2023
Annual Report

CONTENTS
TO OUR STOCKHOLDERSLANXESS At a Glance
Global presence
Key Data
Letter from the CEO

5

STRATEGY

10
11
13
14
14

SUSTAINABILITY
Commitment to Sustainable Transformation
Sustainability Management
Dialog for the Future
Systematic Prioritization of
Sustainability Topics
Circular and Sustainable Sourcing
Safe and Sustainable Sites
Climate Action and Energy Efficiency
Good Governance and E­ nergized Employees
Sustainable Products

19
22
32
37
57

72

LANXESS ON THE ­CAPITAL MARKET

76
77

91

CORPORATE GOVERNANCE
Corporate Governance Statement
pursuant to Sections 289f, 315d of theGerman Commercial Code
Offices Held by Board of Management andSupervisory Board Members
Report of the Supervisory Board

96
96
153
240
241

FINANCIAL INFORMATION
Combined M­ anagement Report
Consolidated Financial Statements
Responsibility Statement
Independent Auditor’s Report

249
250
252

FURTHER INFORMATION
About This Report
Independent Practitioner’s Report on
Non-financial Reporting
Environmental and Safety Performance Data:
Independent Assurance Report
GRI Content Index
SASB Index
Financial Calendar
Contacts

89

254
256
263
267
268

✓
NFR

1
1
2
3
4

Audited disclosures of the
LANXESS Group that areincluded in the 2023 nonfinancial Group report

Page references within thereportReferences to websites

Contents

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Strategy

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Financial Statements

Further Information

LANXESS AT A GLANCE

Business units

Segments

Group Structure

Consumer Protection

Specialty Additives

Advanced Intermediates

Material Protection
Products

Polymer Additives

Advanced Industrial
Intermediates

Flavors & Fragrances

Lubricant Additives
Business

SaltigoRhein Chemie

Inorganic Pigments

MarketpositionsApplications

Liquid Purification Technologies

1› Agrochemicals› Flavors and fragrances› Disinfection, preservation and material
protection products› Products for water treatment› Pharmaceuticals

Top 3 position› Colorants, polymer additives› Phosphorous-based and brominatedflame retardants› Lubricants and lubricant additives

Top 3 position› Agrochemicals› Automotive› Construction› Aromas and flavors› Semiconductors and photovoltaics› Color pigments

Top 3 position

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Financial Statements

Further Information

GLOBAL PRESENCE

55%

51%

16%

35%
22%

27%

13%

Germany

19%
6%Asia-Pacific30%

Americas

10%

16%

EMEA w/oGermany

Employees
Sales
Cash outflows for capital expenditures2

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Financial Statements

Further Information

KEY DATA 2023
LANXESS Group€ million
Sales
Gross profit
Gross profit margin

Q4 2022

Q4 2023

Change
%

1,973

1,436

(27.2)

454

232(48.9)

23.0%

16.2%

2023

8,088

6,714

(17.0)

1,937

1,268

(34.5)

23.9%

18.9%

0.6

0

(44.9)

85.0

79.5

Turnover resulting from voluntary
resignations

4.5

3.9

Specific energy consumption(in gigajoules per metric ton of product)

3.14

3.41

8.6

CO2e emissions (Scope 1 and 2)(in CO2 equivalents, metric tons per
metric ton of product)

1,994

1,722

(13.6)

1.36

1.33

(2.2)

EBITDA1)

153(7)< (100)826

328(60.3)EBIT pre exceptionals1)

28

(55)

< (100)389(53)< (100)4(581)< (100)

280

(668)

< (100)0.2%(40.5)%

3.5%(9.9)%

(21)

(753)

< (100)

250

443

77.2

from continuing operations

(14)

(577)

< (100)

184

(843)

< (100)from discontinued operations

(7)

(176)

< (100)

66

1,286

> 100

86,346,303

86,346,303– 86,346,303

86,346,303–(0.24)(8.72)< (100)

2.90

5.13

76.9

from continuing operations(0.16)(6.68)< (100)2.13(9.76)< (100)from discontinued operations(0.08)(2.04)< (100)

0.77

14.89

> 100

Adjusted earnings per share fromcontinuing operations (€)2)

0.44(0.30)< (100)

3.72

0.13

(96.5)

1.05

0.106)(90.5)

4.8%7)(0.8)%

Dividend per share (€)
ROCE3)Cash flow from operating activities –continuing operations

92

224

> 100

187

852

Depreciation and amortization

149

574

> 100

546

996

82.4

Cash outflows for capital expenditures

158

132

(16.5)

407

326(19.9)

11,2877)

9,665(14.4)
1.8

Total assets
Equity(including non-controlling interests)

4,427

4,507

Equity ratio4)

39.2%

46.6%

Provisions for pensions and otherpost-employment benefits
Net financial liabilities5)

3

Change%0.6

97Earnings per share (€)

2023

Proportion of apprentices hired inGermany

6.8%

Weighted average number of shares
outstanding

2022

(2.1)

175

Net income (loss)

512
7.6%

Change%12,849

8.9%

> 100

367

498

35.7

3,814

2,498

(34.5)

Employees (as of Dec. 31)

Q4 2023

13,126

EBITDA pre exceptionals1)

EBIT margin1)

930
11.5%

Q4 2022Work-related injuries resulting inat least 1 day’s absence(per million hours worked)

EBITDA margin pre exceptionals1)

EBIT1)(44.6)

2022

Change%Specific water consumption(in cubic meters/k€))1) EBIT: earnings before interest and taxes.
EBIT pre exceptionals: EBIT disregarding exceptional charges
and income.
EBIT margin: EBIT in relation to sales.
EBITDA: EBIT before depreciation of property, plant andequipment and amortization of intangible assets, less reversalsof impairment charges on property, plant, equipment andintangible assets.
EBITDA pre exceptionals: EBITDA disregarding exceptionalcharges and income.
EBITDA margin pre exceptionals: EBITDA pre exceptionals in
relation to sales.
Further details can be found under“Value Management andControl System” in the combined management report.
2) A djusted earnings per share from continuing operations:earnings per share from continuing operations disregarding­exceptional charges and income, amortization of intangible
assets, attributable tax effects, income from investments
accounted for using the equity method, and the non-recurring
earnings effects from the settlement of interest rate hedges
in the third quarter of 2022. Details can be found under­ ­“Business Performance of the LANXESS Group” in the
combined management report.

3) ROCE: EBIT pre exceptionals in relation to capital employed (total
assets less deferred tax assets and interest-free liabilities). Capital
employed as of December 31, 2022 and 2023, adjusted. Details ofcapital employed can be found under“Value Management andControl System” in the combined management report.
4) Equity ratio: equity in relation to total assets.
5) Net financial liabilities: sum of current and non-current financial
liabilities (adjusted for liabilities for accrued interest) less cash, cash
equivalents and near-cash assets. Further details can be found under“Value Management and Control System” in the combined
management report.
6) Dividend proposal to the Annual Stockholders’ Meeting on
May 24, 2024.
7) Prior-year figure restated.

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Strategy

Sustainability

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Financial Statements

Further Information

Letter from the CEO

2023 was an extremely challenging year for the entire chemical industry and also for
our company. The year was characterized by persistently weak demand in numerous
customer industries and market regions, high energy costs in Germany and Europe,
political uncertainties, and the impact of the war in Ukraine. As a result, our industry
is in a crisis situation more dramatic than any I have seen in the many years of myprofessional career.
We at LANXESS took quick and decisive counteraction with our comprehensive
FORWARD! action plan back in the early summer. Our package of measures comprises
significant cost savings, the streamlining of our administrative structures, and the simpli­
fication of our processes. Another central element is the further refinement of our businessmodel in order to remain successful on the market into the future. In short, we are doing
all we can to bring LANXESS safely through this steep downturn for the chemical industry
and to be in the best possible position when the economy picks up again.
We have laid the foundation for this in recent years by restructuring the Group into a purespecialty chemicals company with an end consumer-focused and increasingly sustainableproduct portfolio. In 2023, we moved further along in this transformation process. A
particular milestone was the formation of Envalior, our joint company with the private
equity investor Advent International, to which we contributed our High Performance
Materials business unit.

Strengthening our sustainability is an integral part of our corporate strategy. And we areproud that we have made further progress in the past fiscal year and that our engagementin this field is garnering international recognition: We have again achieved leading positions
in several sustainability indices and ratings, such as the Dow Jones Sustainability Europe
and World Indices and the MSCI ESG and EcoVadis ratings. These positive assessments
prove that we act responsibly in the interests of people and the environment. We also
demonstrated this again in fiscal year 2023 with our commitment to the UN Global Compact
and its principles regarding human rights, labor standards, environmental protection andcombating corruption. We firmly believe that these values are the key to long-term success.
The entire Board of Management would particularly like to thank our employees. Theirhigh flexibility and dedication have been a decisive factor in our overcoming the massive
challenges of recent months.
I thank all of our shareholders for their confidence and support in these difficult times.
LANXESS is in a good position for the future and I invite you to continue accompanying us
on our journey. I am optimistic that LANXESS will fully utilize the potential of its reorganized
portfolio in the years to come and look forward to the exciting opportunities ahead.
Best regards,

Matthias Zachert
Chairman of the Board of Management

4

Annual Report 2023 | LANXESSContents

STRATEGY
6OVERCOMING CRISES – DRIVINGINNOVATION

6

Chemical Industry in ­Crisis Mode6

Decisive Action – Going “FORWARD!”

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Further Information

Overcoming Crises – Driving Innovation
2023 was a year of multiple crises. For LANXESS, it was a year of operating crisis management. We focused on generating
liquidity from net working capital and reducing debt. However, strategic restructuring was also central in 2023. By contributing
the polymer business to a company newly formed with Advent, we have taken another step toward becoming a pure specialty
chemicals company.

CHEMICAL INDUSTRY IN­CRISIS MODE
Since the COVID pandemic began four years ago, theoverall economy – and the chemical industry with it – hasbeen in crisis mode. A growing number of geopoliticalconflicts such as the Ukraine war, supply chain disruption,
increased costs for raw materials and logistics, and highenergy prices and interest rates are continuously posing
new challenges for companies in various sectors.
In addition to the generally weak economy, the German
chemical industry was also hampered by structural
deficiencies in fiscal year 2023, such as the persistently
high electricity and raw material costs compared withother countries. At the same time, selling prices andthe demand for chemicals in many customer industries
declined worldwide, especially in the construction andelectrical/electronics industries. The reduction of highinventories from the previous year also considerably

6

weakened demand in otherwise more stable, end
consumer-focused industries such as food, beverages
and cosmetics.
At the start of the year, forecasts suggested that theindustry would recover in the second half, but this failed
to materialize. Key markets, including China, the world’s
largest chemical market, but also North America andEurope, fell well short of expectations.

DECISIVE ACTION –GOING “FORWARD!”LANXESS reacted quickly to the weak business performance and initiated the “FORWARD!” action plan in theearly summer. The first two phases of “FORWARD!” focus
on cost savings and efficiency gains. In fiscal year 2023,
a package of immediate measures provided one-timesavings of €100 million thanks to hiring freezes, salarywaivers, a general raising of cost awareness, and lower
capital expenditures.
The second phase of “FORWARD!” is about creating
an improved, permanently lower cost base and sustainably cutting annual costs by around €150 million. The
measures aim to adjust the plant structure and operatingorganization and to make administration more efficientand streamlined.
The affected plants are at the site in Krefeld-Uerdingen,Germany, where the energy-intensive hexane oxidation is
to be shut down by 2026. The facility for chromium oxide
production is to be sold. If a sale cannot be realized, we
will also consider shutting down this facility.
From 2024, the third “FORWARD!” phase is characterized by transformation and will further refine the businessmodel as a pure specialty chemicals company.

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Sustainability

LANXESS on the Capital Market

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Ad hoc› Prompt stabilization of

Structural
measures› Optimization of structures and processes› Sustainable cost reduction

Business
excellence› Refining the specialty chemicals business model› Preparing for economic recovery

business results for 2023

Implementation
startedStarting in 2024,
concepts indevelopment

In April 2023, we joined up with Advent to form Envalior,
to which we contributed our High Performance Materials
business unit. LANXESS thus took another big strategic
step. With the sales process for the final remaining
polymer business, Urethane Systems, initiated in the fourth
quarter of 2023, we will conclude the transformation of
the portfolio for the time being.

Balance of end markets

Sustainably improving proﬁtability, cash ﬂow and margins

We began systematically restructuring our portfolio towardspecialty chemicals with the spin-off of ARLANXEO in
2016. Through targeted acquisitions, we obtained
leading market positions in multiple areas. For example,

Further Information

expanded our portfolio in the field of protection products forend consumer-focused markets such as cosmetics, food,and beverages, but also augmented our existing flavorings
portfolio. Overall, LANXESS is now one of the world’s
largest providers of antimicrobial protection products.

Immediate “FORWARD!” Measures Complete – Structural Measures Underway

Portfolio transformation complete

Financial Statements

our acquisition of Chemtura made us a leader in flame-­
retardant additives. The acquisitions of Emerald Kalama
Chemical and the Microbial Control business from the
U.S. corporation IFF strengthened the Consumer Protection segment. Through these transactions, we not only

Since the beginning of the transformation in 2016, wehave consistently worked to significantly reduce dependence on the automotive market. We want to achieve amore balanced portfolio of end markets and increase theshare of end consumer-focused, less cyclical markets
that offer high profitability potential. At the same time,
the portfolio changes also expanded our presence in theimportant U.S. market.

Balanced Proportion of End Consumer Markets in %
~10

~20

~20

~10

~20

~20

~20

~10

~20

~20

2022
2020
~20

Mobility~10

Nutrition, health and consumer goods

Energy, natural resources

Construction

Chemical industry

Agriculture and animal care

Reduced exposure in automotive
sectorHigher market share in the
nutrition, health and consumer
goods sectors

Reference: Mobility 2022 includes sales in the automotive, aviation and shipping industries including relevant electronic components.
Reference: Consumer goods 2022 – IFF MC contributed for half a year in 2022.

7

Annual Report 2023 | LANXESSContents

To Our Stockholders

Strategy

Sustainability

LANXESS on the Capital Market

Strategic direction refined
Now that the transactions are completed, all LANXESS
segments have a clear direction: LANXESS is to become aprofitable specialty chemicals company with stable growth.
Sustainability is anchored at the core of our strategy.
The strategy begins with the determination of our products’
carbon footprints and the aim to continuously reducethem. The “Advanced Intermediates” segment inparticular plays a leading role here. In 2023, for example,
we developed the first carbon-reduced intermediates fornumerous customer industries and launched them on
the market.

Corporate GovernanceManagement Report

Besides their own carbon footprint, products of the“Specialty Additives” segment focus on sustainable
use by our customers. Our additives allow materials to
be used for longer, which reduces the carbon footprint ofthese products. Especially in a circular economy, additives
help to ensure that the materials can be used safely in asecond lifecycle.
The “Consumer Protection” segment’s products help
people live in a changing world – whether with highly
effective disinfectants that safeguard against the growing
risk of bacteria and other germs or through our contribution to the development of better-adapted pesticides toprotect the food chain.

Financial Statements

Further Information

As well as the use of our products, we also keep an eye
on our own activities and follow our strategic guidelines.

Refining the business model and driving
digitalization
As part of our FORWARD! action plan, we will continue
to transform our business models. In the future, wewill also particularly focus on reaping the fruits of thedigitalization of recent years. Pilot programs that havealready been developed and successfully tested will bescaled up and deployed across the board in the individual
businesses in order to promote customer benefit andleverage efficiency potential. The overarching goal ofthe digital transformation is to generate added value for

Our Strategic Guidelines

8

Raw materials

Sites

Costs

Value chains& products

Sales markets

Growth & balance

We strategically manage
our raw material portfolio tokeep our value chainscompetitive and sustainable.

We manufacture atcompetitive, sustainable,
and climate-neutral“Verbund sites.”

We keep costs
competitive acrossthe value chain.

We strive for a sustainable
and carbon-neutral productportfolio based on integrated
and balanced value chains.

We focus on mid-sized,
specialty chemicals markets
with higher proﬁtability andinnovation opportunities.

We leverage long-term
growth potential in Asiaand the U.S. and balance
our regional sales.

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To Our Stockholders

Strategy

Sustainability

LANXESS on the Capital Market

customers, suppliers, and employees. For example, we
use new digital solutions on the basis of data analysis or
artificial intelligence to optimize the capacity utilizationof our plants, accelerate our product development, andimprove occupational safety.

Financial discipline is the priority
In 2024, we continue to focus on generating attractive
cash flow and reducing net debt. LANXESS significantly
reduced its debt by 35% in fiscal year 2023. The decrease
resulted primarily from the cash inflow in connection withthe formation of Envalior and a consistent reduction in
net working capital.
The proceeds from the process to sell the Urethane
Systems business unit, which has begun, are expected tocontribute further to the reduction of net debt. In line with
its conservative financial policy, LANXESS also continues
to strive for a sound investment grade rating.

Sustainability targets achieved, newmilestones set
Even in the currently uncertain situation as regards boththe economy and geopolitics, we are consistently pursuing
the long-term transformation into a climate-neutral andcircular economy with fair conditions for people andnature. As a chemicals company, we rely on a wide
range of vital ecosystem resources and services, such

9

Corporate GovernanceManagement Reportas air, water, and energy. We are aware that our businessactivity creates both opportunities and potential risks forbiodiversity.
We therefore ensure that our sustainability strategy isholistic and contributes to the protection of biodiversity
on the one hand, and that the individual measures andtargets are geared toward specific action areas such as
climate change mitigation and water and have a mediumterm impact on the other.
Following the disposal of the high-performance plastics
business, we adjusted our climate pathway in the reporting
year to comply with the 1.5 degree target. We intend
to be climate neutral in terms of Scope 1 and Scope 2
greenhouse gas emissions by 2040 and in terms of
Scope 3 emissions by 2050. The updated climate
pathway has been verified by the SBTi (Science Based
Targets initiative).
Further information on our global climate strategy

Financial Statements

Further Information

Recognition from rating agencies
We see our top placements in international sustainability
indices and ratings as recognition of our efforts: LANXESS
was listed in the Dow Jones Sustainability Index (DJSI)World for the twelfth time in a row and, among chemicalcompanies, was ranked first in Europe and third in theworld.
The non-profit organization Carbon Disclosure Project also
awarded LANXESS an “A” grade for successful climate
management once again. In the renowned sustainability
rating by MSCI ESG Research, we again attained thesecond-highest category, “AA.” We also retained Platinum
level in the sustainability rating by EcoVadis. This rating isgiven to the top 1% of the 75,000 companies analyzed
by EcoVadis.

In a good position for the future
LANXESS is in a good position. The task now, although
the economic situation remains difficult, is to continue
developing the individual business models, leveragesynergies and efficiency, and fully exploit the potential.

We also achieved our targets relating to product responsibility (see“Sustainable Products”) and water (see“LANXESS Water Program,” page 25) in the reportingyear. For both action areas, we have set the next milestoneson the way to sustainable sites and products and for our
responsibility throughout the value chain.

Annual Report 2023 | LANXESSContents

SUSTAINABILITY
11

COMMITMENT TO SUSTAINABLE
TRANSFORMATION

13

Sustainability Management

14

Dialog for the Future

14

Systematic Prioritization of Sustainability Topics

19

Circular and Sustainable Sourcing

22

Safe and Sustainable Sites

32

Climate Action and Energy Efficiency

37

Good Governance and ­Energized Employees

57

Sustainable Products

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Commitment to Sustainable Transformation
Even in challenging times, our commitment to sustainability does not change. We see it as a long-term transformation that
we drive forward according to a clear roadmap – even in phases of geopolitical instability and a tough economic e­ nvironment.
Progress in the field of sustainability makes our company more resilient and promotes our future viability, so that we can­successfully master challenges and crises.

Our mission is the transformation to circular, climate-­
neutral value creation – which must also be fair and safe.
We recognize the fundamental importance of biodiversity
for the wellbeing of humankind and the plant and animal
kingdom, as well as for economic sustainability. As a
specialty chemicals company, we rely on a wide rangeof vital ecosystem resources and services. At the sametime, we are aware that our business activities create
opportunities and potential risks for biodiversity.
Thinking and acting sustainably and in an integrated
manner supports our business goals in a variety of different
ways – from higher resource efficiency to good relationships with our stakeholders, increased risk awareness, andpermanently advantageous cost structures. The quality of
our company is also demonstrated by the social impactof our entrepreneurial activities. Our facilities, locations,and products must have a measurable, sustainable benefit
for the community.

11

Internationally recognized standards and frameworks give
us valuable guidance in this transformation process:› With 2030 Agenda for Sustainable Development,
the United Nations has established the basis for
global economic progress in harmony with social
justice and within the Earth’s ecological limits.
The specific goals of the Agenda are set out in the
Sustainable Development Goals (SDGs).
› The U.N. Global Compact is the world’s biggest andmost important initiative for responsible corporate
governance. Based on ten universal principles, it
pursues the vision of an inclusive and sustainableglobal economy for the benefit of all people, communities, and markets. As a signatory, we recognize
these principles as inalienable rights.

› The term “Responsible Care®” stands for thechemical industry’s goal of achieving progress withsafety and environmental protection, regardless of
the legal specifications. We have documented ourcommitment to the visions and ethical concernsof this initiative from the International Councilof Chemical Associations (ICCA) by signing the
Responsible Care® Global Charter.
› Among the internationally recognized principles ofbusiness activity to which we are committed are theemployment standards of the International Labour
Organization, an agency of the United Nations. These
are aimed at upholding globally recognized social
standards and thereby improving working and living
conditions for all people.

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Sustainability

The Ten Principles of the U.N. Global Compact

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Further Information

The 17 Sustainable Development Goals

Human rights
Businesses should …
1… support and respect the protection ofinternationally proclaimed human rights.

2… make sure they are not complicit in humanrights abuses.

Labor
Businesses should …
3 … uphold the freedom of association and theeﬀective recognition of the right to collective
bargaining.
4 … uphold the elimination of all forms of forced
and compulsory labor.
5 … uphold the eﬀective abolition of child labor.
6 … uphold the elimination of discriminationin respect of employment and occupation.
Environment
Businesses should …
7 … support a precautionary approach toenvironmental challenges.
8 … undertake initiatives to promote greater
environmental responsibility.
9 … encourage the development and diﬀusionof environmentally friendly technologies.

As “Agenda 2030,” the Sustainable Development Goals(SDG) in particular provide important guidance. We must
understand precisely how our priorities – formulated in thematerial topics – relate to the priorities of the international
community. The analysis of our impact on the SDGs has
shown that we are creating societal value and have apositive impact on many SDGs. At the same time, however,the challenges are also made clear – for example in thefields of climate protection and occupational safety.

Further information on our contributions and theeffects of our business activity in relation to the SDGs
The “Global Transition Award” awarded to us by “Handelsblatt” and our nomination for the German SustainabilityAward in the reporting year are proof that our transformation is making good progress.

Anti-corruption
Businesses should …
10 … work against corruption in all its forms, including
extortion and bribery.

12

Annual Report 2023 | LANXESSTo Our Stockholders

Auditeddisclosures ofthe ­LANXESSGroup thatare includedin the 2023
non-financial
Group report

SUSTAINABILITY MANAGEMENT

Sustainability

LANXESS on the Capital Market

Corporate GovernanceManagement Report

✓
NFR

✓

Strategy

Sustainability-Related Committees and Board of Management Responsibilities

NFR

Sustainability Committee
All Board of Management members

Climate & Energy

Health, Safety &Environment

Value Chain­Circularity &­Product­Stewardship

Social &­Governance

Stakeholder
Expectations
and Reporting­Standards

Dr. Hubert Fink

Dr. Hubert Fink

Frederique
van Baarle1)

Dr. Anno­Borkowsky

Oliver Stratmann2)

1) Dr. Anno Borkowsky until March 31, 2023
2) Michael Pontzen January 1, until August 31, 2023

In order to consistently pursue our sustainability targets,
we established a new committee structure back in 2021.
The top decision-making body is the Sustainability
Committee, which manages all key issues relating tosustainability. Its members include all members of theBoard of Management. Five sub-committees report to the
Sustainability Committee, which deal with various focal
points of our sustainability strategy and are each headed
by a Board of Management member:› “Climate & Energy” sub-committee – implementationof the LANXESS “Climate Neutral 2040” climate
program› “Health, Safety & Environment” sub-committee –development of safe production sites

13✓

Financial Statements

Further Information

1.	We reduced our Scope 3 interim goal for 2030 from
16.5 million metric tons to 11 million metric tons
and received updated verification of our climate goals
from the Science Based Targets initiative (SBTi) in
January 2024.
2. Numerous new products, for example from the Lewatit®
range, were awarded the Scopeblue® label.

Sub-committees

NFR

NFR

✓

Contents› “Value Chain Circularity & Product Stewardship”
sub-committee – promotion of sustainable products
and value chains› “Social & Governance” sub-committee (previously“People & Governance”) – coordination of issues of
LANXESS’s corporate and social responsibility› “Stakeholder Expectations and Reporting Standards”
sub-committee – fulfillment of external reporting
standards and stakeholder management
The “Sustainability Committee” adopted several newsustainability topics in the reporting year:

3.	A new 2024/26 product roadmap was approved after
achieving the target of establishing action plans for all
roadmap products up to and including 2023.
4.	We launched a cross-functional CSRD project to meet
the broader reporting obligations of the EU’s Corporate
Sustainability Reporting Directive (CSRD).
Other key aspects of sustainable action in our view arecompliance with and the continual development of ourvalues, rules and standards as well as forward-looking
risk management.
Further information on corporate governance at
LANXESS
Further information on risk management at LANXESSWe also guarantee responsible business activity with our
integrated management system, on which we report indetail in the “Safe and Sustainable Sites” section.

Annual Report 2023 | LANXESSTo Our Stockholders

Strategy

Sustainability

LANXESS on the Capital Market

DIALOG FOR THE FUTURE

We are in intensive exchange and contribute actively todialog and cooperation formats, especially with regard to
the major transformation issues climate protection andcircular economy. For example, LANXESS is one of only
a few companies from the chemicals industry that is afounding member of the BDI Circular Economy initiative,
a platform for dialog between business, politics, scienceand society in order to jointly develop tools to promote
the market for recycled raw materials and unlock potential
for waste prevention. The World Business Council for
Sustainable Development (WBCSD), which we joined at
the beginning of 2020, is another important dialog forum
for LANXESS. The WBCSD is a global, CEO-led organization committed to accelerating the pace of change toward
a more sustainable world.

14

Management Report

Globally, we are also involved in the International Sustainability and Carbon Certification (ISCC) initiative. This
multi-stakeholder initiative is governed by an association
with more than 175 members. We will support the further
development of the ISCC standards on the road to asustainable, climate-neutral and circular economy.
Further information on the topics and dialog forums
for each relevant stakeholder group✓
NFR

The successful transformation of our industry along theentire value chain is possible only in continuous exchange
and close cooperation with our stakeholders. Relevant
stakeholders for LANXESS are groups, institutions, andindividuals with whom we maintain a direct or indirect
relationship through our business activities and who therefore have an interest in our actions. Our main stakeholder
groups are customers, capital market representatives,suppliers, the media, and representatives from politics,
public authorities, and non-governmental organizations(NGOs).

Corporate Governance

SYSTEMATIC PRIORITIZATION OF
SUSTAINABILITY TOPICS
Everything LANXESS does must have due regard for our
strategic guidelines, the relevant interests of our stakeholders, and the material effects of our actions on ourcompany and society. A materiality analysis in line with therequirements of the Global Reporting Initiative (GRI) helps
us to systematically prioritize the wide range of action
areas and use resources as effectively as possible. It isbased on four principles: sustainability context, materiality,
completeness, and inclusion of stakeholders.

✓
NFR

Contents

Financial Statements

Further Information

following a review in the reporting year and, after close
examination, provided our relevant management framework again in 2023. They also influence the structure of
our external reporting on the topic of corporate responsibility. Our review of the material topics in the reporting
year also considers the double materiality perspective.
This shows how our activities impact different sustainability
aspects (“inside-out perspective”) and how sustainability
topics, such as climate change, influence LANXESS(“outside-in perspective”).
In addition to our materiality analysis, we came up witha definition of materiality for the non-financial Group
report – the contents of which are integrated into thissection of the Annual Report and distinctly identified – inaccordance with Section 289c, Paragraph 3, Sentence 1of the German Commercial Code (HGB). The non-financial
report contains disclosures that are necessary in orderto understand the business performance, the businessresults, the position of the Group, and the effects of ouractivities on non-financial aspects. For us, this means
environmental issues, employee and social issues, humanrights, and anti-corruption, as shown in the“About thisReport” section on page 250.

Based on a comprehensive materiality analysis, wecondensed the number of our sustainability topics fromseven to five in 2021, sharpening the focus on important
new topics such as the circular economy. The five main
topics were confirmed by the Sustainability Committee

Annual Report 2023 | LANXESSTo Our Stockholders

NFR✓

Strategy

Sustainability

LANXESS on the Capital Market

Circular and Sustainable Sourcing

Safe and SustainableSites

Our increasingly circular value
chains start from a diverse, sustainable raw material portfolio.
We engage with our suppliers
and relevant stakeholders to
improve working and environmental conditions in the global
supply chains.

LANXESS manufactures
sustainable products atcompetitive and sustainablechemical sites. Continuous
process improvements andinvestments are fundamental
for our success. We care about
the communities of which oursites are a part.

As part of our management of opportunities and risks,
we have implemented a wide range of risk-mitigating
measures. With regard to the aspects defined as relevant
for the non-financial Group report, a net risk analysis showsno material risks in connection with our own businessactivities or with business relationships, products, andservices that are very likely to have serious negative effects.
Further information on the opportunity and risk
management system

15

Corporate GovernanceManagement Report

Financial Statements

Further Information

Material Topics✓
NFR

Contents

Climate Action andEnergy Efficiency

For us, climate action basedon efficient energy use is theright thing to do for society andalso a key to delivering financial
performance in the long term.
In 2040, LANXESS is to be a
climate-neutral company.

Good Governance andEnergized Employees

Sustainable Products

We aim to be an attractive employer and to develop peoples’
full potential throughout theirprofessional lives. To this end,
we create a motivating working
environment for all employees,
striving for high engagement
and impact. We nurture andpromote a value-based, performance-oriented culture.

We systematically evaluate thesustainability of our portfolio
and consider sustainability
criteria in the development of
products and applications. We
have long-term relationships
with our customers, drive
innovation together and help
them to make their businesssustainable.

§

We have formulated specific goals for all key topics.
Some of the variable compensation of the first andsecond management level below the Board of Management depends on the extent to which certain targets forCO2e emissions in Scope 1 and Scope 2 and for thelost time injury frequency rate (LTIFR) are achieved. The
current goals and indicators for all key topics ensurethat our sustainability profile is systematically developed
and refined. New or adjusted goals are assessed andconfirmed by the relevant committees (sub-committees
and/or the Sustainability Committee), for example inconnection with the adjusted Scope 3 target.

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LANXESS Sustainability Goals
Topic

Goal

✓

Indicator

Deadline

Status quo 2023

SDG

Circular and Sustainable Sourcing

NFR

Page

1, 8

Establishment of a systematicsustainability risk analysis toevaluate all suppliers

Status inquiry to identify relevant suppliers with highrisk level

Share of suppliers evaluated 2023

Risk tool reflects all trading partners globally for all countries and categories. Risk
­assessment has been conducted and 15 High Risk suppliers have been audited
in 2023, based on the evaluation.

