LANXESS Conference Presentation - Q1 / 2016 A good start to the year Investor Relations
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LANXESS Conference Presentation Q1 / 2016 A good start to the year Investor Relations
Safe harbor statement The information included in this presentation is being provided for informational purposes only and does not constitute an offer to sell, or a solicitation of an offer to purchase, securities of LANXESS AG. No public market exists for the securities of LANXESS AG in the United States. This presentation contains certain forward-looking statements, including assumptions, opinions and views of the company or cited from third party sources. Various known and unknown risks, uncertainties and other factors could cause the actual results, financial position, development or performance of LANXESS AG to differ materially from the estimations expressed or implied herein. LANXESS AG does not guarantee that the assumptions underlying such forward-looking statements are free from errors nor does it accept any responsibility for the future accuracy of the opinions expressed in this presentation or the actual occurrence of the forecast developments. No representation or warranty (expressed or implied) is made as to, and no reliance should be placed on, any information, estimates, targets and opinions, contained herein, and no liability whatsoever is accepted as to any errors, omissions or misstatements contained herein, and accordingly, no representative of LANXESS AG or any of its affiliated companies or any of such person's officers, directors or employees accept any liability whatsoever arising directly or indirectly from the use of this document. 2
Agenda
LANXESS Equity Story
Executive summary Q1 2016 and outlook 2016
Financial details Q1 2016
Backup
3
Growing a more resilient New LANXESS
A path to transformation
Further business and
New LANXESS
portfolio improvement
! Profitable & growing
First acquisition
! More resilient
ARLANXEO operational ! Less cyclical
! Cash generating
Restructuring ! Integrated supply
chains
Leadership excellence and performance culture
4
LANXESS: Moving strategically into more resilient, less
volatile businesses
LANXESS AG
50%
owned by
Saudi Aramco
as of
April 1, 2016*
Advanced High ARLANXEO
Performance
Intermediates Performance joint venture for
Chemicals
Materials synthetic rubber
The New LANXESS – Effectively diversified and less
volatile businesses are the focus for future growth
* Full consolidation planned until 2019
Formerly Segment Performance Polymers
(until 31.3.2016)
5
LANXESS: A solid foundation to generate shareholder value
Sensible organic and external growth in
Growth & diversified end markets
resilience
Reducing margin volatility
Sound Strong, solid balance sheet
financials
Reduced capex profile
Shareholder Shareholder return back in focus
return Targeting an appropriate stock market
valuation
6
Resilient and profitable businesses
The new LANXESS provides a strong foundation for growth
Growth &
resilience
FY 2015 New LANXESS* ARLANXEO* Group
Advanced Performance High
Intermediates Chemicals Performance
Sound Materials
financials
ROCE ~15% ~5% 8.4%
EBITDA pre €339 m €326 m €115 m €388 m €885 m
Shareholder margin 19% 16% 10% 14% 11%
return
EBITDA pre and margin for HPM and ARLANXEO are unaudited figures
* Operational EBITDA pre without reconciliation or hedging expenses
7
The New LANXESS: Diversified end markets with good growth
rates
CAGR 4.0%
Growth & Chemicals
CAGR 2.5%
resilience Environmental technology
Agro
Efficiency
Growing population
Limited farmland
Need for higher productivity CAGR 3.0%
Sound Consumer goods
financials CAGR 3%
Food and product safety
Growth of middle class
Automotive
Mobility
Vehicle weight reduction CAGR 3.5%
Construction
Shareholder Growth of middle class
Urbanization
return
Growth of middle class
Enhanced productivity
Markets expressed as percentage share of total sales volume; the other ~20% is accounted for by “other” markets, which are growing at ~3%.
Estimates of 5-year CAGR are based on internal research.
8
End market exposure changed visibly
More balanced exposure to end markets
Growth &
Tire ~15 %
resilience ~20%
~20%
~20%
Automotive ~20% ~15%
~15%
Sound Chemicals ~15% ~15%
financials ~10%
Consumer Goods ~10%
~20%
Agro ~10% ~15%
Construction ~10% ~10% ~10%
Shareholder Others ~15% ~15% ~20%
return
Old LANXESS New LANXESS with New LANXESS
50% ARLANXEO without ARLANXEO
9
Advanced Intermediates: AII and Saltigo as provider of high-
quality and custom intermediates
Advanced Intermediates
Growth & Unique Custom synthesis
resilience manufacturing
Focus on agro chemicals,
processes pharma and fine chemicals
Strong market Driven by need of SGO
positions efficiency in
agriculture
Sound Integrated asset
Broad range of
financials structures high quality
~ €1.8 bn AII
Serving niche Sales intermediates
markets Driven by diverse
end markets (e.g.
