Address by Dr. Axel Claus Heitmann, Chairman of the Board of Management LANXESS AG

 

Thank you very much for joining us this morning, ladies and gentlemen.
I would especially like to thank Ms. Aw Kah Peng from the Economic Development Board of Singapore and Mr. Heah Soon Poh from the Jurong Town Council for joining us here today. This is a very special occasion for all of us at LANXESS – and for the dynamic and forward-looking Singapore. In many ways, LANXESS and Singapore have much in common. Both have proud histories. And both have found new life – both have flourished beyond all expectations – once we found our spirit of independence.
Our own history includes the invention of synthetic rubber. An invention that has forever changed the way people travel and move
goods. It also includes a century-old presence in the Asian market.

When today's LANXESS was born on January 31, 2005, we were determined to greatly expand our presence in the Asian market. We wanted to bring the great benefits of our synthetic rubber expertise to the people of Asia, and to make Asia a key to our future success. Now, just three years later, we are changing the landscape of the chemical
industry in Asia and making Singapore one of our top three sites in the
world. Until today, Singapore has been the office from which we have conducted business throughout Southeast Asia. Our presence here has been
limited to sales and distribution work for most of our business units. Now we are making Singapore the hub of all our future operations throughout Southeast Asia. And ladies and gentlemen – what a future it is! Today's announcement marks an important milestone in the realization
of the strategy we have had at LANXESS since the day our new company was born.
The creation of a major new butyl rubber manufacturing facility that will allow us to meet the need for better, safer, more fuel efficient tires for
the people of Asia. The birth of a high tech, state-of-the-art facility that will produce
halobutyl rubber – the extraordinary product that makes possible advanced, high-performance radial tires.
It is hard to imagine a more important announcement for LANXESS – one of the world's leading suppliers of synthetic rubber.
So you can imagine how very pleased I am to be here today. And you can imagine how gratified I am to know that our Asian strategy is being fulfilled here in Singapore.

In our industry, when you plan for sustainable growth, you better think big, and you better think long term. Well, our high-tech Butyl Rubber facility on Jurong Island represents a classic example of thinking big and thinking long term. I can assure you that an enormous amount of energy and talent – from hundreds of committed people – will continuously be poured into this project. It represents the largest financial investment in the history of LANXESS. We will invest roughly 575 million US dollars to construct this high-tech chemical facility.

Ladies and gentlemen, this is a strategic investment with major implications.
- It will change the rubber landscape in Asia for good.
- It will be the world's first entirely new Butyl rubber facility since the year 2000.
- It will be one of the most environmentally friendly, efficient, technology-driven butyl production facility in the world.
- It will bring the great benefits of Halobutyl rubber to the people of Asia – making their automotive transportation safer, more comfortable and above all more fuel efficient.

And it will bring important long-term benefits to Singapore. LANXESS has a strategy that embraces both organic and inorganic growth. Singapore is now the cornerstone of our strategy for organic growth. It makes our commitment to the Asian market every bit as meaningful as our commitment to the fast-growing BRIC markets of Brazil, Russia, India and China. This facility is a milestone for LANXESS and the entire chemical industry. And it marks another milestone in the remarkable economic progress of Singapore.
The Jurong Island facility will bring benefits to Singapore for many decades to come.
- For once built, chemical plants stay.
- They continually contribute to the economy.
- They always require highly skilled labor.
- They constantly create jobs.
- They require special expertise and know-how for Research and Development – day by day, year by year.
- And of course, they demand a constant flow of feedstock.

So you see, this is the start of something very big for LANXESS and for Singapore:
Construction is scheduled to begin in the first quarter of 2009 and we estimate that the facility will come on stream in 2011. The construction of our facility alone will involve roughly 150 engineers and 1,500 construction workers. The development of such an advanced chemical facility requires a broad cross section of experts from the fields of science, engineering and construction. Many more highly-qualified jobs will be created in order to form the support environment through which our facility will interface with energy suppliers, wastewater treatment and other complex chemical infrastructure needs. When completed, the final capacity will reach 100,000 tons of this sophisticated product per year. During the course of my presentation today I will cover three key subjects which I hope will answer many of the questions you may have. First I will discuss why, after an exhaustive analysis of potential sites throughout Asia, we selected Singapore's Jurong Island for this project. I will then discuss butyl rubber, the importance of this high-tech facility, and how it will meet the growing demand for safer, more fuel efficient vehicles throughout Asia. Finally, I will discuss how this new facility addresses our goal at LANXESS of being not only the technology leader in the butyl rubber market, but of being a leading player in the Asian chemical market. But first – why Singapore? Over the past three years we conducted a thorough survey and analysis of suitable sites throughout Asia. Last year we narrowed our search to Malaysia, Thailand, and Singapore. We then conducted an official site competition. This was necessary because of the sheer size of the project and its long-term impact on the Asian rubber world. We also had to consider the high level of R&D required for this complex. We had to be extremely diligent in deciding where to go. In that regard I want to offer special thanks to the local authorities of Thailand and Malaysia and all the fine people we dealt with in those countries as potential hosts for our site. We had outstanding support from the people of each country, and if we could have built three plants – one in each country – we would have. There are five very good reasons why Singapore was our final choice. Those reasons are:

