Lanxess is targeting EBITDA pre exceptionals of approximately € 1.4 billion in 2015. The specialty chemicals company plans to achieve its mid-term earnings target through a dual-track growth strategy of organic and external growth (c.f. article on the left). CHEManager Europe asked CEO Dr. Axel C. Heitmann about the key elements of the company's strategy.

CHEManager: Dr. Heitmann, the global economic recovery only set in a year ago but you are already setting an ambitious growth target for the future. What makes you so confident?

Dr. Heitmann: Lanxess has transformed itself over the last six years into a financially solid company with a strong platform for growth. By the end of this year, we will have increased EBITDA pre exceptionals by roughly 80 percent since 2004, even in spite of the global economic crisis. This clearly underlines our successful track record to deliver sustainable growth. So it is only consistent that we are now targeting another 80 percent increase in earnings.

How did you accomplish this strong performance since the foundation of Lanxess?

Dr. Heitmann: We were quick to manage our costs wisely and restructure our portfolio in the first few years. These steps helped us to also get through the economic downturn in 2009 successfully. In addition, we established a clear focus on premium and innovative products, which are tailor made for the four global megatrends that are mobility, agriculture, urbanization and water. And of course our BRIC strategy has been central to our success.

It seems this strategy to focus on emerging markets has proven to be right.

Dr. Heitmann: The percentage of our group sales in the BRIC countries has more than doubled in the last five years. This is good news because countries such as Brazil, India and China were the first to recover from the economic crisis. In addition, we are strengthening our asset base in the emerging markets in order to be closer to our customers. By 2012, more than 38 percent of our capital expenditures will be directed toward Asia and Latin America, compared with less than 20 percent in 2005. For example, we are planning a new production plant in Asia for Nd-PBR - a key ingredient needed to manufacture green tires.

In order to increase your presence, you also focused your acquisition strategy on the BRIC countries. How has that worked out so far?

Dr. Heitmann: We made selective, bolt-on acquisitions. Our five largest acquisitions have contributed roughly € 600 million in annual sales to our Group. Notably, these transactions mainly took place in the emerging markets of Brazil, China and India. In 2008, we made our largest acquisition - Brazil's Petroflex - a move that added enormous strength to our standing as the world's leading synthetic rubber producer. Our acquisitions of the production assets of Gwalior Chemicals in India and Jiangsu Polyols in China also show that we continued to pursue our external growth strategy even during the economic downturn.

Will acquisitions also play a major role in the years to come?

Dr. Heitmann: We remain very interested in seeking out attractive opportunities for external growth and will continue to make targeted small to medium-sized acquisitions that can build on our existing portfolio. These will have to meet strict financial criteria, though.. Our primary focus will, nevertheless, continue to be on organic growth. A ratio of two-to-one organic to external worked well for us in the past. And we will continue to emphasize organic over external for the next five years. A prime example of our investment strategy is our record € 400 million investment in a new butyl rubber plant in Singapore, which will come on stream in early 2013.

So, investments in targeted innovation will contribute significantly to achieving your growth target?

Dr. Heitmann: Our innovation efforts are focused on meeting specific and concrete customer needs. We have consistently grown our innovation budget and headcount - even during the crisis year of 2009. Most of our R&D is conducted within each of our 13 business units. This allows each unit to conduct research that can meet specific customer needs. It is important to note that Lanxess places an equal focus on innovation in both products and processes. Some of our most remarkable advances have involved finding innovative and highly efficient new ways to manufacture established products. We have also developed close partnerships with major research centers and universities in Europe, Asia and North America.

This, indeed, seems to be a sound basis for your ambitious target.

Dr. Heitmann: Our strategy for the next five years will largely be based on the same proven toolbox we have used. We have set an aggressive growth target for 2015. It is aggressive, but it is achievable!