agro, consumer,
Shareholder construction,
automotive)
return
10Performance Chemicals: Attractive, solutions-oriented
businesses
Performance Chemicals
Growth & Strong market Water treatment, beverages Beverages
resilience positions in Demand for drinking water Construction
niches Urbanization
Increasing awareness of water
Low importance of shortage
raw materials LPT MPP
Strong application Apparel, automotive Construction,
expertise in partly paints & coatings
Sound Growing middle
regulated markets LEA IPG Urbanization
financials class
~ €2 bn
Less capital Steel production Growing demand
Sales
intense for environmentally
Close relations friendly production
with customers
Shareholder ADD
return Automotive, plastics, tire
Mobility and urbanization
Growing demand for green solutions
11High Performance Materials: High-end engineering know-know
for all stages of advanced component development
High Performance Materials
Growth & One of the leading End markets:
resilience providers of
Automotive industry
engineering plastics
Electric & electronics
Upstream integration Construction
in strategic raw
Sound materials
financials Global production
and R&D network
Growth drivers:
Shareholder Vehicle weight reduction
return Growing demand for cars
Growth of electrical & electronics industry
12New LANXESS:
Sound and resilient business platforms
Low margin volatility in New LANXESS’ operative segments*
Growth & EBITDA [€ m] / Margin [%]
4%
resilience 1.000 CAGR
750
Sound
financials
500
250
Shareholder
Sustainable margin
return 15.5% 14.6% 14.0% 12.0% 13.4% 15.6% corridor of 12-15%
0
2010 2011 2012 2013 2014 2015
All reference to EBITDA is EBITDA pre exceptionals
* Excluding Reconciliation segment
13Swift action on growth strategy has already been taken in our
Performance Chemicals segment
Chemours’ Clean & Disinfect business
Significant expansion
Growth & BU MPP of high margin biocide
resilience EV/EBITDA business with attractive
including growth rates (3-6%)
Beverages
synergies
~7.0x Wood Access to attractive
Protection niche market in
Sound
financials Clean &
veterinary disinfection
EPS Paints & Disinfect with potential for top-
Coatings line synergies
accretive in
year 1 Disinfection
Shareholder Chemours’ (formerly
Illustrative
DuPont) business is the
return
Sales EBITDA Employees Production only backward
~€100 m* ~€20 m* ~170 3 sites integrated player
* Financials FY 2015 pro forma pre exceptionals; FX: 1.10 USD/EUR
14Clear and strategic financial criteria for sensible growth
Organic investments External growth
Growth &
resilience Strategic fit
Focus on brownfields and
Sound Limited execution risk
debottlenecking
financials
Attractive valuation after
ROCE* accretive
synergies
Shareholder
return
EPS accretive immediately EPS accretive in year 1-3
* Refers to ROCE of “New LANXESS” through the cycle
EPS and ROCE accretion for organic investments: Once the new investment has reached its normal operating activity
15LANXESS now has strong and sound balance sheet
~€1.2 bn cash from successful closing of ARLANXEO JV visibly strengthens
balance sheet
Growth &
resilience € bn
2.9
Pensions and op.
Sound lease obligations
financials 1.5 Free of
net
Net financial debt
EBITDA EBITDA
financial
debt
Q1 2016 LTM
Shareholder Total debt /
April 1, 2016, pro forma
returns EBITDA 3.2x ~2x
50% of ARLANXEO
All references to EBITDA are to EBITDA pre-exceptional items.
16Strengthening the balance sheet and increasing EPS through
pension funding
Efficient use of proceeds improves pension funding status
Growth & An additional step to reduce
resilience €2.4 bn €2.4 bn
total indebtedness
Reduces volatility of
pension provisions
+8%
points
Increases funding status
Sound 51% materially, by ~€200 m or
financials 43% 8% points
Improves financial result
with resulting EPS
accretion of ~7 cents*
Shareholder
Strengthens certainty of
return 31.03.16 pro forma after funding
pensions for employees
Funded status Pension obligation
* Annualized impact of IFRS interest rate (31.12.2015) vs. a zero-interest deposit
17In parallel, LANXESS maintains a clear focus on cash
Capex cycle comes to an end Cash-outs for restructuring curtailed
Capex [€ m]
Growth & [€ m]
resilience
696
~130
Sound 434 ~450
financials
~50
~20
Shareholder
return
2012 2015 2016e 2017e 2014 2015 2016e 2017e
Maintenance Growth Realignment Cash outs for realignment
18Shareholder returns driven by several factors
Clear dividend policy:
Growth & Aiming for a rising or at least stable dividend