19–21

Identification and reduction ofsustainability risks in the supply
chain

Differentiation of risk score by goods group/country(levels 1–6)

Sustainability risk score

Risk tool reflects all trading partners globally for all countries and categories. Risk
­assessment has been conducted and 15 High Risk suppliers have been audited
in 2023, based on the evaluation.

19–21

2023

3, 4, 6, 8, 9,
12, 13

Safe and Sustainable Sites
Uniform standards and processes
worldwide

Integration of all sites into the global matrix certificate(ISO 9001 and ISO 14001)

Degree of coverage in
relation to sites

Ongoing

As of December 31, 2023, our matrix certificate covered 36 certifiable companies with74 sites in 21 countries. In relation to the number of employees, this equates to 90%
coverage of our matrix certificate. Due to the changes in our site portfolio in recent years, we
still have some site certificates and a region certificate, which will also be transferred to ourmatrix certificate.

22–24

Global process safety

Continuous reduction in incidents relating to facility
and process safety

Number of reportable
incidents relating to facility
and process safety

Ongoing

There were no major process safety incidents in fiscal year 2023.

22

Continuous reduction in environmental incidents

Number of reportable­environmental incidents

Ongoing

There were no relevant environmental incidents.

22

Continuous reduction in transportation incidents

Number of reportabletransportation

Ongoing

There were no relevant transportation incidents.

24–25

Water consumption

Reduction of specific water consumption
by 2% per year

Water consumption in cubic Ongoingmeters per thousand euros
of salesFor continuing operations, the specific water consumption amounted to1.33 cubic meters/thousand euros (–2.2% year-on-year). Including the
HPM business unit, the specific water consumption amounted to1.29 cubic meters/thousand euros (+4.2% year-on-year).

25–26

Wastewater

Reduction of specific Total Organic Carbon (TOC)
by 2% per year

Kilograms per thousand
euros of sales

Ongoing

For continuing operations, the specific TOC amounted to 0.13 kilograms/thousand euros(+6% year-on-year). Including the HPM business unit, the specific TOC amounted to0.12 ­kilograms/thousand euros (+20% year-on-year).

26–27

Water risk sites

Introduction of a water stewardship program

Percentage of sites thathave introduced a water
stewardship program2023

All four water risk sites (100% of the sites) met the defined criteria. They are ­therefore
deemed water stewardship sites in accordance with the “LXS Water Stewardship­Framework.”

25–26

Reduction of absolute water withdrawal by 15%
compared with base year 2019

Absolute water withdrawal
in cubic meters2023

For continuing operations, absolute water withdrawal at water risk sites has been reducedby 31% compared with the base year 2019. Including the HPM business unit, the reduction
was likewise 31%.

25–26

16

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Sustainability

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LANXESS Sustainability Goals
Topic

Goal

Indicator

Deadline

Status quo 2023

SDG

✓
NFR

Climate Action and Energy Efficiency
EmissionsPage

3, 7, 8, 12,
13

Reduction of CO2e emissions by 65% versus 2004
(establishment of LANXESS; 6.5 million metric tonsof CO2e)Absolute CO2e emissions(Scope 1 and 2)

End of 2025

In continuing operations, absolute CO2e emissions amounted to 1,722 thousand metrictons. Including the HPM business unit, the figure was 1,817 thousand metric tons of CO2e.
This constitutes a reduction of 73.5% for continuing operations and 72% including the HPM
business unit versus 2004, when the company was founded.

32–35

Reduction of emissions of non-methane volatileorganic compounds (NMVOC) by 25% compared tobase year 2015

Absolute NMVOC­emissions

End of 2025

For continuing operations, this constitutes a reduction of 91% compared with the base year.
Including the HPM business unit, the reduction compared with the base year is 90%.

32–35

Reduction of CO2e emissions by 80% versus 2004
(establishment of LANXESS; 6.5 million metric tonsof CO2e)Absolute CO2e emissions(Scope 1 and 2)

End of 2030

–

32–35

Climate neutrality for the entire Group

Absolute CO2e emissions(Scope 1 and 2)

End of 2040

–

32–35

Reduction of CO2e emissions by 60% versus 2015

Absolute CO2e emissions(Scope 3)

End of 2030

For continuing operations, this constitutes a reduction of 64.7% compared with thebase year 2015.

32–35

Climate neutrality for the upstream and downstream
supply chain

Absolute CO2e emissions(Scope 3)

End of 2050

–

32–33

§

3, 4, 5, 8Good Governance and Energized Employees

HR retention

High employee retention: Voluntary turnover rate
below 3.5%

Turnover rate on the basis of Ongoing
resignations
until the end of2023

The turnover rate on the basis of resignations was 3.9% in continuing operations. Including
the HPM business unit, it was 3.9%.

50–51

HR development

At least 80% of apprentices hired after completing
their training

Proportion of apprentices
hired in Germany

79.5% of apprentices were hired.

45

Diversity and inclusion

Increase the proportion of women in the first level
below the Board of Management to 25%

Proportion of women in the Mid-2027
first level below the Board ofManagement

The proportion of women on December 31, 2023, was 23.1%.

42–43

Increase the proportion of women in the second level
below the Board of Management to 28%

Proportion of women in
the second level below the
Board of ManagementMid-2027

The proportion of women on December 31, 2023, was 28.4%.

42–43

Increase proportion of women in management to30%

Proportion of women in
management

End of 2030

The proportion of women on December 31, 2023, was 26.1%.

42–43

Continuous decrease in the LTIFR by > 50%(reference LTIFR of 2.0 in 2016)

LTIFR

End of 2025

The LTIFR was 0.6 in continuing operations.
Including the HPM business unit, it was 0.6.

55

Occupational safety

17

Ongoing
until the end of2023

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LANXESS Sustainability Goals
Topic

Goal

Indicator

Deadline

Status quo 2023

Long-term, continuous development of products, applications,and processes

Long-term customer relationship

18

Page

3, 12, 13

Sustainable Products
Active portfolio managementfrom a sustainability perspective

SDG

Development of a strategy plan for all end productswith more than 0.1% critical substances

Development of a strategy
plan

2023

The strategy plan covers 100% of the relevant products.

58–60

Inspection and, if necessary, optimization of thequality of all registration dossiers that were preparedin accordance with the REACH Regulation under theguidance of LANXESS

Proportion of inspected/
updated dossiers2026

The proportion of inspected/updated dossiers is 47.7%.

57

Developing innovative products based on the needs
and expectations of our customers

Number of product-related
projects

Ongoing until
2025

140 projects in the reporting year were aimed at developing new/improving existing­products and applications.

58–61

Continuous further development of our production
processes in order to maintain competitiveness andachieve our climate and energy efficiency targets

Number of process-related
projects

Ongoing until
2025

83 projects in the reporting year concerned process technology issues with a view to­reducing costs, improving efficiency or increasing capacity.

32–33

Improvement in customer satisfaction and maintenance of customer retention: customer retention
index > 75

Customer retention index
score

2024

In the survey at the start of 2024, the customer retention index score was 74.
The survey is carried out every two years.

64

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15

thousandsuppliers
Group-wide

At LANXESS, raw materials, other materials, equipment and services are subject to globally standardized
requirements with regard to safety and environmental
protection. Their procurement is the responsibility of our
Global Procurement & Logistics Group function, the headof which reports directly to the Board of Management
member Dr. Hubert Fink. In close coordination with ourbusiness units, this administrative unit organizes Groupwide procurement, establishes corresponding guidelines,
and initiates measures to promote purchasing synergies
and sustainable behavior by our suppliers.
Pressure on supply chains eased in 2023 thanks to far
lower demand. Cost pressures stabilized and declined for
raw materials, energy and logistics supply.

Logistics
LANXESS ships more than 300,000 metric tons of
products every month through various modes of transport.
This makes the company reliant on favorable freight andtransport cost trends. Over the course of 2023, logistics costs in all areas returned to normal. There is stilla shortage of truck drivers, especially in Europe, GreatBritain, Canada and the U.S. CO2 emission classes wereintroduced as a new truck toll feature in Germany on
December 1, 2023.

19✓

EnergyIn Europe, gas prices have fallen by around a third andare therefore significantly lower than the average price in
2022. The dramatic shift in gas market supply and pricing
from long-term contracts (primarily with Russia) to spot
market-based LNG contracts with the U.S. as the mostimportant swing supplier had a major impact.
The fall in gas prices also caused a drop in electricity
prices, which more than halved compared to 2022 levels.
Increasing demand for renewable energy combined withhighly volatile gas prices resulted in significant fluctuations
in daily electricity prices in Germany.
Spot market prices and fixed price components ensurethat our portfolio is balanced, mitigating the volatility andrelated price risk. LANXESS has set itself an ambitious
CO2 reduction target in order to reduce its own carbon
footprint. We are therefore always aiming to expand ourportfolio of renewable energy. We constantly strive toincrease the share of renewable power in our portfolio,
and 5.3% of the electricity we use worldwide is currently
obtained from proven renewable sources. In 2023, thefocus was on new contracts for Germany and Belgium.

✓
NFR

CIRCULAR AND SUSTAINABLE
SOURCING

NFR

NFR

✓

In the future, it is likely to prove increasingly difficult tosignificantly expand this share at competitive prices, as
demand is rising rapidly while European markets are
increasing renewable energy capacities only slowly.

Guiding principles for procurement
In 2023, procurement transactions with over 14,758
suppliers were processed. A global procurement guideline for the entire Group defines our employees’ conduct
when dealing with suppliers and their employees. We
have specified standardized workflows in the context ofprocurement in more detail in a process description.
In accordance with the principles of the United Nations
Global Compact, the International Labour Organization(ILO), Responsible Care® and other CSR codes, we
expect our suppliers to comply with national and other­applicable laws and regulations for environmental­protection, health and safety at work and with regard tolabor and recruitment practices. It is essential for us thatthey acknowledge the principles contained in the Business
Partner Code of Conduct or have established their own
comparable standards.

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Our organic raw materials, which we use in our production processes, are currently still based primarily on fossil
sources, e.g. Benzene, Toluene, and Cyclohexane. We
are striving to increase the proportion of sustainable raw
materials. The market for sustainable raw materials isundergoing long-term development. To make progress,
we are already working with multiple major partners andtesting the materials and products that they are researchingor have already brought to market. A realistic scenario isthat we will increasingly bring individual products based onsustainable raw materials to market before this is possible
for the entire product range. However, the use of bio-basedorganic raw materials also entails challenges and potential conflicts. For example, the production of food must
always take priority over the use of biomass to manufacturechemical products. Therefore, we proceed with caution
when purchasing bio-based raw materials and ensure thatthe biomass we use is produced in a renewable mannerand is not competing with food production.

20✓

Since 2022, we have used a process and a calculation
tool to track, monitor and continuously improve the proportion of bio-based, circular, renewable and recycled raw
materials.

Supplier assessment
We strive to promote sustainability, increase transparency
throughout our supply chain, and thereby further minimize
procurement risks. This is why LANXESS is a founding
member of the“Together for Sustainability” (TfS) initiative. TfS has established itself in the chemicals industry
as the clear standard for a sustainable supply chain. The
focus here is on environmental protection, workers’ rights
and human rights including the prevention of child labor,labor standards, occupational safety, business ethics andsustainable procurement practices.

✓
NFR

Our inorganic raw materials are primarily obtained fromthe biological cycle, e.g. nitrogen from the air or sodium
chloride from seawater (e.g. chlorine, caustic soda andsulfur). These raw materials are renewable in principle,
but not necessarily sustainable, as their extraction requires
high energy usage in the form of electricity. In order toreduce their carbon footprint, more renewable energy
will have to be used for their extraction. Here, too, weare engaged in strategic partnerships with our suppliersin order to achieve this.
Further information can befound under “Sustainable Products.”

In the interests of safe processing at our production facilities, there is a particular focus on the procurement of raw
materials. For this reason, suppliers must submit up-to-date
information to ensure that the raw materials comply with all
relevant legislation for chemicals. In the case of raw materialdeliveries from non-European suppliers, our purchasing
department, together with the Production, Technology,
Safety & Environment (PTSE) Group function, clarifies which
obligations have to be fulfilled under the REACH Regulation.

NFR

NFR

✓

Because the assessment results and audit reports areshared within the initiative, we had more than 16,900
sustainability assessments and 999 audit reports
available to us as of the end of 2023. Suppliers whose
sustainability-related activities have been assessed in TfS
audits or assessments represent 71% of our relevant
procurement volume. The relevant procurement volume
comprises all suppliers from which we procure morethan €20,000 of goods or services per year. The TfS
sustainability a­ ssessment is also incorporated into ourstrategy process, which must be applied to every contract
negotiation or renewal with a purchasing volume of morethan €5 million. This is known as XCORE. As well as the
XCORE strategy process, we use the SCORE process,which is similar to the XCORE process but geared toward
purchasing volumes between €1 million and €5 million
or over €250,000 in regions outside Europe.
It is also encouraging to see that our suppliers’ average
EcoVadis sustainability assessment of 54.4 points is above
the EcoVadis benchmark of 45.7 points. With our tool
for analyzing supplier risk, with which we ensure compliance with the German Act on Corporate Due Diligencein Supply Chains (LkSG) in the supply chain, we did not
identify any trends regarding deficiencies among our
suppliers in 2023. We had no reason in the year underreview to end our collaboration with suppliers due tosustainability aspects.

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§

NFR

✓

Overall Scores of Our Suppliers at EcoVadis
%
2023
2022

3.2

7.8

4.0

11.3

24.7

13.0

29.2

17.0

17.0

26.2

22.8

6.7 0.1

13.0

4.0

Scale (in points):
0–24

25–34

35–44

45–54

55–64

65–74

75–84

85–100Detailed Scores of Our Suppliers at EcoVadis
%
4.3

2023

Environmental
aspects

2022

Working conditions
and human rights

2023

8.5

6.0
2.8

5.9

20.4

15.0

15.0

10.0

21.4

21.6

18.0

20.0

19.0

12.1

3.5

14.0

32.2

9.0

20.6

2.0
6.8

0.3

2022
4.0

Ethical aspects

11.6

2023

11.0

6.7

14.0
12.5

25.0
11.8

26.0

22.4

26.5

15.0

5.0

14.8

4.4 0.9

2022
8.9

12.0

14.6

2023

Sustainableprocurement

20.1
20.0

21.0
17.3

24.0
22.0

11.0
12.3

8.4

3.0
4.6 0.8

2022
12.0

29.0

16.0

22.0

12.0

6.0

3.0

Scale (in points):
25–34

35–44

45–54

55–64

65–74

With regard to the migration of a database-supported
risk analysis system into our SAP system, we successfullycompleted the global launch as well as a general SAP
system update in some regions. We have real-time access

21

75–84

✓
NFR

0–24

85–100to supplier-related data from around 600,000 sources andin various qualitative dimensions. This includes regulatory,
ecological, social, and financial data that we can use forour risk analysis.

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28

HSE (Health,­Safety, Environment) checks
at ­production
facilities

55

production sites
in 17 countries

22

Our commitment is to make our production safe
and sustainable in every respect, thus ensuring ourlong-term competitiveness. The Production, Technology,
Safety & Environment (PTSE) Group function, the headof which reports directly to Board of Management
member responsible for production and technology,
makes a substantial contribution to this. PTSE develops
and maintains company-wide standards that ensure
responsible use of chemicals at LANXESS. They define
requirements and govern responsibilities for healthprotection, environmental protection, biodiversity, handlingof chemicals, plant safety and safety precautions in theworkplace. Continuous training of our employees andregular audit-based reviews of our health, safety andenvironmental management systems are aimed to ensurethat the requirements are incorporated into our processes
systematically and sustainably.

Uniform standards in production
LANXESS operates a total of 55 production sites andhas a presence in 17 countries (investments ≥ 50%, asof December 31, 2023). Our wide range of products
requires the use of many different chemical and technicalprocesses. Uniform standards for planning, building andoperating plants ensure a high level of process, plant andoccupational safety.

✓

Handling chemical substances and working with technicalequipment involves health and safety risks. We identify
these risks and potential threats systematically worldwide– for new and existing plants – and minimize these risks byimplementing defined preventive and protective measures.
Experts examine the implementation of LANXESS guidelines and local regulations for the safe operation of ourplants. The frequency of audits including on-site targeted
spot checks is geared toward the respective risk profile.
Compliance with safety standards must be regularly
verified worldwide for every plant via audit opinions. In
2023, a total of 28 production facilities (previous year: 35)
were examined in the context of HSE (health, safety andenvironment) compliance checks, including twelve(previous year: 15) in Germany. We use an electronic
reporting system to record accidents and events worldwide in line with uniform regulations. The Intelex IncidentManagement System replaced its predecessor Incident
Reporting System in 2022. By way of digitalization, thenew, more agile and flexible system provides a platform
for greater data and process safety and better functionality on mobile devices. Injuries, transportation accidents,
near-accidents, environmental incidents, instances ofdamage, and security-­relevant incidents such as theft are
documented. Each event is carefully analyzed in order todraw conclusions as to how we can avoid similar incidents
in the future. All measures help us to continuously reduce
the number of events. There were no major process safety✓
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SAFE AND SUSTAINABLE SITES

NFR

NFR

✓

incidents in fiscal year 2023. In the summer of 2023,
however, a leak in an aluminum trichloride barrel caused
smoke to be emitted at the Bergkamen site. A NINA alert
was triggered as a precautionary measure. There was norisk to employees or local residents.
We are continuing the systematic digitalization of production, including by digitizing our paper-based operational
management and maintenance checklists. We use tabletsthat are directly connected to the central IT systems at
LANXESS and enable real-time access to data. The
solution includes the end-to-end integration of digital dataprocessing in the work process and ensures that data isarchived correctly and consistently. Thanks to the clear
data, we can identify necessary measures and implement
them in time, increasing work efficiency in production
and maintenance.

Integrated management system
A centrally organized management system at LANXESS
provides for the necessary global management structuresin all relevant business processes in order to ensure
responsible business activities. Globally, we base ouractions on the international standards ISO 9001 andISO 14001 for quality and environmental management
and ISO 50001 for energy management.

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Input/Output Analysis1)
Indirectgreenhousegas emissions(Scope 2)9972) kt

Coal, gas, oil
9.7 PJ

Biomass
3.0 PJ

Direct­ reenhouseggas emissions(Scope 1)
725 ktVOC­emissions
0.5 ktGreenhousegas emissions
from biomass(climate neutral)
265 ktEmployees
12,7873)

Electricity, steam, cooling10.2 PJ

Steam
4.6 PJ

Production wastewater
12.7 million m3

Cooling water
128.1 million m3

SafetyMAQ
0.6

4)Strategic raw materials
2,911 kt

Waste
650.0 kt

RIR5)
0.6

28 HSE compliance checks

Infrastructure
Total water withdrawal
159.4 million m3

Upstream supply chain(Scope 3 4,995 kt, indirect greenhouse gas emissions)

1) Continuing operations.
2) Calculated according to the market-based method of the GHG Protocol.
3) Core workforce of the core companies as of December 31, 2023.

23

55 production sites in 17 countries

LANXESSplant

Downstream supply chain(Scope 3 4,536 kt, indirect greenhouse gas emissions)

4) L TIFR: rate of occupational accidents with an incapacity certificate per planned million hours worked resulting
in calendar days lost following the day of the accident (day of the accident does not count), calculated for all
employees at all sites (including temporary workers for Germany, NAFTA, China, and India).
5) Number of incidents per 200,000 working hours that have to be reported according to OSHA rules.

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matrix certificate
coverage› High degree of standardization of processes› Uniform in-house guidelines and instructions› Transparent, efficient, and effective processes andcontrols› Considerably reduced external expense for the
maintenance and optimization of the management
system, for the integration of additional management
systems (e.g. ISO 50001, sustainability standards),
and for the integration of new sites or business units
We ensure that progress in integrating new sites into ourmanagement system and its performance are regularly
reviewed worldwide by external, independent experts.
In 2023, we successfully passed the surveillance audit
in accordance with the standards ISO 9001:2015,
14001:2015 and ISO 50001:2018. The West Hill,
Canada; East Hanover, El Dorado (three sub-sites), Fords,
Perth Amboy, all U.S.; and Nantong, China, production
sites were included in the matrix certificate in the reportingyear. Most of the sites taken on with the acquisition ofChemtura were therefore integrated into the matrix certificates. Most of the other sites, as well as those taken overfrom Emerald Kalama Chemical, Theseo and International
Flavors & Fragrances Inc. (IFF), have already been certified
in accordance with ISO 9001 and ISO 14001. For thetime being, they hold these certifications separately. We
are planning to gradually add these sites to our matrix
certificate.

24✓

As of December 31, 2023, our matrix certificate pursuant
to the ISO 9001:2015 and 14001:2015 standards
covered 36 certifiable companies (companies with staff
and in which LANXESS has a stake of over 50%) with a
total of 74 sites in 21 countries. In relation to the numberof employees, this equates to 90% coverage.
In addition, we have had LANXESS AG and all majorGroup companies certified in accordance with ISO 50001
for energy management in Germany and Belgium. The
only exceptions are IMD Natural Solutions GmbH and
CheMondis GmbH, both of whose energy consumption
is below the minimum threshold for the performanceof mandatory energy audits in accordance with EDL-G(German Energy Services Act), as well as Theseo Germany
GmbH in Wietmarschen. As of December 31, 2023, theenergy management system had reached coverage of
99% in these two countries in relation to the numberof employees. IAB Ionenaustauscher GmbH, Bitterfeld,
has its own certificate. Outside Germany and Belgium,
we are continuing to pursue our strategy of regional andlocal certifications. In Great Britain, our sites are certified
in accordance with ESOS (Energy Savings Opportunity
Scheme), for example.
In addition, individual LANXESS Group companies andsites have other specific management systems and certifications such as ISCC+, RC14001 (RC = Responsible
Care®) and ISO 45001.

✓
NFR

Confirmation that our processes comply with the standards
ISO 9001 and ISO 14001 is provided in global matrix
certificates. This approach brings a range of benefits:

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✓

Global hazardous-goods and­transport-safety management system
A global hazardous-goods and transport-safety management system ensures that hazards are minimized or
avoided entirely. We coordinate, monitor and review
implementation of relevant hazardous-goods and transport-safety regulations as well as in-house regulations
centrally in a department that is specifically responsible
for this.
Central classification of our products in line with international, regional and local hazardous-goods regulations
ensures that applicable laws are interpreted uniformly
while taking regional and local aspects into account.
Classification determines such things as the type ofcontainment (packaging and tanks), marking and labeling,
the permitted modes of transport and transportation routes
as well as measures that operational staff must take if atransportation event occurs. The corresponding classification data is stored in the central safety-data systemfor chemicals at LANXESS. The acquisitions of Emerald
Kalama Chemicals and of the Microbial Control businessfrom IFF were successfully integrated in the central safetydata system in 2023. Overall, more than 1,300 products
and raw materials were recorded.
To counter the deficiencies in load securing of generalcargo, the PTSE (Production, Technology, Safety andEnvironment) and GPL (Global Procurement and Logistics) Group functions have worked closely together todevelop a load-securing standard for LANXESS, whichhas proven successful in numerous field tests and in

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Environmental responsibility
The preservation of natural resources – for example
by using raw materials as efficiently as possible – andidentification of further potential are ongoing tasks in thecontext of our environmental responsibility and expertise.
This also includes our efforts to preserve biodiversity. We
are focused on responsible use of water as a resource,which includes both water consumption and water quality.
In addition, we endeavor to fulfill our ecological responsibility with regard to waste. The clear focus is compliancewith all legal requirements. In line with circular economy,LANXESS strives to enforce the waste hierarchy – prevention, reuse, disposal – around the world.

LANXESS Water Program:
Targets largely achieved
As a chemicals company, we rely on water for production.
We use it mainly for cooling (80%), as an input material inchemical processes (18%) or in the form of steam (2%).
In addition, rivers are an important mode of transportation,
particularly for our networked sites in Germany.

25✓

LANXESS is aware of water’s ecological and social
significance beyond water’s importance as an economic
resource. Access to water and sanitary facilities is a humanright. Water availability and quality are global challenges
that we can and must address locally. We are therefore
committed to the responsible use of water. In our own
business activities and beyond, we use our products toadvance the United Nation’s Sustainable Development
Goal 6 (SDG 6): “clean water and sanitation for all.” The
products of our Liquid Purification Technologies business
unit in particular make a major contribution to this. For
example, the Lewatit® ion exchange resin is used in theprocessing and reuse of process water and removes
unwanted substances.
One of the most important indicators in discussions
around water is water stress. Our annual analysis of all
LANXESS production sites using the WRI Aqueduct Tool
showed that – taking all portfolio changes of the current
fiscal year into account – ten of our production sites arein water-stress areas. These sites accounted for around
2% of our total water withdrawal in 2023.

✓
NFR

practice. It was implemented at the Chardon, El Dorado
and Kalama (all U.S.) sites and at the service providers
Broekman (NL) and Nolden (D) for the first time in 2023.
The load-securing system was also introduced for our
temperature-sensitive products to transport our Velcorin
product in refrigerated containers.

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✓

improvements at the LANXESS water risk sites. The sites
are assessed using a customized, extensive water risk
analysis that focuses on the water stress situation at thesite as well as other factors. For fiscal year 2023, we identified a total of four locations as water risk sites: Jhagadia
and Nagda, India; Latina, Italy; and Qingdao, China. The
sites have not changed since the program began.
In the reporting year, we conducted a final review of ourtarget to reduce water withdrawal at water risk sites by
15% by the end of 2023 (base year: 2019). With areduction of 31%, we exceeded our target, illustrating
our commitment to sustainability. For example, water
withdrawal has been reduced significantly by a technicaloptimization of the cooling towers in Latina and by various
water saving measures in Qingdao. At the two Indiansites, Jhagadia and Nagda, rainwater projects were
implemented with the local community. In addition, we
carried out analyses regarding the local water stewardshipprograms at all water risk sites in the reporting year. Allgaps identified were closed in time and all four water risksites met the extensive requirements of the LANXESSWater Stewardship Program.

In order to further drive our dedication to the protectionof water as a resource, we launched our global LANXESSWater Program in 2020. In addition to the global efficiency
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Handling scarce water resources in a conscious andcareful manner is an investment in the future. In order tobreak the link between our growth and water consumption
and potential stresses from wastewater discharge, we have
set targets at Group level that we will continue to monitor
in the future. We are aiming for an annual reduction ofboth specific water consumption and specific total organiccarbon (TOC) in wastewater flows by 2%.
Water Withdrawal & Consumption
in million cubic metersin cubic meters/
thousand euros of sales

Water withdrawal (absolute)
Water consumption (absolute)
In relation to sales (total water consumption)

3.0

800
2.18
1.68

600

1.36

1.33

2.0
1.0

400
222.9

209.6

217.0

200
14.7

2019

13.3

2020

12.7

2021

178.3
11.0

2022

159.4 0.0
8.920231), 2)✓

Wastewater Discharge (treated)in million cubic meters
Absolute

80

In relation to sales

in cubic meters/
thousand euros of sales

3.95

60
40

Sparing use of water

2.16

✓

4.0
2.59

3.0
2.13
1.76

26.9

20

2019

1.89

15.8

16.1

14.2

12.7

2020

2021

2022

20231), 2)

2.0
1.0

1) Continuing operations2) LANXESS total: Wastewater discharge (treated): 13.1, speciﬁc: 1.84

The comparison of water withdrawal and water
consumption shows that, while large volumes of water
are withdrawn (e.g. once-through cooling water), thiswater is later returned to the water cycle in the same
quality. LANXESS’s water consumption is calculated bysubtracting the volume of treated and untreated wastewater (including once-through cooling water) and water
volumes (e.g. sold steam) sold to third parties from thewater withdrawal (including purchased steam).
Our water withdrawal in continuing operations declined
in 2023, which is attributable to changed production
volumes. We achieved our target of reducing specificwater consumption by at least 2% in the reporting year
despite lower sales.

NFR

The expiry of the two water targets in fiscal year 2023
does not mean an end to our commitment to water as animportant resource. To seamlessly continue our work, theSustainability Committee resolved to continue and expand
the previous targets from the fiscal year 2024 onward:
Water stewardship and risk-based reduction will remainpart of our LANXESS Water Program in the future.

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✓

The volume of treated wastewater declined again
compared to the previous years. This is mainly due tothe deconsolidation of the HPM business unit. We also
analyze other water indicators in addition to volumes. Oneof the most important wastewater parameters is TOC (totalorganic carbon). In fiscal year 2023, the specific TOC after
wastewater treatment increased slightly to 0.13 kilograms/
thousand euros (previous year: 0.12 kilograms/thousand
euros). In combination with the decline in sales, we missed
the reduction target of 2%.
Further information on our use of water can be foundin our “Water” Background Paper.

Our contribution to biodiversity
Biodiversity covers all life forms on our planet. As the
UN agreement, the COP15 Global Biodiversity Framework, emphasizes, preserving ecosystems is vital to thewellbeing of people, plants and animals. This aligns with
the Sustainable Development Goals (SDGs) to protect life
below water (SDG 14) and on land (SDG 15). Given thatabout 50% of the global economy is also dependent on
natural resources, good biodiversity is also indispensable
to a sustainable and successful economy.
SDGs & LANXESS’s contributions

1) Continuing operations2) LANXESS total: Water withdrawal: 168.6,
water consumption: 9.2, speciﬁc: 1.29

26

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We evaluated the main impacts of the specialty chemicals
industry using established scientific tools (ENCORE and
WWF Biodiversity Risk Filter). Climate change and water
protection (both water consumption and pollution) wereidentified as key factors in our potential environmental
impact. We have already formulated obligations, strategies and specific goals for these two issues. We arecommitted to the responsible use of water and work witha water program that includes global efficiency targets
for water consumption and pollution (TOC reduction
in wastewater), and other water stewardship measures(see
Water Strategy). Through our ambitious climate
targets that we have set and implemented for the entire
value chain, we have taken important steps in tacklingclimate change and, in turn, preserving species diversity(see
Climate Strategy). We also aim to reduce ouremissions and waste.

27✓

Sustainable waste management
We aim to avoid hazardous as well as non-hazardous
waste and decouple our business growth and waste
production. Rigorous material-flow management from raw
material input to finished product is aimed at ensuring that
we use resources as efficiently as possible and minimize
our waste volumes.

✓
NFR

The sustainability performance of our product portfolio
is another way we aim to positively impact biodiversity.
To do so, we use our product sustainability monitor to
identify products that are particularly sustainable or thathave the potential for improvement (seeProduct
Sustainability Monitor). We also strive for circular andsustainable sourcing and have undertaken to support theuse of secondary (circular) or sustainable and renewable
raw materials. It is important to us that we comply withrecognized sustainability standards when using renewable
raw materials.

