LANXESS: Good start to the year 2006

18 May 2006

Chemicals company LANXESS AG got off to a good start in fiscal 2006, with year-on-year growth in earnings (EBITDA pre exceptionals) in double digits for the period from January to March, 2006. In what is traditionally the strongest quarter of the year, EBITDA pre exceptionals rose 13.3% to EUR 205 million (Q1 2005: EUR 181 million). The EBITDA margin pre exceptionals was 11.2% (10.5%). The operating result (EBIT) pre exceptionals improved by 18.2% to EUR 143 million (EUR 121 million). Sales advanced by 6.2% to EUR 1,836 million (EUR 1,729 million). All the operating segments contributed to sales growth. 'With our earnings in the first three months of 2006, we have laid a solid foundation for achieving our full-year expectations', said LANXESS Management Board Chairman Dr. Axel C. Heitmann. Net income improved considerably in the first quarter, from EUR 70 million in the prior-year quarter to EUR 82 million. Capital expenditures were down by nearly one third to EUR 37 million (EUR 51 million). For the full year, however, they will be slightly above the 2005 level. Business trends by region In the EMEA region (Europe [except Germany], Middle East, Africa), LANXESS Group sales fell by just 3.3%, to EUR 619 million (EUR 640 million), while business in Germany expanded considerably, advancing by 6.9% to EUR 417 million (EUR 390 million). In the Americas region, LANXESS increased sales by 10.7% to EUR 497 million (EUR 449 million). Helped by the continuing dynamic growth in the region, sales in Asia/Pacific rose by 21.2% to EUR 303 million (EUR 250 million). Business in China showed very pleasing growth, increasing by over 40 percent. The Asia/Pacific region's share of Group sales rose to 16.5 percent, from 14.5% in the prior-year quarter. Performance of the segments Sales revenues in the Performance Chemicals segment rose by 8.2% to EUR 517 million (EUR 478 million), the slight decline in volume being offset by price increases. Nearly all the business units in this segment raised their prices, with the Rubber Chemicals and Leather business units posting significant growth in volume at the same time. The Textile Processing Chemicals business unit recorded a significant drop in volume, especially in Europe and Japan. EBITDA pre exceptionals advanced by 19.0% to EUR 69 million (EUR 58 million), thanks largely to the improved business in the Rubber Chemicals and Leather business units. The EBITDA margin pre exceptionals for the segment rose by 1.2%age points to 13.3%. Outlook for the full year LANXESS expects the world economy to maintain a good rate of growth in 2006, providing a positive operating environment for the chemical industry. Raw materials and energy prices that are volatile at a high level will remain a relevant factor. LANXESS will take this into account in its pricing as it has done in the past. LANXESS will continue the transformation of the Group that has already begun. Implementation of the restructuring program continues at a rapid pace and has already yielded significant results. Against the background of a positive business trend, LANXESS expects EBITDA pre exceptionals to increase to between EUR 640 and EUR 680 million for fiscal 2006, compared to EUR 581 million for fiscal 2005. 'This target is within the upper half of the 9 to 10% margin range, calculated on 2004 sales, that has been communicated in the past', said the LANXESS CEO. As a result of its consistently applied 'price before volume' strategy, the LANXESS Group anticipates moderate growth in sales from continuing operations. Capital expenditures in 2006 will be at the upper end of the EUR 250 million to EUR 270 million range and thus slightly above the previous year.

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