Stability. Singapore is a highly-developed and successful free-market economy. It enjoys a remarkably open and corruption-free environment. It has stable prices, a business-friendly government, and a per capita  GDP equal to that of the four largest West European countries. Believe me, these are qualities that any CEO looks for when contemplating a major investment in any part of the world today.

Infrastructure. The chemical park on Jurong Island offers ideal infrastructure for a major new facility such as ours. There is an obvious reason why such companies as DuPont, Chevron Oronite, Shell and Sumitomo Chemical all have set up plants here. They can, above all, reap the benefits of the efficient, comprehensive infrastructure and production synergies that Jurong Island's unique chemical cluster development provides. This cluster guarantees the feedstock we need, the clean energy we need, and the unique facilities we need. An important factor in our decision was the logistical benefits offered by the Port of Singapore. We could see that Singapore's immense and far-sighted investment in its port would serve us well for years to come. The Port of Singapore now offers the fastest turnover time in the world for loading and unloading ships. Its terminals link shippers to an excellent network of 200 shipping lines with connections to 600 ports in 123 countries. The Port of Singapore attracts roughly 140,000 vessel calls annually and handles roughly one fifth of the world's total container transshipment throughput. Good shipping, good logistics, and good transport services are very important to us. In addition, good IT connectivity means that we can conduct our business at very high efficiency levels here in Singapore.

The Workforce. Our business demands a highly skilled workforce. And the superior workforce available to us in Singapore was one of the major reasons we chose to locate our facility here.

Technology. LANXESS is an innovative, technology-oriented company. New technology only thrives in an environment that fosters innovation and strongly supports the superior education and training of young people. And we certainly have that here in Singapore. Singapore boasts one of the leading scientific institutes in Asia. We are extremely impressed by the Faculty of Science at the University of Singapore. And I can assure you that we will want to talk with some of the young scientists now earning their degrees in chemistry, biology, mathematics and physics here. I understand that as many as 25% of them are majoring in chemistry – and that's what we like to hear at LANXESS. The fact that education and worker training are of strategic importance here – and a key component of the government policy of Singapore – gave this country high marks when we made our decision.

We are already here. In the final analysis, this last fact made our ultimate decision easier. While Malaysia and Thailand offered compelling reasons for selection, we know Singapore. We have a legal entity in Singapore. We have long appreciated the strengths of this dynamic city, this unique Republic. And we have long recognized that Singapore can and should play a critical role in the growth of LANXESS. We know from experience that our presence in Singapore will play a transformational role in the life of our company. That is what has happened at our sites in Zwijndrecht, Belgium, and Sarnia, Canada. With this new facility, we now have a global footprint for innovative butyl production with sites in Europe, North America and Asia. It brings great benefits to our business and to our customers – and it results in
great benefits for our host cities. Those are the five key reasons why we selected Singapore as the site of our new facility:
- Singapore provides real stability,
- an ideal infrastructure,
- an excellent workforce,
- the right environment for new technology and innovation,
- and, last but not least, we are already here.

When we added up the multiple benefits that Singapore offered for this project, it was clear what decision we had to make. Ladies and Gentlemen, this investment, the largest in the history of LANXESS, will change the global butyl landscape of Asia for good and make Singapore the centerpiece of our Asian butyl operations. This could not have happened without the friendship, hard work and cooperation of many good people here in Singapore. I particularly wish to thank:
Prime Minister: Mr. Lee Hsien Loong Minister of Trade and Industry: Mr. Lim Hng Kiang Chairman of the Economic Development Board (EDB): Mr. Lim Siong Guan
Chairman of the Jurong Town Council (JTC): Mr. Cedric Foo They – and so many others – are all owed a real debt of gratitude from all of us at LANXESS for making this day possible. Now let me talk briefly about Butyl rubber – and why this new facility is so important.