NFR

As a company in the chemicals industry, we rely on a wide
range of vital ecosystem resources and services, including
clean water, energy, raw materials and flood protection.
We are also aware that our business activities entail both
opportunities and potential risks for biodiversity.

as a raw material directly in neighboring plants – both ourown as well as those of other chemicals companies – tocreate closed loops and thus avoid the generation ofwaste.
The absolute amount of waste generated has decreased
compared to the previous year. This is primarily attributable
to a further reduction in aqueous waste streams at our site
in El Dorado, U.S., and a significant reduction in waste
sent to landfill at the site in Krefeld-Uerdingen, Germany.
In relation to the decline in sales, however, the specificfigure increased.
We group waste into five categories, each divided into
hazardous and non-hazardous waste. The chart on thefollowing page shows each category’s share (in %) of
total waste.
In fiscal year 2023, the shares of waste for disposal were
nearly unchanged year-on-year.

Our business units and sites strive to increase efficiency
and are working constantly on various research projects forthe prevention, reduction and recycling of waste. In turn,our networked sites enable us to reuse many by-products

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Waste for Disposal1% (LANXESS total)
8.2 (8.7)
10.0 (10.1)

Material recycling
Incinerated wastewith energy
recovery

3.9 (3.9)
3.7 (3.7)

Incinerated waste
without energy
recoveryLandﬁlled wastes
Other forms of disposal

74.2 (73.6)

1) Continuing operations

Total Waste
in thousand metric tons
Absolute

in kilograms of waste/
thousand euros of sales

In relation to sales

6,400

360

5,600

315

4,800

270

252.7
231.4

225

4,000
178.2

3,200

✓

Systematic recording of key data

NFR

✓
NFR

§

To record key data on safety and environmental protection
systematically worldwide, we use an electronic data-entry
system. This enables us to calculate a wide range of
HSE performance data for each business unit, site andoperation worldwide, which is used as a valid data poolfor strategic decisions as well as internal and externalreporting. In addition, it maps the progress that we makewith our global sustainability targets. Data is gathered
only at production sites where we have equity interest of
more than 50%. Due to the deconsolidation of the HPM
business unit, we are disclosing this data separately.
PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft audited our environmental and safety performance data and the requisite data-gathering processes
with limited assurance for fiscal year 2023.
The non-financial performance indicators “CO2e emissions(Scope 1 and Scope 2) and energy” as well as the “losttime injury frequency rate (LTIFR)” are management-relevant performance indicators. Therefore, they are part of the“reasonable assurance” audit of the consolidated financial
statements and the combined management report.

180
135

2,400
1,718.8
1,412.2

1,600

2020

707.5

650.0

2022

20231), 2)

1,346.3

800

2019

87.5

96.8

2021

90
45

1) Continuing operations2) LANXESS total: Total waste: 656.7, speciﬁc: 92.4

28

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Environmental and Safety Performance Data*
2021

2022

2023

2023

Continuing
operations

HPM­business unit

SafetyOccupational injuries to LANXESS employees resulting in at least one day’s absence (LTIFR1))
Energy consumption in petajoules (1015 joules)

2)

0.9

0.6

0.6

2.2

28.6

25.4

22.9

0.9

Non-renewable

11.2

10.4

9.7

0.4

Renewable (biomass)

3.3

3.3

3.0

0.0

Indirect energy sources (GRI 302–1)3)
Electricity consumption

6.3

4.7

4.4

0.4

Heat and steam consumption

7.05

6.3

5.2

0.1

Energy consumption for cooling

0.54

0.55

0.5

0.0

Other

0.11

0.11a)

0.1

0.0

217.0

178.2a)

159.4

9.2

Water and wastewater in million cubic meters
Surface water

57.5

28.1

29.0

8.6

Groundwater

4.6

4.5

4.2

0

Third-party wastewater

1.1

1.1

1.3

0

Third-party water

a)

153.8

144.5

124.9

0.6

Total water withdrawal in water-stress areas,
3.312) (GRI 303–3)

4.5

4.1

3.3

0.0

Volume of once-through cooling water, 136.712)(GRI 303–4)

176.4

142.7

128.1

8.6

Total wastewater discharge (GRI 303–4)
Wastewater discharge (treated)

16.1

14.2

12.7

0.4

Wastewater discharge (untreated)

187.4

152.2

137.5

8.6

Surface water

191.5

155.5

140.8

8.9

Groundwater

0.0

0.7

0.6

0.0

Total wastewater discharge by destination(GRI 303–4)

Seawater

0.4

0.4

0.3

0.0

Third-party water

11.5

9.8

8.6

0.1

Total nitrogen

0.5

0.4

0.3

0.0

Total organic carbon (TOC)4)

1.3

1.0

0.9

0.0

0.00230.00190.0015

0.0

12.7

11.0

8.9

0.3

Wastewater emissions (after treatment)in thousand metric tons

Heavy metals5)
Total water consumption in million cubic meters(GRI 303–5)6)29

Emissions to air in thousand metric tons
Total greenhouse gas emissions CO2e
(GRI 305–1, GRI 305–2)
Direct (Scope 1)7)
Indirect (Scope 2, market-based)8)
Ozone-depleting substances (GRI 305–6)

Direct energy sources (GRI 302–1)

Total water withdrawal (GRI 303–3)

NFR

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✓

2,591

1,994

1,722

95

1,284

843

725

7613)

1,307

1,151

997

19

0.004

0.004

0.003

0.000
0.1

NOX, SOX and other emissions (GRI 305–7)
NOX9)

1.4

0.9

0.8

SO²10)

0.9

0.4a)

0.3

0.1

CO

3.2

2.6

2.5

0.0

NH3

0.03

0.01

0.01

0.0

NMVOC11)

0.8

0.7a)

0.5

0.0

Total weight of waste (GRI 306–3)

1,346.3

707.5

650.0

6.7

Incineration with energy recovery

70.7

68.3

64.8

1.6

Waste in thousand metric tons

Incineration without energy recovery

28.7

27.6

25.4

0.1

Landfilling

52.4

45.0

23.8

0.2

Material recovery

60.5

59.1

53.1

4.1

1,134.0

507.5

482.9

0.7

Hazardous

664.8

626.9

594.2

1.4

Non-hazardous

681.5

80.6

55.8

5.3

Other forms of disposal
Type of waste

Explanations concerning our environmental and safety performance data
* The aggregate data refers to all LANXESS production sites in which the company holds equity interest of more than 50%.
1) LTIFR: rate of occupational accidents with an incapacity certificate per planned million hours worked resulting in calendar days lost following the day of the accident (day of the accident does not count), calculated for all employees at all sites (including temporary workers forGermany, NAFTA, China, and India).
2)	The energy volumes given were calculated on the basis of typical substance values. They do not include energy contained in
raw materials.
3) Presented as a balance sheet, whereby the volume of energy sold is subtracted from the volume of energy purchased.
4) Chemical oxygen demand (COD) is calculated as follows: [COD] = [TOC] x 3. COD 2023: 2.7 kt (not including HPM BU).
5) Heavy metals (arsenic, cadmium, chromium, copper, mercury, nickel, lead, tin, zinc).
6) According to GRI 303–5, total water consumption is calculated by subtracting the total water discharge from the total water withdrawal.
7)	All Scope 1 greenhouse gases are calculated as CO2e. The emission factors used for fuels are based on calculations by the U.S. EPA(GHG Emission Factors Hub, September 12, 2023) and on the IPCC Guidelines for National Greenhouse Gas Inventories (2006).
In accordance with the GHG Protocol (2004), since 2021 the factors for calculating CO2e have been based on the global warming
potential (time horizon: 100 years) defined in the IPCC Sixth Assessment Report (AR6 2021), previously IPCC Second Assessment
Report (SAR, 1995).
In accordance with the GHG Protocol, the CO2 emissions from the combustion of biomass are shown separately and are not includedin the Scope 1 emissions. The following emissions were produced during the reporting period: 2019: 184 kt CO2, 2020: 268 kt CO2,
2021: 294 kt CO2, 2022: 298 kt CO2, 2023: 265 kt CO2 (not including HPM BU). The material composition of the biomass is partiallybased on assumptions/estimates.
8) All Scope 2 greenhouse gases are calculated as CO2e. In 2023, the conversion factors used were provided by the energy producers.
Where these were not available, factors from the IEA (International Energy Agency) from 2021 were used for fiscal year 2023, from2020 for 2022 and from 2019 for 2021.
CO2 Scope 2 emissions for 2023 (location-based method): 1,134 kt (not including HPM BU).
9) Nitrogen oxide (NOX) calculated as NO2 (excluding N2O; nitrous oxide).
10) Sulfur dioxide (SO2) + SO3 calculated as SO2.
11)	Total VOC (volatile organic compounds) excluding methane and acetone.
12) LANXESS total.
13) The emissions stated are based on forward projection from prior-year data and the planned reduction.
a) Values restated due to supplementary notifications or change in calculation method.

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Our understanding of sustainable sites also includes beinga strong and reliable partner for the people locally andin the respective region and taking social responsibility.
Our commitment is based on our corporate expertise andobjectives and focused on education, climate protection,water and culture. Our goals in all these areas are identical:› Mobilizing resources and people for social
commitment› Achieving positive impacts on the company, theenvironment and society
As a company, we aim to play a positive part in improving
living conditions, education, training, equal opportunities,
and health and safety. In addition, we are working to
attract talented persons, engage in extensive dialog with
our stakeholders, have a positive impact on employee
motivation and constantly improve our reputation.

✓

We select projects involving social engagement according
to whether they pursue purely charitable ends (“charitablegift”) or whether we are investing in the social environmentof our sites (“community investment”) or in corporate
objectives such as image, sales and income while also
generating social value (“commercial initiative”).
In total, roughly 0.3 million (previous year: roughly
1.5 million) people benefited from our projects in 2023.
We use a system of performance indicators to measure
the social impact of our activities above and beyond thenumber of people who benefit. We performed an impact
assessment for all (100%) of our projects in 2023, taking
into account positive effects in the area around the siteand positive effects on the environment and our business.
We regard these indicators as relevant benchmarks, withwhich we manage our measures in an impact-oriented
manner.
Social Activities by Topic1)

We provided around €1.1 million globally for our projects
in 2023 (previous year: around €1.3 million). The regional
focal points of our activities in the reporting year were
the EMEA (particularly Germany) and Americas regions(94 projects).

Social Activities by Type of Investment1)
%
10
6

84
Charitable gift
Commercial initiative
Community investment

1) Number of projects: 94

Impact Dimensions of Evaluated Activities
and Projects%

Impact on the community
e.g. quality of life, well-being or skills

Impact on the environment
Direct environmental eﬀects or impact
on attitude toward the environment%
1 6

Impact on our businesse.g. attractiveness as an employer,
improved stakeholder relations andperception

12
Education✓
NFR

Corporate citizenship

NFR

NFR

✓

2

Culture

1001)
100

50

100

1) Number of projects: 94

Climate protection
Water
Other

79

1) Number of projects: 94

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For more than 15 years, we have been running projects
at our sites worldwide under the LANXESS education
initiative to get young people interested in the naturalsciences at an early age. Since 2014, for example, wehave helped high schools in Germany improve theirchemistry and science teaching. In 2023, LANXESS
sponsored a project by the physics project course andthe astronomy club at Werner-Heisenberg-Gymnasium inLeverkusen. A helium-filled balloon was launched 38 km
into the stratosphere to take measurements and record
videos from the edge of the earth’s atmosphere.
As preparation for the 55th International Chemistry
Olympiad in 2023, 20 school pupils from NRW attended
a state seminar in Cologne sponsored by LANXESS. The
program focused on having fun while learning, challenging
theoretical and practical lessons and a site tour of the
Leverkusen Chempark with the opportunity to visit theCentral Organics Pilot Plant of the LANXESS subsidiary
Saltigo.
The Excellence Lab Day was also held once again in 2023
in cooperation with the Cologne University of Applied
Sciences. Eight school pupils from four schools gained
an insight into what a future chemistry degree mightentail and had the opportunity to work on a challenging
experiment in a state-of-the art laboratory.

31✓

At our El Dorado site in the U.S., we support STEM activities at local schools attended by our employees’ children.
Through USD 30,000 in financial support for STEM
education programs, teachers were given assistance inteaching the children about problem solving and criticalthinking through real learning experiences.
In Seoul, Republic of Korea, we launched the LANXESSScience Exploration Challenge for young people in 2023.
The challenge is run in conjunction with the Seoul Metropolitan Boramae Youth Center and designed for individuals
or teams of two to three members between the ages of 17
and 19. Participants submit a research plan on a chemistry
topic of their choice. Ten projects are then selected andthe participants are given support in carrying it out. The
aim of the program is to foster scientific creativity andcuriosity in young people.
In Japan, we strove to educate schoolchildren aboutclimate change and its impact. Our program “Climate
Class and Science Experiment Workshop”, providing
opportunities to learn about the environment and thefight against climate change, was continued in 2023. In
the reporting year, we offered a virtual and an in-person
workshop for children in grades one through six.

✓
NFR

Commitment to education, climate protection,water and culture

NFR

NFR

✓

In Brazil, the “Juntos pelo clima/Together for the Climate”
project in 2023 saw elementary schoolers learn about
ecological challenges and how they can help to solve
them on an environmental activity trail.
As part of our cultural commitment, we sponsored theinternational literature festival lit.Cologne as a lead partner
between 2010 and 2023. The Ozawa International
Chamber Music Academy in Japan, which we have
likewise supported for 13 years, gives talented young
musicians from all over Asia the opportunity of first-classmusical training.
i

LANXESS assistance for severe
flooding in India
Our activities in India in 2023 focused on assistance for the regions hit by the devastating floods.
During the monsoon season, the town of Nagda
and the surrounding area experienced the heaviest
rainfall seen in 50 years, resulting in heavy flooding.
LANXESS India supported the state government anddistrict administration by providing food packages
and ­essential supplies for local residents, as well as
in the neighboring area of our Jhagadia site, including Bharuch and Ankleshwar. We also supported the
Nagda municipal council’s welfare campaign, whereplastic-coated GSM roof sheeting was provided forthe homes of less affluent rural communities.

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§

NFR

✓

With the Paris Climate Agreement, the international
community committed to limiting global warming toless than 1.5 degrees Celsius above the pre-industrial
level. At the Climate Change Conference in Glasgow
in November 2021, this ambition was for the first timebacked up with concrete reduction requirements for greenhouse gas emissions. By 2030, for example, global CO2
emissions must be cut by 45% versus 2010, and net-zeroemissions must be achieved by 2050. Meanwhile, inGermany, the “Climate Protection Plan 2050” currently
sets out the interim goal of cutting greenhouse gas
emissions by 2030 by 55% compared with the base yearof 1990. Industry is expected to contribute to this with areduction of between 49% and 51%.
LANXESS has set ambitious medium- and long-termtargets to fulfill our responsibility as a global specialty
chemicals company: By 2040, LANXESS wants tosignificantly reduce its own emissions (Scope 1) andemissions from purchased energy (Scope 2) and become
climate neutral. By 2030, we aim to reduce our greenhouse gas emissions to around 1.3 million metric tons of

32

CO2e, an 80% decrease on the level of emissions at thetime LANXESS was established. We achieved a reductionof around 73% in the reporting year.
The Group also intends to make the entire supply chain
climate neutral by 2050. To this end, LANXESS launched
the “Net Zero Value Chain” initiative in 2022.
The LANXESS climate targets for Scope 1 and Scope 2
emissions are in line with the Paris Climate Agreement.
The Science Based Targets initiative (SBTi), a joint initiativeof the climate change mitigation organizations CDP, theU.N. Global Compact, the World Resources Institute andthe World Wide Fund for Nature, validated the Grouptargets for the reduction of emissions and confirmed thatLANXESS is supporting the objective of limiting global
warming to 1.5 degrees Celsius. At the same time, theSBTi also confirmed our Scope 3 emissions reduction
target as ambitious and acknowledged our long-term“climate-neutrality targets.” To measure climate-relevant
emissions, we collect data on emissions of greenhousegases defined in the Kyoto Protocol and calculate theirgreenhouse effect in comparison to carbon dioxide(CO2e).

✓
NFR

✓
NFR

CLIMATE ACTION AND ENERGYEFFICIENCYi

Initiatives for our journey
to climate neutrality“Climate Neutral 2040” (Scope 1 + 2)
› Implement climate protection projects thatgenerate major reductions.
› Decouple growth and emissions.
› Strengthen process and technological innovations.
› Offset remaining emissions.

“Net Zero Value Chain” (Scope 3)› Purchase sustainable raw materials.
› Transition to green logistics.
› Offer more climate-neutral products and solutions
with a low carbon footprint.

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We are taking a multi-pronged approach to achieve ourtarget:Launch climate protection projects(medium-term target)
Over the next few years, several measures will significantly
lower greenhouse gases.

For example, we are switching the energy supply at our
Indian sites to a mix of biomass and solar power. Afterthe planned measures are implemented, we expect our
CO2e emissions to decrease by 150,000 metric tons by
the end of 2024. As of the reporting date, the percentageof renewable energy at the Jhagadia site was 53%, while
the Nagda site achieved around 88%.
Through these projects and other measures, we want
to decrease our CO2e emissions to 1.3 million metrictons by 2030.
Decouple growth and emissions(long-term target)
Independently of production volumes, emissions ofgreenhouse gases in our individual business units are set
to shrink. In addition to technological efficiency, changed
governance instruments play a significant role: a ­company’s
carbon footprint becomes an investment criterion that
impacts organic growth and acquisitions. This gives
business units that achieve better than average reductions

33✓

in greenhouse gas emissions a direct financial advantage.
In 2020, the Board of Management and the Supervisory
Board also decided that the reduction in CO2e will be used
as an assessment criterion for the compensation system
for managers and the Board of Management in the future.
 trengthen process and technological innovations
S(long-term target)
We are revising many of our existing production processes
in order be climate neutral by 2040. For example, weplan to continue improving our network structures, e.g.
when it comes to heat exchange between plants andair purification. However, other procedures must first be
developed on a large industrial scale. We will therefore
focus our research activities more closely on climate-­
neutral process and technological innovation.

By implementing these measures, we want to decrease
our annual emissions to less than 220,000 metric tons
by 2040. We plan to neutralize the remaining emissions
via appropriate offsetting measures. In this way, we will
not only make a significant contribution to climate protection in the years to come but also become an even moresustainable partner for our customers.

Clear strategy to lower indirect­emissions
Back in 2022, LANXESS launched the “Net Zero Value
Chain Program” to cut indirect emissions from the
upstream and downstream supply chain (Scope 3). Theseemissions from purchased raw materials and air pollution✓
NFR“Climate Neutral 2040”: Clear strategy
to lower direct emissions

NFR

NFR

✓

produced in logistics and when making end products
are to be cut by 60% – from 27.0 million metric tons to
11.0 million metric tons of CO2 equivalents – by 2030
compared with the reference year 2015.
One example of the program in action is our growing
Scopeblue® product range. This umbrella brand identifies
products that are made primarily of certified sustainable
raw materials or where the carbon footprint is at least 50%
lower than that of a product made from conventional raw
materials. As well as ion exchange resins made from fossilbased raw materials, for example, LANXESS now alsooffers resins made partly of sustainable raw materials inaccordance with the mass balance approach. The indirectemissions in the upstream and downstream supply chain(Scope 3) are to be eliminated by 2050. The “Net Zero
Value Chain” initiative is based on three pillars:› Transition of raw materials purchasing to increasingly
sustainable raw materials that are bio-based,
originate from a recycling process or are producedwith renewable energy.
› Greater consideration of carbon footprint whenselecting means of transport.
› Expansion of our range of climate-neutral products
and solutions with a low carbon footprint.
In the coming years and decades, climate change will havesignificant global consequences for companies’ businessactivities. LANXESS therefore continues to work on an
extensive risk analysis, based on three climate scenarios.

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Transitional climate risks were also closely analyzed in
the reporting year. We perform these scenario analyses
globally for all locations and assess the risks that could
arise in the short, medium and long terms.

Uncertainty over emissions trading
In Europe, twelve of our plants are subject to European
emissions trading. Trading with CO2 emissions rights,
known as certificates, is intended to reduce emissionsof the environmentally harmful gas CO2 cost-effectively.
Because all of our plants covered by emissions trading arestate-of-the-art and compete at the international level, we
expect to receive enough certificates from free allocation
to cover our CO2 emissions by the end of the fourth trading
period in 2030. At present, however, we cannot precisely
estimate the effects of planned changes in the allocationof emissions certificates as the benchmarks required have
not yet been published. Since 2021, the introduction of
the Fuel Emissions Trading Act (n-ETS) has resulted inadditional costs, which suppliers include in the natural gas
price. Expanding the scope to include waste in 2023 alsoentails additional costs. The transition from the n-ETS to
the EU-ETS II will also pose additional risks from 2027
onward, as the CO2 costs fluctuate significantly and are
difficult to calculate.

✓
NFR

NFR

✓

i

CDP gives LANXESS top score
For more than a decade, we have been participatingin the international climate protection initiative CDP(formerly the Carbon Disclosure Project), each year
sharing data and information on climate protection
and the reduction of emissions. We ­received a gradeof “A” in the “climate” category in the ­assessment for
2023, which puts us in the top 25% of c­ ompanies
in the chemicals industry. These gratifying results
encouraged us to c­ ontinue systematically pursuing
our climate ­protection ­strategy. In the reporting year,
we also received an “A–” from CDP for our water
security efforts.

Greenhouse Gas Emissions (Scope 2)
in thousand metric tons of CO ² equivalents

6,000
5,000

in metric tons CO ² equivalents/
thousand euros of sales

Absolute
In relation to sales

6,000

0.30

5,000

0.25

0.21

0.21

4,000

0.20

0.17

3,000
2,000

1,459

1,263

1,284

2019

2020

2021

0.10

0.11

843

725

2022

1) Continuing operations2) LANXESS total: Scope 1: 801, speciﬁc: 0.11

0.3020231), 2)

0.05

0.21

4,000

0.20

0.17
0.14

3,000
2,000

1,491

1,270

1,307

0.15

0.15
0.10

1,151

997

0.05

1,000

2020

2021

2022

20231), 2)

1) Continuing operations2) LANXESS total: Scope 2: 1,016, speciﬁc: 0.14

Greenhouse Gas Emissions (Scope 3)
in thousand metric tons of CO² equivalents
Scope 3 (absolute)

30,000

0.15
0.10

0.25

0.22

2019

in thousand metric tons of CO ² equivalents

in metric tons CO ² equivalents/
thousand euros of sales

Absolute
In relation to sales

Greenhouse Gas Emissions (Scope 1)

1,000

34

✓
NFR

§

20,00019,087
14,49916,876
11,160

9,531

2022

20231), 2)

10,000
2019

2020

2021

1) Continuing operations2) LANXESS total: 10,333

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For continuing operations, Scope 2 emissions are alsosignificantly below the previous year’s level. This development is based on the one hand on a slightly lower
production volume and on the other hand on the growing
percentage of renewable indirect energy.
Compared to the previous year, the specific figure
increased slightly due to lower sales.
In fiscal year 2023, we again registered significantly lower
Scope 3 emissions due to a change in raw materials
purchasing.

✓

VOC Emissions

NFR

Other atmospheric emissions

in metric tons

in kilograms/
thousand euros of sales

Absolute
In relation to sales

10.0

0.8

8.0

0.6

6.0
4.0
2.0

0.4
0.20
0.10
0.7

2019

1.2

2020

0.11

0.091)

0.07

0.8

0.71)

0.5

2021

2022

20232), 3)

0.2✓

In fiscal year 2023, absolute VOC emissions decreasedslightly again. Specific emissions are therefore also below
the previous year’s level.

An analysis of energy consumption by region shows
stark regional differences both in the amount of energy
and the types of energy source.

Systematic energy management

Since the German sites account for the largest share of
production volume, the most energy is also consumed
there. At the networked sites in the Lower Rhine region,
the site utility company mostly provides indirect energy
sources. LANXESS operates most sites in the U.S., where
according to the balance sheet only direct energy sources
are used. In EMEA, the energy mix shifted slightly infavor of direct energy sources. In the Latin America andAsia-Pacific regions, the large share of biomass-based
direct energy sources is particularly notable.

A high level of energy efficiency improves not just ouremissions footprint but also our cost position, thus
ultimately making LANXESS more competitive. Our global
energy management promotes projects that increaseenergy efficiency in our plants. In each business unit,
energy officers ensure the ongoing improvement ofenergy-related performance. Technical experts from thecentral departments help the local teams to identify andimplement effective projects to increase efficiency.
With this efficiency improvement target, we have taken
part in the Energy Efficiency Networks Initiative, established by the German federal government and leadingindustry associations, with several German sites since2017. For example, our Mannheim site also participatedin the ChePap 2 network in the reporting year, the Bitterfeld site in the Bitterfeld-Wolfen 2.0 network.
Absolute energy consumption decreased again
in 2023. Due to a simultaneous drop in sales,
specific energy consumption in the reporting year
was higher than in the previous year. Efficiency
measures also helped lower energy consumption.

✓

Energy Consumption (Balance Sheet)

NFR

The transition from coal to biomass at our Indian sites
continues apace and is contributing to the reduction of
our CO2 figures. Although absolute Scope 1 emissions
decreased, specific Scope 1 emissions increased slightly
year-on-year as a result of lower sales.

NFR

NFR

✓

in petajoulesin gigajoules/
thousand euros of sales

Absolute
In relation to sales

90

7.5

75

6.0

60

3.98

4.00

3.78

3.14

3.41

45
30

4.5
3.0

27.1

24.4

28.6

25.4

22.9

15

1.5
0.0

2019

2020

2021

2022

20231), 2)

1) Continuing operations2) LANXESS total: Energy: 23.8, speciﬁc: 3.35

0.01) Figure restated
2) Continuing operations3) LANXESS total: VOC: 0.5, speciﬁc: 0.07

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Direct and Indirect Energy Consumption by Region1)

NFR

NFR

✓

in petajoules/%
17.8%
100%

82.2%

North America

5.8 PJ

Germany

5.7%

3.6%

10.5 PJ

7.2%

36.4%

20.8%
63.6%

90.7%
Latin America

EMEA(excluding Germany)

1.0 PJ

3.0 PJ

Furthermore, we plan to make increasing use of comparatively low-emission combined-transport options, wheremost of the distance involved is covered by rail, barge or
sea vessel, thus keeping journeys by road to a minimum.
Europe in particular has good infrastructure for this kindof transport. One good example of this are the links
between the plants in the Lower Rhine region, in particular
Leverkusen and Uerdingen. The new concepts connecting
the plants in the Lower Rhine region to European international ports are key to making our transport solutions
sustainable.

72.0%
Asia-Paciﬁc

2.9 PJ

When selecting our logistics service providers, especiallyfor overland transport in Europe, we take particular noteof EcoVadis and SQAS Standard certification. This allows
us to focus on sustainability and fulfill our environmental
and social responsibilities alike.
Further information on our climate strategy can befound in the “Climate” Background Paper.

Direct energy sources (excl. biomass)
Direct energy sources (only biomass)
Indirect energy sources

36

Sustainable logistics✓

We select our transportation solutions individually worldwide in line with the principles of safety, punctuality andcost-efficiency. In doing so, we also take into account theCO2 emissions resulting from our supply chain.

NFR1) Continuing operations

We are endeavoring to transition from road transport tointermodal transport options. For example, we use digitalsolutions to record the status of ship transports early on
so that we can plan the subsequent land transport withmeans of transport with the lowest possible emissions.

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Good governance

NFR

LANXESS’s corporate culture is based on five central
values: respect, ownership, trust, professionalism andintegrity. These values apply always and everywhere – andto all employees. We seek to foster a corporate culture
in which responsible and morally irreproachable actions
and striving for performance complement each other.
Our central values, supplemented by operational guidelines and organizational structures – summed up as
good corporate governance – enable our employees
to act responsibly in their day-to-day work and thus turna relatively abstract concept into a specific corporate
success factor. At LANXESS, good corporate governanceis embodied by a values-based and safety-conscious
corporate culture, effective management systems anda commitment to internationally recognized principles of
responsible management, such as the principles of the
U.N. Global Compact.
We also ensure responsible business activities withcommittee structure geared toward effective
oursustainability management and with our
integrated
management system that provides for the necessary
global structures in all business processes.

37✓

Compliance organization
For LANXESS, responsible corporate governance particularly implies compliance with legal and internal standards
and ethical principles to which all employees must adhere.
Our global compliance organization – comprising theGroup Compliance Officer, the regional Compliance
Officers, and a network of local Compliance Officers –supports all areas of the company in implementing

✓
NFR

§
GOOD
GOVERNANCE AND­ENERGIZED EMPLOYEES

NFR§appropriate measures to counter unlawful or unethicalconduct within the LANXESS Group at an early stage
and to prevent misconduct. The compliance organizationis also available to all employees as a point of contact
for any compliance-related issues. The direct reporting
line from the Group Compliance Officer to the Board ofManagement guarantees that the Board of Management
members receive regular information.

Clear Rules Provide Guidance
Corporate
PolicyPrinciples of responsible business operations
and sustainable development

Compliance CodeGroup directives

Standard operating procedures,process instructions

Code of Conduct applicable throughout theGroup requiring compliance with valid laws
and international principles
Detailed Group-wide regulations
concerning speciﬁc areas ofcompliance

Regulations deﬁned at
operational level

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Internal guidelines and regulations✓

Human rights✓

NFR

Our Corporate Policy lays out principles of responsible
business operations and sustainable development
and defines our general corporate philosophy and the
expected conduct of all employees in relation to ourstakeholders.

NFR

In line with our values and operational guidelines, we arecommitted in our markets and supply chains to promoting
respect for human rights at all times and systematically
preventing child and forced labor, for example. At
LANXESS, human rights and ethical principles apply
without restriction, even if they are not stipulated in thelegislation of individual countries. Our target is formulated with corresponding clarity: in all areas over which
LANXESS has control, there should be no breaches ofhuman rights. We have included all relevant informationon our commitment and on the measures establishedin the Group to protect human rights in the “LANXESS
Position on Human Rights.”

NFR§

The LANXESS Code of Conduct, which is applicablethroughout the Group, requires all our employees – acrossall organizational units, regions and hierarchy levels – tobehave lawfully and with integrity. Through correct andproper conduct, each employee is responsible for helping
to prevent harm to LANXESS and increase the company’svalue over the long term. The code covers issues suchas human rights, cartel and antitrust law, anti-corruption,
data protection, occupational, product and plant safety,
and environmental protection.
Other Group directives or Group-wide standards, such as
the HSE directives and the anti-corruption standard, define
the specific application of regulations in the individual
areas of compliance covered by the code and are bindingfor our staff throughout the Group. On the basis of these
LANXESS directives, more detailed regulations that
also take account of local requirements are defined at
the operational level in standard operating proceduresand process instructions, etc. The applicable directives,
standard operating procedures and guidelines areaccessible to all employees. Employees are also regularly
informed of new and updated regulations relevant to them.

38

Direct responsibility for ensuring that human rights arerespected at all times lies with the respective managementat our sites, supported by our global compliance organization and by the regional and local Compliance Officers.
At Group level, human rights are subject to evaluation atleast once a year as part of our risk management system.
We also carry out human rights risk analyses on an annual
and ad hoc basis across the Group. These take accountof the requirements of the German Act on Corporate Due
Diligence in Supply Chains (LkSG) and cover our own
business units as well as direct and, where necessary,
indirect suppliers. If risks are identified, suitable preventive
or corrective actions are taken. The risk assessments arecoordinated by Group headquarters and carried out by
the responsible departments. The assessments confirm
that there is a high level of awareness of the subject andthat functioning mechanisms have been established toprevent violations of human rights.