resilience
Planned share buy-back of ~€200 m
Sound
financials
Reduced risk profile from both the business and
financial perspectives
Shareholder
return An experienced and capital market minded
management team
19Agenda
LANXESS Equity Story
Executive summary Q1 2016 and outlook 2016
Financial details Q1 2016
Backup
20Q1 2016 financial headlines
Good Q1 2016 performance
[€ m]
EBITDA pre and margin Net income
+14% +>100%
262 53
229
22
11.2% 13.6%
Q1 2015 Q1 2016 Q1 2015 Q1 2016
High Performance Materials and Performance Chemicals
showed strong improvement
21Q1 2016: A strong quarter resulting from volume growth and
cost relief
Sales and EBITDA pre Q1 2016
Sales variances yoy €1,920m (€2,038 m) Lower selling prices mainly due to lower raw
material prices
All segments contributed with higher volumes
-8% +2% +1% -6%
Some customers pre-buying due to rising raw
Price Volume FX Total
material prices
EBITDA pre €262 m (€229 m) EBITDA pre increased due to volume growth,
absence of one-time costs* and support from FX
Mitigating effect from market price pressure in
229 262 rubber and absence of prior-year raw material
tailwind for Advanced Intermediates
Q1 2015 Volume Price Input costs Other Q1 2016
Strong start to the year
* ~€25 m total ramp-up cost in Q1 2015 for EPDM and Nd-PBR plants
22Q1 2016 financial overview: Good set of results
[€ m] Q1 2015 Q1 2016 yoy in % Sales decreased due to
Sales 2,038 1,920 -5.8% lower selling prices partly
offset by higher volumes
EBITDA pre except. 229 262 14.4%
EBITDA increased by ~14%
margin 11.2% 13.6%
due to higher volumes and
EPS 0.24 0.58 >100% the absence of one-time
EPS pre1 0.66 0.67 1.5% costs2
Capex 56 49 -12.5%
Net financial debt stable,
while working capital
[€ m] 31.12.2015 31.03.2016 ∆% increased in a normal pattern
Net financial debt 1,211 1,216 0.4% Number of employees
Net working capital 1,526 1,719 12.6% increased due to status
change of external
ROCE 8.4% 8.9%
contractors to internal
Employees 16,225 16,606 2.3% employees3
1 Netof exceptionals, using the local tax rate applicable where the expenses were incurred
2 Q12015 was burdened by ~€25 m ramp-up costs for new rubber plants in Asia
3 Required by legal changes in China and South Africa
23Q1 2016: All businesses began the year with higher volumes
Advanced Intermediates Performance Chemicals High Performance Materials ARLANXEO
Price Volume Currency Total Price Volume Currency Total Price Volume Currency Total Price Volume Currency Total
-8% +5% 0% -3% -2% +1% 0% 0% -8% +1% 0% -7% -14% +1% +1% -11%
Lower prices driven by Volume increase driven by Lower selling prices driven Lower selling prices driven
lower raw material costs BUs MPP, LPT and IPG by lower raw material costs by lower raw materials;
Both BUs made strong EBITDA advanced through Good volume growth in pricing pressure remains
volume contribution improved utilization compounds, consequently Nice volume growth in butyl
EBITDA pre and margin Emerging market lower volumes in and Nd-PBR, while volumes
strong; but last year’s raw currencies supported intermediates (caprolactam) in other rubbers declined
material tailwinds did not EBITDA EBITDA pre rose due to
reoccur absence of one-time costs
[€ m] Q1’15 Q1’16 [€ m] Q1’15 Q1’16 [€ m] Q1’15 Q1’16 [€ m] Q1’15 Q1’16
Sales 478 463 Sales 533 533 Sales 292 273 Sales 723 640
EBITDA pre 92 89 EBITDA pre 87 98 EBITDA pre 25 38 EBITDA pre 97 113
Margin 19% 19% Margin 16% 18% Margin 9% 14% Margin 13% 18%
24Macroeconomic outlook largely unchanged – FY guidance
lifted as a result of the strong start to 2016
New LANXESS ARLANXEO
High
Advanced Performance
Performance
Intermediates Chemicals
Materials
Segment to perform Segment to perform Engineering plastics Macroeconomic
above prior year above prior year with strong projected weakness in emerging
Highly diversified mix Two flagship development markets
of customer industries businesses (IPG and Growth to be driven by Margin pressures
Agro customer industry ADD) to benefit from various end expected to increase in
to remain soft new capacities and applications the second half of the
newly established Europe and North year, largely resulting
business platforms America expected to from new rubber
be robust capacity in the market
FY 2016 EBITDA pre expected between €900 – 950 m due to a good first quarter
25Agenda
LANXESS Equity Story
Executive summary Q1 2016 and outlook 2016
Financial details Q1 2016
Backup