As I mentioned earlier, LANXESS has long been an innovator in the chemical industry and invented synthetic rubber a century ago. This was an innovation that changed the world. It was the beginning of the mobility that we all enjoy today. Before our discovery, rubber was a precious and extremely expensive commodity found in the rain forests along the equator. Around 1909, during the earliest boom of the automotive industry, the first tires were made from natural rubber. And natural rubber was as expensive as silver. Early importers called it "the tears of the rubber tree." Tires of natural rubber cost a small fortune. Our invention of synthetic rubber immediately brought the price down, making mobility possible for everyone, not just a luxury for the very rich. And it formed the basis for the modern, high-performance tire design which has made automobiles safer at high speeds and in bad weather and under rough conditions. And now, with this facility, we can support the growing demand for  mobility and for affordable, top quality tires throughout Asia. Our Company commitment to the Asia-Pacific region goes back a long way. We have been doing business here since 1882. Back then we were known as Bayer. Today we have a new independence, a new name: LANXESS. And I can assure you that our commitment to innovation, and our commitment to Asia, has never been stronger. This new Butyl rubber facility is the proof of that. We are creating a high-tech facility to produce a high-tech product. And we are doing it to advance our strong commitment to the Asian market.
Butyl is a specialty in synthetic rubber.
The butyl process, especially when it includes halogenation, is an extremely sophisticated process – a process mastered by very few companies worldwide. LANXESS is one of them.
Just to give you an example: the entire manufacturing process must be conducted at minus 110 degrees Celsius. That means in order to make production possible on Jurong Island we have put the entire plant into a deep freeze. Innovation – in manufacturing processes and in creating new raw materials – is at the heart of our success at LANXESS. It is why we spend more than 150 million US dollars on research and development annually. We believe that our consistent investment in research has
made our technology the most advanced in the industry. Our rubber innovations often involve raw materials that can be used in cutting edge production processes that lead to a new generation of products. This is the kind of innovation that allowed us to push the  limits of isoprene incorporated into butyl rubber. The result is a new generation of high performance tires.

Butyl rubber itself is a specialty elastomer offering a unique blend of physical and chemical properties which are critical to the manufacture of modern tires.
This new facility will produce two key product groups – halobutyl and regular butyl. Halobutyl is the pre-dominant butyl type, both by market demand and by LANXESS sales. The production of radial tires is not possible without halobutyl. Therefore, it is the strategic product for our business unit.
Halobutyl rubber is the next generation of butyl rubber. It acts as the "inner liner" in every modern tubeless tire. It helps make tires safer, longer lasting, and it provides greater driving comfort. And most importantly: it prevents tires from deflating regardless of speed. It also provides greater fuel economy. Tires contribute to about 20  percent of a vehicle's total energy consumption. Our product is helpinghundreds of millions of tires throughout the world save gasoline and reduces emissions.

The top three butyl consumers are Michelin, Goodyear and Bridgestone – the "Big Three" of the world's tire producers. In recent years a number of Asian companies have become important global tire producers, including Hankook, Cheng Shin, Grand Tour and Triangle.
These and many others around the globe represent our customer base. From the completion of our facility onwards, we expect there to be an increase in demand for halobutyl due to increased demand for radial tires and the constantly growing automobile market in Asia.
This is our fastest growing market – and it is now the most important region for LANXESS butyl rubber.
Every indicator points to a growing need for products that we will produce on Jurong Island. The demand for more and better cars throughout Asia means increased demand for more and better tires – bigger tires and tires with new and high-tech designs. As a leading  producer of halobutyl rubber, we are ready and able to meet that demand. Our new facility here in Singapore guarantees that we will continue to expand in this critical part of the chemical industry.

Ladies and Gentlemen, I would like to say a few words about how this new facility will impact LANXESS – and our presence here in Asia.

I realize, of course, that to some of you LANXESS may be an unfamiliar name. That is why we have launched a major image campaign which demonstrates our commitment to Singapore and the region. "Chemistry Moves Singapore. LANXESS Moves chemistry." This campaign underscores that we want to live our claim:
- Energizing chemistry.
- We want to be more than just a chemicals group.
- We want to shape the market.
- We intend to continue to take our position seriously as a global, responsible company.
- And: we want to be the driving force in the chemical industry.

Today LANXESS is a global corporation dedicated to "re-energizing chemistry" by bringing a new entrepreneurial approach to the chemical business.