Furthermore, all organizational units at LANXESS andtheir business activities are subject to regular internal andexternal audits. It goes without saying that these activities
also include monitoring respect for human rights and –if necessary – the introduction of suitable measures toguarantee this.
Our Code of Conduct includes unambiguous instructions regarding the respect of human rights. The code,
which all new employees receive with their employment
contract, is also an aspect of general training measures. In
addition, we hold training sessions geared toward specificselected human rights issues such as occupational safety.
In the event of suspected human rights violations, ouremployees and external third parties can report them invarious ways. For example, the Compliance Helpdesk andthe “SpeakUp” reporting system can be used to notify thecompliance organization – also anonymously if they wish.
We have no reports or knowledge of any systematic
discrimination against LANXESS employees on thebasis of skin color, age, gender, sexual orientation,
origin, religion, physical and mental abilities, trade union
membership or political opinion. In individual cases,
misconduct by employees in respect of colleagues or
third parties was reported in the reporting year. We will not
tolerate verified misconduct and it will result in appropriate
disciplinary measures up to and including dismissal.

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In addition, we promote responsible action in the supply
chain with our involvement in the Together for Sustainability (TfS) initiative, which we operate jointly with otherinternational chemical companies. Under this initiative,
companies that supply significant goods and services
are regularly assessed in the context of TfS audits.
These supplier assessments also cover compliance withaspects of our Business Partner Code of Conduct, suchas compliance with human rights, including with regard
to child labor and forced labor. In the reporting year, we
received no indications of human rights violations by our
suppliers. We generally have structures in place to follow
up individual indications of rights violations as part of ourestablished processes.
We have also established the necessary sales-related
processes to fulfill our responsibilities. This particularly
includes our processes for central product monitoring andfor trade compliance, especially with regard to regulations

39✓

for preventing dual use. We also systematically evaluate
the impact of our products on people as part of ourportfolio analysis.
All acquisitions of companies, interests in companies, orbusinesses are subject to a careful due diligence process
to ensure that human rights are also respected by thetarget company.
Thanks to our long-standing, proven mechanisms forcompliance with human rights due diligence ­obligations –both in our business operations and in the supply chain– we believe we are well prepared for the regulatory
developments formalizing the protection of human rights
in many regions of the world. Our “Social & Governance”
sub-committee has taken on the task of closely examining
the growing legal requirements in an interdisciplinary teamof experts and coordinating the necessary measures. We
report on compliance with our due diligence obligations
under the German Act on Corporate Due Diligence in
Supply Chains on our
website.

Anti-corruption
By signing the U.N. Global Compact, we have undertaken
to actively counter all forms of corruption. This undertaking
is also contained within the LANXESS Code of Conduct,
wherein we make all employees aware of this topic. Our
target is clear: no incidents. Prevention of corruption ispart of our general compliance management system.
Group-wide guidelines define organizational measures✓
NFR

We also expect our suppliers to commit to values andrules, especially the principles of the U.N. Global Compact
and the ILO Labour Standards, and to establish adequate
systems for ensuring legally compliant and responsible
behavior. When we select new suppliers, it is essential
for us that they acknowledge the principles on respectfor human rights contained in our Business Partner Codeof Conduct or have established their own comparable
regulations and management systems in line with the
U.N. Global Compact.

NFR

NFR

✓

and regulations for setting up the compliance management system as well as responsibilities for implementation,
support and continuous monitoring of the system. The
respective site management, supported here too by our
global compliance organization and by regional andlocal compliance officers, is responsible for preventing
instances of corruption at all times.
A Group-wide standard provides clear guidance regarding
incentives. Our employees are prohibited, either directly
or in connection with their professional duties, fromoffering personal advantages to the employees of othercompanies – in particular when initiating, awarding or
handling an order or assignment. Our employees are
likewise prohibited from accepting such advantages orrequesting them for themselves. If an employee is offeredsuch gifts, they must immediately notify their supervisor
or the compliance organization. Exceptions may be madefor occasional, low-value gifts (e.g. promotional gifts).
LANXESS must not grant advantages of any kind to public
servants or other officials in Germany or abroad. Whencommissioning service providers who have contact with
officials on behalf of LANXESS, employees must likewise
ensure compliance with the prohibition on corruption. It
is one of LANXESS’s basic principles not to support any
political parties or groups. LANXESS is involved in large
industrial associations, which we regard as fundamental
to representing our interests. We disclose contributions
and spending on political activities transparently.

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To enhance our employees’ awareness of these rulesof conduct, the issue of corruption is regularly coveredby compliance training. In addition, we hold specificanti-corruption training aimed at exposed professionalgroups and countries. In the reporting year, we recorded
more than 6,000 participations in compliance training
sessions worldwide. If there are indications of complianceviolations, our employees and external third parties cancontact the compliance organization – anonymously if theywish. Our Group-wide “SpeakUp” reporting system allows
all employees or external third parties to report potential
violations in writing or by telephone in over 20 languages
and guarantees secure and anonymous communication
between the compliance organization and the individuals
making the reports.

More than

6,000
compliancetraining­sessions­attended

40

The Corporate Audit function examines the implementation of and adherence to our compliance principles
in the LANXESS Group. This also includes reviewing
the measures to prevent corruption. The annual audit
planning, which covers all business units, follows arisk-based approach, which also considers the exposure
to corruption.
Last year, we received no reports or other indicationsof cases of active corruption or acceptance of bribes
by LANXESS employees. Verified cases of fraudulent✓

behavior on the part of LANXESS employees lead toappropriate disciplinary actions up to and including
dismissal as well as consideration of further legal steps.
In the reporting year, we recorded a single-digit number ofsuch cases, but these did not have any further significant
effects for LANXESS.
We also communicate our clear expectations for theprevention of corruption to our suppliers and service
providers in our Business Partner Code of Conduct. It
makes the clear demand that our suppliers must notengage in bribery, fraud or extortion. It is essential for usthat they acknowledge the principles contained in theBusiness Partner Code of Conduct or have establishedtheir own comparable standards. If suppliers or service
providers do not comply with these principles, this maylead to the termination of the contractual relationship.
To avoid conflicts of interest, all employees must separate
their personal interests from those of the company. Our
Code of Conduct clearly requires employees to disclosepotential conflicts of interest, for example as a result of
secondary employment or personal business relationshipsthat could conflict with the interests of LANXESS. There
were no verified conflicts of interest in the reporting year.
We will not tolerate verified misconduct and it will result
in appropriate disciplinary measures up to and including
dismissal.
LANXESS complies with all applicable anti-money
laundering and terrorist financing laws and regulations.
We do not do business with partners that are subject torelevant sanctions, that engage in illegal business activities✓
NFR

Donations require approval from the Corporate Communications central function – depending on the value – orfrom the Chairman of the Board of Management of
LANXESS AG, in both cases after prior consultation withthe compliance organization.

NFR

NFR

✓

or whose funds are derived from illegitimate sources.
To ensure this, LANXESS describes the requirements
placed on our business partners in the Business Partner
Code of Conduct and has established a Group-wide tradecompliance management system. We did not receive
any reports or other indications of cases involving money
laundering or terrorist financing at our company for thelast fiscal year.

Employees
LANXESS works consistently to be a sustainable andenduringly successful chemicals company. Our successis based on the personal commitment of each individual
employee and high-performing, diverse teams. Our goal isto enable our employees to shape their professional lives
actively and to create a safe, productive and motivating
environment. This makes us attractive to applicantsof all ages and skill levels and enables us to counter
demographic change and the shortage of skilled workers
while also promoting a diverse workforce in which everybody feels included.
An HR strategy (see page 41) based on four pillars
helps us to achieve our goal. We are continuously
enhancing it in order to appropriately support ouremployees at all times in the diverse and sometimes
complex change processes at LANXESS. In times of
profound social and business transformation processes,change management is generally growing in importance.
Another major driver of change is the consistent digitalization of our business processes.

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The still challenging market conditions and weakeconomy, which hit our sector particularly hard, posed
major challenges for the company and, in turn, for our
employees in the reporting year. LANXESS is resolutely
tackling these challenges through the FORWARD! action
plan to stabilize the company in the short term and makeit more structurally efficient in the long term. Short-term
immediate measures under the program in 2023 included
a hiring freeze throughout Europe, postponing the global
Merit round from April to October, suspending theIndividual Performance Payment (IPP) rewarding particu­
larly good performance from the second quarter onward,
significantly reducing the Annual Performance Payment(APP), a six-month voluntary salary cut for the Board ofManagement (25% of fixed salary) and at executive level(10% of fixed salary) and, for Germany, a 65% reductionin the collectively agreed annual benefit. As part of negotiations with the Group Works Council, it was agreed tosuspend the collectively agreed demography payment
in Germany for 2024. Structural personnel measures
included 870 job cuts worldwide, more than half of which
in Germany. This downsizing is achieved by not fillingvacancies as they arise, as well as by natural turnover,transfers and the termination of employment relationships,
for example by offering severance agreements. Measures
under the FORWARD! action plan were communicatedto employees in depth.

41

In times of major change, a strong corporate culture isespecially important. The motto for “Performance Culture
Day 2023” was “We take the challenge and focus on
performance” – because we can only master the major
challenges together. The activities emphasized the importance of diversity, openness and feedback and improved
communication across business units and hierarchies(
see page 51).
This communication is exemplified by the LANXESS
women’s network WInX (Women Initiative LANXESS)

established in 2021, which continued to expand and step
up its activities in 2023. As well as sessions to stimulate
discussion of issues and workshops, other activities onoffer included presentation training (see page 43).
Health was another priority for HR work in 2023. This
was the focus of numerous in-person and online eventssee page 52).
(
Information on life and work at LANXESS can also befound in our “Working at LANXESS” Background Paper.

LANXESS HR Strategy

Enabling growth

Developing
employees andmanagers

Making HR work
more efficient

Acting as partners

Support for sustainable growth throughlong-term and strategic
workforce planning
as well as a global
recruiting strategy andsystemically supported
recruiting activities.

Promotion of crossfunctional and cross­divisional careerdevelopment throughextensive training andlearning concepts
and holistic talent­management.

Creation of efficient andstandardized global HR
processes, supported byconsistent digitalization.

Increased communication within and outside
the HR department for
more transparency andmore targeted identification of the needs of thevarious Group functions
and business units.

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83

Number of Employees
Headcount

Full-time equivalents

15,479 15,258.0

Number of new employees

14,756 14,531.0

14,866 14,636.0

15,177 14,945.0

nationalities at
LANXESS

12,849 12,643.0

1,130
868

842

728

508

2020

2021

2023

2022

✓

NFR

✓

42

Diversity and inclusion✓

We value diversity and regard it as a strategic advantage.
Therefore, we aim to enhance diversity at LANXESS and
use its positive effects for our company and employees. A
corporate culture that is open equally to all people helps us
to become more innovative and efficient and to attract andretain promising talents. Recognizing and appreciating
diversity is therefore ingrained in our values, our guiding
principles as well as our leadership principles.

NFR

NFR

all HR processes D&I-compliant. We take a holistic viewof D&I, focusing on aspects such as gender, nationality,
age, disability and sexual orientation.
In 2023, we again encouraged our managers andemployees to consider unconscious patterns of thought
and bias through the Performance Culture events “Just
Do It” and the “Performance Dialog Impulse.”
Ratio of Disabled Employees at German Companies

We continued to follow our strategic “Diversity & Inclusion”(D&I) concept for promoting diversity, equal opportunities
and inclusion in 2023. We are working steadily to makeRatio in %

2019

2020

2021

2022

2023

5.9

6.2

6.2

6.8

6.8

✓
NFR

2019

The ﬁgures for 2022 in this table and below include the High Performance Materials business unit. For 2019, the discontinued operationsof the Leather business unit are included. All ﬁgures relate to the core workforce. The ﬁgures for 2018 include ARLANXEO.

Gender diversity remains an important focus topic for
us – with the clear target of increasing the proportionof women in the company. In addition, the German Act
on Equal Participation of Women and Men in Executive
Positions in the Private and the Public Sector commits us
to set targets in Germany for aspects such as increasing
the share of women at the two management levels below
the Board of Management.
Accordingly, in April 2022 LANXESS set the target ofincreasing the proportion of female employees to atleast 25% at the first level and 28% at the second level
below the Board of Management by June 30, 2027. In
the reporting year, women made up 23.1% of the firstmanagement level below the Board of Managementand 28.4% of the second level below the Board ofManagement.

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NFR

✓

We have also set further targets above and beyond thelegal requirements, and one of our consistent aims is
to ensure that women account for at least 30% of all
management positions by the end of 2030. At the end of2023, the proportion was 26.1% (previous year: 25.2%).

D&I (Diversity & Inclusion)
Leverage diversity to improve business results
WInX (Women Initiative LANXESS)
Promote gender equality
Attraction
and retention

Proportion of Women

Advancement

Awareness

Allyship%Total workforce

Non-managerial

21.5

knowledge

26.1

Further D&I targets can be found in the targets tableon page 17.
Networks can make an important contribution to thepromotion of diversity, equal opportunities and inclusion. WInX – our global “Women Initiative LANXESS” –connects women at LANXESS across national borders. As
part of this initiative, participants were able to network at
virtual, hybrid and in-person events around the world. Witha “Male Ally Workshop,” the German women’s network
showed that the engagement of male employees is also
important for gender diversity and equality. The workshop
gave rise to the “HeForWInX” network group for men
who are committed to supporting the women’s networkin the future.

43› Increase transparency› Let role models guide› Foster gender equality
with male allies

through KPIs
› Reduce unconscious
biasesthe path› Upskill and coachwomen› Get leaders to actively
support women

20.0

✓
NFR

Management positions› Attract female talents› Retain workforce andProportion of Women on the Board of Management and at the Top Management Levels
Proportion of women1)

2019

2020

2021

20222)

2023

Goal

Target date

First level below the
Board of Management

20.9%

16.7%

18.2%

22.5%

23.1%

25%

June 30,
2027

Second level below the
Board of Management

25.1%

23.4%

25.7%

24.8%

28.4%

28%

June 30,
2027

Board of Management(number of women)

0

1

1

0

1

–3)

–

1) Figures as of December 31 of the respective fiscal year.
2) Year when new target was set.
3) The Second Act on Equal Participation of Men and Women in Management Positions applies here, according to a target is no longer required for the
Board of Management and the statutory requirement applies instead.

Recruiting
In the reporting year, we again saw an intensificationof the competition for talent in our core markets. The
significant development toward an employees’ market
and the demographic challenges make recruiting animportant strategic issue. To reflect this, we continued
to expand and network our recruiting teams in GreatBritain and the Netherlands and bolstered our internal

knowledge sharing. Identifying and approaching specificpromising external staff, known as active sourcing, has
become a permanent tool around the world. Specialized
LANXESS recruitment teams work in the U.S., China, India
and Europe and, since 2023, in Great Britain and theNetherlands. In order to approach interesting candidates
in both an active and a targeted manner, we have our own
pool of active sourcing specialists, with whom we largely

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replaced external HR service providers in the reportingyear. This significantly reduced recruiting costs even in achallenging labor market.
Our recruitment process is highly digitalized. Our
software platform covers all processes from recruiting
to onboarding to the signing of employment contracts.
It helps to make approaching and acquiring new talent
standardized, transparent and candidate-focused. We canalso keep our business units and global management up
to date on the status of an application process at all times
through standardized reports. In 2023, we successfullyrolled out the software platform in Canada, the Netherlands and Great Britain.
Even in challenging times, we invest in a clear employer
brand in order to highlight the advantages of LANXESS asa global and socially responsible employer. Our employer
brand centers on authenticity, diversity and, increasingly,
sustainability. We communicate this brand via social
media, where we share a mix of company, product and HR
information in order to spark enthusiasm for our company
among talented people from various functions. In thereporting year, we ran numerous social media campaigns
with a focus on the U.S. market. Making contact via social
media and, in particular, through videos, also plays a
key role in education. We also attended university andapprenticeship fairs around the world.

44

New Employees by Age Group, Gender and Region
EMEA(excluding Germany)

Germany

North America

Latin America

Total

Asia-PacificAge group

f

m

f

m

f

m

f

m

f

m

< 30

8

20

16

76

12

60

5

12

10

19

238

30–49

17

46

39

106

20

87

5

11

23

47

401

≥ 50

6

9

3

37

8

21

0

0

2

3

89

Total

31

75

58

219

40

168

10

23

35

69

728

Region total

106

277

208

33

104

%
f

m

f

m

f

m

f

m

f

m

< 30

Age group

26.7

17.2

8.2

9.4

20.5

34.4

11.5

24.1

27.0

24.1

30–49

9.4

9.0

6.0

4.5

10.1

11.7

3.8

3.1

7.4

4.7

6.2

≥ 50

4.4

1.8

0.5

1.3

3.1

2.7

0

0

2.7

1.0

1.6

Total

8.9

6.7

4.2

3.7

7.8

9.9

4.9

4.3

8.3

4.9

5.4

Region total

7.2

3.8

9.4

4.4

15.0

5.7

Disclosures apply to the core workforce not including conversion of temporary to permanent employees and acquisitions. The total in the table deviates slightly
from the ­figure stated in the text because the table only includes employees of male or female gender. In 2023, we hired five people who indicated their gender as“other/undeclared/unknown.” Including temporary employees, the number of new employees increases to 1,216 (all genders included).

Despite difficulties on the labor market and at thecompany, we were able to fill some urgent vacancies in
the reporting year. A total of 728 new employees joined
the Group (1,216 including temporary employees).
Reflecting increasing demographic change, the newhires were spread across all functions. Overall, 2023
was dominated by the challenges of financial difficulties
at the company combined with higher expectations among
applicants in a clear employees’ market. This combination

makes it increasingly challenging to attract external
applicants to LANXESS and fill vacancies. Positioning our
employer brand is all the more important and is possible
only by raising greater awareness of sustainability issues
and ensuring that the chemical industry is viewed asa solutions provider. Increasing product marketing forsustainable products (Scope Blue) on social media was
helpful here.

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Vocational training

NFR

Training young people has always been hugely important
to us, both in order to safeguard the company’s future andas part of our social responsibility. Vocational training is
the basis of our strategy of developing specialist staff for
the German sites from within our own ranks.

LANXESS Deutschland GmbH on September 1, 2023.
The proportion of female career starters was 7.5% in
the reporting year (previous year: 7%). Taking the new
intake into account, 642 apprentices are employed at
LANXESS Deutschland GmbH (as of October 1, 2023).
The proportion of female apprentices across all years isaround 7%. We invested around €22 million (previous
year: €22 million) in the vocational training of young
talents in 2023.

201 apprentices on eight technical, scientific andcommercial career paths and young talents in fourdual-study programs started their apprenticeships at

Hire Rate of Apprentices and Students on CombinedWork and Bachelor’s Degree Courses at LANXESS1)
%

100

88

85

83

85

2020

2021

2022

80

79

60
40
20

Training will remain a key pillar of our HR policy in the years
ahead. We are importantly demonstrating this with new,modern offerings. For example, we initiated various special
campaigns to recruit apprentices. The “Meet & Match –Dreh Dein Ding” event was supplemented with the“Meet & Match – Business” format, which aims to recruit
apprentices for commercial careers. At the two events,
junior recruits signed an apprenticeship contract withina day after passing a test and an interview.
Apprentices by Career Path1)%

It is our aim to retain at least 80% of our apprentices
after successful completion of their training. Given the
difficult economic conditions and structural changes,
we fell slightly short of this target in the reporting year at
79.5% (previous year: 85%).

✓
NFR

✓
NFR

Our international graduate trainee program is a fundamental tool for securing talent in Germany. Exceptionally well qualified master’s graduates are prepared forchallenging specialist and managerial tasks and cangather valuable experience in Germany and abroad. In
addition to an engineering orientation, LANXESS alsooffers attractive areas of activity for economics graduates.
Our young talents receive diverse practical learning opportunities as well as targeted training and opportunities forinternal networking. In 2023, we acquired 14 new talents(five women, nine men). The goal remains to hire themonce they have successfully completed their management apprenticeship and for them to take on leadership
positions in the medium and long term.

Scientiﬁc(including 8 students on
combined vocational
training and study courses)

6
19Technical(including 8 students on
combined vocational
training and study courses)
Commercial(including 6 students on
combined vocational
training and study courses)

75

2019

2023

1) LANXESS in Germany

Outside Germany, we offer apprenticeship programs inseveral European countries, as well as Canada, Brazil andIndia, for example, in order to cover our requirement foryoung talent in those countries. In addition to our regularapprenticeship activities, we also cooperated with the
Iochpe Foundation in Brazil. The program was launched
in July 2022 and ended in May 2023. Through thiscooperation, we again enabled ten young people fromdisadvantaged backgrounds to take part in a training
course at our production site in Porto Feliz. In India,
the government supports an apprenticeship program
to give more young people the opportunity to acquire
qualifications required to work in the chemical industry.
Within this framework, a total of 45 apprentices worked
for us at the LANXESS sites in Nagda and Jhagadia in
the reporting year.

1) LANXESS Deutschland GmbH45

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staff chiefly from our own ranks in the future. Despite thechallenging situation at present, we are still looking aheadto the future and continuing to work on retaining young
staff at our company. As part of this, we offer attractive
development opportunities. The personnel conferences
introduced in 2020 for the production and technology(P&T) workforce have become successfully establishedand a proven planning instrument. They take place
annually and serve the purpose of strengthening rotations
and development in operations in particular. Various
workstreams were launched in 2022 to cater moreclosely to the personnel needs and challenges of P&T.
HR and the department in question devised joint solutions
to specifically gear talent acquisition, remuneration, work
flexibility and employee retention and development to P&T
requirements. Four of the seven working groups havealready met their targets. The other working groups will
be reassessed and potentially restructured at the next
personnel conference.

8.14%
Apprentice ratio1)1) This figure is the ratio of apprentices at LANXESS Deutschland. The numberof LANXESS Deutschland employees undertaking an apprenticeship isexpressed as a percentage of the core workforce of LANXESS Deutschland(
employees with a permanent, full- or part-time employment contract) plus
the apprentices of LANXESS Deutschland.

Strategic workforce planning
The increasing average age of our employees in conjunction with the scarcity of young talent in some regions
means that the competition for qualified employees is
growing fiercer. Therefore, we have been investing in ourown apprenticeship and management trainee programsfor years in order to cover our requirements for specialist

12,849LANXESS­employees­worldwide

To pass on the immense knowledge of our employees
entering retirement to subsequent generations, weEmployees by Age Group, Gender and Region1)
EMEA (excluding
Germany)Age group

Germany

North America

Latin America

Total

Asia-Pacific

f

m

f

m

f

m

f

m

f

m

< 30

25

85

178

753

56

171

41

47

32

55

1,443

30–49

166

417

632

2,267

196

729

122

343

292

909

6,073

≥ 50

133

416

540

2,699

249

752

31

125

73

315

5,333

Total

324

918

1,350

5,719

501

1,652

194

515

397

1,279

12,849

Region total

1,242

7,069

2,153

709

successfully rolled out a knowledge transfer program in
2021. It aims to identify departing knowledge carriers at
an early stage, systematically record their implicit knowledge, and ensure its structured transfer to subsequent
generations. This is achieved through moderated transfer
processes (expert debriefings) and self-guided processes(learning tandems). Since the project was initiated in
2021, there have been 35 successful expert debriefings
and five learning tandems in Germany, the EMEA region
and the U.S. Expertise is centralized and digitalized as partof the knowledge transfer program. A plant-specific knowledge database – the Plant Wiki PLUS – has already been
introduced at four German plants. LANXESS received the
HR Excellence Award for the project in 2022 and took
second place in the German “Personalwirtschaftspreis”(Human Resources Award) in 2023.
We use our global strategic HR planning process tosimulate the long-term development of our global
workforce. We use a planning tool to simulate the development of our workforce given various assumptions,from which we derive our requirement for new staff. The
analysis includes data on retirements as well as voluntary turnover, with the assumptions used for the analysis
varying country by country. Our aim is always to identify
staff shortages at an early stage so that we can takemeasures and countermeasures in good time.
Further information on learning and development canbe found on page 51–56.

1,6761) In total, we had 12,849 employees in the reporting year.

46

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Remuneration and benefits✓

NFR

Our remuneration policy offers fair and competitive
remuneration worldwide, chiefly based on relevant externalbenchmarks, level of professional experience and qualityof work, regardless of the gender of the employees. We
regularly reassess the fixed annual salary of our non-payscale employees on the basis of these factors in ourannual salary review. Salary increases for our pay-scale
employees follow the applicable collective agreements.
The remuneration ratio of women and men is reviewed
regularly and analyzed including other factors.

NFR§

Remuneration Ratio of Women to Men
%

100
106
103

Executive level
Management level– Middle management level

98
101– Junior management level

94
97
100
105

Non-management level

Base salary

Total remuneration

The difference between the average remuneration for men
and women at LANXESS is less than ±6% for all individuallevels. These salary differences represent the most critical
approach and are influenced by further, non-gender-specific variables – such as professional experience, salary47

differences due to geography or function, or differing work
histories. It is close to the clear goal of our HR policy tohave no differences in pay on the basis of gender. Our
Diversity & Inclusion measures also contribute to this(see page 42).
As part of the transparent remuneration in line withmarket conditions, LANXESS offers most of its employees
bonus systems geared toward the company’s long-term
success. In total, 92.3% (previous year: 86%) of LANXESS
employees worldwide participated in our variable compensation systems in 2023. Nevertheless, the amounts paidout were far lower in 2023.
The central performance-based compensation component
is the Annual Performance Payment (APP), which we
provide on a non-pay-scale basis and in most countries
within the pay scale on top of fixed pay. This bonus
payment is linked to our key controlling indicator, so
requires the Group’s attainment of a defined EBITDA pretarget. Further individual targets in areas such as safety
and sustainability additionally apply to top management.
In April 2023, we shared around €68 million of our profits
for fiscal year 2022 with our employees worldwide (2021:€136 million). This was far lower than in the previous year,
reflecting the strained business performance in 2022.
With the Individual Performance Payment (IPP), managers
can also reward employees’ extraordinary individual
achievements during the year in a prompt and unbureaucratic way. About 91% of our employees worldwide areentitled to receive the IPP. Around €0.2 million wasawarded in fiscal year 2023. The amount was considerably lower than in previous years on account of thecompany’s financial situation.
In addition, we offer a long-term incentive program forour managers in Germany. There are similar programsin the U.S. and India. The Long-Term Stock Performance
Plan (LTSP) consists of four tranches commenced eachyear and tracks the performance of the LANXESS sharecompared with FTSEurofirst 300 Eurozone Chemicals
Index, over a period of four years in each case. In addition,
there is a Share Ownership Guideline (SOG) for the Boardof Management and our top-level managers in order toemphasize trust in the strategy and long-term success of
LANXESS (see “Compensation Report,” page 15).
100% of those eligible participated in the current LTSP
program in 2023.
Another core element of our offering is the company
pension plan for plugging potential gaps in provision in oldage. The design of the company pension plan differs fromcountry to country depending on the state pension system.
LANXESS’s pension commitments often go beyond what
is required by law. They are funded by employer and/or employee contributions. In Germany, employees canvoluntarily increase their pension and receive an additional
grant from LANXESS. 73% of employees participate in the
supplementary component of the current pension plan.
Other offerings facilitate the transition into retirement,such as the long-term account for pay-scale employees
in Germany. The participation rate in 2023 remained at
a high level of around 90%.

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Working conditions and benefits

LANXESS Employee Structure by Employment Type, Gender and Region(also including employees on fixed-term contracts)1)

In addition to fair monetary remuneration, flexible
working conditions and benefits are becoming increasingly important. As components of total remuneration
at LANXESS, they make a material contribution to thewellbeing and productivity of our workforce. It is important
to us that the benefits support our corporate targets,values and culture and address the relevant needs of ouremployees. When designing these benefits, we often go
further than the respective statutory framework. In addition,
we always aim to account for individual needs and life
situations in the best possible manner.

NFR

✓

48

In line with our office-based employees’ desire for more
flexible working and working-time models, we introduced“Xwork – Flexible Work” and global flexibility principles five
years ago. A significant aspect of this flexibility is the ability
to work remotely. The last few years have shown that muchof our office employees’ work can be done from home.

Contract
Permanent contract
Full-timePart-time
Temporary contract
Full-timePart-time
Total

Germany

North America

Latin America

Total

Asia-Pacific

f

m

f

m

f

m

f

m

f

m

324

918

1,350

5,719

501

1,652

194

515

397

1,279

12,849

280

887

875

4,410

496

1,652

194

515

393

1,279

10,981
1,868

44

31

475

1,309

5

25

27

109

694

5

5

27

29

17

52

990

21

27

80

646

5

5

18

19

15

51

887

29

48

9

10

2

1

103

945

1,459

6,413

506

1,657

221

544

414

1,331

13,8394349

41) In total, we had 13,844 employees in the reporting year (including temporary employees). The difference of five employees is because five employees indicatedtheir gender as “other/undeclared/undefined.” In fiscal year 2023, we also employed a total of 41 temporary staff members (10 women, 30 men and one person“undeclared”) at our German companies.

For creative activities and team interactions, however,going into the office is still indispensable for success andemployee wellbeing. Accordingly, employees can work
remotely for an average of up to eight days a month inaddition to working in the office – provided the tasks are
suitable for remote working. Guidelines to this effect wereadopted in the U.S., Great Britain, India and in central
and eastern Europe. Countries in which no LANXESS
guidelines on remote working previously existed, suchas Korea and Australia, have now also published internal
guidelines.

✓
NFR

✓
NFR

All services apply to our core workforce. Even so, someindividual services in the regions may have differing
structures and be locally adapted to the needs of ouremployees. Our core workforce includes all employeeswith a permanent full-time or part-time employment
contract. As of December 31, 2023, this was 93%(previous year: 93%) of our total workforce worldwide.

EMEA(excluding Germany)

The “flexitime” model derived for Germany from the Xwork
principles aims to enable employees in management
to work part-time in an intelligent way. In the Flexi-95
model, the level of employment is reduced to 95% witha corresponding adjustment to remuneration, meaningthat a full-time worker is entitled to 13 extra days off per
year. Corresponding models with levels of employmentof 90% and 85% are also possible. Flexitime has been
available to all non-pay-scale employees since the startof 2021. In 2023, there were 199 active participants, ofwhich 55 in senior management.

