The LANXESS Group
Business and strategy
The LANXESS Group is a globally operating chemicals enterprise with a portfolio ranging from basic, specialty and fine chemicals to polymers. Following the spin-off from the Bayer Group, it was first necessary to implement lean, straightforward structures and systematically optimize plants and processes. In our core businesses, all of the conditions are now in place for long-term success. These include a flexible asset network, a diversified customer base, a global presence with regional flexibility and an entrepreneurial management structure.
We see ourselves as a premium company that is not only a reliable supplier of products in optimal quality. We also actively support our customers’ innovation processes and add measurable value. This enables us to strengthen customer loyalty and set ourselves apart from the competition.
Demand for LANXESS products declined dramatically as the global economic crisis worsened in the fourth quarter of 2008 and in early 2009. This prompted us to set up a crisis management team headed by the Chairman of the Board of Management that analyzes the effects of flagging demand on our business and draws up proposals for suitable countermeasures.
As far as possible we will attempt to compensate reduced demand within our own structures through variable capacity management, flanked by our flexible alignment and the elasticity of our cost structures. We are also taking steps to lower operating costs and adapt the capacity of our facilities. The “Procurement and Production” section of this Group Management Report provides an overview of the measures implemented in this regard.
We are reviewing all investment projects, without any exceptions. Following careful analysis, in December 2008 we decided to postpone several capital expenditure projects in response to the altered market conditions. This increases our financial headroom in the present difficult year. The construction of a new butyl rubber plant in Singapore is one of the projects affected. As a consequence, the facility is not expected to come into operation until 2012. The planned relocation of our corporate headquarters from Leverkusen to Cologne has also been deferred by one year to 2012 and capacity expansion plans in Leverkusen and Antwerp have been put on ice.
Furthermore, we expect our “CHALLENGE 09” package of measures announced at the end of January 2009 to cut spending by around €50 million in 2009/2010. This package encompasses a number of technical process improvements and human resources measures. These are described in detail in the Outlook section of this Management Report.
The segments in brief
Since 2007, LANXESS’s 13 business units have been grouped in three segments: Performance Polymers, Advanced Intermediates and Performance Chemicals.
Our synthetic rubber and plastics manufacturing activities are combined in the Performance Polymers segment. Here, LANXESS offers a broad portfolio of innovative products that holds a leading position internationally. The segment comprises the Butyl Rubber, Performance Butadiene Rubbers (up to June 30, 2008: Polybutadiene Rubber), Technical Rubber Products and Semi-Crystalline Products business units. The Performance Polymers segment’s production facilities are located in Dormagen, Krefeld-Uerdingen, Leverkusen, Hamm-Uentrop and Marl, Germany; Antwerp and Zwijndrecht, Belgium; La Wantzenau and Port Jérôme, France; Sarnia, Ontario, Canada; Orange, Texas, United States; and Wuxi, China. With our acquisition of synthetic rubber manufacturer Petroflex in 2008, we also acquired its three production facilities in Cabo, Duque de Caxias and Triunfo, Brazil. Rubber products have applications in various areas, particularly the automotive and tire industry, construction materials, leisure equipment, machinery and chewing gum. The plastics that LANXESS produces are used in particular in the automotive industry, electronics and electrical engineering, and medical equipment.
The business activities that LANXESS combines in its Advanced Intermediates segment make it one of the world’s leading suppliers of basic and fine chemicals. The business units in this segment are Basic Chemicals and Saltigo. The Advanced Intermediates segment’s production sites are situated in Brunsbuettel, Dormagen, Krefeld-Uerdingen and Leverkusen, Germany, and Baytown, Texas, United States. Its products are used in such diverse sectors as agrochemicals, construction, dyes and pharmaceuticals.
The Performance Chemicals segment embraces the Group’s application-oriented specialty chemicals operations. The business units in this segment are Material Protection Products, Inorganic Pigments, Functional Chemicals, Leather, Rhein Chemie, Rubber Chemicals and Ion Exchange Resins. The segment’s production sites are in Bitterfeld, Brunsbuettel, Dormagen, Krefeld-Uerdingen, Leverkusen and Mannheim, Germany; Antwerp, Belgium; Branston, United Kingdom; Filago, Italy; Vilassar de Mar, Spain; Isithebe, Merebank, Newcastle and Rustenburg, South Africa; Burgettstown, Pennsylvania, Bushy Park, South Carolina and Chardon, Ohio in the United States; Lerma, Mexico; Porto Feliz, Brazil; Zárate, Argentina; Qingdao, Tongling, Shanghai, Wuxi and Weifang, China; Madurai and Thane, India; Toyohashi, Japan; and Sydney, Australia. The segment’s varied products are used in areas such as disinfectants, colorants, wood preservatives, the food and beverage industry, water treatment, construction and the leather industry.
Organization
LANXESS AG functions largely as a management holding company. Each business unit has global responsibility for its own operations. The business units are complemented by group functions with international responsibility for providing services.
LANXESS Deutschland GmbH and LANXESS International Holding GmbH are wholly owned subsidiaries of LANXESS AG, and in turn control the other subsidiaries and affiliates both in Germany and elsewhere.
The following are the principal companies wholly owned by LANXESS AG directly or indirectly:
- LANXESS Deutschland GmbH, Leverkusen: production and sales, all segments
- LANXESS Corporation, Pittsburgh, Pennsylvania, United States: production and sales, all segments
- LANXESS Elastomères S.A.S., Lillebonne, France: production and sales, Performance Polymers
- LANXESS Holding Hispania, S.L., Barcelona, Spain: holding company, all segments
- LANXESS Inc., Sarnia, Ontario, Canada: production and sales, Performance Polymers
- LANXESS International SA, Granges-Paccot, Switzerland: sales, all segments
- LANXESS N.V., Antwerp, Belgium: production and sales, Performance Polymers and Performance Chemicals
- LANXESS Rubber N.V., Zwijndrecht, Belgium: production and sales, Performance Polymers
- LANXESS Elastômeros do Brasil S.A. (formerly: Petroflex Industria e Comercio S.A.), Rio de Janeiro, Brazil: production and sales, Performance Polymers
- Rhein Chemie Rheinau GmbH, Mannheim, Germany: production and sales, Performance Chemicals
- SALTIGO GmbH, Leverkusen, Germany: production and sales, Advanced Intermediates
On December 13, 2007, we announced the acquisition of Brazilian chemicals enterprise Petroflex. Petroflex is one of the world’s major producers of synthetic rubber. We initially acquired nearly 70% of the company’s shares at a purchase price equivalent to around €200 million. The transaction was completed on April 1, 2008 following the approval of the antitrust authorities, and Petroflex has been included in the LANXESS consolidated financial statements since the second quarter of 2008. In compliance with local regulations, we then made a public tender offer to the minority stockholders. By the end of the offer period on October 16, 2008, we had acquired a further 27% of Petroflex shares, which made a rapid squeeze-out possible. LANXESS has held all shares in Petroflex since November 13, 2008. The price for the full block of shares including net debt amounted to approximately €370 million. The successful takeover also ended Petroflex’s stock market listing.
In the second quarter of 2008, we expanded the Asian activities of our Inorganic Pigments Business Unit by purchasing one of China’s largest iron oxide pigment facilities from our previous cooperation partner Jinzhuo Chemicals Company Ltd. This acquisition not only expands our production capacity, but also secures the supply of raw materials for our pigment blending facility in Shanghai. The transaction was completed in October 2008.