LANXESS Aktiengesellschaft ($LXS)

Good morning, ladies and gentlemen, esteemed stockholders Welcome to this year's Annual Stockholders' Meeting. Thank you for taking the time to be here today. This Annual Stockholders Meeting is not a routine event. It is taking place at a time when the chemical industry in Europe is under immense pressure. It is taking place at a time when we, as a company, must provide clear answers, especially in areas where we can take countermeasures ourselves. My and our fundamental conviction at LANXESS is when the outside world is difficult, it does no good to wait for help from others. No, The key is to take matters into your own hands wherever you can make a difference. I would like to tell you more about that later in my speech today. about what we are doing and have done to cope as best as we can with the crisis bearing down on us from the outside. Ladies and gentlemen, the European chemical industry, including LANXESS, is in the midst of a perfect storm. Multiple pressures are acting simultaneously. In some cases, these pressures reinforce one another. First, demand is weak in nearly all major customer industries, including building and construction, automotive and agriculture to name Just a few. And this is true in all relevant market regions. Even China, a long-time growth engine has not provided positive momentum for Europe in quite some time. Quite the contrary is true. We are seeing increasing competitive pressure from China, other Asian countries and the Middle East. Over the past few years, massive overcapacities have been built up there. And now that the U.S. market is closed off by tariffs, they are being pushed into European markets and at rock bottom prices that often have very little to do with fair competition. Added to this are profound geopolitical tensions. These tensions have not diminished since our last Annual Stockholders' Meeting. In fact, with the conflict in the Middle East, they have reached a new level of escalation. And I will address the war in Iran and its consequences for us separately later. But one thing is certain. These conflicts are weighing on global markets. They are unsettling our customers and our investors, and they are slowing global growth. This complex situation is particularly hard on the chemical industry in Europe and especially here in Germany. Local companies are suffering from anticompetitive conditions, high energy prices, ever-expanding bureaucracy and lengthy approval processes. The figures show where this is leading. Since 2022, the number of chemical plant closures in Europe has increased sixfold. A total of 37 million tons of chemical production capacity has been lost. And this is equivalent to around 9% of Europe's total. And with it, around 40,000 jobs. These were well-paying jobs that will not return. Value creation and prosperity are thus being lost. Since these production capacities typically migrate to countries with weaker emissions controls, climate protection is suffering as well. everyone loses out. I must say that unfortunately, the framework conditions created by policymakers, particular in the European Commission, resemble a reckless ride into the wrong direction, ecologically and economically speaking. The realization of the state of our industry is only slowly gaining traction in the political decision-making centers in Berlin and above all in Brussels. Yes, some measures have already been launched to improve our industry's competitiveness. But overall, I must say there are too few and they are too slow. However, policymakers must act now. They must enact major reforms without getting bogged down in the details. Otherwise, we risk more plant closures, job losses and a lack of investment in this country. Now let's review the financial figures from the previous fiscal year. In 2025, the group's sales were EUR 5.7 billion. This represents a decline of about 11% compared to the previous year. EBITDA pre-exceptionals decreased by 17%, reaching EUR 510 million. This decline is primarily due to the persisting weak demand in many of our customers' industries. We sold less and capacity utilization at our facilities was correspondingly low. Additionally, the sale of our Urethane Systems Business reduced sales and earnings. A key focus in the past fiscal year was strengthening our balance sheet. We have made significant progress in this area. We reduced our net financial debt further. It stood at around EUR 2 billion at the end of 2025. That is nearly 50% less than in 2022. The sale of the Urethane Systems Business and our consistent cash and working capital management contributed significantly to this reduction. At the same time, we ended the year with cash reserves of about EUR 500 million and undrawn credit lines of about EUR 1.4 billion. Despite these successes, the earnings situation remained tight in 2025. Nevertheless, the Board of Management and the Supervisory Board are sticking to our dividend policy and are once again proposing a stable dividend of EUR 0.10 per share. This corresponds to a total payout of approximately EUR 9 million. This dividend is a deliberate signal. It stands for continuity and reliability. At the same time, it shows that we are exercising restraint during this phase. In summary, this means our figures reflect the severe global crisis facing our industry. However, they also demonstrate LANXESS' strong financial position. We have reduced our debt last year. We are securing our financial flexibility. And in so doing, we are laying the groundwork to actively steer LANXESS, ladies and gentlemen, in an environment like the current one, minor adjustments are not enough. A clear strategic direction is needed. It also requires a willingness to break with the familiar. That is exactly what we have done at LANXESS in recent years. We essentially finished our realignment in 2025 when we sold our Urethane Systems division, our last polymer business. As a result, LANXESS is now a specialty chemicals group with a clear focus on pure chemical value chains on businesses with higher value creation with greater stability and with a clear relevance to the key challenges of our time. Our group rests on three strong pillars. In the Consumer Protection segment, we develop products that protect people and improve their quality of life. Our second segment, the Specialty Additives segment provides additives that make our customers' products more efficient, durable and sustainable. In our third segment, Advanced Intermediates, we produce chemical intermediates that form the basis of many industrial value chains. All three segments have one thing in common. We deliver solutions that help our customers overcome their own challenges. At the same time, we hold leading market positions in all areas, thereby strengthening our international competitiveness. Ladies and gentlemen, even in this setup, we just like our customer industries are facing increasing pressure, particularly from Chinese competition. Therefore, we must continue to work on improving our structure and our own competitiveness. We launched our Forward action program already in 2023. This program is working, and it is having a lasting impact. By the end of 2025, we will have achieved annual savings of around EUR 150 million. These savings come from more efficient processes, a leaner organization and an increased competitiveness. And they are not just having a onetime effect, but a lasting one. However, the economic environment has continued to deteriorate since the launch of FORWARD! In particular, the escalation of tariffs has