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Work/life balance has become even more importantunder the difficult conditions of the coronavirus pandemic.
Since January 2023, we have offered our employees inGermany a number of new childcare options, such as two
additional daycare center locations. A total of 8% of theworkforce in Germany aged between 20 and 40 wereon parental leave for a time. Of this figure, 57% werefathers. 100% of the employees who ended a parental
leave period in 2023 returned to a job at LANXESS, 99%of which still worked in the company at the end of 2023.
The legally defined framework for maternity rights andparental leave taken for granted in Germany and similar
models in the European Union are by no means standard
worldwide. Therefore, at our sites outside Europe, we areassessing whether we can introduce or expand country
specific models for our employees. In Brazil and the U.S.,
for example, we offer parental leave programs that go
beyond the respective legal requirements and allow ouremployees to spend time with their children on full pay.
Against a backdrop of demographic change, careis a major issue in Germany. The centerpiece of the
LANXESS care model is caregiver leave, which allows
our employees to reduce their working hours by morethan their pay during the care period and to work off thehours commensurate with the pay they received after
their return. Caregiver leave and time off have beenused by more than 150 employees in Germany since

49

Options for Childcare, Maternity/Paternity Leave
and Care Models Worldwide%

100Childcare
Paid maternity leave

66
80

1)

Paid paternity leave1)
Breast feeding/lactation facilities
or beneﬁts

75
30

Paid family/caregiver leave2)

761) Beyond legal requirements.
2) Besides parental leave.
Coverage is shown in percent for each initiative with regard
to the countries and the total number of employees.

the LANXESS care model was introduced. In addition,
the supplementary long-term care insurance “CareFlex”
was launched in Germany in mid-2021. We thus offer our
pay-scale employees additional protection against the risks
and strains that arise for those affected and their families
when care is required but are not covered by statutory
long-term care insurance. The costs of the additional
insurance cover are borne entirely by LANXESS. Since
the beginning of 2022, CareFlex has also been available
to our managerial employees. In fiscal year 2023, about
7,700 employees took advantage of this offer.

✓

Commitment and loyalty

NFR§

Committed and motivated employees are the key tolong-term corporate success. Accordingly, we pay
special attention to encouraging the commitment of ouremployees. Good management helps here, as do personal
development prospects and company values with which
the employees can identify. All these factors shape the
LANXESS corporate culture, which we actively strengthen
and develop with regard to the constant new challenges
in our markets.
Since 2021, internally trained culture coaches have madean important contribution here. They start and supervise
cultural initiatives in their own area and can be involvedin major change processes. Regular performance culture
touchpoints serve communication on cultural issues. For
example, the cross-location Performance Culture Networkin Germany meets online on a regular basis for a critical
discussion of culture issues. Additional regional performance culture groups were established in the U.S. and
EMEA region in 2023 (see pages 42 and 53).
Regular and structured feedback is another importantelement of our corporate culture. To this end, we use
different survey formats to allow feedback relating to thesatisfaction and commitment of the various employee
groups. Employee surveys were carried out at selected
locations in 2023, for example in the U.S. and theNetherlands.

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§

NFR

%

Total turnover
Turnover resulting from voluntary resignations

10.0
7.7

9.0
7.0

6.5

4.4

5.0
4.0

3.4

3.0

3.9

2.2

3.0

✓

left our company of their own accord within three years of
being hired (early turnover) stood at an average of 1.3%
worldwide in the reporting year (previous year: 1.7%).
We rate our performance in relevant rankings and competitions as a further sign of our employees’ satisfaction
and the attraction of LANXESS as an employer. In Brazil,
LANXESS was recognized as the best employer in the

In Germany, the voluntary turnover rate was 2.6%
(previous year: 2.8%). The percentage of employees who

6.4
5.2

6.0

✓

7.7

NFR

8.0

our internal employer branding, for example by tailoring
it individually to the different age groups in the company.
We also inspire a strong sense of belonging among
our workforce with various opportunities for internal
networking, which we are increasing in a targeted manner.

NFR✓

Development of Turnover Over Time

Early Turnover Resulting from Voluntary Resignations by Age Group, Gender and Region%
EMEA(excluding Germany)

2.0

Germany

North America

Latin America

Total

Asia-Pacific%1.0
Age group
20191)

2020

2021

2022

2023

1) The turnover rate is the sum of departures (from the Group) in the last twelve
months divided by the average of the headcounts at the end of the last four
quarters. It therefore includes employer- and employee-initiated departures aswell as retirement. Since ﬁscal year 2019, temporary absences, e.g. due toparental leave or lengthy illness, are no longer counted as departures.

NFR

✓

50

The turnover rate on the basis of resignations is an
important indicator of our employees’ commitment.
Our goal is to continuously keep this ratio below 3.5%
until the end of 2023. In the reporting year, the global
voluntary turnover rate was 3.9% (previous year: 4.4%),
meaning that we unfortunately missed our target for thisyear. The retention of employees, especially talented ones,
is a growing challenge, as the labor market has clearly
become an employees’ market. In terms of HR strategy, itis therefore increasingly important to keep specialist staff
within the company. Accordingly, we are also intensifying

Abs.

f

m

f

m

f

m

f

m

f

m

< 30

6.7

6.9

1.0

1.2

5.1

8.0

4.6

6.0

8.1

11.4

3.5

56

30–49

3.3

3.3

1.5

0.6

3.5

2.8

0.8

0.8

1.9

1.6

1.6

101

≥ 50

0

1.0

0

0

1.9

1.6

0

0

0

0

0.4

22

Total

2.3

2.7

0.9

0.4

2.9

2.8

1.5

1.1

2.1

1.8

1.3

179

Region total

2.6

0.5

2.8

1.2

1.9

Region total(absolute)

38

36

62

9

34

Early turnover: percentage of employees who left our company of their own accord within three years of being hired.

Turnover Resulting from Voluntary Resignations by Age Group, Gender and Region%
EMEA(excluding Germany)Age groupfmGermany

North America

f

m

f

m

Latin America

Total

Asia-Pacific

f

m

f

m

%

Abs.

< 30

6.7

11.2

5.2

5.7

6.8

13.8

9.2

8.0

16.2

15.2

7.9

125

30–49

9.4

8.4

4.0

2.9

10.1

6.9

2.3

2.8

3.9

4.4

4.6

293

≥ 50

4.4

2.7

1.4

1.2

3.1

3.7

0

0

5.5

1.0

1.9

104

Total

7.2

6.2

3.2

2.5

6.2

6.2

3.4

2.6

5.2

4.2

3.9

522

Region total

6.4

2.6

6.2

2.8

4.4

Region total(absolute)

94

190

136

21

81

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Total Turnover by Age Group, Gender and Region
EMEA(excluding Germany)

Germany

North America

Latin America

Total

Asia-PacificAge group

f

m

f

m

f

m

f

m

f

m

< 30

2

14

10

59

4

35

6

6

10

17

163

30–49

21

54

29

83

27

74

11

24

22

77

422

≥ 50

10

41

25

204

28

105

2

12

8

29

464

Total

33

109

64

346

59

214

19

42

40

123

1,049

%
Age group

f

m

f

m

f

m

f

m

f

m

< 30

6.7

12.0

5.2

7.3

6.8

20.1

13.8

12.1

27.0

21.5

10.3

30–49

11.7

10.6

4.5

3.6

13.6

10.0

8.5

6.7

7.1

7.6

6.6

≥ 50

7.3

8.4

4.5

7.3

10.9

13.6

6.7

9.1

11.0

9.2

8.4

Total

9.5

9.8

4.6

5.8

11.5

12.7

9.3

7.8

9.5

8.8

7.7

Region total

9.7

5.6

chemical and petrochemical industry for the fourth timein a row, while our Indian subsidiary received the FICCI
Chemical & Petrochemicals Award 2023 for Sustainability
and Excellence. In China, we were again recognized asa top employer for our HR work. In Germany, LANXESS
also placed second in the 2023 “Personalwirtschaftspreis”(Human Resources Award).

Employee development and talent­management
Only by constantly investing in training our employees
and imparting clear, globally binding values and standards
can we as a company keep on using the opportunities
of changing markets successfully. Wide-ranging leadership and HR development tools enable and motivate our

51

12.4

8.2

9.0

employees to act on the basis of our values, rethink issues,
implement them quickly and devise solutions in a team.
We also provided additional opportunities to best support
our managers and employees in economically challenging
times, for example through social learning and dialog
formats, team workshops and digital learning.
In 2023, we carried out some training face-to face again,
but also continued to develop and implement virtual
formats. The experience of the last few years has shown
us that hybrid formats yield the best results. After its
successful launch in 2021, our digital learning platform“LinkedIn Learning” was further rolled out internationally.
This means that our employees now benefit from morethan 21,000 additional digital learning opportunities

for their professional and interdisciplinary development
and the strengthening of future skills. In 2023, LinkedIn
Learning helped employees make effective use of the
new Microsoft 365 applications. Our internal network
includes 70 LinkedIn Learning curators who develop
tailored learning pathways, increasing the quality ofdigital learning. Globally, more than 95% of our workforce
received training in the reporting year, including both basic
and safety training, as well as further education to further
their careers and skills.
Strategic manager development again played a central
role last year. Our development programs promote thekey skills that managers need in a constantly changing
business world. We provide both in-person and virtualmanagement development programs, as this hybrid
format ensures an optimum combination of effective
training and flexibility, with a mix of face-to-face contact
and digital learning. The aim of the programs is to embed
our leadership principles more deeply worldwide andto strengthen our leadership culture. Depending on theexperience of the participants, basic leadership techniques
are conveyed, refreshed and translated into individual
measures. Since management practice differs dependingon the country and cultural environment, our training
programs also take cultural differences into account andinclude the requirements of digital management.

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As well as the training programs, we have prepared asimple overview of the further training we recommend
for our managers. These recommendations are regularly
updated and are designed to improve individual leadershipskills and encourage the ongoing professional development of our managers.

NFR✓

With our global, cross-divisional and cross-hierarchical“compass,” and “eXplorer” talent programs, we support
particularly high-performing employees, retain themwithin the company and identify suitable successors for
key positions at an early stage. “Compass” for employees
at the start of their career offers guidance for their future
career path. The format encourages practical development
measures. The core element is a Development Center.
“eXplorer” is aimed at employees who have the potential
to develop toward major leadership roles at LANXESS
in the next few years. Key topics include dealing withcomplexity, new forms of collaboration and digital andagile leadership principles.
Events were held in person again in 2023, supplemented by virtual and individual learning opportunities.
Although the specific targets for female and non-German
participants expired in the reporting year, we exceeded
our previous quotas: 93 people took part in the talent
programs in 2023. The share of 33% female and
56% non-German participants demonstrates that weare committed to strengthening diversity in our talent
programs.

52

International deployments are another key componentof our systematic HR development. At the end of 2023,
33 employees – i. e. around 1% of our specialist andmanagerial staff – were deployed outside their contractual
country as expatriates. To support their development, we
also send younger employees in particular on shorter
assignments abroad throughout the year. It remains
our aim to build up local management with specialist
knowledge and expertise and assign challenging tasks
to suitable employees at our international sites. At sites
outside Germany, 88% of our leadership positions are
currently held by local employees.

As part of mental health week in October, we looked at
how to deal with uncertainty and fear in times of crisis.
We ran various campaigns around the world aiming,for example, to promote good mental health. As partof “mindful@LXS,” an online mindfulness program,
we provided six modules in English and German on­mindfulness training and improving resilience. Screening
based on the Vienna stress test was also carried out at
the Leverkusen, Cologne and Mannheim sites.

Occupational health and safety› Company integration management (CIM) for

Our occupational health management (OHM) aims tocreate a safe and healthy working environment, to raise
all employees’ awareness of their own health and to
motivate them to act on their own initiative and adopt
healthy behaviors in their professional and private lives.

employees with long-term illnesses› Division-specific OHM with structured management
approach for plants and departments› Occupational health promotion with offerings for all
employees

The World Day for Safety and Health at Work in April 2023
addressed the impact climate change has on people’s
health and safety. A series of health events were organizedaround the world, including the digital “Health for future”
event, which discussed health-related measures to combat
climate change. In Germany, we talked to our employees
about the links between food, the climate and health andoffered skin screening. At the Leverkusen and Uerdingensites, we organized trade fairs in collaboration with occupational health physicians, a health insurance fund and a
PPE manufacturer.

All three action areas were worked on systematically in thereporting year and strengthened in line with the company’s
overarching health goals.

In Germany, occupational health management (OHM)
works in three action areas:

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In 2023, we designed a new seminar for managers andran the first series of events in Germany and in the EMEA
and Americas regions. Working in small groups, managers
reflected on their personal self-care and leadership stylewith regard to how these benefit their health.

53

NFR

✓

We address the topic of occupational safety with our global
safety initiative Xact. It pursues the goal of gradually lifting
the safety culture of LANXESS to a higher level. Startingwith top management, all employees are expected to work
together to improve safety in the Group. We are doing thisbecause we firmly believe that all industrial accidents are
avoidable. As a specific target for occupational safety, we
aim to reduce the lost time injury frequency rate (LTIFR,
known as MAQ [“accidents per million hours worked”] inGermany) by more than half by the end of 2025 comparedto the reference year of 2016 (LTIFR 2.0).

✓
NFR

We also promote wide-ranging measures to promote
employee health and wellbeing at our international sites.
In addition to the physical aspects, the topic of mental
health is continuously growing in importance. Findings
from neuroscience show that mindfulness-based stress
reduction can protect against the effects of chronic stressand improve wellbeing as well as teamwork. Mindfulness
is likewise of great importance for the safety culture.
Since February 2021, we have therefore offered the“mindful@LXS” program to our employees worldwide.

In company integration management, we continued ourcollaboration with an external service provider for casemanagement. Our goal here is to establish uniform quality
standards at all LANXESS locations and to provide thegrowing number of employees who return to work after
an illness with prompt professional advice and permanent
reintegration.
Expanding the division-specific OHM was a particularpriority in 2023. A total of five plants from four Germansites and around 450 employees took part in a programwith the goal of further improving prevention andhealth-promoting working conditions and systematicallyembedding this way of working in the divisions. Theinternal health groups, whose role involves training
employees as health promoters, also worked on this.
Measures were also implemented and evaluated that
aim to improve ergonomics in plant-specific activities orthat address mental health at work.

As ever, the work of the Xact team is focused on stabilizing and fostering a positive culture of safety and greateralignment toward behavior-based safety. To this end, wedeveloped a systematic process called the Safety Culture
Development (SCD) Process, which was launched globallyin 2019.

In occupational health promotion, we arranged activities
related to exercise and addiction at the workplace, among
other topics, in 2023.

The six-stage process is centered on a full-day, focus group
workshop led by the Xact team. In this workshop, representatives of all hierarchy levels engage in an in-depth discussion on the safety culture in their own plant. In this way,
we can identify the individual strengths and weaknessesof the respective plant and initiate targeted improvements. To boost sustainability, a follow-up workshop a
few months later discusses how to implement measuresat the plant. The Xact team collates and evaluates theresults centrally in order to determine global, regionalor department-­specific trends. Internal communication,
training and useful processes and tools are the aspects
with the greatest potential for improvement.
By the end of 2023, 99 of the roughly 140 planned focusgroup workshops had been carried out in Germany, Argentina, Belgium, Brazil, France, India, Italy, Canada, GreatBritain, the U.S. and China. The process was continued
in 2024 and open workshops conducted.

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Management
kick-oﬀ

6–8 weeks

Shiftmeetings

NFR

Our Safety Culture Development Process

Focus-group
workshop

4–6 weeks

2–3 weeks

An interim evaluation shows that our employees appreciate the fact that they can contribute personally, receive
direct feedback from their colleagues and managers andactively help to shape the safety culture in their own areaof activity. The greatest potential for improvement is in thecultural and behavioral reasons for unsafe actions. The
characteristics that define our LANXESS safety culture
play a fundamental role here. These are:54

Feedback
to the shifts

✓
NFR

NFR

✓

Implement
actions

Immediately

Follow-up
workshop

3–6 months› Safety leadership by example› Attitude to safety/taking responsibility› Learning and sharing/error culture› Mindfulness/vigilance› Positive reinforcement of safe behavior› Communication/feedback culture

The Xact initiative has summarized these six cornerstones
in a guidebook called “How Can Safety Culture Be Made
Visible?”. It was introduced worldwide in six languages inearly 2021 and is a key element of our communication
about safety. In order to make the content of the Xact
guidebook more visual, the global Xact-Community developed digital flashcards in which employees presented
their own examples and experiences in video messages.
Knowledge is imparted and consolidated in interactive
exercises. Five of a total of six digital flashcards havealready been created and provided to employees in elevenlanguages on local e-learning platforms. Flashcard #6“Communication/feedback culture” was created in English
and German at the end of 2023 and will be translated
into other languages and rolled out internationally at thestart of 2024. More than 6,000 employees have alreadyused this learning opportunity.
In accordance with the safety guidelines at LANXESS,
every organizational unit, e.g. a plant, is required to carryout regular risk assessments and define suitable measures
to protect against potential hazards. Employees are trained
accordingly, and the training and the measures arechecked regularly. We thus meet the legal requirements
and protect employees, contractual partners and visitors
to the plant alike.

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Indicators for the assessment of occupational safety at
LANXESS are the recordable incident rate (RIR: numberof incidents per 200,000 working hours that have to bereported according to the Occupational Safety and HealthAdministration [OSHA]) and the lost time injury frequency
rate (LTIFR: accidents per million hours worked) for
accidents with days lost. The LTIFR in 2023 was 0.6 (asof December 1, 2023) and thus higher than the previous
year’s low level of 0.6, again within our medium-termtarget of < 1.0.

✓✓

Work-Related Injuries to LANXESS Employees
Resulting in Absence from Work (LTIFR)

NFR

We also want to reach an improved shared understandingof occupational safety with service providers who perform
technical services for us, as well as including them in oursafety culture. For instance, our partners must demonstrate that they maintain their own safety management
system and have carried out all safety training that isrequired of all employees who work for us. Regardless of
this, we provide personal safety briefings for employees
of our partner companies.

NFR

NFR

✓

2.5
2.0

1.6

1.5
1.0

1.0

0.9
0.6

0.6

2022

20231), 2)

0.5

2019

2020

2021

1) Continuing operations2) LANXESS total: 0.6

Work-Related Injuries to LANXESS Employees that are
Reportable in Accordance with OSHA Regulations (RIR)As in previous years, no fatal accidents occurred in thereporting period. The RIR, which also includes accidents
with no days lost in accordance with OSHA rules, was
0.6 (as of December 1, 2023) in 2023 and thus in linewith the previous year’s level of 0.6. Companies havebeen taking occupational safety increasingly seriously inrecent years and so the low number of reports of serious
accidents remained unchanged.
All accidents, including significant near-misses, aresystematically analyzed with regard to their cause andpossible preventive measures. The results of theseinvestigations are, for instance, incorporated into safety
updates that are made available to the entire organization.
We regard the sharp fall in the LTIFR in recent years andthe stable rate at present as evidence that the structured
transfer of knowledge and the many occupational safetymeasures at LANXESS are having a positive effect.

1.5

1.0

0.8

0.8

0.7

0.6

0.6

2022

20231), 2)

0.5

2019

2020

2021

1) Continuing operations2) LANXESS total: 0.6

55

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CEO Safety Award
For us as a chemicals company, the safety of ouremployees, plants and processes is the utmost
priority. The international CEO Safety Award, which
was bestowed for the fifth time in the reporting year,
recognizes particularly successful initiatives andcontributions to occupational safety at LANXESS.
An important criterion for the award is how easily
the submitted contribution can be implemented andtransferred to other sites. For example, we are not
only anchoring occupational safety even deeper inthe minds of all employees, but also illustrating how
important it is to learn from each other at LANXESS.

The award was granted in 2023 to a team from
India for three effective training methods that reducerisk when working in confined spaces: presence,
digital and simulation (“safer confined space work”).
The initiative also includes identifying hazards inthe confined space and providing training plans,suitable rescue equipment and practical simulation
training for rescue teams. The concept has alreadybeen successfully put into practice at both Indian
production sites.
Second place was awarded jointly to the “Mobile
first aid/extinguishing station” (Inorganic Pigments
business unit, IPG, Krefeld-Uerdingen) and “Safety
goes digital” (Polymer Additives business unit, PLA,
Leverkusen) projects.

56

Employee codetermination
Dialog with chemicals social partners – works councils,
trade unions and employer associations alike – as aprinciple of consultation in action is the global practiceat LANXESS. As part of this, we also respect the freedomof association of our employees in accordance with theInternational Labour Organization (ILO) and the Global
Compact and comply with collective bargaining agreements. We regularly seek dialog with employee representative committees in Germany, Europe and worldwide,
provide information on our corporate objectives andinvolve them in organizational changes at an early stage.

Fair dealings with employee representatives and tradeunions are also a top priority for us outside Europe. At all
our sites, we comply with International Labour Organization (ILO) standards with respect to our employees’
freedom of association. Where possible and in compliancewith local laws and regulations, this includes regularexchange between local management and trade unions
as well as binding, collectively agreed-upon regulations
on remuneration and working conditions.
Proportion of Employees Covered by Collective
Bargaining Agreements%

100

The first half of 2023 was dominated by the joint venturewith Advent. Key aspects here were agreements reachedwith employee representatives to successful transfer
employees to the new company Envalior and the changes
to the collectively agreed wage structure agreement thisrequired. The collective bargaining partners were involvedin the latter. Negotiations and dialog took place in anenvironment of constructive collaboration.

63

Proportion of employees worldwide

Proportion of employees in Germany

92

Given Germany’s economic performance and the impact
on the Group, the focus in the second half of fiscal year
2023 was on adjusting the business and, in turn, theworkforce to the new situation. The aim was to manage
this crisis together with the employee representatives
using a range of measures.

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SUSTAINABLE PRODUCTS
Product responsibility
We see the constant improvement of product safety, whichis enshrined as a core aspect of our corporate policy andin the Group-wide management system, as part of our
product responsibility. We have undertaken to avoid risks
for humans and the environment across all phases of the
product lifecycle through safe research, manufacturing,storage, logistics, use and disposal.
With regard to the safety of our products, our ambitions
exceed the legal requirements in many areas. Examplesof this include the creation of safety data sheets evenfor substances not subject to labeling requirements andour roadmap for a sustainable product portfolio. Our“Product Safety Management at LANXESS” guideline
stipulates how product responsibility is to be implemented
throughout the Group and ensures collaboration between
all of the parties involved. The Production, Technology,
Safety & Environment (PTSE) Group function ensuresthat laws and regulations are complied with, resulting
obligations and preventive measures are derived andtheir effective implementation monitored.
We classify and label hazardous products (substancesand mixtures) in packaged form in accordance with57

hazardous substances and hazardous goods legislation
before they are used or brought to market. We regularly
adapt our electronic safety data system to take accountof new features in GHS (Globally Harmonized Systemof Classification and Labeling of Chemicals) legislationin the different countries. We thus ensure that risks forhumans and the environment are avoided in transport,
storage, use and disposal.
Complying with global chemicals control regulations
across the whole value chain is an essential prerequisite for the sale ability of our chemicals and chemical
products. We go to great effort to ensure comprehensive
compliance both for our own products and together
with our partners – who produce our raw materials, forexample – for their products. Particularly in the case of
consumer applications, we especially make sure that our
products meet high national and international standards,
certificates, and quality seals.
Materials that we produce in the EU or import into the
EU in quantities of more than one metric ton per year
are registered, listed and evaluated in accordance with
the REACH (Registration, Evaluation, Authorisation
and Restriction of Chemicals) Regulation. We conduct
workshops for our REACH officers in the business units atleast twice a year in order to present new developments,

promote understanding of the importance of productresponsibility and guarantee legal conduct. The REACH
requirements have been continuously updated since2007, so it is necessary to regularly review and revise
the registration dossiers. In this context, we support thevoluntary Action Plan of the European Chemical Industry
Council CEFIC (Conseil Européen des Fédérations del’Industrie Chimique) and have undertaken to review and– if necessary – update our REACH registration dossiers by
2026 at the latest. Moreover, we welcome the opportunity
provided by the European Commission to contribute to
the planned REACH revision in a public consultation.
A statement on the REACH revision can be found here.
The safe use of our products, along both our own andthe downstream value chains, is another essential part ofour product responsibility. Our business units help theircustomers to use our products safely and in an eco-friendly
way by way of training and advice and shed light on therisks associated with use. In our electronic safety datasystem, we provide our customers with safety data sheetsand extended safety data sheets for all substances andproducts handled regularly – in some cases includingintermediates.

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Portfolio development
In line with societal trends and needs, we aim to constantly
improve the sustainability performance of our productportfolio, to identify critical substances in products andto substitute them or develop safe alternatives.
For the management and long-term development ofour product portfolio, we follow an approach with threeperspectives. This is based on the LANXESS ProductSustainability Monitor. Using this analytical tool, we identify
products that are produced in a particularly sustainable
manner as well as products where we see potential for
improvement, and have been increasing the sustainability
performance of our portfolio for years.

As a third perspective, we look at the benefit of our
products in their application. A sustainable world needs
not only sustainably manufactured products but also
solutions for new concepts such as in the areas of climate
protection or circular economy. For example, additives
make a significant contribution to extending the useful lifeof products or enabling materials to be recycled.

Safe and sustainable products
Using the LANXESS Product Sustainability Monitor, we
divide our portfolio into five categories:› Energizer: Products in this category offer
outstanding sustainability performance. They meet
our ambitious requirements for all criteria. They haveno intrinsic properties that give cause for concern.
Energizers are manufactured with a very low to low
environmental impact. These products contribute toat least one SDG and are experiencing increasing
demandThe second significant perspective is the product carbon
footprint (PCF) and the circular potential of our products.
Here, it is important to understand and account for the
upstream value chain as well as our own production. Our
aim is to continuously reduce our products’ influence on
the climate, to use sustainable raw materials and to ensurethat our products can be recycled.
LANXESS Product Portfolio
1

Safe and sustainable products

LANXESS Product Sustainability Monitor

2

3

Climate-neutral and circular products

Products for climate protection and the circular
economy› Performer: These products are sustainableaccording to the current state of the art. They meet
our ambitious sustainability requirements for many
criteria. Performers are manufactured with a low to
medium environmental impact and have a benefit tosociety.
› Transitioner: Products in this category do not yet
fulfill all LANXESS sustainability requirements. We
monitor these products and actively steer themby way of improvement measures and targeted
innovation, for example to reduce their environmental
impact and make these products more sustainable.
› 2024/2026 roadmap: This category covers
products with serious sustainability concerns, namely
chemical end products with more than 0.1% bymass of substances with the properties of substancesof very high concern (SVHC). We manage theseproducts in our roadmap process, in which we
examine in particular whether critical substancesin the respective chemical end products could be
replaced with safe and sustainable alternatives. We
do not market new chemical end products in thiscategory.
› Phase out: Roadmap products for which actionplans were established between 2021 and 2023
with the target of replacing them with sustainable
alternatives by 2030. If using sustainable alternatives
is not possible, we will withdraw the products fromthe market by 2026 and not replace them.

Carbon footprint, sustainable raw materials, recyclability
Solutions that enable sustainable concepts

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In 2023, we already generated 83% of our total sales withproducts that fulfill our sustainability requirements. 17% of
our sales were attributable to products that did not (yet)completely fulfill these. As of the 2023 reporting date,specific action plans had been developed for all roadmap
products (2021–2023). Based on the reference year
2021, we will stop marketing for 21% of sales generated
with roadmap products by 2026 and offer non-criticalalternatives for a further 69% by 2030. In the case of theremaining 10% of sales generated by roadmap productsthat we cannot currently replace, our analysis has shownthat they are used exclusively by professionals undercontrolled, safe conditions.
Based on a detailed analysis of our entire product portfolio,
we prepared a new roadmap process in 2023. We willdevelop additional action plans in the next three years for
all products previously categorized as transitioners that
already have confirmed or expected critical properties.
These products will be added to the 2024/2026 roadmap
in the future.

LANXESS Product Portfolio 2023%
9

Energizer

230

6Performer
Transitioner
2024/26
roadmap
Phase out

53
83% sustainable products

Criteria of the LANXESS Product Sustainability Monitor
Environmental

Climate change
Water use and water risk
Waste efficiency
Environmental riskSocialEconomical

Climate-neutral and circular products
We want to help transform the entire value creation system
into a resource-efficient and climate-neutral society. On
the road to climate-neutral and circular products, we arefocusing on three partially overlapping action areas.
Three Elements for Climate-Neutral and Circular Products

Human health risk

Climate-neutral products

Support of the 2030 Agenda (product benefit)

Carbon footprint(cradle-to-gate)

Demand trend
Profitability
Legislative and reputational risk

­ ustainableS
raw­materials

Recyclability

Circular products

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When selecting products, knowledge about the carbon
footprint is becoming increasingly important – both for
us and for our customers. Our aim is to continuously
reduce the product carbon footprint (PCF) and thus our
products’ negative impact on the climate. In a cradle-togate assessment, the PCF results from:› Emissions from our own processes (Scope 1)› Emissions from purchased energy (Scope 2)› Emissions from purchased goods, upstream

While LANXESS has achieved closer proximity to end
customers following its acquisitions of Theseo, the Microbial Control business from the corporation International
Flavors & Fragrances, and Emerald Kalama Chemical,
most of our products are still sold to industrial customers.
Only they or customers even further downstream use themto produce end products for a wide range of markets.
Our chemical end products, which remain unchangedin the further value chain, are only processed into end
products by our customers. With regard to completing

cycles, this means that there are sometimes very long
periods between production and the end of our products’
lifecycles. As the first step, we are therefore focusing on
what we as a company can control: We are working toensure the “recyclability” of all our products so that they
are suitable for environmentally friendly recycling. In
order to understand which “recyclability” requirements
to impose on our products, it is important to analyze thefunction of our molecules in their final use and in which
cycles (biological or technical) they circulate.

transport and waste generation (Scope 3)
Allocation of LANXESS Products to Cycles According to Their Use (Examples)

As a company, we can directly influence our Scope 1
and Scope 2 emissions in particular. With our strategy
for climate neutrality in 2040, we have set ourselves
ambitious targets in this area (see “Climate Action
and Energy Efficiency”). More important for the PCF thanthe Scope 1 and Scope 2 emissions are often the Scope 3
emissions arising in connection with purchased goods,
i.e. our raw materials. In chemical production, they often
account for more than 50% of the PCF. We are therefore
placing a strategic focus on the purchase of sustainable
raw materials with a reduced carbon footprint. The transformation away from conventional, often fossil-based raw
materials toward renewable resources not only leads to a
reduction in greenhouse gas emissions but also makes ourvalue chains less dependent on certain limited resources(
see “Circular and Sustainable Sourcing”).

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Materials

Additives

Active ingredients

Plastics or intermediates for the
manufacture of plastics that can beused in diverse ways. They return totechnical cycles and are essential for afunctioning circular economy.

Antioxidants or pigments that areadded to products and determine their
physical characteristics. When used inpaints, plastics or other materials, they
are part of technical cycles. If they arecontained in cosmetics or food, they
are added to the biological cycle via
wastewater.

Fertilizers, pesticides, insect­repellents, disinfectants, additions
to animal feed or flavorings. These
substances are used in agriculture or
food production. They are degradednaturally when used and enter the
biological cycle.

Aim:
Recyclable materials, suitable for
return to technical cycles.

Aim:
Additives that are suitable for theirrelevant cycles.

