Welcome to LANXESS Annual Report 2011!

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Structure of the statement of financial position

As of March 31, 2012, the LANXESS Group had total assets of €7,141 million, up €263 million, or 3.8%, from €6,878 million on December 31, 2011. The principal reasons for the increase were the increase in net working capital and the earnings-related growth in equity.

Non-current assets rose by €7 million to €3,496 million. The intangible assets and property, plant and equipment included in that figure decreased by €11 million to €3,041 million, mainly on account of negative currency effects. Cash outflows for purchases of property, plant, equipment and intangible assets, at €92 million, were well above the prior-year figure of €68 million due to the high level of investment activity. Depreciation and amortization in the first three months totaled €88 million against €71 million in the prior-year period. The first-time consolidation of Tire Curing Bladders, LLC, Little Rock, United States, which was acquired in March 2012, led to additions in the low single-digit million range. The increase in the carrying amount of investments accounted for using the equity method was chiefly attributable to the positive earnings of Currenta GmbH & Co. OHG in the reporting period. The change in investments in other affiliated companies was partly due to the purchase of a strategic minority interest in BioAmber, Inc., Minneapolis, United States, in February 2012. In addition, there were positive effects from the mark-to-market valuation of the interest in Gevo Inc., United States, in light of the recent development of its share price. The ratio of non-current assets to total assets was 49.0%, down slightly from 50.7% on December 31, 2011.

Current assets amounted to €3,645 million, up €256 million, or 7.6%, from December 31, 2011. Inventories rose by €60 million to €1,446 million, largely because of a business-driven inventory build-up. Trade receivables were up by a substantial €155 million to €1,301 million compared to year end 2011 in light of sales development. The balance of cash and cash equivalents and near-cash assets increased by €32 million to €560 million. The ratio of current assets to total assets was 51.0%, against 49.3% as of December 31, 2011.

The LANXESS Group has significant internally generated intangible assets that are not reflected in the statement of financial position due to accounting rules. These include the brand equity of LANXESS and the value of the Group’s other brands. A variety of measures were deployed in the reporting period to continually enhance these assets. These measures contributed to the continued success in positioning the business units in the market.

Our established relationships with customers and suppliers also constitute a significant intangible asset, which cannot, however, be reflected in the statement of financial position. These long-standing partnerships with customers and suppliers, built on trust and consistent product quality, enable us to firmly adhere to our price-before-volume strategy. Our specific competence in technology and innovation, also a valuable asset, is rooted in our specific knowledge in the areas of research and development and custom manufacturing. It enables us to generate significant added value for our customers.

Our commercial success is also founded on the knowledge and experience of our employees. In addition, we have sophisticated production and business processes that create competitive advantages for us in the relevant markets.

Equity rose by €151 million from December 31, 2011 to €2,225 million, predominantly due to the net income of €193 million for the first three months of the year. The principal offsetting items were negative effects in other equity components from the measurement of pension obligations. The ratio of equity to the Group’s total assets was 31.2% as of March 31, 2012, against 30.2% as of December 31, 2011.

Non-current liabilities grew by €109 million to €2,824 million as of March 31, 2012. The main reason for the increase was the €71 million increase in pension provisions to €750 million, mainly resulting from an adjustment in the interest rates used for measurement. In February 2012, we placed a bond denominated in Chinese off-shore Renminbi in Hong Kong. The bond has a volume of CNH 500 million, or €60 million, and a three-year term. We repatriated the funds from the bond issue into mainland China to finance our operating business and growth strategy in the Chinese market. With a coupon of 3.95% per year, the bond offers advantages over financing via local banks.

The ratio of non-current liabilities to total assets was 39.5%, the same as on December 31, 2011.

Current liabilities came to €2,092 million, up by €3 million, or 0.1%, from December 31, 2011. The increase in other current provisions was more than offset by lower liabilities from currency hedging contracts and the decrease in other financial liabilities, which was largely attributable to the repayment of bank liabilities. Current income tax liabilities showed a business-related increase. Trade payables declined. The ratio of current liabilities to total assets was 29.3% as of March 31, 2012, against 30.3% as of year end 2011.

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