Financial Condition
Balance sheet structure
As of March 31, 2007, the LANXESS Group had total assets of €4,287 million, up slightly from €4,205 million on December 31, 2006. Non-current assets remained nearly unchanged from the end of last year, at €1,725 million. Capital expenditures for property, plant and equipment and the additions to non-current assets resulting from the acquisition of the remaining 50% of the shares of South Africa-based Chrome International South Africa (Pty.) Ltd. compensated for depreciation and amortization amounting to €62 million in the first quarter. The equity carrying value of the interest in Bayer Industry Services GmbH & Co. OHG increased due to the equalization payment for the 2006 fiscal year, while the first-time full consolidation of the South African subsidiary led to a decrease in loans to affiliated companies. The ratio of non-current assets to total assets thus remained virtually unchanged at 40.2%.
As of March 31, 2007, current assets stood at €2,562 million, up 3.5% from December 31, 2006. Inventories and trade receivables increased by 2.8% and 8.3%, respectively, due to seasonal effects. Other current assets declined, mainly due to receipt of the purchase price related to the divestment of the Textile Processing Chemicals business unit at the end of 2006. Liquid assets totaled €213 million at the end of the quarter, up 24.6% compared with December 31, 2006. As of March 31, 2007, current assets made up 59.8% of total assets.
Equity, including minority interests, rose by 6.9% from December 31, 2006 to €1,526 million thanks to the positive net earnings. As of March 31, 2007, the equity ratio was 35.6% as against 34.0% at the end of 2006.
Non-current liabilities decreased by 1.1% to €1,537 million. The ratio of non-current liabilities to total assets, at 35.9%, was down by 1.1 percentage points from December 31, 2006. Current liabilities remained steady at €1,224 million. A reduction in current financial liabilities was offset by an earnings-related increase in current tax liabilities. The ratio of current liabilities to total assets was 28.6% at the end of the quarter, close to the figure of 29.1% recorded as of December 31, 2006.
Liquidity and capital resources
Bolstered by the €17 million increase in pre-tax income, operating cash flow was up by €41 million from the prior-year period to €77 million in the first three months of 2007. The typical seasonal increase in working capital in the first quarter of 2007 was €32 million less than in the same period of 2006 due to higher repayments of trade payables in the prior-year quarter.
With respect to investing activities, there was a cash outflow of €28 million, against an outflow of €2 million in the first three months of 2006. The €13 cash outflow for financial assets consisted of an equalization payment related to the prior-year loss of Bayer Industry Services GmbH & Co. OHG. In the previous year, the corresponding disbursement was made in the second quarter. A total of €23 million was spent to acquire subsidiaries. The €45 million cash inflow in the first quarter of 2007 was mainly attributable to the divestment of the Textile Processing Chemicals business unit. Cash outflows for property, plant and equipment and intangible assets came to €47 million, exceeding the figure for the first three months of 2006 by €10 million. This reflects the increase in capital expenditures planned for fiscal 2007 as announced along with the figures for 2006 at the Spring Financial News Conference in March 2007. Capital expenditures were below the €62 million in depreciation and amortization, which was unchanged from the previous year. Capital expenditure volume was highest in the Performance Rubber, Engineering Plastics and Chemical Intermediates segments. In the Performance Rubber segment, the Butyl Rubber business unit again invested in capacity extensions at the Sarnia site in Canada. In the Engineering Plastics segment, the Semi-Crystalline Products business unit continued to invest in expanding capacity for polyamide 6 at the production facility in Krefeld-Uerdingen, Germany. In the Chemical Intermediates segment, the Saltigo business unit continued its investment to expand an existing cGMP (current Good Manufacturing Practice) plant complex in which it manufactures intermediates for pharmaceutical industry customers.
Net cash used in financing activities amounted to €7 million, compared with €82 million in the prior-year period. These disbursements were made mainly to further reduce net borrowings, while interest paid and other financial disbursements totaled €2 million.
Cash and cash equivalents, at €213 million, exceeded the year-end 2006 level by €42 million. The net financial debt of €448 million as of March 31, 2007 was down by 12.3% compared with December 31, 2006 (€511 million).