Aim:
Degradable active ingredients thatenter the biological cycle when used

Technical cycle

Biological cycle

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Products for climate protection and thecircular economy
A full picture of the importance of our product portfolio toclimate protection and the circular economy is obtained
only when assessing the benefit and the positive environmental impact that our products have when used. Here,
we prioritize solutions that contribute to climate protection
or enable a circular economy.
Products that support climate protection are suitable for
reducing greenhouse gas emissions and thus stopping
or slowing climate change (climate mitigation). A second
important group comprises products that support
adaptations to climate change – i.e. help to cope with
the negative consequences resulting from changes in the
climate that have already materialized or are expected in
the future (climate adaptation).
The biggest drivers of climate change are the generation of electricity and heat. The change from fossil fuels
to renewable energy requires a large number of new
solutions, especially for wind power, photovoltaics andthe necessary storage of energy in the form of batteries orhydrogen. The transport sector and especially road traffic
are other significant causes of climate change. Lightweightautomotive construction with modern plastics harbors
potential to considerably reduce fuel consumption in
vehicles with combustion engines. In recent years, electric
mobility has also become established as an important

61

path to a sustainable future in road transport. Industry
and the building sector are in third place when it comesto the emission of greenhouse gases. Electrification andinsulation play a key role here. We address all these topics
with our product portfolio.
The effects of climate change are already plain to see inmany regions of the world. Changing water cycles andthus new patterns of precipitation and evaporation are
one consequence of climate change. In this respect, thecirculation of process water and the purification of drinking
water are becoming important elements of local water
strategies. Our Liquid Purification Technologies business
unit provides support here with decades of experience,a broad product range and innovative solutions. Anotherconsequence of climate change is the increasing threatof infectious diseases. Global warming is enablingcertain pathogens to advance and survive in not only
tropical but also temperate zones. Other factors such as
globalized passenger, livestock and goods transport help
these diseases to spread faster and farther. For years,
we have therefore continuously enhanced our range ofdisinfectants.
For a functioning circular economy, it is not only the useof alternative raw materials and environmentally friendly
recycling at the end of the lifecycle that are important.
Products are also required that help materials to be
used for longer or enable materials to be reused at all. In

particular, appropriate additives significantly extend the
product lifecycle of plastics. When renewable materials
such as wood are used, material protection solutions
also extend their useful life many times over. If it is nolonger possible to continue using products and they reachthe end of their lifecycle, it is important that they can berecycled in an environmentally friendly manner. Here,too, the right additives help to complete the cycle. Boththe correct use of additives and material protection areamong LANXESS’s core areas of expertise.

Product innovation
In 2023, our portfolio strategy was again shaped primarily
by specific product and application development. We
put the needs and expectations of our customers at thecenter here and frequently pursue projects together withthe customers concerned or other high-powered partners.
In the reporting year, we expanded our Scopeblue® series
with innovative products.
Details can be found under“Product Portfolio.”“Scopeblue®” products contain more than 50% sustainable raw materials and so they provide green solutions andhelp promote the circular economy. Another product has
now been awarded the sustainability label – Neolone BioG
Preservative. It has been approved for use in cosmetic andpersonal care products in accordance with the COSMOS
standard and fulfills the ISO 16128 definition of a naturally
derived ingredient.

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We also further developed our electric mobility and battery
work in 2023. In El Dorado, Arkansas, U.S., a project forthe commercial and sustainable extraction of lithium forbatteries is on track. LANXESS is working together with
the Canadian company Standard Lithium Ltd. on thisproject. If the company produces lithium for batteries on
an industrial scale, LANXESS will supply the necessarybrine for the extraction of the lithium.
We have found another application for LANXESS Lewatit®
ion exchange resins in lithium-ion battery recycling. We
are currently working on Lewatit resins to extract lithium,nickel, cobalt, and manganese from the black mass thatarises during recycling so that they can be reused forcathode materials.
Good industrial plant hygiene is essential to sustainableproduction. For this reason, we – one of the world’s largest
suppliers of antimicrobial protection products – andTennants GmbH have agreed on a strategic cooperation
for integrated solutions in the field of industrial planthygiene. The aim of this is to combine our biocide portfolio
and the Bielefeld company’s adenosine triphosphate (ATP)technology. ATP technology can be used to quickly andreliably monitor hygiene levels at plants, ensuring theefficient use of biocides.

62

LANXESS has developed UltraPure 1296 MD PLUS for
semiconductor production, a new mixed-bed resin for
ultra-pure water with a far lower content of metals suchas iron, zinc and sodium compared to standard products.
In addition, the special production process for UltraPure
1296 MD PLUS ensures only very little total organiccarbon (TOC) and particles are released.
After being launched on the U.S. market and thenapproved in Australia, the EU and Canada in 2023, ourinnovative, natural preservative Nagardo® has now also
been approved in Ecuador, Colombia and Peru. LANXESS
wants to sell its preservative to beverage producers
around the world in the future. Nagardo not only efficiently
safeguards product quality, it also allows European
beverage producers to transform their product ranges
and to meet consumers’ growing demand for naturalingredients. The use of Nagardo can also help beverage
producers to achieve their sustainability targets, since they
can lower energy usage by switching from hot filling or
tunnel pasteurization to cold filling and reduce the amountof plastic needed for packaging. Nagardo is currently
the most effective natural preservative for non-­­alcoholic
beverages on the market. It won in the “Innovation” and“Product Launches” categories at the prestigious 2023
Just Drinks Excellence Awards organized by the online
magazine “Just Drinks.”

By acquiring the Microbial Control business from U.S.
corporation International Flavors & Fragrances Inc. (IFF) in
2022 and through the acquisition of specialty chemicals
manufacturer Emerald Kalama Chemical, U.S., in 2021,
we continued to grow our innovation portfolio and supplemented it with important areas. The Flavors & Fragrancesbusiness unit is now working on making the Group’s value
chain climate neutral by 2050. By the end of 2023, it willoffer sustainable product variants for its entire portfolio offlavors and fragrances, preservatives and animal nutrition
products. To provide this sustainable range, ISCC Pluscertification must be granted for all five of the business
unit’s production sites. This was achieved by mid-2023.

Valuing customer relationships
Our customers’ satisfaction is not only an indicator of
our success, but above all also a requirement for it. We
therefore work continuously on the meaningful and best
possible consideration of customers’ constantly changing
needs in our product and process innovations. In addition,
we aim to build on and consolidate our relationships withour customers.

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Especially in challenging times like these, proximity to
the market and direct contact with our customers are of
the utmost importance to us. In-person conversations,customer visits, on-site support and our own events are
particularly important to this and so we further expanded
these activities in 2023 after the pandemic years. The
same is true of attending trade fairs and exhibitions. To
reduce travel expenses, we have focused on strategically
relevant events such as the European Coating Show for
the Inorganic Pigments business unit and AQUATECH
for the Liquid Purification Technologies business unit.
These events allow us to meet many of our key customers
and partners in one place. Nevertheless, virtual collaboration still plays an important role in our interactions
with customers. Remote meetings are now standard andhelp us save travel costs and time while at the same timeincreasing the amount of contact. Through webinars andtechnical workshops, we reach a broad target group.
When forming our customer relationships, the top priorities are customer satisfaction and avoiding customer
complaints. Based on a central customer relationshipmanagement (CRM) system and a uniform complaint
management platform, each of our business units has its
own market- and customer-oriented complaint management and optimization processes. Shared elements

63of these processes include clear targets, for example
in relation to the reduction of customer complaints orprocessing times for customer complaints, as well as acorresponding statistical analysis of the feedback received,
and structured monthly reporting to the management of
the respective business unit. Various bodies and dialog
forums, such as the quarterly Marketing & Sales Community, also guarantee the regular exchange of experiences
between our business units and Group functions.
Our business units regularly review their complaint
management process to identify potential for improvement. In 2023, we launched a project to improve thecomplaints process in the Lubricant Additives, Polymer
Additives and Urethane Systems business units. This
involved detailed analyses of the differences and priorities
in the various business units and regions. In the Liquid
Purification Technologies business unit, multiple departments assess and discuss complaints each month. A newrole of “Complaint & Data Manager” was also createdhere in 2023.
In our digitalization offensive, we use software to
improve the speed and efficiency of the communication
between our customer service teams and their respective
customers. In light of the large number of simultaneousorders, it is a major challenge for our customer service
employees to keep track of changes across the entire orderacceptance, production and delivery process. Here, we areassisted by software solutions that continuously search our
ERP systems for changes in order data records, factor inexternal information and compare it with dynamic specifications. Our customer advice experts obtain constantly
updated information about the key influencing factors andchanges that Order Management, for example, has madeto the orders – such as postponements of delivery dates orquantity changes. Our customer service is therefore able
to inform customers immediately and promptly tackle any
problems arising from the changes.
To position the business units in an increasingly competitive market and further boost their online presence,
Saltigo, Flavors & Fragrances and Material Protection
Products launched a joint LinkedIn Showcase Page called“LANXESS Personal Care & Cosmetics.” The aim of this is
to facilitate discussion about highly effective and sustainable ingredients in cosmetic and personal care products
such as Saltidin®, Purox®B and Purox®S, KATHON™ andNEOLONE™. Inorganic Pigments regularly sends its sales
partners newsletters discussing topics relevant to its own
product marketing.

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Customer satisfaction surveys are essential for LANXESS
in order to determine potential for improvement incustomer relationships and to check whether customer
requirements have changed. LANXESS conducts ananonymous online survey of all relevant customers in all
business units once every two years.
In terms of content, the survey aims to evaluate LANXESS’s
performance in comparison to the competition and toindicate whether customers would recommend LANXESS.
Customers were also asked if they intended to continue
the business relationship in the future and to assess theadvantages resulting from this relationship.

64

In the current 2023/24 survey, the customer retention
index (CRI) score was 74. We therefore gained threepoints versus the 2021/22 survey and were likewise threepoints ahead of our competitors again. This positive development, driven in particular by our customers’ increased
desire for long-term business relationships with us andtheir greater willingness to recommend us, shows that ourcustomers appreciate our efforts to be a reliable partner,
especially in difficult times.
As sustainability was already a focus area in the 2022
survey, Saltigo contacted numerous customers, explained
the various measures (green chlorine, green sodiumhydroxide, green hydrogen etc.) and, where data wasavailable, presented the carbon footprint of customer-­
specific projects. Saltigo customers were positive about
the progress and rated the business unit the best-in-class
supplier in Europe.
Based on the results of the latest customer satisfaction
analysis, we have implemented targeted measures at
LANXESS and in the business units in order to remain areliable and value-enhancing partner for our customers
and thus to retain them in the long term. For example,
the Polymer Additives business unit increased its training
on new software systems, improving its on-time, in-full
figures. The Inorganic Pigments business unit significantly
reduced lead and shipping times.

✓
NFR

The rollout of the sales software successfully introduced
in 2020 is almost complete. It enables flexible access tocustomer information regardless of internet connection or
technical equipment. This means that our sales employees
are always up to date, no matter where they are, andcan respond to the specific needs of our customers. The
software has proved a valuable tool for the sales teams
and offers new features and content, such as an area
specifically dedicated to sustainability. It has already beenpresented at trade fairs, where it proved very successful.
It was also well received by customers.

Reporting on the EU taxonomy
Introduction
A central element in the European Union’s Green Deal is
the strategy for sustainable financing. It aims to channel
financing flows into investments that support sustainable
development in the future. In this context, a classification
system for economic activities – the EU taxonomy (Regulation (EU) 2020/852) – is to help investors assess whether
investments contribute to political targets and obligations
such as the Paris Agreement on climate change at thesame time as meeting specified environmental and social
standards. To this end, the EU has defined six categories,
or objectives:
1. Climate change mitigation
2. Climate change adaptation
3.	Sustainable use and protection of water andmarine resources
4. Transition to a circular economy
5.	Pollution prevention and control
6.	Protection and restoration of biodiversity andecosystems

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The relevance of an economic activity for one of theseenvironmental objectives depends on how the activity
influences the respective environmental objective.
In order to assess an economic activity, a two-step analysis
must be performed with regard to eligibility and alignment.
According to the EU Taxonomy Regulation, economic
activities are taxonomy-eligible if they match the activity
descriptions in the delegated acts of the Taxonomy Regulation and potentially contribute to the achievement of one of
the six environmental objectives. To determine alignment,
an EU taxonomy objective is to be used to assess whether
all of the technical screening criteria are met for eachactivity. It must make a substantial contribution to an
environmental objective while doing no significant harm
(DNSH) to any of the other objectives. Moreover, minimum
safeguards for compliance with human rights including
labor and consumer rights and in the fields of bribery
and corruption prevention, taxation and fair competition
must be guaranteed for each activity. For each of the six
environmental objectives, the European Commission
issued delegated acts with technical screening criteria
for relevant economic activities. The initial focus was on
the climate objectives. In 2023, criteria were established
for the other four environmental objectives. The Climate
Delegated Act was also amended in 2023. As part of thisamendment, new economic activities were included andselective changes made to technical screening criteria forexisting economic activities.

65✓

Reportable ratios✓

Companies that fall within the scope of the EU taxonomy
must disclose the defined sales, capital expenditure(CapEx) and operating expenditure (OpEx) ratios for theirshare of taxonomy-eligible or taxonomy-aligned economic
activities. These ratios must be itemized according to
the respective taxonomy-eligible or taxonomy-aligned
economic activity. The disclosures must specify theenvironmental objective to which this activity contributes
and whether it is a transitional or enabling economic
activity. Climate-related environmental objectives havebeen subject to taxonomy eligibility and alignment
reporting requirements since 2022. For the other four
environmental objectives and the newly included activities
in the Climate Delegated Act, only taxonomy eligibility
reporting is required for fiscal year 2023.

NFR

NFR

✓

NFR

§

Sales
The ratio relating to the relative share of sales with taxonomy-eligible or taxonomy-aligned products is the ratio of
two sales figures: The numerator is the sum of all sales that
we have generated in the reporting year with taxonomy-­eligible or taxonomy-aligned activities. The denominatoris the value of the external sales as reported under “Sales”
in the income statement of ourconsolidated financial
statements in the Annual Report on page 155 pursuant to
the relevant IFRS requirements as presented in the notes
to the consolidated financial statements.

Capital expenditures and operational­expenditures
We report the proportion of expenditures and expenses
incurred in connection with the operation of ourplants in order to manufacture taxonomy-eligible ortaxonomy-aligned products as taxonomy-eligible ortaxonomy-aligned capital expenditures and operational
expenditures. The relevant value chain begins with the
manufacture of products that are taxonomy-eligible
according to the Taxonomy Regulation.

Relevant capital expenditures comprise firstly our capital
expenditures to maintain our production plants for taxonomy-eligible or taxonomy-aligned products, including
production plants added via business acquisitions.
Relevant spending/expenses for non-sales-generating
activities are also to be taken into account and aredescribed in the delegated acts.
The numerator is the share of additions from investments
and business acquisitions that relate to taxonomy-eligible
or taxonomy-aligned activities. The denominator of
the ratio is the sum of additions to property, plant andequipment and intangible assets from investments andacquisitions, adjusted for acquired goodwill, which canbe found in thenotes to the consolidated financial
statements on pages 185 and 187. The recognition
and measurement rules as presented in the notes to theconsolidated financial statements apply accordingly.

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At LANXESS, operational expenditures comprise all
non-capitalized costs incurred in the reporting period
in connection with research and development and themaintenance of our plants and buildings. According toa Group directive, these also include direct expenditures
relating to day-to-day servicing, through which we ensure
the continued and effective functioning of such assets.
Short-term leases or leases of low-value assets are notof material importance for LANXESS and therefore
not included in the denominator (see consolidated­financial statements).
The operational expenditures in connection with research,development and patents include for example costs for ourscientific departments and laboratories. These expenditures are reported in theNotes on page 213 in accordance with IAS 38.126 et seq. Maintenance includes all
operating expenses for maintenance measures, overhaulsof production plants, the implementation of legal requirements and plant downtimes in the relevant reporting
period, which according to our accounting guidelines✓

cannot be capitalized and are therefore not a componentof capital expenditures. This also includes direct expenses
for maintenance materials as well as external and internalmaintenance services. Costs for building modernizationthat cannot be capitalized are immaterial and are notreported separately.
The ratio’s numerator covers those expenses for fiscal year
2023 that relate to taxonomy-eligible or taxonomy-aligned
activities. The denominator covers all non-capitalizable
expenses for research, development and maintenance.

Taxonomy-eligible activities
With regard to the environmental objectives “climatechange mitigation” and “climate change adaptation,”
the Taxonomy Regulation covers activities of selectedeconomic sectors that have the greatest potential for
helping significantly reduce greenhouse gas emissions.
These activities are described as “taxonomy-eligible.” With
regard to the “climate change mitigation” objective, thechemical industry is a “transformative industry” because,
among other things, basic chemicals and plastics that are
produced in very large quantities are labeled as transitional
activities. This means that the activities make a relevant
contribution to the EU’s GHG emissions and thus havesignificant reduction potential. LANXESS – as a specialty
chemicals company – is not focused on such products.

✓
NFR

Relevant operating expenditures are direct non-capitalized
costs relating to research and development, building
renovation measures, short-term leases, maintenance andrepair. These must be covered by the ratio’s denominator.
Any other direct expenditures relating to the day-to-day
servicing of assets of property, plant and equipment by thecompany itself or by third parties must also be included.

NFR

NFR

✓

In terms of the other four environmental objectives, theactivities covered by the Taxonomy Regulation relate
to the chemical industry only to a very limited extent.
These are essentially activities that do not generatesales, such as remediation measures. In order to identify
the taxonomy-eligible economic activities at LANXESS,
we analyzed all economic activities at central level.
The respective products and activities were assigned
to the activity descriptions in the delegated acts on the
climate goals and the other four environmental goals. The
data-gathering process likewise took place centrally on
the basis of consolidated data. In this way, we ruled out
the double counting of sales, capital expenditures andoperational expenditures.
Economic activities that LANXESS classifies astaxonomy-eligible:› CCM1) 3.17. “Manufacture of plastics in primaryform”: LANXESS produces high-quality plastics fora broad range of applications – from the automotive
and electrical/electronics industries to water treatment.

› CCM1) 3.14. “Manufacture of other organic basic
chemicals”: This activity covers our adipic acid. It is aprecursor that is in high demand in the plastics industry,e.g. to make polyamides or polyurethanes.

› CCM1) 3.4. “Manufacture of batteries”: LANXESS
produces components for battery manufacturingthat are used in electric vehicles.
1) Climate Change Mitigation

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Further Information§› CCM1) 5.4. “Renewal of water collection, treatment andsupply systems” at the site in Leverkusen› CCM1) 6.5. “Transport by motorbikes, passenger cars
and light commercial vehicles”› CCM1) 7.7. “Acquisition and ownership of buildings”› PPC 2.4. “Remediation of contaminated sites and2)

areas.” LANXESS is building a groundwater treatment
plant in South Africa.

Taxonomy-aligned activities
Since fiscal year 2022, LANXESS has also been required
to report on the taxonomy alignment of its economic activities. We analyze whether they make a substantial contribution to the achievement of one or more environmental
objectives while doing no significant harm (DNSH) to otherenvironmental objectives and also whether they provide
the minimum social safeguards. The 2023 review related
to the activities defined as part of the climate objectives.
No compliance review is required until fiscal year 2024 foractivities covered by environmental objectives three to six.
Substantial contribution
Our business activities contribute to climate change
mitigation. We do not disclose taxonomy-eligible activities
in connection with the second environmental objective,✓

climate change adaptation, because we generate no sales
from enabling activities in relation to this environmental
objective and identified no separate CapEx (or OpEx) in
the reporting year that contributes specifically to climatechange adaptation.

› CCM1) 3.4.: LANXESS manufactures components forbatteries at the Leverkusen site that are mainly used
for electric cars.

› CCM1) 3.17.: As part of this, LANXESS produces plastics
used for renewable raw materials at the Leverkusen site.
In addition to plant-based raw materials, LANXESS also
views green caustic soda in the context of renewable
raw materials.

› CCM1) 5.4.: Investing in a wastewater treatment plantin Leverkusen resulted in significantly more efficient
pretreatment of a wastewater flow, achieving considerable energy savings.
Do no significant harm (“DNSH”)
LANXESS’s economic activities that make a substantial
contribution to climate change mitigation were analyzed
according to the DNSH criteria. To assess the “climatechange adaptation” criterion, physical climate risks andclimate trends were identified for the corresponding site
and their relevance for the economic activity assessed.
With regard to the supply chain, we also included the risks
from goods flow and logistics for the activity. In addition,
qualitative scenario analyses for 2020, 2030 and 2040✓
NFR

As well as the sales-generating activities, the following
economic activities are also taxonomy-eligible:

NFR

NFR

✓

were carried out with several suitable climate projections
such as Representative Concentration Pathway (RCP) 4.5
and 8.5. In order to counter the identified climate risks,measures for the relevant site were devised in line withthe company’s overall climate strategy (see “Climate
Action and Energy Efficiency,” page 32).
The economic activities were also evaluated with regard
to harm to “sustainable use and protection of water andmarine resources.” The focus was on preserving water
quality, avoiding water stress and assessing the impact
on water, as addressed in the LANXESS Water Program
see “Safe and Sustainable Sites,” page 25).
(
No criteria that negatively impact the “transition to acircular economy” environmental objective have been
defined for the activities 3.17 and 5.4. For activity 3.4,
we regularly review whether it is possible to reuse battery
materials and to use secondary raw materials for the
manufacture of battery components. The criteria relating torecycling processes are not applicable because LANXESS
does not perform this activity.
In our roadmap process, we manage products andproduction processes involving SVHC with the aim ofdeveloping safe and sustainable alternatives. Our products
contain no SVHC in a concentration of more than 0.1%
by mass. All raw materials used are handled following
the necessary safety precautions. Our taxonomy-aligned
products therefore meet the “pollution prevention andcontrol” criteria.

1) Climate Change Mitigation
2) Pollution, Prevention & Control

67

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Further Information

At LANXESS, we meet the requirement of the criterion for
DNSH to “protection and restoration of biodiversity andecosystems” by way of HSE compliance checks (health,safety and environment),
see “Safe and Sustainable
Sites,” page 22). For the single relevant site, evidence wasprovided that it is not located in a biodiversity sensitivearea.
Minimum safeguards
Requirements of minimum social safeguards generally
apply Group-wide at LANXESS and are not limited toindividual economic activities.

In the reporting year, we continued our work in the projectgroup for the German Act on Corporate Due Diligence in
Supply Chains, which reports to the Social & Governancesub-committee, and further formalized the processes thatguarantee the requirements for minimum safeguards. In
the field of corporate governance, we have long-standing
management systems for compliance with humanrights (see “Human rights” under “Good corporate
governance,” page 38), for monitoring our supply chain(
see “Procurement,” page 19), for anti-corruption(
see “Anti-corruption” under “Good Corporate
Tax Guideline)­Governance,” page 39), for taxes (and for fair competition.
Further information on corporate governance at
LANXESS✓

Results✓

Sales
In fiscal year 2023, LANXESS generated 8.2% of its
external sales with products allocable to taxonomy-eligible
activities. The remaining 91.8% of sales relate to productsthat are not included in the taxonomy’s activity categories.

NFR

NFR

✓

NFR

§

As LANXESS’s taxonomy-eligible sales result exclusively
from production, the company’s main business activity, we
disclose the figures at Group level and do not otherwise
present them in clusters. In the reporting year, LANXESS
generated total sales of €548 million classified as taxonomy-eligible. The taxonomy-aligned sales in the reporting
year were 2.3%.

Capital expenditures
In the reporting year, the share of taxonomy-eligible capital
expenditures was 12.7%, with investments in buildings
accounting for the majority. Therefore, the share of taxonomy-non-eligible activities in our capital expenditures is87.3%. The share of taxonomy-eligible capital expenditures amounts to 1.0% of our capital expenditures. All
taxonomy-aligned capital expenditures comprise additions
to property, plant and equipment.
Operational expenditures
In the reporting year, the share of operational expenditures
for taxonomy-eligible products amounted to 9.7% of thetotal operating expenditures. Therefore, the share oftaxonomy-non-eligible operating expenditures is 90.3%.
The share of taxonomy-eligible operational expenditures
amounts to 2.7% of our operating expenditures.

Key Data Pursuant to EU Taxonomy Regulation%
Sales

Capital expenditures

Operational expenditures

thereof 2.3 8.2

thereof 1.0 12.7

thereof 2.7 9.7

91.8

87.3

90.3

Taxonomy-eligible
Taxonomy-aligned
Taxonomy-non-eligible

68

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Proportion of Sales from Products and Services Associated with Taxonomy-Aligned Economic Activities

NFR✓

Fiscal year 2023

Economic activities
(1)

Code
(2)

Proportionof net sales,
2023
(4)

Climatechangemitigation(5)

Climatechangeadaptation
(6)

Water
(7)

Currency %

Y;N; N/EL

Y;N; N/EL

Y;N; N/EL

Net sales(3)

DNSH criteria(“do no significant harm”)

Substantial contribution criteria

2023

Pollution(8)

Circulareconomy(9)

Y;N; N/EL

Y;N; N/EL

Biodiversity(10)

Climatechangemitigation(11)

Climatechangeadaptation
(12)

Water
(13)

Y;N; N/EL

Y/N

Y/N

Y/N

Pollution(14)

Circulareconomy(15)

Biodiversity
(16)

Y/N

Y/N

Y/N

Proportionof taxonomy
aligned (A.1.)
oreligible (A.2.)­turnover,
Minimumyear 2022
safeguards
(18)
(17)
Y/N

Category
enabling
activity(19)

Categorytransitional
activity
(20)

%

E

T

E

A. TAXONOMY-ELIGIBLE ACTIVITIES
A.1. Environmentally sustainable activities(taxonomy-aligned)
3.4. Manufacture of batteries

CCM 3.4.

€14,956,873

0.2%

Y

N/EL

N/EL

N/EL

N/EL

N/EL

Y

Y

Y

Y

Y

Y

Y

0.2%

3.17. Manufacture of plastics in primary form

CCM 3.17.

€137,574,579

2.0%

Y

N/EL

N/EL

N/EL

N/EL

N/EL

Y

Y

Y

Y

Y

Y

Y

0.0%

Net sales of environmentally sustainable activities(taxonomy-aligned) (A.1)€152,531,452

2.3%

2.3%

N/EL

N/EL

N/EL

N/EL

N/EL

Y

Y

Y

Y

Y

Y

Y

0.2%

of which enabling activity€14,956,873

0.2%

0.2%

N/EL

N/EL

N/EL

N/EL

N/EL

Y

Y

Y

Y

Y

Y

Y

0.2%

of which transitional activity€137,574,579

2.0%

2.0%

0.0%

T

E
T

A.2 Taxonomy-eligible but notenvironmentally sustainable activities(not taxonomy-aligned activities)
EL; N/EL

EL; N/EL

EL; N/EL

EL; N/EL

EL; N/EL

3.14. Manufacture of other organic basic chemicals

CCM 3.14.

€55,190,090

0.8%

EL

N/EL

N/EL

N/EL

N/EL

EL; N/EL
N/EL

1.0%

3.17. Manufacture of plastics in primary form

CCM 3.17.

€340,122,770

5.1%

EL

N/EL

N/EL

N/EL

N/EL

N/EL

7.0%

Net sales of taxonomy-eligible but notenvironmentally sustainable activities(not taxonomy-aligned activities) (A.2)€395,312,860

5.9%

5.9%

8.0%

A. Sales of taxonomy-eligible activities (A.1 + A.2)

€547,844,312

8.2%

8.2%

8.2%

Net sales of taxonomy-non-eligible activities€6,166,439,162

91.8%

Total

€6,714,283,474

100%

B. TAXONOMY-NON-ELIGIBLE ACTIVITIES

Gas and nuclear activities are not relevant for LANXESS, so we do not present the special templates.
The taxonomy-aligned sales result from production, the company’s main business activity. These are external sales.
Significant changes compared with the previous year arise from the recognition of taxonomy-aligned products under CCM 3.17.
Y
N
EL
N/EL

69

Yes, activity is taxonomy-eligible and taxonomy-aligned with the relevant environmental objective
No, activity is taxonomy-eligible but not taxonomy-aligned with the relevant environmental objective
Activity is eligible for the relevant environmental objective
Activity is not eligible for the relevant environmental objective

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Financial Statements

Further Information§

Proportion of CapEx from Products and Services Associated with Taxonomy-Aligned Economic Activities

NFR✓

Fiscal year 2023

Economic activities
(1)

Code
(2)

DNSH criteria(“do no significant harm”)

Substantial contribution criteria

2023

Proportion of
CapEx CapEx 2023
(3)
(4)

Climatechangemitigation(5)

Climatechangeadaptation
(6)

Water
(7)

Currency %

Y;N; N/EL

Y;N; N/EL

Y;N; N/EL

Pollution(8)

Circulareconomy(9)

Y;N; N/EL

Y;N; N/EL

Biodiversity(10)

Climatechangemitigation(11)

Climatechangeadaptation
(12)

Water
(13)

Y;N; N/EL

Y/N

Y/N

Y/N

Pollution(14)

Circulareconomy(15)

Biodiversity
(16)

Y/N

Y/N

Y/N

Proportionof taxonomy
aligned (A.1.)
oreligible (A.2.)
CapEx,
Minimumyear 2022
safeguards
(18)
(17)
Y/N

Category
enabling
activity(19)

Categorytransitional
activity
(20)

%

E

T

E

A. TAXONOMY-ELIGIBLE ACTIVITIES
A.1. Environmentally sustainable activities(taxonomy-aligned)
3.4. Manufacture of batteries

CCM 3.4.

€210,000

0.1%

Y

N/EL

N/EL

N/EL

N/EL

N/EL

Y

Y

Y

Y

Y

Y

Y

0.2%

3.17. Manufacture of plastics in primary form

CCM 3.17.

€3,709,935

0.9%

Y

N/EL

N/EL

N/EL

N/EL

N/EL

Y

Y

Y

Y

Y

Y

Y

0.0%

5.4. Renewal of water collection, treatment and supply systems

CCM 5.4.

€258,000

0.1%

Y

N/EL

N/EL

N/EL

N/EL

N/EL

CapEx of environmentally sustainable activities(taxonomy-aligned) (A.1)

T

0.3%

€4,177,935

1.0%

1.0%

N/EL

N/EL

N/EL

N/EL

N/EL

Y

Y

Y

Y

Y

Y

Y

0.5%

of which enabling activity€210,000

0.1%

0.1%

N/EL

N/EL

N/EL

N/EL

N/EL

Y

Y

Y

Y

Y

Y

Y

0.2%

of which transitional activity€3,709,935

0.9%

0.9%

E
T

A.2 Taxonomy-eligible but notenvironmentally sustainable activities(not taxonomy-aligned activities)
EL; N/EL

EL; N/EL

EL; N/EL

EL; N/EL

EL; N/EL

EL; N/EL

3.14. Manufacture of other organic basic chemicals

CCM 3.14.

€2,431,064

0.6%

EL

N/EL

N/EL

N/EL

N/EL

N/EL

0.2%

3.17. Manufacture of plastics in primary form

CCM 3.17.

€14,679,748

3.7%

EL

N/EL

N/EL

N/EL

N/EL

N/EL

2.0%

6.5. Transport by motorbikes, passenger cars andlight commercial vehicles

CCM 6.5.

€5,421,732

1.4%

EL

N/EL

N/EL

N/EL

N/EL

N/EL

7.7. Acquisition and ownership of buildings

CCM 7.7.

€21,611,343

5.4%

EL

N/EL

N/EL

N/EL

N/EL

N/EL

2.4. Remediation of contaminated sites and areas

PPC 2.4.