26Q1 2016: Good results in a challenging market environment
Q1 yoy sales variances Price Volume Currency Total Lower selling prices mainly due
Adv. Intermediates -8% +5% 0% -3% to lower raw material prices
Higher volumes in all segments
Perf. Chemicals -2% +1% 0% 0%
Overall some customers pre-
High Perf. Materials -8% +1% 0% -7% buying due to currently rising
ARLANXEO -14% +1% +1% -11% raw material prices
LANXESS -8% +2% +1% -6%
Q1 yoy EBITDA pre bridge [€ m] EBITDA increased due to
higher volumes, absence of
one-time costs* and FX support
Mitigating effect from market
229
746 262 price pressures in rubber and
absence of last year’s raw
Q1 2015 Volume Price Input costs Other Q1 2016 material tailwinds in Advanced
Intermediates
* ~€25 m total ramp-up costs in Q1 2015 for EPDM and Nd-PBR plants in Asia
27Q1 2016: All regions affected by lower selling prices – Latin
America sole region with visibly lower volumes
Q1 2016 sales by region Regional development of sales
[%] [€ million]
Operational
2,038 development*
Asia/Pacific Germany 1,920
23 18
Asia/Pacific 495 -9% -10%
448
LatAm 213 -15%
180 -15%
North America 342 0% -2%
341
LatAm
10
EMEA EMEA
(excl. Germany) 623 -3% 603 -3%
(excl. Germany)
North 31
America
Germany 365 -5% 348 -5%
18
Q1 2015 Q1 2016
* Currency adjusted
28Q1 2016 showing improved margins year-on-year
[€ m] Q1 2015 Q1 2016 yoy in %
Sales 2,038 (100%) 1,920 (100%) -6% Cost of sales decreased
Cost of sales -1,595 (78%) -1,459 (76%) 9% disproportionately to sales
mainly due to the absence of
Selling -183 (9%) -194 (10%) -6%
one-time costs (~€25 m ramp-
G&A -64 (3%) -72 (4%) -13% up costs in Q1’15)
R&D -32 (2%) -30 (2%) 6% Selling expenses increased due
EBIT 63 (3%) 131 (7%) >100% to higher freight and stock
keeping costs
Net Income 22 (1%) 53 (3%) >100%
Among others variable
EPS 0.24 0.58 >100%
compensation weighed on
EPS pre1 0.66 0.67 2% overhead costs
EBITDA 178 (9%) 251 (13%) 41% Lower exceptional items lifted
thereof exceptionals -51 (3%) -11 (1%) -78% EBIT and net income
EBITDA pre exceptionals 229 (11.2%) 262 (13.6%) 14%
A good first quarter
1 Net of exceptional items, using the local tax rate applicable where the expenses were incurred
29Q1 2016: EBITDA increase driven by nearly all segments
[€ m] Sales [€ m] EBITDA pre
HPE
-6% +14%
TSR 262
2,038
1,920 229
HPM
+16% 113
723 97
-11% 640
25 +52% 38
LPT MPP
292 -7% 273 LEA 87 98
IPG +13%
533 +0% 533 92 -3% 89
ADD
478 -3% 463 SGO -72 -76
Q1 2015 Q1 2016 AII Q1 2015 Q1 2016
Advanced Intermediates Performance Chemicals High Performance Materials ARLANXEO Reconciliation
Total group sales and EBITDA pre figures include reconciliation
30Advanced Intermediates: Strong volume contributions and
proven resilience
[€ m] Q1 2015 Q1 2016 ∆
Sales 478 463 -3.1% 1,847 1,826 -1.1%
EBIT 70 64 -8.6% 202 258 27.7%
Depr. / Amort. 23 25 8.7% 93 80 -14.0%
EBITDA pre exceptionals 92 89 -3.3% 308 339 10.1%
Margin 19.2% 19.2% 16.7% 18.6%
Capex 10 9 -10.0% 90 87 -3.3%
Q1 sales bridge yoy [€ m] Q1 yoy EBITDA pre effects
Volume growth in both business units driven by good
-8% +5% +0% 0%
+ demand across various end markets
Higher volumes lead to higher capacity utilization rates
478 463 Lower selling prices due to lower raw material prices,
- tailwinds from lower raw material costs in Q1’15 did not
reoccur
(approximate numbers)
Price Volume Currency Portfolio Q1 2016 D&A increases due to write-backs at the end of 2015,
Q1 2015
resulting in higher asset base
31Performance Chemicals: A diversified business benefits from
improved utilization
[€ m] Q1 2015 Q1 2016 ∆
Sales 533 533 0.0% 1,989 2,085 4.8%
EBIT 64 76 18.8% 156 225 44.2%
Depr. / Amort. 21 22 4.8% 82 88 7.3%
EBITDA pre exceptionals 87 98 12.6% 269 326 21.2%
Margin 16.3% 18.4% 13.5% 15.6%
Capex 17 16 -5.9% 71 139 95.8%
Q1 sales bridge yoy [€ m] Q1 yoy EBITDA pre effects
Selling prices almost unchanged amid volatile raw
-2% +1% +0% 0%
+
material prices
Improved profitability in BU LEA due to better utilization
533 533 Support from currency effects, especially in emerging
markets
Q1 2015 Price
(approximate numbers)
Volume Currency Portfolio Q1 2016
- Higher volumes leading to higher utilization
Slightly lower volumes in BU ADD due to a distributor
change
32High Performance Materials: Major performance improvement
resulting from continuing shift to high-value-added business
[€ m] Q1 2015 Q1 2016 ∆
Sales 292 273 -6.5% 4,128 3,944 -4.5%
EBIT 14 27 92.9% 120 280* >100%
Depr. / Amort. 10 11 10.0% 231 227 -1.7%
