On track to deliver 2021 financial targets Meeting the Management Michael Pontzen, CFO
In 2017 we set our 2021 financial targets in a favorable market environment Despite rising political risks, global economy was robust What we aim for 2016 2017 (~2021) EBITDA pre Asia and USA with strong growth, 10-14% 14-18% margin Brasil recovery expected (group, Ø through the cycle) EBITDA L O W Additional US growth forseeable 2-3%pts margin M E D I U M due to pending tax reform volatility Cash Con- Main customer industries expected 56% >60% version* to continue a growth path * Cash Conversion = EBITDA pre – CAPEX / EBITDA pre 2
In 2019 the world is much more challenging, but we are well on track to achieve our goals The political uncertainty with full negative impact on global economy 2019 We stick to our targets (~2021) EBITDA pre Asian economies with visible margin slowdown, Brasil recovery pending, Specialty level LATAM uncertain (group, Ø through the cycle) EBITDA Resilience Serious trade conflicts / BREXIT margin volatility Main customer industries weak, Cash Strong cash generation auto in crisis mode, capital goods Conversion and agro sluggish 3
LANXESS self-help measures are the foundation on our way to achieve our financial targets Active portfolio Leveraging of synergies management Significantly reduced Streamlining asset auto exposure networt More balanced regional Additional organic exposure growth with ROCE ~20% Profitable organic Further M&A and growth restructuring 4
LANXESS margin improvement and resilience proven Stable margin growth in cyclical environment Margin resilience proven in recent quarters! resilience * European Peers: Arkema, DSM, Covestro, BASF, Clariant, Evonik, Solvay 5
Cash Conversion target also on track – but at what price does it come? We could deliver on our Cash Conversion target already in 2019, but give priority to profitable growth 2019 estimate in € m Conscious decisions backed by sound financials ~1,000 – illustrative 1,050 Growth CAPEX ~20% ROCE Growth: ~100 – 150 €100 Restr.: ~0 – 50 m ~50 % Maint.: ~300 – 350 ~ €30 m** ~ €0.16** additional additional ~500 EBITDA pre Earnings per Share Cash EBITDA pre - CAPEX = … t 0 t 1 t 3 Conversion* * Cash Conversion = EBITDA pre – CAPEX / EBITDA pre; ** ROCE: ~ 20%, considering ~€10 m D&A & ~30% tax 6
We decided to invest ~€400 m in financially attractive debottleneckings and brownfield investments Advanced Specialty Performance Engineering § Intermediates Additives Chemicals Materials Targeted growth CAPEX until 2020, in € m ~150 ~50 - 100 ~50 - 100 ~50 - 100 7
Organic investments fuel improvement of ROCE* Adjusted ROCE* shows improved operational return Transformation pays off: profile of LANXESS Divestment of ARLANXEO Acquisition of Chemtura 18 Streamlining asset network 16 Adjusted ROCE Organic growth investments 14 12 in % 10 ROCE reported 08 06 04 2012 2013 2014 2015 2016 2017 2018 * Adjusted ROCE = EBIT pre adjusted for amortization of Chemtura PPA related intangibles & assumed ARL ROCE 8
Strong management attention also on EPSpre* Strong EPSpre* growth Active EPS management: Operational improvement Lower interest expenses Funding of pension debt ~30% CAGR Tax management (tax rate from ~45% to ~30% in 2019) Share buyback in 2019 6 4.45 3.84 4 ~2.30 in € ~1.80 ~1.60 2 0 2014 2015 2016 2017 2018 * Earnings per Share: net of exceptionals and amortization of intangible assets as well as attributable tax effects / figures for 2014 until 2016 exclude ARLANXEO (non audited figures) 9
Capital allocation follows shareholder interests Shareholder return is the driver for capital allocation Organic growth illustrative (€ m) Restructuring ~1000 ~120 Mergers & Acquisitions ~550 Share buyback ~300 - 350 Dividend Deleveraging Tax EBITDApre Maintenance Free Cash CAPEX Flow Interest expenses 10
Our project pipeline allows us to continue our organic growth path We keep our internal benchmark for organic growth Future invest approach: projects: 20% ROCE Attractive ROCE around 20% Focus on debottlenecking and Growth CAPEX from brownfield investments 2021, examples Strategic fit to future growth Advanced Industrial Performance Chemicals markets Intermediates Biocides, Resins ~€50 m Aromatics ~€100 m Strenghten regional presence or balance growth regions High Performance Materials Polymer Additives TEPEX, Resins Lithium ~€100 – 400 m ~€50 -100 m 2021 Brownfield investments Debottleneckings 11
Tepex: Leveraging strong demand for continuous fiber reinforced thermoplastics Thermoplastic composite sheets serve as powerful and cost effective substitute for traditional components Illustrative: Tepex adressable global market volume* ~€40 m Investment +24% CAGR 1H 2022 Planned operation start 2020 2025 2030 12
LANXESS strengthens its AII aromatic „Verbund“ with additional synthetic menthol capacity Clear long-term investment approach based on synergetic customer relationship Investment rationale: ~€40 m Significant increase in demand for synthetic menthol Investment Strong customer relation based on long-term contracts Early 2021 Downstream development of the aromatic „Verbund“ Planned operation start 13
Venture investment into Lithium with low risk and potentially high return Opportunity in cooperation with Standard Lithium Investment rationale: ~€100 – Potential lucrative yield of 400 m battery grade lithium from LANXESS‘ „waste material“ tail brine Investments Strong growth of Lithium use based on rising Early 2021 demand for batteries Planned start of construction 14
The journey will continue … * European Peers: Arkema, DSM, Covestro (formerly BMS), BASF, Clariant, Evonik, Solvay 15
Looking ahead … energized! Moving our way towards even more stable and Profitability attractive margin levels Further balanced exposure to end markets and Resilience regions in the future Financials Maintaining strong financials and balanced debt Rating Commitment to stay solid investment grade 16
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