€2,392,000

0.6%

N/EL

N/EL

N/EL

EL

N/EL

N/EL

CapEx of taxonomy-eligible but notenvironmentally sustainable activities(not taxonomy-aligned activities) (A.2)€46,535,888

11.6%

11.0%

0.6%

2.2%

A. CapEx of taxonomy-eligible activities (A.1 + A.2)

€50,713,823

12.7%

12.1%

0.6%

2.7%

CapEx of taxonomy-non-eligible activities€349,675,687

87.3%

Total

€400,389,509

100%

0.0%

B. TAXONOMY-NON-ELIGIBLE ACTIVITIES

Gas and nuclear activities are not relevant for LANXESS, so we do not present the special templates.
Significant changes compared with the previous year arise from the recognition of taxonomy-aligned products under CCM 3.17.
Y
N
EL
N/EL

70

Yes, activity is taxonomy-eligible and taxonomy-aligned with the relevant environmental objective
No, activity is taxonomy-eligible but not taxonomy-aligned with the relevant environmental objective
Activity is eligible for the relevant environmental objective
Activity is not eligible for the relevant environmental objective

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Proportion of OpEx from Products and Services Associated with Taxonomy-Aligned Economic Activities

NFR✓

Fiscal year 2023

Economic activities
(1)

Code
(2)

DNSH criteria(“do no significant harm”)

Substantial contribution criteria

2023

Proportion of
OpEx OpEx 2023
(3)
(4)

Climatechangemitigation(5)

Climatechangeadaptation
(6)

Water
(7)

Currency %

Y;N; N/EL

Y;N; N/EL

Biodiversity(10)

Climatechangemitigation(11)

Climatechangeadaptation
(12)

Water
(13)

Y;N; N/EL

Y;N; N/EL

Y/N

Y/N

Pollution(8)

Circulareconomy(9)

Y;N; N/EL

Y;N; N/EL

Proportionof taxonomy
aligned (A.1.)
oreligible (A.2.)
OpEx,
Minimumyear 2022
safeguards
(18)
(17)

Pollution(14)

Circulareconomy(15)

Biodiversity
(16)

Y/N

Y/N

Y/N

Y/N

Y/N

%

Category
enabling
activity(19)

Categorytransitional
activity
(20)

E

T

A. TAXONOMY-ELIGIBLE ACTIVITIES
A.1. Environmentally sustainable activities­(taxonomy-aligned)
3.17. Manufacture of plastics in primary form

CCM 3.17.

OpEx of environmentally sustainable activities­(taxonomy-aligned)1) (A.1)
of which enabling activityof which transitional activity€10,868,734

2.7%

Y

N/EL

N/EL

N/EL

N/EL

N/EL

Y

Y

Y

Y

Y

Y

Y

0.0%

€10,868,7342)

2.7%

2.7%

N/EL

N/EL

N/EL

N/EL

N/EL

Y

Y

Y

Y

Y

Y

Y

0.1%

N/EL

N/EL

N/EL

N/EL

N/EL

Y

Y

Y

Y

Y

Y

Y

0.1%

€0

0.0%

0.0%

€10,868,734

2.7%

2.7%

T

E
T

A.2 Taxonomy-eligible but notenvironmentally sustainable activities(not taxonomy-aligned activities)
EL; N/EL

EL; N/EL

EL; N/EL

EL; N/EL

EL; N/EL

EL; N/EL

3.14. Manufacture of other organic basic chemicals

CCM 3.14.

€3,204,844

0.8%

EL

N/EL

N/EL

N/EL

N/EL

N/EL

0.8%

3.17. Manufacture of plastics in primary form

CCM 3.17.

€20,458,750

5.1%

EL

N/EL

N/EL

N/EL

N/EL

N/EL

7.2%

7.7. Acquisition and ownership of buildings

CCM 7.7.

N/EL

N/EL

N/EL

N/EL

N/EL

0.0%

€4,488,098

1.1%

EL

OpEx of taxonomy-eligible but notenvironmentally sustainable activities(not taxonomy-aligned activities) (A.2)€28,151,692

7.0%

7.0%

8.0%

A. OpEx of taxonomy-eligible activities (A.1 + A.2)

€39,020,427

9.7%

9.7%

8.1%

OpEx of taxonomy-non-eligible activities€362,489,714

90.3%

Total

€401,510,140100%

B. TAXONOMY-NON-ELIGIBLE ACTIVITIES

Gas and nuclear activities are not relevant for LANXESS, so we do not present the special templates.
Significant changes compared with the previous year arise from the recognition of taxonomy-aligned products under CCM 3.17.
Y
N
EL
N/EL
1)
2)

71

Yes, activity is taxonomy-eligible and taxonomy-aligned with the relevant environmental objective
No, activity is taxonomy-eligible but not taxonomy-aligned with the relevant environmental objective
Activity is eligible for the relevant environmental objective
Activity is not eligible for the relevant environmental objective
The taxonomy-aligned operational expenditures result from the production of plastics at the Leverkusen site, for which renewable raw materials are used.
Of the taxonomy-aligned operational expenditures, around 40% are attributable to research and development and around 60% to maintenance.

Annual Report 2023 | LANXESSContents

LANXESS ON THE­CAPITAL MARKET73

LANXESS ON THE CAPITAL MARKET74

Dividend Policy

74

Stockholder Structure

74

Bonds

75

Ratings

Contents

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Financial Statements

Further Information

LANXESS on the Capital Market
The 2023 stock market year was dominated by high levels of volatility due to persistent uncertainties over­future economic development, the ongoing war in Ukraine and other geopolitical crises. High rates ofinflation and rising financing costs significantly depressed growth momentum in key markets, also affecting
company outlooks.

Only when worries about inflation eased at the end of theyear, combined with initial signals from central banks ofan end to restrictive monetary policy, did stock markets
break the downward trend dominating since August 2023
and pick up significantly again. Nevertheless, the adverse
factors affecting economic performance remained in place
into the new year.
The 2023 stock market year started strong, both for
the LANXESS share and for the relevant DAX, MDAX
and FTSEurofirst 300 Eurozone Chemicals benchmark
indices. Propelled by a substantial upward trend, the
LANXESS share price climbed by almost 20% to anannual high of €47.83 on February 3, 2023 (intraday
Xetra). As the year went on, the weak economy andimpact of high raw material and energy costs squeezed
operating business. This was also reflected in the further
price trajectory of the LANXESS share in the reportingyear. In light of the weak environment, at the same time
as presenting figures for fiscal year 2022 we also had to73

issue a cautious outlook in March 2023, resulting in aconsiderable decline in our share price. In the weeks that
followed, the price moved sideways within a narrow range.
As a result of the challenging economic environment andmade worse by the ongoing reduction in chemical productinventories among our customers, demand dropped bymore than expected and so we were forced to lower our
expectations for the second quarter and for the year as awhole on June 19, 2023. It did not pick up again in thesubsequent quarters either. We initiated a Group-widesavings program in response to this muted demand, but
it was unable to compensate for ongoing inventory reduction among our customers in the short term. As a result of
operating performance, the LANXESS share price reachedits low for the year on October 26, 2023, at €20.14(intraday Xetra). With operating business also failing to pickup in the fourth quarter of 2023, the negative impact of
inventory reduction among our customers in the agricultural sector, and supplier-related production cuts in the

Flavors & Fragrances business unit at the site in Botlek,
Netherlands, the full-year forecast was further adjusted on
November 6, 2023, and the dividend proposal for fiscal
year 2023 reduced to €0.10 per share.
Our share price gained some momentum again following
the publication of the third quarter figures and a roundtable discussion and direct communication with ouranalysts. Shored up by the general year-end rally on thestock market, the LANXESS share price picked up again
and closed the stock market year on December 29, 2023,
at €28.37 (Xetra). This equates to a 24.7% price decline
as against the end of 2022, putting the LANXESS sharebehind the relevant benchmark indices. The MDAX closed
the stock market year up 6.7% at 27,137 points, with the
DAX up 19.0% at 16,752 points. The FTSEurofirst 300
Eurozone Chemicals sector index also saw considerable
growth of 18.3% to 4,796 points.

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LANXESS Stock at a Glance

Capital stock/no. of shares1)€/no. of shares

2020

2021

2022

2023

87,447,852

86,346,303

86,346,303

86,346,303€ billion

5.49

4.71

3.26

2.45

High/low1)€

64.86/25.68

67.38/50.46

59.04/28.16

47.83/20.14

Closing price

€

62.76

54.50

37.70

28.37

Adjusted earnings per share from continuing operations€

3.503)

4.83

3.752)

0.13

Dividend per share

€

1.00

1.05

1.05

0.104)

Market capitalization

1) As of end of year (intraday Xetra): December 31, 2020; December 31, 2021; December 31, 2022; December 31, 2023.
2) Earnings per share from continuing operations disregarding exceptional charges and income, amortization of intangible assets, attributable tax effects, income frominvestments accounted for using the equity method, and the non-recurring earnings effects from the settlement of interest rate hedges in 2022.
3) Including Business Unit High Performance Materials
4) Dividend proposal to the Annual Stockholders’ Meeting on May 24, 2024.

Capital Market InformationClass

No-par shares

ISIN

DE0005470405

WKN (German
securities identification number)

547040

Selective indices

MDAX, DAX 50 ESG, Dow Jones STOXX
600 Chemicals SM, MSCI Global Small Cap
Index, Dow Jones Sustainability Index (DJSI)World and Europe, among others

Investment grade
ratings

Moody’s: Baa3 (negative)1)
Scope: BBB (negative)2)

1) Since November, 2023
2) Since February, 2024

DIVIDEND POLICY
We aim to pay a stable or increased dividend each year.
For each year’s proposal, we will take certain factors, suchas the economic situation and our financial leverage, into
consideration. We will however always pay a dividend. At
the Annual Stockholders’ Meeting on May 24, 2024, theBoard of Management and the Supervisory Board willpropose a dividend of €0.10 per share.

74

STOCKHOLDER STRUCTURE
The LANXESS stockholder structure predominantly
consists of institutional investors pursuing a growth- or
value-oriented investment strategy. As of the end of2023, the percentage of such investors was unchanged
at around 92%. The remaining roughly 8% of LANXESS
stocks are held by private investors.
Our investors were mainly based in the U.S., Germany
and France in 2023. The percentage of U.S. stockholders
most recently increased sharply to around 52% (previous
year: 43%). Far fewer stocks were held in Germany as of
the reporting date at about 22% (previous year: 31%).
The holdings of investors in Great Britain also declined
to around 4% (previous year: 7%). They thus fell slightly
behind French investors, whose holdings have remained
stable at 5% since 2022.

Financial Statements

Further Information

You can find an overview of the institutional investors
who are required to inform us if they hold at least 3% of
outstanding LANXESS stocks in the Investor Relations
section of our
website.

BONDS
Securing the Group’s liquidity and creditworthiness is an
important aim of LANXESS’s financial management. With
standardized documentation, our debt issuance program
offers the opportunity to issue bonds quickly and flexibly.
The sustainability-linked financing framework complements our existing debt issuance program and createsa framework that allows us to link bonds to sustainability
targets.
No new bonds were issued in fiscal year 2023. The€500 million hybrid bond (ISIN: XS1 405763019) thatmatures in 2076 was redeemed early at the first possible
repayment date on June 6, 2023.
There are thus five outstanding LANXESS bonds atpresent. All LANXESS Eurobonds are listed on the
Luxembourg Stock Exchange.
Further information on the respective bond conditions
can be found on our website.

The share of investors from elsewhere in Europe increasedslightly year-on-year to around 16% (previous year: 15%).
In other regions, this share also rose slightly to about 5%(previous year: 4%).
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LANXESS on the Capital Market

Overview of LANXESS’s Main Bonds 
ISIN/WKN

Duration

Coupon

XS1 820748538 €500
millionVolumeMay 16, 2018–
May 16, 2025

1.125%

XS1 501367921 €500
millionOctober 7, 2016–
October 7, 2026

1.000%

XS2 383886947 €500
millionSeptember 8, 2021–
September 8, 2027

0.000%

XS2 459163619 €600
millionMarch 22, 2022–
March 22, 2028

1.750%

XS2 415386726 €600
millionDecember 1, 2021–
December 1, 2029

0.625%LANXESS Eurobond Spreads vs.
Corporates Index in the BBB Range1)
Basis points

Corporate GovernanceManagement Report

In addition to the absolute price performance, anotherimportant parameter for corporate bonds is the relative
measurement of the company-specific credit risk incomparison to a reference interest rate. This credit risk
premium is reflected in the credit spread.
Geopolitical crises and monetary policy measures taken
by central banks in response to the sustained period ofhigh inflation were once again the main source of volatilerisk premiums for corporate bonds last year. High energy
costs in Europe and weak demand particularly affectedrisk premium performance in the European chemical
sector. Changes to LANXESS profit expectations and therating also increased the credit risk premium for LANXESS
bonds. The LANXESS Group continues to have competitive access to capital market finance.

Financial Statements

Further Information

The agencies took a positive view of our continuoustransformation into a specialty chemicals company witha focus on stable businesses in various medium-sizedmarkets, the accordingly lower cyclicality and the good
geographical diversification. As part of this transformation, the High Performance Materials business unit was
successfully transferred to the joint venture with Adventfor high-performance engineering polymers, and the jointcompany “Envalior” was established. The rating agencies
commented generally positively on the transaction.
Further information on the development of LANXESS
ratings and rating outlook since 2015
Detailed information, downloadable publications, andcontacts

240
210

RATINGS180
150

Our strategic corporate goal is to maintain an investment
grade rating. LANXESS’s creditworthiness has beenassessed by the rating agencies Moody’s Investors Service
and Scope Ratings for many years already.

120
90
60
30
0
–30
Jan. 1, 2023

Dec. 31, 2023

BBB Corporates, 5 years

LANXESS Eurobond 2027

LANXESS Eurobond 2025

LANXESS Eurobond 2028

LANXESS Eurobond 2026

LANXESS Eurobond 2029

1) The LANXESS hybrid bond that matures in 2076 is not includedin the overview

Rating agencies again assessed LANXESS’s creditworthiness in the reporting year. Moody’s gives LANXESS a“Baa3” rating with a negative outlook1) and Scope Ratingsa “BBB” rating likewise with a negative outlook2). The
ratings reflect the challenging market environment in thechemical industry at present and higher debt leverage dueto the decline in earnings in 2023. LANXESS is focusing
on reducing its debt and has already taken important steps
to do so, including through its “FORWARD!” program andthe announced sale of the Urethanes Solutions business.
1) Since November, 2023
2) Since February, 2024

75

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CORPORATEGOVERNANCE
77

CORPORATE GOVERNANCE
STATEMENT PURSUANT TOSECTIONS 289F, 315D OF THE
GERMAN COMMERCIAL CODE

77

Declaration of the Board of Management and theSupervisory Board of ­L ANXESS AG on the German
Corporate Governance Code pursuant to Section
161 of the German Stock Corporation Act

77

Corporate governance ­practices going above and­ eyond the legal ­requirementsb79Work of the Board of ­Management and the­Supervisory Board

80

Composition and work of the Supervisory Board
Committees

81

Setting and implementation of targets for female
representation on the Board of Management andin managerial positions pursuant to Sections 76,
Paragraphs 3a and 4, and 111, Paragraph 5, of theGerman Stock Corporation Act

82

Diversity concept for the ­composition of the Boardof Management and the ­Supervisory Board

87

Stockholders and ­stockholders’ meetings

87

Compensation system and compensation report

87

Reportable securities ­transactions

88

Risk management and ­compliance88

Accounting and auditing

89

OFFICES HELD BY BOARD OF
MANAGEMENT AND SUPERVISORY
BOARD MEMBERS

89

Offices Held by Board of ­Management Members

89

Supervisory Board of LANXESS AG

91

REPORT OF THE SUPERVISORY
BOARD

92

Principal Topics Discussed by the Supervisory Board

94

Work of the Committees

94

Corporate Governance and Declaration ofCompliance

95

Annual and Consolidated ­Financial Statements

95

Changes in Management

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Corporate GovernanceManagement Report

Financial Statements

Further Information

Corporate Governance Statement pursuant to
Sections 289f, 315d of the German Commercial Code
The Board of Management and Supervisory Board of LANXESS are committed to the principles of transparent andresponsible corporate governance and control. They place high value on the standards of good corporate governance,with a view to strengthening the trust of investors, customers, employees and the public in LANXESS.

In the Corporate Governance Statement pursuant to
Sections 289f, 315d of the German Commercial Code
(HGB), LANXESS AG reproduces the latest declaration ofcompliance issued by the Board of Management and theSupervisory Board and describes the work of the Boardof Management and the Supervisory Board and of theSupervisory Board committees, the corporate governancepractices followed in the Group and the diversity concept
for the cooperation of the Board of Management and theSupervisory Board. The statement also includes additional
information on corporate governance.

DECLARATION OF THE BOARD
OF MANAGEMENT AND THE
SUPERVISORY BOARD OF­LANXESS AG ON THE GERMANCORPORATE GOVERNANCE CODE
PURSUANT TO SECTION 161
OF THE GERMAN STOCKCORPORATION ACTOn December 15, 2023, the Board of Management
and the Supervisory Board of LANXESS AG issued
the following declaration of compliance pursuant to
Section 161 of the German Stock Corporation Act (AktG):

77“Since the issuance of the last declaration of complianceon December 9, 2022, LANXESS AG has complied withthe recommendations of the Government Commission on
the German Corporate Governance Code (‘Government
Commission’) as amended on April 28, 2022, which were
published by the Federal Ministry of Justice and Consumer
Protection in the official section of the Federal Gazette,with the exception described below and will comply withthem without exception in the future:
The share of variable compensation received by the Boardof Management as a result of achieving long-term targets
does not yet exceed the share from short-term targets inall existing Board of Management employment contracts(deviation from recommendation G.6 of the German
Corporate Governance Code (GCGC)).
Following the publication of the then new version of the
GCGC on March 20, 2020, and the resulting introductionof recommendation G. 6, the Supervisory Board began
to successively implement this recommendation whenconcluding new Board of Management employment
contracts in connection with upcoming (re-)appointmentson the basis of a revised Board of Management compensation system as of January 1, 2021. In order to maintainthe weighting of individual compensation components andthus the total amount of compensation originally agreed

in existing Board of Management employment contracts,
however, these contracts were not amended. Following
the latest (re-)appointments of Board of Management
members in 2023, recommendation G.6 of the GCGC
will be fully implemented in all contracts of serving Boardof Management members from April 1, 2024, onward.”The
declaration of compliance can be viewed on
LANXESS AG’s website. Declarations of compliancefrom previous years are also permanently available on
the website.

CORPORATE GOVERNANCE­PRACTICES GOING ABOVEAND ­BEYOND THE LEGAL­REQUIREMENTS
As an international company, LANXESS bears global
responsibility for the propriety and sustainability of its
conduct. Compliance, meaning the observance of all legal
provisions that are binding on the LANXESS Group, ethicalprinciples and self-imposed regulations, is a fundamental
requirement for all corporate activities. For this reason,
LANXESS has established a global compliance management system (CMS), which is defined in the CMS policy
applicable throughout the Group.
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The goal of the CMS is to appropriately and effectively
ensure compliance throughout the LANXESS Groupso as to counter unlawful or unethical conduct within
the LANXESS Group at an early stage and introduce
suitable measures to prevent misconduct. The CMS is
supported by the compliance organization, which is madeup of the Group Compliance Officer, regional Compliance
Officers and a network of local Compliance Officers forthe countries in which LANXESS has subsidiaries. The
compliance organization acts, in particular, as the central
point of contact and provider of advice for all employeeson all compliance-related issues. The staff function towhich the global compliance organization belongs reports
directly and regularly to the Board of Management.
One of the fundamental elements of the CMS is a compliance culture based on LANXESS’s corporate values ofrespect, responsibility, integrity, professionalism and trust.
It is shaped by the clear commitment and dedication of
the LANXESS Board of Management and the Supervisory
Board. All managerial staff at LANXESS have a duty toembody this compliance culture and communicate it to
the workforce, so that all LANXESS employees live by andpractice this compliance culture.

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The aim of the LANXESS Compliance Program, which ispart of the CMS, is to establish appropriate organizational
measures and processes to prevent individual misconduct (prevention) or to identify misconduct as quickly
as possible (identification) and react with appropriate
sanctions (response). The most important instrument in
the Compliance Program is the Group-wide “LANXESSCode of Conduct.” It defines binding principles of conduct
and provides employees with important information andguidance on compliance. The
LANXESS Code of
Conduct is published on our website. Additional preventive
measures include, in particular, an extensive portfolio ofcompliance briefings and targeted compliance training.
Compliance risk assessments are performed regularly
to identify and evaluate company-specific compliancerisk areas, as well as to develop additional measures andprocesses for reducing compliance risks. The main risk
areas identified are assigned to individual Group functions
as special compliance responsibilities. These functions
are developing and implementing individual complianceprograms that encompass, in particular, specific Group
policies, standard operating procedures and training
concepts. The compliance organization supports theGroup functions during both the design and implementation phases on an overall and global level.

Financial Statements

Further Information

An effective internal control system, appropriate monitoring
activities and audits performed by Internal Auditing andthose functions with special compliance responsibilities
are designed to ensure that requirements are met. In theevent of indications of compliance violations, the global
whistleblower platform “SpeakUp” enables employees
and external third parties to report suspected violations(anonymously if desired), which are investigated by thecompliance organization.
We consider corporate responsibility a prerequisite for
operating successfully in the future and creating value
for all stakeholders. With this in mind, sustainability is a
key factor for success that is at the heart of LANXESS’s
corporate culture and a component of our businessstrategy. For us, actively demonstrating corporate responsibility involves knowing and evaluating the impact of ouractions – whether positive or negative – and maintaining
a dialog with stakeholders that enables us to satisfy their
expectations to the best of our ability. We subscribe to
globally recognized standards and frameworks such as
the U.N. Global Compact, the standards of the International Labour Organization (ILO) and Responsible Care®.
The principles of responsible business operations andsustainable development are expressed in our Corporate
Policy, which defines our general corporate philosophy
and the conduct of every single employee in relation to
our stakeholders.
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WORK OF THE BOARD OF­MANAGEMENT AND THE­SUPERVISORY BOARD
LANXESS AG is a stock corporation established under
the laws of Germany. One of the fundamental principles ofGerman stock corporation law is the two-tier management
system with the governing bodies of management board
and supervisory board. This system is characterized bya clear separation between the management board as
the body that manages a company and the supervisoryboard as the body that advises and oversees management.
The management board and the supervisory board work
closely together in a relationship of mutual trust for the
benefit of the company.
From the appointment of Frederique van Baarle on
April 1, 2023, until the end of fiscal year 2023, the Boardof Management of LANXESS AG temporarily had fivemembers again. After the former CFO Michael Pontzen left
at his own request on August 31 and his role was takenover by the former Head of the Treasury & Investor Relations
department, Oliver Stratmann, these five members were
Matthias Zachert (Chairman), Frederique van Baarle,
Dr. Anno Borkowsky, Dr. Hubert Fink and Oliver Stratmann.
Dr. Anno Borkowsky retired and stepped down from theBoard of Management of LANXESS AG at the end of the
fiscal year on December 31, 2023. There are currently noplans to appoint a successor.
Information on membersof the Board of Management

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The Board of Management is appointed to manage andrepresent the company. It is responsible for conducting
business in the company’s interests with the goal of
creating sustainable value. The principal tasks of the Boardof Management include defining the company’s goals
and strategic alignment, managing and overseeing theoperating units, setting human resources policy, arranging
the company’s financing, focusing on sustainable value
creation, and establishing an effective risk management
system. The Board of Management has a duty to ensurecompliance with legislation, regulatory requirements andthe company’s internal directives. It is also responsible
for preparing the quarterly and half year financial statements, the financial statements of LANXESS AG, theconsolidated financial statements of the LANXESS Groupand the management report for LANXESS AG and the
LANXESS Group.
The Chairman coordinates the work of the Board ofManagement. As a rule, Board of Management decisions
are adopted with a simple majority. In the event of a tie,
the Chairman has the casting vote. Resolutions of theBoard of Management are generally passed at regularly
held meetings. The rules of procedure for the Board ofManagement that are enacted by the Supervisory Board
contain further regulations concerning the form of cooperation within the Board of Management, the allocation ofduties and the matters requiring resolution by the full
Board of Management. The Board of Management has
not formed any committees.

Financial Statements

Further Information

The company’s Supervisory Board is composed of twelve
members, with equal numbers of stockholder representatives and employee representatives in accordancewith the provisions of the German Codetermination Act
of 1976. The stockholder representatives are elected by
the Annual Stockholders’ Meeting, whereas the employee­representatives are elected in accordance with theprovisions of the Codetermination Act and its electoral
regulations. Supervisory Board members generally serve
for a five year term. However, appointments can also bemade for shorter terms.
Information on members of
the Supervisory Board
The Supervisory Board’s role is to advise the Board ofManagement in its management of the company and tomonitor its conduct of the business. The Supervisory Board
discusses business performance, planning and strategy atregular intervals. Its responsibilities also include appointing
the members of the Board of Management as well as
reviewing the financial statements of LANXESS AG and theconsolidated financial statements of the LANXESS Group.
The Supervisory Board makes decisions on the Board ofManagement’s proposed appropriation of the distributable profit and on its report to the Annual Stockholders’Meeting. It also deals with sustainability issues and climate
action. The Supervisory Board reaches its decisions witha majority of the votes cast unless a different majority
is stipulated by law. In the event of a tie, the Chairmanof the Supervisory Board has two votes in a second
ballot on the resolution, even if this also results in a tie.

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The German Codetermination Act contains special
requirements concerning resolutions. The Chairman of theSupervisory Board coordinates the work in the Supervisory
Board, chairs its meetings and represents the concernsof the body externally. Supervisory Board resolutions
are usually adopted at regularly held meetings.
An
overview of the attendance of Supervisory Board members
at meetings of the Supervisory Board and its committees
in fiscal year 2023 can be found in the Report of theSupervisory Board and on the company’s
website.
The Supervisory Board has issued its own rules ofprocedure, which, in addition to defining the tasks andresponsibilities of the Supervisory Board and the personalqualifications of its members, establish the processes forconvening, preparing and chairing meetings as well as
the procedures for voting.
Rules of procedure of theSupervisory Board
The Board of Management provides full and timely reports
to the Supervisory Board about the course of businessand the situation of the Group, including potential risks
and relevant issues relating to corporate planning. The
Supervisory Board has specified the Board of Management’s notification and reporting obligations in its rules ofprocedure. The Chairman of the Board of Management
regularly exchanges information with the Chairman of theSupervisory Board in order to discuss matters of strategy,planning, business performance, the risk situation, risk

80

Corporate GovernanceManagement Reportmanagement and compliance. Certain transactions
and measures of major or long-term importance require
the Supervisory Board’s approval. Measures requiring
approval include, but are not limited to: the adoption of thecorporate planning, the acquisition, sale or encumbranceof real property, shareholdings or other assets, and borrowings and certain other types of financial transactions.
Thresholds have been set for some of these transactions.
The Supervisory Board assesses, at regular intervals, howeffectively it as a whole and its individual committees fulfill
their tasks. An externally supported self-assessment waslast carried out in fiscal year 2022. The results were
presented to the Supervisory Board, which discussed
opportunities for improvement and recommendations
for action thus derived.
The
Report of the Supervisory Board details theSupervisory Board’s work.

COMPOSITION AND WORK OF THE
SUPERVISORY BOARD COMMITTEESThe Supervisory Board has a Presidial Committee, an
Audit Committee, a Committee pursuant to Section 27,
Paragraph 3 of the German Codetermination Act and a
Nominations Committee formed from among its members.
Composition of the Supervisory Board Committees

Financial Statements

Further Information

The Presidial Committee discusses key issues andprepares the meetings and resolutions of the Supervisory
Board. In addition, it makes decisions on transactions
requiring approval that are already included in thecompany’s annual planning. The Presidial Committee
may also resolve on the exercise of participation rights
pursuant to Section 32 of the German Codetermination
Act and on transactions requiring approval that cannot bedeferred. It consults regularly about long-term succession
planning for the Board of Management and prepares the
personnel decisions to be made by the Supervisory Board.
In addition, the Presidial Committee prepares the Supervisory Board resolution on the compensation system for
the Board of Management including the implementationof this system in the Board of Management contracts,
the setting of targets for variable compensation and theassessment and review of the appropriateness of thetotal compensation of the individual Board of Management members. The Presidial Committee is chaired by
Dr. Matthias L. Wolfgruber. The other members of the
Presidial Committee are Birgit Bierther, Manuela Strauch,Hans van Bylen, Ralf Sikorski and Dr. Rainier van Roessel.
The Audit Committee supports the Supervisory Boardin overseeing the conduct of the business and deals
with matters relating to the supervision of accounting,the accounting process, effectiveness of the internal
control system, the risk management system and theinternal auditing system, as well as auditing, including

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the independence of the auditor and the work additionallyperformed by the auditor, and compliance. It prepares
the Supervisory Board’s resolutions concerning theannual and consolidated financial statements andrecommends an auditor whom the Supervisory Board
then proposes to the Annual Stockholders’ Meeting forappointment. The Audit Committee also prepares theseparate ­non-financial report. As of December 31, 2023,
the Audit Committee comprised the following members:
Pamela Knapp (Chairwoman), Hans van Bylen, Armando
Dente, Dr. Hans-Dieter Gerriets, Lawrence A. Rosen andIris Schmitz. The members of the Audit Committee are allfamiliar with the sector in which LANXESS AG operates.
Under German stock corporation law, at least one memberof the Audit Committee must have expertise in the field of
accounting and at least one other member of must haveexpertise in the field of auditing (“financial experts”). In
accordance with the recommendations of the GCGC, theChairman or Chairwoman of the Audit Committee mustalso have expertise in at least one of these two areas andbe independent. Ms. Knapp as Chairwoman of the Audit
Committee fulfills these requirements because of her
earlier professional practice. She has held various management positions in the financial field during her professional
career, most recently as CFO of a listed company where
her responsibilities included the Accounting, Controlling
and Treasury divisions. Ms. Knapp therefore has in-depth
knowledge and many years of experience in the application of accounting principles, in the field of auditing
and with regard to internal control and risk management
systems, and also expertise in the field of sustainability
reporting.

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Mr. van Bylen, among others, also has a business
management background and during his career has
been a long-term member and most recently chairmanof the management board of a large, international, publicly
traded corporation. In this role, Mr. van Bylen has gained
extensive experience in the application of accounting
principles as well as various aspects of sustainability
reporting, which he actively contributes to the Supervisory
Board and the Audit Committee. Ms. Knapp and Mr. van
Bylen therefore meet the relevant statutory requirements
for “financial experts.”
The Mediation Committee pursuant to Section 27,
Paragraph 3 of the German Codetermination Act
performs the tasks described in Section 31, Paragraph 3of the German Codetermination Act. The Chairman is
Dr. Matthias L. Wolfgruber. The other committee members
are Dr. Heike Hanagarth, Ralf Sikorski and Iris Schmitz.
The Nominations Committee comprises solely stockholder
representatives and proposes candidates for the Supervisory Board to nominate for election as new membersof the Supervisory Board by the Annual Stockholders’Meeting. The members of the Nominations Committee
are Dr. Matthias L. Wolfgruber (Chairman), Lawrence A.
Rosen and Dr. Heike Hanagarth.
The respective committee chairmen or chairwomen report
regularly to the Supervisory Board on the work of thecommittees.