significantly worsened to the situation. Last year, we, therefore, introduced additional structural measures to counteract this trend. This includes further optimizing our production network. These measures will generate additional annual savings of around EUR 50 million starting in 2027. These measures affect sites and facilities where profitable production is no longer sustainable under current conditions. For example, our Hexane oxidation facility at Krefeld-Uerdingen was closed at the end of the second quarter in 2025. Our global network of Roma chemical facilities is also affected. We will close the Widnes site in the U.K. this year. And at the El Dorado site in the U.S., we will streamline the production of bromine products. In the beginning of this year, finally, we have started a third package of measures that will enable us to save around EUR 100 million per year by the end of 2028 in addition. This addition to -- in addition to strict cost discipline at all levels of the group, this package also means reduction of approximately 550 positions across all levels of the group, particularly in administrative functions. Ladies and gentlemen, let me be very clear. These are not easy decisions. They affect jobs and consequently, people and their families. Our goal is clear. We want to implement these measures in a socially responsible and in a decent manner. That is how we have always handled such situations at LANXESS, and that is how we intended to proceed this time as well. Ladies and gentlemen, in addition to our rigorous cost management, we are also working on new offerings to meet our customers' future needs. Innovation is especially key to creating new opportunities in times of crisis. Let me give you a few examples. Let's take our ion exchange business, for example, which deals with water purification in a wide variety of contexts and across a broad range of industries. We have now further developed these products for use in carbon capture, which involves the capturing and sequestering of CO2 from the air. Our products thus actively contribute to climate protection. Another example is our iron oxides, which have so far been used primarily for coloring the construction industry. We have now developed iron oxides and iron phosphates that make batteries more durable and more powerful. These time-honored products are helping advance the energy transition and e-mobility. Ladies and gentlemen, this shows that we develop solutions that help address the key challenges of our time. And we actually also are vigorously pursuing the development of sustainable product portfolios. That's what you've seen. Scopeblue is a brand of [indiscernible] for our products that are either made of at least 50% circular raw materials or have a very low carbon footprint. Over the past 12 months, we have further expanded our offerings in this area and launched Scopeblue products for rubber additives and lubricants. Ladies and gentlemen, in the midst of a profound crisis, it goes without saying that we must redefine our priorities, but there are areas where we do not and must not compromise. For us, sustainability is clearly one of them. It is firmly anchored in our strategy and is nonnegotiable. We have set clear and ambitious climate goals. By 2040, we aim to be climate neutral in terms of our Scope 1 and Scope 2 emissions. As you can see, we have improved year after year. By 2025, we have reached a figure of 1.7 million tons, representing a substantial 73% reduction compared to our baseline year, which was 2004. By 2050, we also aim to be climate neutral in terms of Scope 3 emissions along the value chain. Last year, our Scope 3 emissions fell to around 10 million metric tons of CO2 equivalents, a significant 62% decrease compared to the base year of 2015. Our targets are scientifically sound and validated by the well-known science-based target initiative. They are aligned with the 1.5-degree target of the Paris Agreement. Our commitment is recognized. LANXESS is highly ranked in international ESG ratings. For example, EcoVadis, they have awarded us the gold status once again. And in May, we published the Dow Jones Best-in-class Index, where we rank first in Europe in the chemicals category and fifth worldwide. These rankings also in the chemicals categories are not an end in themselves for us, but they are proof that we are taking responsibility for the environment, for society and good corporate governance. Ladies and gentlemen, let me conclude by looking ahead. The global political and economic environment remains extremely tense. Geopolitical risks have recently increased significantly once again. The current war in the Middle East is further destabilizing the already fragile global economy. It is increasing uncertainty for investments worldwide, weighing on energy and raw materials markets and disrupting supply chains. The direct impact of the conflict on LANXESS is currently minimal, luckily so. In fact, we can see that other regions of the world are more severely affected than we are. And this is creating at least temporarily a changed competitive environment for some products. We are observing that the supply chains of many Asian competitors are disrupted and that customers are turning more strongly back to European suppliers such as LANXESS. Our ability to deliver is currently a significant competitive advantage. Accordingly, we have seen a slight positive momentum in demand since March. At the same time, immediately after the outbreak of the conflict, we raised prices for many of our products to pass on the increased costs of raw materials, energy and logistics. However, we are aware that this could be a temporary market situation, the duration and financial impact of which are uncertain. Accordingly, in the second quarter of 2026 as compared to the first quarter, we expect EBITDA pre-exceptionals to rise significantly to between EUR 130 million and EUR 150 million. For the full year 2026, we expect EBITDA pre-exceptionals to be between EUR 450 million and EUR 550 million. We do not expect to see any sustained positive economic momentum, particularly in our home market of Europe until the second half of the year at the earliest, if at all. Until then, our operating environment will remain challenging and marked by high uncertainty. For LANXESS, this means we remain realistic yet capable of taking action. We are consistently managing the factors we can influence. These include our costs, our liquidity and our strategic focus. LANXESS will be ready when demand recovers. LANXESS will be ready to seize opportunities and to grow profitably. And we are also ready to create sustainable value even in a world that will remain turbulent for the foreseeable future. Ladies and gentlemen, in this challenging environment, I would like to extend my special thanks to our employees all over the world. They support change, they drive change, make difficult decisions every day and keep our company on course even during volatile times. This deserves respect and recognition. I would also like to thank you, our stockholders, for your trust and for your patience. Especially in a phase like this, that is not something to be taken for granted. Today, LANXESS is better positioned, more focused and more resilient than it was just a few years ago. We know where we want to go, and we have the strength to follow this path. Let us continue on this path together with responsibility, with a sense of proportion and with confidence. [Statements in English on this transcript were spoken by an interpreter present on the live call]