(37) Segment reporting

Key Data by Segment
 
€ million Performance
Polymers
Advanced
Intermediates
Performance
Chemicals
Reconciliation LANXESS
                     
  2012 2013 2012 2013 2012 2013 2012 2013 2012 2013
                     
External sales 5,176 4,486 1,674 1,647 2,203 2,132 41 35 9,094 8,300
Inter-segment sales 0 1 53 51 9 8 (62) (60) 0 0
Segment/Group sales 5,176 4,487 1,727 1,698 2,212 2,140 (21) (25) 9,094 8,300
Segment result/EBITDA pre exceptionals 817 389 305 286 281 231 (180) (171) 1,223 735
Exceptional items affecting EBITDA (9) (17) 6 1 (17) (50) (17) (45) (37) (111)
Segment assets 3,779 3,294 1,030 1,026 1,452 1,392 151 161 6,412 5,873
Segment acquisitions 36       5 18     41 18
Segment capital expenditures 455 405 104 113 139 117 36 41 734 676
Depreciation and amortization 207 253 67 76 85 87 15 22 374 438
Impairments 2 236 0 1 2 40 0 2 4 279
Segment liabilities 988 817 505 577 598 671 588 396 2,679 2,461
Employees (December 31) 5,348 5,379 2,841 2,854 6,031 5,837 2,957 3,273 17,177 17,343
Employees (average for the year) 5,237 5,419 2,862 2,857 6,019 5,928 2,844 3,226 16,962 17,430
2012 figures restated
Key Data by Region
 
€ million EMEA
(excluding Germany)
Germany North America Latin America Asia-Pacific LANXESS
                         
  2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013
                         
External sales by market 2,526 2,404 1,577 1,458 1,611 1,332 1,185 966 2,195 2,140 9,094 8,300
Non-current region assets 746 631 1,043 1,039 454 388 397 319 781 882 3,421 3,259
Acquisitions     36   5         18 41 18
Capital expenditures 157 135 211 229 68 46 46 50 252 216 734 676
Employees (December 31) 3,442 3,444 8,072 8,117 1,553 1,526 1,626 1,560 2,484 2,696 17,177 17,343
 

Notes to the segment reporting

The valuation principles applied in segment reporting correspond to the uniform recognition and valuation principles used for the consolidated financial statements prepared in accordance with IFRS.

On December 31, 2013 the LANXESS Group comprised the following reporting segments:

Segments
 
Segment Operations
   
Performance Polymers Special-purpose rubbers for high-quality rubber products, e.g. for use in vehicles, tires, construction and footwear; engineering plastics, polyamide compounds
Advanced Intermediates Intermediates for the agrochemicals and coatings industries; fine chemicals as precursors and intermediates for pharmaceuticals, agrochemicals and specialty chemicals; custom manufacturing
Performance Chemicals Material protection products; inorganic pigments for the coloring of concrete, emulsion paints and other coatings; finishing agents for the leather industry; rubber chemicals; reverse osmosis membrane elements and ion exchange resins for water treatment; plastics additives such as flame retardants and plasticizers
 

The reconciliation eliminates inter-segment items and reflects assets and liabilities not directly allocable to the core segments including, in particular, those pertaining to the Corporate Center. The reconciliation also includes the investments of €12 million (2012: €8 million) accounted for using the equity method and the income of €0 million (2012: €1 million) from these investments (see note [3]).

The transfer prices used for inter-segment business transactions are calculated using the OECD rules as if they had been agreed upon between independent third parties in comparable circumstances (arm’s-length principle).

The majority of employees reflected in the reconciliation provide services for more than one segment. They include technical service staff.

The reporting regions are those into which LANXESS’s activities are organized: EMEA (Europe [excluding Germany], Middle East, Africa), Germany, North America, Latin America and Asia-Pacific.

Regional sales are calculated according to the recipient’s place of business. In fiscal 2013, no individual customer of the LANXESS Group accounted for more than 10% of Group sales.

The earnings indicator used for internal management purposes in the LANXESS Group is the operating result before depreciation and amortization (EBITDA) pre exceptionals (see the section headed “Value management and control system” in the combined management report for 2013). This is disclosed as the “segment result.” The starting point for calculating EBITDA pre exceptionals is the operating result (EBIT), which comprises gross profit, selling expenses, general administration expenses, research and development expenses and other operating income and expenses. EBITDA pre exceptionals is calculated from EBIT by adding back depreciation and write-downs of property, plant and equipment, amortization and write-downs of intangible assets, disregarding exceptional items. The latter are effects of an unusual nature or magnitude. They may include write-downs, restructuring expenses, expenses for the design and implementation of IT projects or expenses for portfolio adjustments.

In view of the Group’s central financial management, interest income and expense and income tax income and expense are not reported at segment level. The write-downs recognized in the Performance Polymers and Performance Chemicals segments in fiscal 2013 mainly comprised impairment charges resulting from the impairment tests carried out for the Keltan Elastomers, High Performance Elastomers and Rubber Chemicals cash-generating units. Further information is contained in the section headed “Estimation uncertainties and exercise of discretion.”

Reconciliation of Segment Sales
 
€ million 2012 2013
     
Total segment sales 9,115 8,325
Other/Consolidation (21) (25)
Group sales 9,094 8,300
 
Reconciliation of Segment Result
 
€ million 2012 2013
     
Total segment results 1,403 906
Depreciation and amortization (378) (717)
Exceptional items in EBITDA (37) (111)
Net interest expense (96) (106)
Other financial income and expense (53) (40)
Income from investments accounted for using the equity method 1 0
Other/Consolidation (180) (171)
Income (loss) before income taxes 660 (239)
2012 figures restated

Segment assets principally comprise intangible assets, property, plant and equipment, inventories and trade receivables. In particular, segment assets do not include cash and cash equivalents, income tax receivables, receivables from derivatives, or other financial assets.

Information on equity-method income is contained in Note [3]. This mainly arises from the provision of site services by Currenta GmbH & Co. OHG, Leverkusen, Germany, and is not allocated among the segments.

Reconciliation of Segment Assets
 
€ million Dec. 31, 2012 Dec. 31, 2013
     
Total segment assets 6,261 5,712
Cash and cash equivalents 386 427
Deferred tax assets 211 254
Near-cash assets 411 106
Derivative assets 44 78
Income tax receivables 41 56
Other financial assets 14 17
Other/Consolidation 151 161
Group assets 7,519 6,811
 

Capital expenditures made by the segments mainly comprise additions to intangible assets, property, plant and equipment.

All depreciation, amortization and write-downs in fiscal 2012 and 2013 were recognized directly in profit or loss.

Segment liabilities mainly comprise provisions, trade payables and other liabilities. In particular, segment liabilities do not include income tax liabilities, liabilities from derivatives, or other financial liabilities.

Reconciliation of Segment Liabilities
 
€ million Dec. 31, 2012 Dec. 31, 2013
     
Total segment liabilities 2,091 2,065
Other financial liabilities 2,334 2,317
Income tax liabilities 80 70
Derivative liabilities 14 34
Deferred tax liabilities 82 29
Other/Consolidation 588 396
Group liabilities 5,189 4,911
2012 figures restated