EBITDA pre exceptionals 25 38 52.0% 392 502 28.1%
Margin 8.6% 13.9% 9.5% 12.7%
Capex 4 5 25.0% 428 184 -57.0%
H
Q1 sales bridge yoy [€ m] Q1 yoy EBITDA pre effects
Good volume development: Product stream shifted
-8% +1% +0% 0% towards polyamides and compounds with resulting
reduced caprolactam exposure
292 273 + Balanced capacity model starts to pay off
EBITDA improvement driven by downstream
development into compounding business with strong
(approximate numbers)
backward integration
Q1 2015 Price Volume Currency Portfolio Q1 2016
Preliminary unaudited figures
33ARLANXEO: A well-managed quarter in a persistently
challenging market environment
[€ m] Q1 2015 Q1 2016 ∆
Sales 723 640 -11.5% 4,128 3,944 -4.5%
EBIT 4 57 >100% 120 280* >100%
Depr. / Amort. 57 56 -1.8% 231 227 -1.7%
EBITDA pre exceptionals 97 113 16.5% 392 502 28.1%
Margin 13.4% 17.7% 9.5% 12.7%
Capex 20 16 -20.0% 428 184 -57.0%
H
Q1 sales bridge yoy [€ m] Q1 yoy EBITDA pre effects
Good volume development in butyl and Nd-PBR, while
-14% +1% +1% 0%
+ volumes in other rubbers declined
Absence of one-time costs (Q1 ‘15 ~€25 m; Asia plants)
723 640 Support from emerging market currencies and US dollar
(approximate numbers)
- Lower selling prices driven by lower raw material prices
and margin pressures
Q1 2015 Price Volume Currency Portfolio Q1 2016 Supplier force majeure unresolved; expected to weigh
down ARLANXEO in Q2 and Q3
Preliminary unaudited figures
34Q1 2016: Increase in working capital weighs on cash flow
[€ m] Q1 2015 Q1 2016
Profit before tax 34 94 Swing in changes in other assets
Depreciation & amortization 115 120 and liabilities mainly driven by FX
Gain from sale of assets 0 0 effects from intercompany
Result from investments (using equity method) 0 0
financing and recognition of bonus
schemes
Financial (gains) losses 15 17
Changes in working capital driven
Cash tax payments/refunds -5 -42 by higher receivables (higher
Changes in other assets and liabilities -6 77 sales in March ‘16 vs Dec ‘15)
Operating cash flow before changes in WC 153 266 and lower payables
Changes in working capital -120 -218 Investing cash flow includes cash-
Operating cash flow 33 48
in from disposal of near cash
assets
Investing cash flow -61 56
Financing cash flow reflects early
thereof capex -56 -49 repayment of financial liabilities*
Financing cash flow -52 -137
* Early repayment of outstanding EIB tranche in January 2016
35Balance sheet remains solid
[€ m] Dec 2015 Mar 2016 Equity ratio remains strong
Total assets 7,219 7,140 Net financial debt stable
Equity 2,323 2,294 despite increase in working
Equity ratio 32% 32% capital; ~€1.2 bn of cash
Net financial debt 1,211 1,216 received on April 1, 20164
Near cash, cash & cash equivalents 466 333 Pension provisions
Pension provisions 1,215 1,375 increased due to interest
rate adjustments in
ROCE1 8.4% 8.9% Germany (from 3.0% to
Net working capital 1,526 1,719 2.5%)
Net working capital/sales1 19% 22% Net working capital
DIO (in days)2 84 83 increased, following normal
DSO (in days)3 48 51 yearly pattern; lower
payables burden additionally
1 Based on last twelve months for EBIT pre or sales 4 On April 1, 2016, LANXESS placed 50% of its rubber business in a joint venture with Saudi
2 Days of inventory outstanding calculated from quarterly COGS Aramco, receiving in return ~€1.2 bn in cash
3 Days of sales outstanding calculated from quarterly sales
36Balance sheet solid
[€ m] Dec’15 Mar’16 Dec’15 Mar’16
Non-current assets 4,180 4,106 Stockholders’ equity 2,323 2,294
Intangible assets 300 289 Non-current liabilities 2,936 3,067
Property, plant & equipment 3,447 3,330 Pension & post empl. provis. 1,215 1,375
Equity investments 0 0 Other provisions 271 257
Other investments 12 11 Other financial liabilities 1,258 1,258
Other financial assets 21 20 Tax liabilities 19 19
Deferred taxes 361 411 Other liabilities 127 106
Other non-current assets 39 45 Deferred taxes 46 52
Current assets 3,039 3,034 Current liabilities 1,960 1,779
Inventories 1,349 1,339 Other provisions 411 484
Trade accounts receivable 956 1,082 Other financial liabilities 443 327
Other financial & current assets 268 280 Trade accounts payable 779 702
Near cash assets 100 0 Tax liabilities 85 89
Cash and cash equivalents 366 333 Other liabilities 242 177
Total assets 7,219 7,140 Total equity & liabilities 7,219 7,140
Increase in pension provisions driven by interest rate changes (mainly in Germany from 3.0% to 2.5%).
