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LANXESS expects the economic environment to remain challenging and does not anticipate any improvement in the business situation in the second half of the year. For our business with the automotive and tire industries, in particular, we do not expect any recovery in the weak market environment for the second half-year. In agrochemicals, on the other hand, we believe that the solid demand will persist in the months ahead as well.

In regional terms, the risk components that can adversely affect economic expectations have increased significantly. The economic situation in the emerging economies has deteriorated considerably, and the situation in Europe is likely to remain strained. Growth expectations are lower for China, as well as for Brazil and India. It is expected that demand in Europe will stabilize at its current low level. We see signs of a slight improvement in the U.S. for the second half-year. However, we expect below-trend growth overall.

We believe that automobile production will post only low growth, driven by demand in the U.S. and China. In Europe, production is expected to remain at a low level. There will likely be just a slight improvement in the tire industry as a result of the economic conditions. Only weak improvement is anticipated for replacement tire sales. The U.S. construction industry is expected to perform well because of demand for residential building. The situation in Europe remains varied, with some crisis-struck countries stabilizing. Overall, however, the outlook remains weak.

Looking ahead to the remainder of the year, we do not expect any relief from the absence of one-off charges that affected the first quarter, taking account of seasonality in the second half of the year. Consequently, we still expect EBITDA pre exceptionals for the full year to come in below €1 billion and anticipate a figure of €700 million to €800 million in 2013. As in the past, this forecast does not reflect any further possible write-downs of inventories since these are difficult to predict.

In the first half of 2013, we already applied our flexible asset management and rigorous cost discipline in taking the first steps to mitigate the impact of declining demand. As announced, this also included initial action in our Performance Chemicals segment. In the Rubber Chemicals business unit, for example, we are working to consolidate the production processes for vulcanization accelerators, which are primarily used in the tire industry, at the sites in Belgium and the U.S. The production site for antidegradants in Isithebe, South Africa, will be closed. These measures will be completed in 2014. We are also streamlining the product portfolio in order to further boost the efficiency and competitiveness of the Rubber Chemicals business in this area.

LANXESS is also working on other measures and an update of its strategy. Details will be announced in September.

Given the persistently weak demand this year, we no longer consider achievement of our target EBITDA pre exceptionals for 2014 of €1.4 billion to be realistic, even if demand recovers as expected in the coming fiscal year.

In view of the challenging market environment, we have already reduced our capital expenditures budget to around €600 million.

We will systematically pursue our Group growth strategy. Despite the difficult economic environment, we are maintaining our mid-term target EBITDA pre exceptionals for 2018 of €1.8 billion. However, we consider the achievement of this target to be a greater challenge.

Forecasts Unchanged in the Reporting Period
Information in the Annual Report 2012 Page
Future organization and corporate structure 131 ff.
Future corporate objectives and strategy 131 ff.
Future production and products 132 ff.
Future sales markets and competitive position 132 ff.
Future research and development activities 119 ff., 132
Future financing 134 f.
Future dividend policy 135