Formed only three years ago, we are already one of the world's leading chemical companies, with sales of over 8.7 billion US dollars in 2006, a major presence in 21 countries, and a workforce of more than 14,500 people. Our global chemicals group now manufactures and markets thousands of products that meet a wide range of needs. Our work is not only making tires safer and more fuel efficient. Our work is also helping to create lighter, more fuel efficient cars. We help manufacturers produce goods more efficiently, while saving resources. We make biodiesel fuels more practical and less expensive.

We help protect harvests, and the health of productive livestock. We help make medical drugs safer. There are many other ways that our chemical innovations help affect
people's lives. We truly believe that our chemical innovations help, in our small way, to make this a better world.

Our new facility on Jurong Island – featuring, as it will, the very latest technologies in worker safety and environmental protection – will stand as a proud example of our continuing efforts to create chemical products that can improve all of our lives. And ladies and gentlemen, it goes without saying that in addition to the advances in technology that this new facility will feature, we at LANXESS will always make worker safety and environmental protection our first priority.
You will find that wherever we do business, we have taken a leadership position regarding safety and the environment. I can assure you that it will always be our focus here in Singapore. A LANXESS butyl plant is a good neighbor – and let me give you just one example of what I mean by that. In 1986 our Sarnia butyl plant was selected as one of the ten outstanding Canadian engineering achievements of the last 100 years by the Engineering Centennial Board of Canada. The plant was the first externally validated Responsible Care site in the world. In fact the term Responsible Care was invented by a site
employee. And finally – our Sarnia plant is so respected in Canada that the government put a picture of it on the back of the Canadian ten dollar bill. So you see, ladies and gentlemen, LANXESS does make every effort to be a good neighbor. And I can assure you that we will be a very good neighbor here in Singapore.

Environmental protection is a key feature of the new Jurong Island plant.

In fact, 10 to 15% of our total investment sum will be dedicated to environmental measures. This means that LANXESS will spend up to 70 million US Dollars on environmental protection for this one facility. That is how seriously we take our responsibility for the environment and to Singapore. While our existing facilities in Sarnia and Zwijndrecht are already setting the highest standards today, this plant will open a new chapter in environmental standards within butyl rubber production.
The engineering design is drafted with a high regard to protecting the environment by saving energy as well as waste water. In the new facility we will recover energy through waste heat recovery, which will save CO2. And we will reduce waste water by half, in comparison with our existing plants, through internal recycling streams. As we see it, conserving natural resources and identifying further potential for reducing emissions and waste is an ongoing mission.
It is an inherent part of our ecological obligations to which we must apply our expertise. The continuous improvement of environmental performance is a key corporate goal. We are determined that our products in all segments have a positive environmental impact. Now I would like to discuss our commitment to the markets of Asia.

I cannot emphasize enough the importance of Asia to our overall growth strategy at LANXESS. We expect sales from the region to grow continuously. There is no question that Asia is becoming increasingly important to the LANXESS bottom line and the chemical industry as a whole.
From India to Singapore, from China to Korea, from Malaysia to Japan, the future is happening here in Asia – right before our eyes – and
LANXESS is a part of it. Here in Singapore our goal is three-fold: One – to create high quality, local production capacity, with precision
German engineering, that will further enhance our position as a leading force in the production of advanced butyl rubber products. "Made in Singapore" will be a quality trademark just like "Made in Germany". Two – to utilize Singapore's superior local workforce in our highly
complex manufacturing process. And three – to create a major, high-tech facility in the heart of Asia – to bring us closer to our Asian customers and to better serve the growing Asian market.

So you see our major new facility on Jurong Island is the cornerstone of the fulfillment of a very specific strategy for the long term, sustainable growth of LANXESS.
Ladies and gentlemen, LANXESS and Asia fit together perfectly. LANXESS is flourishing in Asia by pursuing a specific strategy of capital-effective investment – and this new cutting-edge facility is a dramatic example of that. Growth at all costs is not our strategy. We will continue to grow in a healthy and sustainable way and we will continue to closely monitor developments in Asia in order to take advantage of new opportunities to expand our market position. Based on our existing record of success, I am sure there will be more projects and more agreements to come. The bottom line shows that LANXESS is on the right track. We have been rewarded with success. This success would not have been possible without the significant growth we are enjoying in Asia. And ladies and gentlemen, if Asia is the perfect fit for our global strategy, certainly Singapore is the perfect fit for our presence here. Our theme at LANXESS is "energizing chemistry." Two words that capture the soul of our enterprise. So what could be more fitting – in generating new growth for LANXESS – than to tap into the dynamic energy of Singapore?
We are, indeed, a perfect fit.

Thank you very much.