Receivables increased due to higher business activity in March 2016 against December 2015.
37Agenda
LANXESS Equity Story
Executive summary Q1 2016 and outlook 2016
Financial details Q1 2016
Backup
38Backup
Housekeeping items
Additional financial expectations
Capex 2016: ~€450 m
Operational D&A 2016: ~€450-460 m
Reconciliation 2016: underlying expenses of ~-€150 m
EBITDA; additionally hedging expenses
of ~€90 m in 2016*
Annual tax rate: - 2016: around 2015 level
- mid-term: 30-35% (for New LANXESS)
* Based on an exchange rate of 1.10 USD/EUR
402015: LANXESS now on solid foundation:
Transformation ahead of plan, management teams in place
Portfolio
Business & administration Operations
1 2 3 competitiveness
structure competitiveness competitiveness
and alliances
Restructuring of R&D and Site-by-site analysis of Strategic alliances to address
SG&A production and supply chain lack of backward integration
~1,000 headcount reduction to identify and leverage Saudi Aramco and LANXESS
Savings realized earlier than synergies enter a strategic joint venture
originally anticipated Capacity adjustments for synthetic rubber
announced for EPDM, NBR, Start of JV April 1st
ESBR and PBR rubbers
~€150 m additional JV for synthetic rubber
~€150 m savings by
efficiency gains by end business resulting in
end of 2015
2019 cash in of ~€1.2 bn
41~€150 m savings from Phase II – through process efficiencies
and asset network reconfiguration
Savings from Phase II One-time items of Phase II
~€150 m
~€20 m* by end of 2019 ~€140 m
by end of 2019
~€20 m
~€10 m EPDM /
~€100 m Nd-PBR ~€100 m
Capacity global
Capacity adjustments network ~€10 m ~€55 m
Rubber adjustments
~€40 m
Latin already already
France America
realized booked
in 2015 (Q1’15)**
New
LANXESS
~€60 m
Process Total OTCs as Capex for
efficiencies Asset network reconfiguration savings exceptional efficiency
charges** measures
* €20 m savings from the EPDM and Nd-PBR reconfiguration already communicated in March 2015
** OTCs include ~€55 m already communicated and booked (Marl / Nd-PBR reconfiguration) / *** Cost base 2014 without depreciation and amortization
42Phase I savings realized faster than anticipated
Faster execution of realignment program Phase I
updated
2014 2015 2016 Total
Headcount reduction ~425 ~475 ~100 ~1,000
[€ m] Cash out ~20 ~110 ~20 ~150
[€ m] P&L expense (OTC) ~110 ~40 ~0 ~150
[€ m] Cost reduction ~20 ~100 ~30 ~150
Already realized
by end of 2015
43Financial details on Phase II
Detailed table to summarize financial impact of restructuring Phase II
2015 2016 2017 2018 2019 Total
[€ m] P&L expense (OTC) ~60 ~30 ~10 ~100
[€ m] Cash-out (OTC) ~5 ~50 ~20 ~15 ~90
[€ m] Capital Invest by 2019 ~140
[€ m] Cost reduction ~10 ~20 ~40 ~40 ~40 ~150
Includes €20 m savings from the EPDM and Nd-PBR reconfiguration already communicated in March 2015 / OTCs include ~€55 m already communicated
and booked in 2015 (Marl / Nd-PBR reconfiguration) / OTC = one-time-costs booked as exceptionals
44The JV with Saudi Aramco generally offers several ways of
value creation
Near-term strategic initiatives Mid-term initiatives
Horizontal consolidation
Integration of value chains:
Building C4 extraction units
R&D and technology-related investments Terminals for physical butadiene
Tolling agreements
Supply of naphtha to existing suppliers
Swap agreements
Investments in Saudi Arabia Logistics and supply chains already in place
No transportation costs due to direct procurement
After closing: 1 to 5 years Time horizon 5 to 10 years
45New strategic focus: Building a more balanced and resilient
company
Advanced Intermediates Performance Chemicals High Performance Materials ARLANXEO
Leading market Strong positioning in a A leading producer of Leading market
positions and process broad range of niche engineering plastics positions with strong
technologies markets Balanced value chain and diversified
Efficient and strong Low importance of raw with limited exposure portfolio
production platform materials to volatile markets Broadest synthetic
Highly diversified end Acting as solution rubber platform with
markets provider competitive advantage
for future development
Adding functionality, High-tech plastics for Highly competitive JV
Delivering chemical
color or processability a wide range of end and global #1 for
