AGM 2021

May 19, 2021

Slides

morning, stockholders. Come here in Cologne, I would like to welcome you to the annual stockholders meeting of Vansas. Since we are unfortunately unable to meet in person this year either, I'm once again speaking to you from our communications center for a purely virtual meeting. I should first make it clear, however, that I'm going to to do so with a positive message. Lancet is on course and has come through the corona crisis very well so far. And I am extremely happy to be able to say that just as it was for many other companies, twenty twenty was an extraordinarily challenging year for Lanceste, a year that often saw disruptions in supply chains in the industry, dramatic drops in sales worldwide, and partial total shutdowns in different countries. And in which we were concerned about the health of our employees. In order to protect our colleagues from infection, we have enabled them to work from home since spring twenty twenty. We immediately implemented strict hygiene rules at all of our buildings, whether administration or production, and have continuously adjusted these measures in accordance with the evolving scientific recommendations. In this way, we have succeeded in containing the spread of infection and keeping nearly every plant in continuous operation. Our supply chains and our supply of raw materials have also remained stable. This has been and remains an incredible team effort for which I would like to thank all employees at LANXESS. The corona virus pandemic has also put the way we work together to the test. This is because our strengths, creativity, team spirit, and the will to constantly develop further have always been based our direct dialogue and open discussion in other words, on closeness that was hardly possible last year. As such, it is all the more gratifying to be able to say that we dealt with all these adversities well and acted quickly. In no time at all, we have learned to bring our strengths to bear in a virtual context as well and to continue working efficiently and effectively. The 2020 business year, which I would now like to report to you Yeah. Is good evidence. It is true that the greatest economic crisis since the end of the second world war has left its mark on us as well. At €6,100,000,000 Flancestor's sales were down 10.3 from previous year's figures of €6,800,000,000 Our EBITDA pre exceptionals amounted to €862,000,000 which corresponds to a decrease of 15.4% relative to the previous year's figure of €1,019,000,000 but stands at the higher end of our forecast range of 820 to €880,000,000. Our EBITDA margin pre exceptional reached 14.1%, close to our best value from the previous year, namely 15%. In terms of net income from continuing operations, however, we were able to achieve the best figure in our company's history at €908,000,000. However, this was largely due to the sale of our shares in the chemical park operator, Currenta. Ladies and gentlemen, you can see from these key figures that we too were hit by the crisis, that we performed excellently in such a difficult corona year. On the one hand, we are in a very good position compared to the rest of the industry. We limited the decline in turnover, delivered an impressive EBITDA, kept the margin, the group result high, or even led them to a top value. There are not so many chemical companies that can say the same. I'm confident that this performance puts us in an outstanding position in comparison with other international companies in the context of the pandemic. Secondly, our performance is also remarkable from another perspective. Just think back to the Southern European debt crisis of twenty thirteen. Today, one would probably say a rather overseeable regionally limited event. And yet, its impact on Langsace's business was enormous at the time. Our EBITDA at the time fell by 40% and the EBITDA margin at the time by 4.5 percentage points. Today, however, in the middle of one of the greatest global crises of recent decades, our EBITDA has decreased by only 15%, and the margin has, as mentioned, remained almost the same even with the previous year's record high as a reference figure. This shows that we are now reaping the fruit of the group restructuring carried out over the last several years in the areas where it counts most. We have become considerably more resilient and far less vulnerable to economic fluctuations than before. The diligence we have applied in doing our homework is now paying off. All of this is the result of hard work. For this, my gratitude goes out to the entire LANXESS team who did everything humanly possible to keep our businesses going during this extraordinary job. It has been proven once again that our employees truly live our slogan, energizing chemistry. And this makes me immensely proud. At the same time, the past year has once again made it very clear how important, especially in times of crisis, the contribution of politics is. They must be aware that industry is the heart of the economy and that we need a strong industry for prosperity and jobs, for sustainability and climate protection, and currently for the economic management of the corona crisis. The North Congress failing state government The Lashet government has thus done a great deal to strengthen industry on the Rhine and Ruhr in global competition. And this dynamic and progressive approach that Armin Laschit has shown as the minister president of North Main West failure is also what we need in Berlin and Brussels. Ladies and gentlemen, we face many challenges. In view of this, our record is therefore never measured only by its figures, but also by how well we have future of Langsace. I believe that we made crucial progress in this area once again in 2020. At our last annual stockholders meeting, as you may recall, I introduced to you our new consumer protection segment focused on consumer protection products. In its first year alone, this new segment and its highly profitable businesses have already become a strong pillar of lancess. Personally, I have no doubt whatsoever that this progress will continue. This is because hygiene and the safe supply food rank among the most important trends that will define markets worldwide in the years to come. Global efforts to reduce the use of antibiotics in livestock farming are increasing. Diseases are to be prevented with disinfectants instead. Consumer protection and its products offers excellent solutions for this market. The food industry in turn faces the challenge of reducing the amount of packaging it uses for foods, which must simultaneously remain safe and ensure long shelf lives. Consumer protection's portfolio includes suitable products in this area as The list of examples could be extended considerably, but my message should already have become clear. Protection is a segment with a future. It is precisely for this reason that we expanded this