markets that promise steady, above-average growth in the coming years. Accordingly, our regional focus is mainly on expanding our businesses and production capacities in the faster-growing BRICS countries, especially Brazil, India and China. We are concentrating particularly on organic growth.

Program to increase competitiveness

To mitigate the effects of changes to the competitive situation in what currently remains a challenging market environment, we initiated a program to increase competitiveness in the second half of 2013. Known as Advance, the program aims to generate annual savings of around €100 million from 2015 through efficiency enhancements and selective restructuring. It will result in exceptional charges of around €150 million in 2013 and 2014. Implementation is expected to reduce headcount by about 1,000 employees worldwide by 2015.

Among the areas affected by selective restructuring is the Rubber Chemicals business unit in the Performance Chemicals segment. We have closed this unit’s Isithebe site in South Africa because it was no longer competitive and focused production capacity in Belgium. Our portfolio adjustments also include exploring strategic options for various non-core businesses such as the Perlon monofilaments product line of the High Performance Materials business unit, the accelerators and antioxidants of the Rubber Chemicals business unit and the nitrile butadiene rubber activities of the High Performance Elastomers business unit.

Capital expenditure strategy

We make capital expenditures with a view to increasing our international competitiveness, focusing on attractive growth opportunities in profitable markets. The following principles guide our capital expenditure policy:

  • The focus is on expanding our portfolio of premium products that set us apart from our competitors.
  • We invest in sustainably growing markets that are the strategic focus for our operating segments.
  • Capital expenditures must satisfy clear financial criteria that, at a minimum, preserve the average return on capital employed (ROCE) achieved by the LANXESS Group during a normal business cycle.
  • Capital expenditures are mostly financed out of the cash flow from operating activities or, if that is insufficient, from other available liquidity or credit lines.

Financing strategy

Our conservative, sustainability-based financing policy prepares the ground for long-term dynamic business activity. The cornerstones of this policy are accessing international financial markets and securing long-term financial flexibility.

In respect of capital requirements and capital coverage, we work to optimally reconcile competing requirements for profitability, liquidity, security and autonomy. The debt level is aligned to the ratio systems used by the leading rating agencies for investment-grade companies.

Growth of our company is enabled by its business operations and by specific financing measures. Our goal is to generate positive earnings contributions along with a positive cash flow.