intermediates
to products markets synthetic rubber
46A lean business organization
Advanced Industrial Intermediates Advanced Industrial Intermediates
Advanced Saltigo Advanced Saltigo
Intermediates Intermediates
Rhein Chemie Additives Rhein Chemie Additives
Inorganic Pigments Inorganic Pigments
Performance Leather
Performance Leather
Chemicals Material Protection Products
Chemicals Material Protection Products
Liquid Purification Technologies Liquid Purification Technologies
Tire & Specialty Rubbers High High Performance Materials
High Performance Elastomers Performance
Performance High Performance Materials Materials*
Polymers
Tire & Specialty Rubbers
High Performance Elastomers
ARLANXEO*
*Future reporting structure – ARLANXEO to be Sales: > €500 m Sales: €200 m – 500 m Sales: < €200 m
fully consolidated for the first three years
47New LANXESS: resilient, cash generating and well positioned in
growing markets
Strong Advanced Performance High Performance
businesses Intermediates Chemicals Materials
Target margin >10%,
Resilience Proven level of 15-18% Sustainable at 13-16% resilience moving forward
(EBITDA margin) Margin volatility of ~2-3% pts Margin volatility of ~2-3% pts with transformation of
business
Attractive cash generation Cash generation will improve
Considerable cash generation
through technology with a more balanced value
Cash generation leadership and efficient
based on good mix of solution
chain and shift to higher-
focused businesses
business set-up margin businesses
Growth Growth slightly above GDP Growth with GDP Growth above GDP
Valuable businesses with resilience, cash generation and growth opportunities
48Corporate Responsibility well integrated - achieving goals
sustainably
Climate / Environmental goals Procurement initiatives
Reduction of specific CO2 emission by 25%* until 2025 ‘Supplier Code of Conduct’ for supplier selection and
Reduction of specific energy consumptions by 25%* until rating
2025 ‘Together for Sustainability’ initiative for higher
Reduction of volatile organic compounds (NMVOC) transparency in the supply chain (implementation of a
emissions by 25%* until 2025 global auditing program)
Safety goals Social initiatives and goals
Xact: Global safety program to improve occupational, Global board initiative ‘Diversity & Inclusion’: raising the
process and plant safety (since 2011) proportion of women in management to 20% by 2020
Global management system for optimization of Leverage water know-how: support of AMREF
transportation of (dangerous) goods Education initiatives with local and global commitment
Rating Category: C+
* Base year: 2015; for CO2: Scope 1 and Scope 2 emissions
49ARLANXEO effects on LANXESS’ income statement from
Q2 2016 onwards
LANXESS to fully consolidate ARLANXEO for the first three years
Sales
No changes:
Cost of sales
ARLANXEO fully consolidated within LANXESS
Selling group for the first three years
G&A ARLANXEO comprises the BUs TSR and HPE
R&D No consolidation effects on margins
EBIT / EBT / tax expenses
./. Non-controlling interests Changes in net income and EPS:
Net Income 50% of ARLANXEO’s net income is attributable to
non-controlling interest of Saudi Aramco
EPS
EBITDA No changes:
thereof exceptionals No effects in EBITDA and EBITDA pre as
ARLANXEO is fully consolidated
EBITDA pre exceptionals
Group net income and EPS reflect participation of Saudi Aramco
50ARLANXEO effects on LANXESS’ statement of cash flows from
Q2 2016 onwards
LANXESS to fully consolidate ARLANXEO for the first three years
Profit before tax
Depreciation & amortization
Gain from sale of assets
Result from investments (using equity method) No changes:
Financial (gains) losses
Cash flow statement includes the full consolidated
Cash tax payments/refunds
results of ARLANXEO; comprising the 50% owed by
Changes in other assets and liabilities Saudi Aramco
Operating cash flow before changes in WC
Capex figure includes 100% of ARLANXEO
Changes in working capital
Operating cash flow
Investing cash flow
thereof capex
Potential changes:
Financing cash flow Dividends and similar payouts to Saudi Aramco will
thereof payouts/dividend to non-controlling interest be shown in financing cash flow
Financing cash flow potentially affected by alliance with Saudi Aramco