area further with strategic purchases right at the beginning of this year. The first of these acquisitions was the French company, INTASE, a manufacturer of special fungicides for the manufacture of paper and packaging. Just a few days later, this was followed by the takeover of the also French company, Tizio, a provider of disinfectant and hygiene solutions for livestock farming. We have already concluded both transactions. We have announced another milestone in the development of consumer protection in February of this year, the acquisition of U. S. Chemical company Emerald Kalama Chemical. Emerald Kalama and its roughly 500 employees are an outstanding match for us. With its highly profitable business, this company represents another optimal addition to our Consumer Protection segment. Roughly 75% of its sales are generated from specialty products for the consumer sector. These include preservatives for use in food, household products and cosmetics, flavors and fragrances as well as products for animal nutrition. The remaining quarter of sales originates from business in special chemicals for industries including and adhesives industries. Furthermore, this acquisition serves not only to expand our portfolio with new areas of application but also to simultaneously expand our presence in our North America growth regions. Both will make us even more profitable and stable. Emeralds Emeralds. Certain rights combined status at US dollar. Point 1 billion US dollar roughly has sales of 425,000,000 US dollars and an EBITDA of roughly $90,000,000 Thus, it will be the second largest acquisition in our history. The transaction is expected to be completed in the second half of twenty twenty one. It is still subject to the approval of the responsible authorities. Dear stockholders, we prepared all three of these transactions under the challenging conditions of the past fiscal year. I found this to be a brilliant example of how effectively our team can take action even in these times of physical distancing. Furthermore, we promised you in the past years that growth would be the outlook for lapses. I believe that we can now say with a justified sense of pride that you can count on our word. We still have a great deal in store. We intend to open up new fields of business. A good example of this is electromobility, which is currently experiencing a dramatic upswing before our eyes. A great number of new battery manufacturing plants are being established in Europe. This entails great opportunities for LANXESS as we already produce many of the raw materials for battery manufacturing. Against this backdrop, we entered into a cooperation with Chinese company Tinshi, one of the world's leading manufacturers of lithium ion battery materials. And as early as next year, we will be manufacturing electrolyte formulations for lithium ion batteries for Tinci in a high-tech plant of our subsidiary Saltigo, a pioneering step forward in the direction of this high growth market of the future. Dear shareholders, why not talk about setting the strategic course for the future of LANXESS? I'm always also talking about sustainability. This is because sustainability is the guiding principle for our activities. In 2019, as you all know, we became one of the world's first major chemical companies to set the target of becoming climate neutral by 02/1940. At that time, we clearly defined the route by which we would arrive there. We implement projects featuring major reductions, decoupled growth and emissions, and drive forward technology and process innovations. We began a significant step along this route last year, which we successfully concluded this February, namely the commissioning of our nitrous oxide production plant at the Antwerp location. Nitrous oxide is harmless to people but is roughly 300 times more harmful to the climate than c o two. This is why a reduction in this area was so important to us. In our new plant, we will break down around 500 tons of nitrous oxide per year into its harmless components, nitrogen and oxide oxygen, and thus completely neutralize it. This is equivalent to the climate impact of 50,000 metric tons of c o two. We have invested roughly €10,000,000 in the plant. A second plant will commence operation in 2023, after which it will eliminate a further 300,000 metric tons of CO2 equivalent per year. In this way, we are advancing towards our goal of climate neutrality piece by piece. At the same time, we are becoming a more sustainable partner for our customers, reducing our costs because we need fewer certificates from the European emissions trading system and using less energy thanks to innovative technologies. As you can see, our sustainable actions based on conviction have long since become a success factor for our business. Dear shareholders, we are serious about sustainability. Just how serious can also be seen from item six of today's agenda, the vote on the compensation system for board of management members. In future, about one third of our variable remuneration will be linked to the extent to which LANXESS achieves its sustainability targets for climate protection and occupational safety. Ladies and gentlemen, 2020 was a tough year. That said, hard times are always, always an opportunity to build resolve and inner strength. This is exactly what I have seen happen with LANXESS and its employees. We defied the past fiscal year's challenging conditions with resolve and inner strength and thus achieved a result we can all be proud of. As a matter of course, such a result should also be reflected in our dividend. We therefore propose to the Annual Stockholders' Meeting that the dividend be increased to €1 per share. This corresponds to growth of roughly 5% relative to the previous year and a total distribution of roughly €86,000,000. As I bring my remarks to a close, let me offer a brief look into the future. After the thoroughly exceptional year of 2020, how do we view our prospects for the months ahead? The answer is with optimism. We expect to see a noticeable decrease in the influence of the coronavirus pandemic. The advancing vaccination campaigns, in particular, will also have a positive effect on the economy. All told, we are therefore expecting EBITDA to be between $950,000,000 and €1,000,000 for 2021. Dear shareholders, a degree of uncertainty may still remain in light of the pandemic situation, which still remains precarious. However, there is one thing that I can assure you. Every employee, every board of management member, and every supervisory board member of LANXESS will be bringing the same energy and drive to work once again in 2021. We all have the same goal: profitable growth. You have my sincere thanks for your trust in our work, and I would be delighted to be accompanied by your guidance and support along our way forward. Take good care of yourselves and stay healthy, and thank you for listening.