Global economic turmoil impacts performance Audited

The development of total revenues and operating result in the Performance & Life Science Chemicals division reflects the effects of the global economic crisis. In 2009, total revenues declined by 3.8% to € 1,202 million. While the Life Science Solutions and Laboratory businesses largely remained stable, the decline in effect pigments particularly impacted business performance. The division was especially affected by the global drop in demand in, for example, the automotive industry, which is a cyclical business. Performance was strongly influenced by, among other things, the underutilization of production capacities in the Pigments business. Gross margin decreased by 12% to € 556 million. The operating result fell to € 97 million, which corresponded to a decrease of 42% compared with 2008. At 8.0%, return on sales was significantly lower than in 2008. By contrast, underlying free cash flow rose significantly as a result of massive reduction of inventories, doubling to € 140 million.

The division bolstered its business by resolutely managing costs and optimizing cash flow. Cutting pigment production in response to the downturn in demand proved to be an effective measure. Consequently, reduced working hours or similar measures were introduced at all pigment production sites. By consolidating our sites in the United States, a process which began in January 2009, we laid the foundation for the long-term profitable growth of our U.S. subsidiary EMD Chemicals. In parallel, we significantly increased the range of innovations we offer customers, optimized our delivery and supply chain, and expanded our web presence. We now have 50 country-specific websites in 20 different languages. The division also continued to invest above average in research and development, although more moderately than in 2008. R&D spending amounted to € 54 million in 2009, which corresponds to a decrease of 7.8%. A main focus of spending was on centers of application technology that support the sales departments. In addition, we have sustainably strengthened our businesses through acquisitions and cooperation agreements.