51ARLANXEO effects on LANXESS’ group balance sheet
including full consolidation
Non-current assets Stockholders’ equity
Intangible assets Equity attributable to
Property, plant & equipment non-controlling interests
Equity investments Non-current liabilities
Other investments Pension & post empl. provis. 50% non-
Other financial assets Other provisions controlling
Deferred taxes Other financial liabilities
Other non-current assets Tax liabilities interest of Saudi
Other liabilities Aramco in
Deferred taxes ARLANXEO
Current assets Current liabilities
Inventories Other provisions
Trade accounts receivable Cash Other financial liabilities
Other financial & current assets Trade accounts payable
Near-cash assets received Tax liabilities
Cash and cash equivalents from Saudi Other liabilities
Aramco
Total assets Total equity & liabilities
Only minor changes in balance sheet due to full consolidation
52A well managed and conservative maturity profile
Long term financing secured Liquidity and maturity profile as per March 2016
[€ m]
Diversified financing sources Private Placements
750
- Bonds & Private placements 2022 – 3.50%
- Syndicated credit facility 500 2027 – 3.95%
Bond 2016
- Bank facility 5.5% Bond 2018 Bond 2022
250
4.125% 2.625%
All group financing executed 0
without financial covenants -250
Syndicated
No refinancing need in 2016 -500 Revolving
Credit
due to cash position and -750 Facility
expected JV proceeds €1.25 bn
-1000
-1250
€150 m EIB1
-1500
2016 2017 2018 2019 2020 2021+
Financial liabilities Cash & cash equivalents Near cash assets Undrawn long-term facilities
EIB = European Investment Bank
1 Final maturity of EIB facility in case of utilization earliest in 2020; EIB facility currently undrawn
53High volatility in raw material prices
Global raw materials index* Sharp decline in raw
[%]
150 material prices in Q4 2014/
140
Q1 2015 driven by a steep
drop in the price of oil
130
Raw material prices
120
remained volatile, trending
110 downwards through year
100 end 2015
90 Q2 2016 expected to be
80 marked by progressively
higher raw material costs on
70
average
60
50
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2010 2011 2012 2013
2014 2014 2014 2014 2015 2015 2015 2015 2016 2016
* Source: LANXESS, average 2013 = 100%
54Overview of exceptional items in Q1
[€ m] Q1 2015 Q1 2016
Excep. thereof D&A Excep. thereof D&A
Performance Polymers 46 9 0 0
Advanced Intermediates -1 0 0 0
Performance Chemicals 2 0 0 0
Reconciliation 13 0 11 0
Total 60 9 11 0
55Abbreviations
ARLANXEO Performance Chemicals
TSR Tire & Specialty Rubbers ADD Rhein Chemie Additives
HPE High Performance Elastomers IPG Inorganic Pigments
LEA Leather
MPP Material Protection Products
LPT Liquid Purification Technologies
Advanced Intermediates High Performance Materials
AII Advanced Industrial Intermediates HPM High Performance Materials
SGO Saltigo
56Upcoming events 2016
Proactive capital market communication
Annual General Meeting May 20 Cologne
Deutsche Bank 7th Annual dbAccess Asia Conference May 24/25 Singapore
dbAccess German, Swiss & Austrian Conference June 8/9 Berlin
Exane BNPP 18th Europe CEO Conference June 15 Paris
Q2 results 2016 August 10
Capital Markets Event “Meeting the Management” September 8 Cologne
Goldman Sachs 5th German Corporate Conference September 19-21 Munich
Q3 results 2016 November 10
Morgan Stanley Global Chemical Conference November 14 Boston
Deutsche Börse Eigenkapital Forum November 21 Frankfurt
57Contact details Investor Relations
Oliver Stratmann Ulrike Rockel
Head of Treasury & Investor Relations Head of Investor Relations
Tel. : +49-221 8885 9611 Tel. : +49-221 8885 5458
Fax. : +49-221 8885 5400 Mobile : +49-175 30 50458
Mobile : +49-175 30 49611 Email : Ulrike.Rockel@lanxess.com
Email : Oliver.Stratmann@lanxess.com
Janna Günther Katharina Forster
Assistant to Oliver Stratmann Institutional Investors / Analysts / AGM
Tel. : +49-221 8885 1035
Tel. : +49-221 8885 9834 Mobile : +49-151 74612789
Fax. : +49-221 8885 4944 Email : Katharina.Forster@lanxess.com
Mobile : +49-151 74612615
Email : Janna.Guenther@lanxess.com
Dirk Winkels
LANXESS IR website Institutional Investors / Analysts
Tel. : +49-221 8885 8007
Mobile : +49-175 30 58007
Email : Dirk.Winkels@lanxess.com
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