Financial Statements

Further Information

SETTING AND IMPLEMENTATIONOF TARGETS FOR FEMALE
REPRESENTATION ON THE
BOARD OF MANAGEMENT AND
IN MANAGERIAL POSITIONSPURSUANT TO SECTIONS 76,
PARAGRAPHS 3A AND 4, AND 111,
PARAGRAPH 5, OF THE GERMANSTOCK CORPORATION ACT
In accordance with German stock corporation law, theSupervisory Board of LANXESS AG must comprise atleast 30% women and at least 30% men. In the context
of separate fulfillment, the company’s twelve-member
Supervisory Board currently has five female members:
Birgit Bierther, Dr. Heike Hanagarth, Pamela Knapp, Iris
Schmitz and Manuela Strauch. This is a ratio of 42%
women. New appointments in the future will also comply
with the statutory requirements.
Under the German Act on Equal Participation of Womenand Men in Executive Positions in the Private and the
Public Sector, certain companies in Germany are required
to set targets for the management board and the next two
management levels down, and to specify a deadline formeeting these targets. In accordance with the German
Stock Corporation Act, companies like LANXESS thatare listed on the stock exchange and subject to equal
codetermination and have a Board of Management withmore than three members must also have at least one
female and one male Board of Management member andobserve this requirement in the event of (re-)appointmentsof Board of Management members (minimum participation requirement).

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Management Report

Following the appointment of Frederique van Baarle asof April 1, 2023, the LANXESS Board of Management
has a female member again, meaning that the temporary
vacancy resulting from Dr. Stephanie Coßmann’s departure in fiscal year 2022 was quickly filled.

encompass diversity in terms of age, gender, educational/
professional background and internationality/ethnicity. This
diversity contributes to a greater wealth of experience anda wider range of expertise and skills within the Board ofManagement and the Supervisory Board.

The Board of Management last adopted new targets forthe management levels below the Board of Managementin April 2022. These plan for greater representation than
before in accordance with the company’s interest in continually increasing the number of women in management
positions. By June 30, 2027, the proportion of female
employees must therefore amount to at least 25% at thefirst level and 28% at the second level below the Board ofManagement. At the end of fiscal year 2023, these figures
amounted to 23.1% and 28.4%, respectively.

Board of Management diversity concept

DIVERSITY CONCEPT FOR THE­ OMPOSITION OF THE BOARDC
OF MANAGEMENT AND THE­SUPERVISORY BOARD

When appointing members of the Board of Management,
the Supervisory Board considers personal suitability,
professional qualifications, integrity, leadership qualities,
international experience, previous achievements, andknowledge of the company and the chemical industry.
Diversity is an additional criterion, especially with regard
to age, gender, educational and professional background,and internationality/ethnicity.

LANXESS AG’s Board of Management and Supervisory
Board as a whole should reflect the principles of diversity.
Both the Board of Management and the Supervisory
Board of the company observe principles that particularly82

Corporate Governance

The Supervisory Board’s decisions on the filling of specific
Board of Management positions are based on the interestsof the company, taking all individual circumstances into
account. The Supervisory Board aims to put together aBoard of Management with strong leadership qualities
and the most diverse and complementary compositionas possible. The goal is for all Board of Management
members to have the knowledge, skills and professional
expertise required to successfully perform their Board ofManagement duties.

Financial Statements

Further Information

Age
In line with recommendation B.5 GCGC, the Supervisory
Board has adopted a standard age limit of 70 for the Boardof Management. This is designed to enable members of
the Board of Management to contribute their professional
and life experience for a sufficient length of time for the
benefit to the company. The Supervisory Board also seeks
to ensure a balanced mix of ages so that the managementof the company is guided both by long-term professional
and life experience and by the perspective of a younger
generation. The balance also ensures continuity in the
management of the company.

Gender diversity
LANXESS also strongly believes that gender diversity
is a key component of diversity. The company therefore
promotes, for example, family-friendly workplace initiatives. In accordance with the statutory requirements
in Section 76, Paragraph 3a of the German Stock
Corporation Act, the Supervisory Board also aims – asdescribed above – to have at least one female member on
the company’s Board of Management. This requirement
was met in fiscal year 2023 thanks to the appointment
of Frederique van Baarle as of April 1, 2023.

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Educational and professional backgrounds
LANXESS is of the firm belief that a diverse range ofeducational and professional backgrounds is necessary
to enable the governing bodies to fulfill the duties andresponsibilities placed on them by law, the company’s
articles of association and the rules of procedure to thebest of their ability and in the interests of the company.
Varying educational and professional backgrounds also
guarantee varying perspectives and approaches to solving
business challenges. The members of the company’s
Board of Management have educational qualifications
in business, science or law and diverse international
management experience.

Internationality/ethnicity
LANXESS is a global company with a correspondingly
wide range of customers and suppliers. LANXESS
employees come from many different countries. This is
why membership of the Board of Management must also
be international. The newly appointed Board of Management member Frederique van Baarle is a Dutch citizen.
However, we do not mean international only in the sense ofa specific nationality. A different cultural background also
plays a role here. Cross-cultural characteristics and experiences, which can also be acquired through education or
professional activity, are crucial. The Board of Management membership must therefore be characterized by83

Corporate GovernanceManagement Reportan openness to other cultures and an understandingof international issues and relations. In many cases, theexperience and skills of the members of the Board ofManagement have been acquired while working abroad
Further information about
or in an international field.
all members of the Board of Management of LANXESS AG
The diversity concept described above is implemented in
the Supervisory Board’s process for appointing Board ofManagement members. Board of Management staffing
issues are prepared in the Supervisory Board’s Presidial
Committee and then discussed and decided upon in the
Supervisory Board. In the long-term succession planningfor the Board of Management, the Presidial Committee
and the Supervisory Board regularly communicate with
the Board of Management regarding suitable internal
candidates for the Board of Management, taking thecurrent Board of Management mandates into account. If
necessary, external candidates are also evaluated. Whenselecting the candidates, the Supervisory Board considers
the requirements laid down in the diversity concept for
the Board of Management.
The composition of the Board of Management of
LANXESS AG complies entirely with the current diversity
concept.

Financial Statements

Further Information

Goals for composition, diversity­concept and qualification matrix of
the S­ upervisory Board
With the goals for its composition, skills profile anddiversity concept, the Supervisory Board aims to ensurethat the Board of Management receives qualified advice
and supervision. Therefore, proposed candidates forappointment to the Supervisory Board should be able toperform the duties of a Supervisory Board member in aninternational chemicals company by virtue in particularof their personality and integrity, their professional skills
and the time they have available. Sufficient diversity andindependence are also taken into account. In addition toGerman stock corporation law and the recommendationof the GCGC, proposed appointments to the Supervisory
Board consider the skills profile and the targets for thecomposition of the Supervisory Board. New Supervisory
Board members are provided with the information relevantto their work in an onboarding process.

Goals for composition, skills profile
The members of the Supervisory Board of LANXESS AG
are expected to possess the necessary expertise, skills
and professional experience to perform their duties. They
autonomously undertake training and are supported intheir efforts by the company. In addition to the requirements
applicable to each individual member of the Supervisory

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Board such as integrity, professionalism and independence, the entire Supervisory Board should be composedin such a way to ensure that the Board of Management
receives qualified supervision and advice. The Supervisory Board of LANXESS AG has devised a skills profile
which stipulates that in-depth specialist knowledge andexperience are represented in the Supervisory Board fromfields such as the chemical industry, management of majorinternational companies, production, marketing and saleof chemical products, corporate governance/compliance,
M&A, corporate financing, accounting, risk management,
digitalization/IT, cybersecurity, and ESG/sustainability.
In its current composition, the entire Supervisory Board
fulfills these goals and completes the skills profile. The
Supervisory Board members are all familiar with the sector
in which LANXESS operates and possess the knowledge,
skills and experience that are crucial to the company. In
its proposals to the Annual Stockholders’ Meeting forfilling vacant positions on the Supervisory Board, theSupervisory Board will continue to take account of thetargets for the composition of the Supervisory Board and,at the same time, endeavor to complete the skills profile
for the entire body.

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Independence
The Supervisory Board of LANXESS AG should ensure
the provision of impartial advice and supervision to theBoard of Management. It must include what it considers
to be an appropriate number of independent members,
but this number must in any event be more than half ofthe shareholder representatives, taking the company’sownership structure into account. Supervisory Board
members are to be considered independent from thecompany and its Board of Management if they have no
personal or business relationship with the company or its
Board of Management that may cause a substantial – andnot merely temporary – conflict of interest. In particular, it
must be taken into consideration whether the respective
Supervisory Board member or a close family member› was a member of the company’s Board of Managementin the two years prior to appointment;› currently is maintaining (or has maintained) amaterial business relationship with the company or
one of the entities dependent upon the company(e.g. as customer, supplier, lender or advisor) in
the year up to his/her appointment, directly or as ashareholder, or in a leading position of a non-group
entity;› is a close family member of a Board of Management
member; or› has been a member of the Supervisory Board formore than twelve years.

Financial Statements

Further Information

Moreover, no more than two former members of the Boardof Management of the company may be members of theSupervisory Board. Supervisory Board members may not
be members of governing bodies of, or exercise advisory
functions at, significant competitors of the company or aGroup entity, and may not hold any personal relationships
with a significant competitor.
The Supervisory Board deems all current Supervisory
Board members to be independent. In its assessmentof employee representatives, the Supervisory Board also
assumes that their ability to act independently is notaffected by their status as employees of the company ormembers of labor unions. No member of the Supervisory
Board has a personal or business relationship with thecompany, its executive bodies, a controlling shareholder orany enterprise affiliated with a controlling shareholder that
may cause a material and not merely temporary conflictof interest. Moreover, no Supervisory Board members
have a family relationship with anyone who performsor has performed a Board of Management or executivefunction at the company or a Group entity. No Supervisory
Board members are in a contractual service relationshipwith the company or its management personnel. In
addition, no Supervisory Board members are partners
or employees of the audit company working for LANXESS.
No Supervisory Board members have been in office formore than twelve years. Furthermore, the Supervisory
Board sees no conflicts of interest on the part of any of its

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LANXESS on the Capital Market

members that could cast doubt on their independence.
Only one member of the Supervisory Board – Dr. Rainier
van Roessel – is a former member of the company’s Boardof Management. In line with the recommendations of
the GCGC, Dr. van Roessel was not appointed to theSupervisory Board until two years had elapsed since his
departure from the Board of Management.

Age limit and length of membership
The Supervisory Board has defined an age limit for its
members, which is contained in the rules of procedure for
the Supervisory Board. Supervisory Board members may
not currently continue to serve after the end of the Annual
Stockholders’ Meeting following their 75th birthday. The
Supervisory Board has stipulated a maximum length ofmembership of the Supervisory Board of generally not
more than twelve years, bearing in mind that stability
in the composition of the Supervisory Board promotes
trusting cooperation within the board and with the Boardof Management.

Diversity
In general, the Supervisory Board should be guided by
the principles of diversity in its composition. LANXESS isa global company with a correspondingly wide range ofcustomers and suppliers. LANXESS employees come frommany different countries. This is why membership of the
LANXESS Supervisory Board must also be international.
By international, we do not mean merely in the sense

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Corporate GovernanceManagement Reportof a specific nationality. A different cultural background(ethnicity) also plays a role here. Cross-cultural characteristics and experiences, which can also be acquired
through education or professional activity, are crucial. The
global reach of LANXESS AG and the different culturalcharacteristics of Supervisory Board members have beenreflected in the composition of the Supervisory Board
thus far and will remain a factor in selecting candidates
to be proposed to the Annual Stockholders’ Meetingfor election to the Supervisory Board. The company’s
Supervisory Board contains members from four different
countries (Germany, Belgium, Netherlands, and the U.S.),
who acquired much of their experience and skills whileworking abroad for long periods.
Diversity applies equally to gender. LANXESS AG’s twelvemember Supervisory Board currently has five female
members: Birgit Bierther, Dr. Heike Hanagarth, Pamela
Knapp, Iris Schmitz and Manuela Strauch. This is a ratioof 42%. The company therefore complies with the legal
requirements for gender diversity and will also take these
into account when filling positions on the Supervisory
Board in the future.

Financial Statements

Further Information

member who belongs to the management board of alisted company must not have, in aggregate, more than
two supervisory board mandates in non-Group listedcompanies or comparable functions, and must not
accept the chair of a supervisory board in a non-Group
listed company. A member that does not belong to the
management board of a listed company must not have,in aggregate, more than five supervisory board mandates
at non-Group listed companies or comparable functions,with an appointment as chairman or chairwoman of thesupervisory board being counted twice.
In line with recommendation C.1 GCGC, the table below
provides an overview of the Supervisory Board members’
qualifications on the basis of the targets for the composition of the Supervisory Board:

Time available
Each Supervisory Board member ensures that they havesufficient time available to discharge their duties. They
must be willing and able to engage with the work andto undertake necessary training. A Supervisory Board

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Corporate GovernanceManagement Report

Financial Statements

Further Information

Qualification Matrix
Stockholder representatives
Dr. Matthias L.
Wolfgruber
Length of­membership

Hans
Dr. Heikevan Bylen Hanagarth

2015

2020

2016

Employee representatives

PamelaKnapp

Lawrence A.
RosenDr. Rainier
van Roessel

BirgitBierther

ArmandoDente

Dr. HansDieter
Gerriets

Ralf
Sikorski

Iris
Schmitz

ManuelaStrauch

2018

2015

2022

2019

2020

2014

2015

2021

2015

Member since

Personal
suitability

Independence

Diversity

GenderMale

Male

FemaleFemaleMale

Male

Female

Male

Male

Male

FemaleFemaleNationality

GermanBelgianGermanGermanAmericanDutch

GermanGermanGermanGermanGermanGermanNot overboarded

Professional
aptitudeManagement of majorinternational companies
Chemical sector
Production, marketing andsale of chemical products
Corporate governance(compliance)
M&A
Corporate financing
Accounting
Risk management
Digitalization/IT
Sustainability/ESG

International
experience

Proposals of candidates to the Annual Stockholders’Meeting must take the Supervisory Board’s targets for its
composition into account and, at the same time, endeavor
to complete the skills profile for the entire body. Candidate

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proposals and succession in the Supervisory Board are
based on the self-set targets and the skills profile of theSupervisory Board. The current composition of the Supervisory Board complies with the targets and the skills profile.

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STOCKHOLDERS AND­STOCKHOLDERS’ MEETINGS
The stockholders of LANXESS AG exercise their rights at
the Annual Stockholders’ Meeting, where they can voteon the resolutions submitted. The Annual Stockholders’Meeting resolves on all matters reserved for its decisionby law, with binding effect on the stockholders and thecompany. Each share confers one vote.
The items resolved on by the Annual Stockholders’Meeting include appropriation of the distributable profit,
ratification of the actions taken by the members of theBoard of Management and the Supervisory Board,
appointment of the auditors, election of the stockholder
representatives to the Supervisory Board, the compensation system for the members of the Board of Management
and the Supervisory Board, and the approval of the Boardof Management’s compensation report. The Annual Stockholders’ Meeting also resolves on amendments to thearticles of association, measures affecting the company’s
capital and the approval of intercompany agreements.
Each year, there is an Annual Stockholders’ Meeting at
which the Board of Management and Supervisory Board
give an account of the last fiscal year. The German Stock
Corporation Act requires the convening of an Extraordinary
Stockholders’ Meeting in certain situations.
All stockholders who register in time and prove theireligibility to attend the Annual Stockholders’ Meeting andexercise their voting rights shall be allowed to participate
in the Annual Stockholders’ Meeting. Stockholders may
exercise their voting rights at the Annual Stockholders’Meeting in person, through a proxy of their own choosing

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Corporate GovernanceManagement Reportor through a company-nominated proxy who acts
according to their instructions. Stockholders may also
cast mail-in votes in writing, by e-mail or electronically.
As in the previous years, which were impacted by the
COVID-19 pandemic, the company’s Annual Stockholders’ Meeting on May 24, 2023, was again held with
the Supervisory Board’s approval as a virtual Annual
Stockholders’ Meeting without the physical presenceof the stockholders or their authorized representatives.
This followed careful examination and consideration of
all decision-making criteria relevant for the event format.
By resolution of the Annual Stockholders’ Meeting ofMay 24, 2023, the company’s articles of association
were amended and the Board of Management was authorized to arrange for the Annual Stockholders’ Meeting
to continue to be held without the physical presence ofthe stockholders or their authorized representatives atthe venue of the Annual Stockholders’ Meeting (virtual
Annual Stockholders’ Meeting). This authorization applies
to virtual Annual Stockholders’ Meetings held during a
two-year period following the entry of this amendment tothe articles of association in the company’s commercial
register, which occurred on June 12, 2023.

Financial Statements

Further Information

new version of the GCGC. Taking particular account of
LANXESS’s sustainable and strategic alignment, significant changes were implemented in the new compensation system. In particular, both the short-term variable
compensation and the long-term variable compensation
are based on two measurable performance criteria thatare aligned with the sustainable corporate strategy. In
addition, the proportions of short-term and long-term
variable compensation have been determined such thatthe long-term compensation components outweigh theshort-term ones. The revised compensation system for
the Board of Management was approved by the Annual
Stockholders’ Meeting of LANXESS AG on May 19, 2021,
with a majority of 94.22% of the valid votes cast.
The
compensation report in accordance with
Section 162 AktG including the auditor’s report can befound together with the compensation system on thecompany’s website. In accordance with Section 120a AktG,
it was approved at the Annual S­ tockholders’ Meeting of
LANXESS AG on May 24, 2023, by a majority of 90.48%.
The most recent
resolution of the Annual Stockholders’ Meeting on the compensation of the Supervisory
Board in accordance with Section 113, Paragraph 3,
Sentence 1 AktG of May 19, 2021, is also available.

COMPENSATION SYSTEM AND
COMPENSATION REPORTREPORTABLE SECURITIES­TRANSACTIONS

In fiscal year 2020, the Supervisory Board revised thecompensation system for the members of the Board ofManagement on the basis of the Second Shareholder
Rights Directive Implementation Act (ARUG II) and theMembers of the Board of Management and Supervisory
Board and persons closely related to them are required
to disclose transactions in shares or debt securities of
LANXESS AG or associated financial instruments if theAnnual Report 2023 | LANXESSContents

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total volume of such transactions in any given calendar
year equals or exceeds €20,000.
Reportable securities
transactions are published on the LANXESS AG website.
The total number of shares of LANXESS AG held bymembers of the Board of Management and Supervisory
Board as of December 31, 2023, was still less than 1%of all shares issued by the company.

RISK MANAGEMENT AND­COMPLIANCE
The Board of Management sees systematic and effective risk and opportunity management as an importantpart of good corporate governance and as an integral
component of value-oriented management. This is asystematic, Group-wide process, which helps the Boardof Management to identify, assess, manage and minimizerisks and opportunities. The risk management system iscontinuously updated and adapted to the changing conditions. The Board of Management regularly informs theSupervisory Board of potential risks and their development.
The Audit Committee regularly reviews the effectivenessof the risk management system and the internal control
and auditing system.

Corporate GovernanceManagement Report

ACCOUNTING AND AUDITINGLANXESS AG prepares its consolidated financial statements and interim financial statements in line with theInternational Financial Reporting Standards (IFRS), as
applicable in the European Union. The annual financial
statements of LANXESS AG are prepared in accordancewith the provisions of the German Commercial Code. Afterbeing adopted and approved by the Supervisory Board,
the annual financial statements and consolidated financial
statements of LANXESS AG as well as the combined
management report are published within 90 days after
the end of the fiscal year. The company’s accounts forfiscal year 2023 were audited by the auditor PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft(PwC) for the last time. The condensed financial statements and interim management report included in the2023 half-year financial report were also reviewed by
PwC. PwC was appointed following an external tender
procedure, which took place in 2016. Folker Trepte has
been the responsible auditor since 2022. In line with theexternal rotation required by law, the Annual Stockholders’Meeting of LANXESS AG on May 24, 2023, accepted theSupervisory Board’s nomination and appointed KPMG AG
Wirtschaftsprüfungsgesellschaft as the new auditor of the

Financial Statements

Further Information

financial statements for fiscal year 2024 and as the auditor
for the review of the condensed financial statements andinterim management report included in the 2024 half-year
financial report. The audits are conducted in line withGerman auditing regulations and in compliance with theGerman generally accepted standards for the audit offinancial statements promulgated by the Institute of Public
Auditors in Germany (IDW). The statutory requirements
and rotation obligations in Sections 319 and 319a of theGerman Commercial Code are fulfilled. The auditor has
agreed to immediately inform the Supervisory Board ofany possible reasons for disqualification or conflicts that
may arise, as well as any material findings or events inthe course of the audit.
Cologne, February and March 2024

LANXESS Aktiengesellschaft
The Board of Management 

The Supervisory Board

Key characteristics of therisk management system
and internal control system can be found in the
combined management report for LANXESS AG andthe LANXESS Group.

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Corporate GovernanceManagement Report

Financial Statements

Further Information

Offices Held by Board of Management andSupervisory Board Members
OFFICES HELD BY BOARD OF ­MANAGEMENT MEMBERS

SUPERVISORY BOARD OF LANXESS AG

Offices Held by Serving Board of Management Members (as of December 31, 2023)

Serving Members

Member of the Boardof Management
External offices
Matthias Zachert
Chairman of the• Member of theBoard of Management
Supervisory Board ofSiemens AG, Berlinand Munich
Dr. Anno ­Borkowsky(resigned as of­December 31, 2023)
Member of the• Member of the Board
Board of Managementof Administration of
Hüttenes-Albertus­Chemische Werke
GmbH(since July 1, 2023)
Dr. Hubert Fink
Member of theBoard of Management

Frederique van BaarleMember of theBoard of Management

Oliver Stratmann
Member of theBoard of Management

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Offices within the LANXESS Group

Dr. Matthias L. Wolfgruber (Chairman)• Chairman of the Executive Board of LANXESS Deutschland GmbH

• Self-employed consultant• Former Chairman of the Management Board of ALTANA AG
Further offices:• LANXESS Deutschland GmbH, Cologne1) (Chairman)• ALTANA AG, Wesel1) (Chairman of the Supervisory Board)• Cabot Corporation, Boston, Massachusetts, U.S.

• Member of the Executive Board of LANXESS Deutschland GmbH• Chairman of the Board of Directors of LANXESS Hong Kong Ltd.
• Member of the Board of Directors of LANXESS Corp.
• Chairman of the Board of Directors of LANXESS Chemical (China)
Co. Ltd.
• Chairman of the Board of Directors of LANXESS India Private Ltd.

• Member of the Executive Board of LANXESS Deutschland GmbH• Chairman of the Supervisory Board of Saltigo GmbH• Chairman of the Supervisory Board of
LANXESS Performance Materials GmbH
(resigned as of March 29, 2023)• Member of the Executive Board of LANXESS Deutschland GmbH(since April 1, 2023)• Chairwoman of the Board of Directors of LANXESS Corp.
(since November 1, 2023)• Member of the Executive Board of LANXESS Deutschland GmbH(since September 1, 2023)

Hans van Bylen• Self-employed consultant• Former Chairman of the Management Board of Henkel AG & Co. KGaA
• Former President of Verband der Chemischen Industrie e.V. (VCI)
Further offices:• LANXESS Deutschland GmbH, Cologne1)• Akzo Nobel N.V., Amsterdam, Netherlands• Etex NV, Brussels, Belgium• Ontex Group NV, Erembodegem (Aalst), Belgium (Chairman)
Dr. Heike Hanagarth• Self-employed management consultant• Former member of the Board of Management of Deutsche Bahn AG, Berlin
Further offices:• LANXESS Deutschland GmbH, Cologne1)• Grillo-Werke AG, Duisburg1) (since March 16, 2023)• Martur Fompak International/Automotive Seating Systems AS, Istanbul, Turkey• Rivean Capital Advisory GmbH, Frankfurt am Main (member of the Advisory Board – formerly Gilde Buy Out Partners BV)

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Corporate Governance

Serving Members

Serving Members

Pamela Knapp• Member of the Boards of Management and Supervisory Boards of various European commercial enterprises• Former CFO of GfK SE

Birgit Bierther

Further offices:• LANXESS Deutschland GmbH, Cologne1)• Compagnie de Saint-Gobain S.A., Courbevoie, France (member of the Board of Directors – Conseil d’Administration –and Chairwoman of the Audit Committee)• Signify NV, Eindhoven, Netherlands (member of the Supervisory Board and Chairwoman of the Audit Committee)
Dr. Rainier van Roessel• Self-employed consultant• Former member of the Board of Management and Labor Relations Director of LANXESS AG
Further offices:• LANXESS Deutschland GmbH, Cologne1)• K+S Aktiengesellschaft, Kassel1)• K+S Minerals and Agriculture GmbH, Kassel1)
Lawrence A. Rosen• Member of the Supervisory Boards of various commercial enterprises• Former member of the Board of Management of Deutsche Post AG

Management Report

Further Information• Member of the LANXESS Works Council at the Cologne SIte (until October 31, 2023 as chairwoman)
Further offices:• LANXESS Deutschland GmbH, Cologne1)
Armando Dente• District manager at IGBCE, Cologne-Bonn district
Further offices:• LANXESS Deutschland GmbH, Cologne1)• INEOS Deutschland Holding GmbH, Cologne1)• INEOS Manufacturing Deutschland GmbH, Cologne1)
Dr. Hans-Dieter Gerriets• Chairman of the Group Managerial Employees’ Committee of LANXESS AG• Chairman of the LANXESS Managerial Employees’ Committee• Manager of a production facility in the Advanced Industrial Intermediates business unit of LANXESS Deutschland GmbH
Further offices:• LANXESS Deutschland GmbH, Cologne1)

Further offices:• LANXESS Deutschland GmbH, Cologne1)• Deutsche Post AG, Bonn1)• Qiagen N.V., Venlo, Netherlands (Chairman of the Supervisory Board)

Iris Schmitz

Ralf Sikorski (Vice Chairman)• Vice Chairman of the German Mining, Chemical and Energy Industrial Union, HanoverFurther offices:• LANXESS Deutschland GmbH, Cologne1)• Saltigo GmbH, Leverkusen1)

Further offices:• LANXESS Deutschland GmbH, Cologne1) (Vice Chairman)• RAG AG, Herne1)• RWE AG, Essen1) (Vice Chairman)• RWE Power AG, Cologne and Essen1) (Vice Chairman)• RWE Generation SE, Essen1) (resigned February 28, 2023)• Chemie Pensionsfonds, Wiesbaden1) (Chairman, resigned as of December 31, 2023)

Financial Statements• Chairwoman of the LANXESS Central Works Council• Vice Chairwoman of the LANXESS Group Works Council• Chairwoman of the LANXESS Works Council at the Leverkusen site

Manuela Strauch• Chairwoman of the LANXESS Group Works Council• Vice Chairwoman of the LANXESS Central Works Council• Chairwoman of the LANXESS Works Council at the Uerdingen site
Further offices:• LANXESS Deutschland GmbH, Cologne1)1) S tatutory supervisory boards.

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Corporate GovernanceManagement Report

Financial Statements

Further Information

Report of the Supervisory Board
DEAR STOCKHOLDERS,
Fiscal year 2023 was the most challenging year in
LANXESS’s history. In difficult times for global politics andwith a recession in Germany, the company was adversely
affected by generally low demand, which was exacerbatedby the inventory reduction among customers as well as
the reduction of the company’s own inventories.
In April, the company completed the contribution of theHigh Performance Materials business unit to Envalior, thejoint company for high-performance engineering plastics
formed with private equity investor Advent International. In
line with the acquisitions of previous years, this step further
sharpened the focus of LANXESS’s business portfolio on
specialty chemicals.
This progress was made in a difficult environment for
global politics and the world economy, which also hada significant influence on our company. The year wasshaped by the ongoing war in Ukraine, still high raw
material and energy prices, and generally subdued
consumer confidence. As a result, LANXESS had to adjust
its forecast for the full year in June. In order to counteract

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the generally weak demand, we promptly implemented
the FORWARD! action plan, which includes immediate
measures to stabilize earnings as well as a medium-termplan to permanently lower the cost base. Because of thepersistently weak demand, inventory reduction by ourcustomers, and supplier-related production cuts, we had
to adjust our forecast again in November.
However, LANXESS again achieved positive results withregard to sustainability and especially climate change
mitigation. As early as 2019, we said we would become
climate neutral in terms of direct emissions in production(Scope 1) and from purchased energy (Scope 2) by2040. This target was expanded to include emissions
from the upstream and downstream supply chains(Scope 3). We likewise wish to make these climate
neutral by 2050. As part of this strategy, last year weentered into additional cooperations that enable us tooffer sustainable alternatives in our product portfolio, forexample. In 2023, external rating agencies specializing
in sustainability therefore gave our holistic sustainability
strategy very good ratings once again.

For fiscal year 2024, we continue to expect a difficult
environment with political uncertainties. Our focus for2024 is the realization of cost savings through the
FORWARD! program and the management of ourbusinesses in a persistently challenging environment.
During the reporting year, the Supervisory Board duly andfully performed the tasks and duties incumbent upon it
under the law, the articles of association and the rules ofprocedure for the Supervisory Board. It regularly advised
the Board of Management in its management of thecompany and monitored its activity. In the process, wewere satisfied at all times by the legality, usefulness andpropriety of the Board of Management’s work.
The Supervisory Board was directly involved in alldecisions of fundamental importance for the company.
The Board of Management informed us regularly in
written and oral reports about business performance,
the situation of the Group, including the risk situation
and risk management, strategic development, compliance, management development, and current issues.
On the basis of these reports, we discussed significant
business transactions in detail. We thoroughly examined

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the reports and the resolutions proposed by the Board ofManagement and discussed them at length in meetingsof the full Supervisory Board and its committees. If thelaw, articles of association or other provisions required theSupervisory Board to approve the actions of the Board ofManagement, we discussed these actions in detail andadopted resolutions on them.
The chairs of the Supervisory Board/Presidial Committee
and Audit Committee and the Board of Management
were in regular contact outside of the Supervisory Board’s
meetings and discussed in particular the company’s
current situation and material transactions.

PRINCIPAL TOPICS DISCUSSED BY
THE SUPERVISORY BOARD
The Supervisory Board met a total of five times in thereporting year. We regularly discussed the sales andearnings performance of the Group and its segments,
as well as the financial position. Additionally, the Board ofManagement kept us updated about the overall state of
the economy, the difficult situation in the chemical industry
in the reporting year, the development of raw material,
energy and logistics costs, the performance of LANXESS
stock, the energy supply at LANXESS sites in Germany,
the effects of the Ukraine war on LANXESS’s businessactivities, sustainability issues, and the FORWARD!
cost reduction and stabilization project initiated by thecompany. The Supervisory Board addressed the following
important issues:

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The focus of the Supervisory Board’s financial statements
meeting held on March 14, 2023, was the review of theannual financial statements and consolidated financial
statements for fiscal year 2022 and the proposal for useof the distributable profit. We discussed and approved
the non-financial Group report 2022, which shows thesustainability aspects pursued by the company. In addition,
the Supervisory Board resolved upon the motions forresolution by the Annual Stockholders’ Meeting, whichis to be held in virtual format, including the approval of
the compensation report. The Board of Management
then presented the internal control and risk management
systems, and we satisfied ourselves of their efficacy. In
addition, the Supervisory Board decided upon the variable
compensation for the Board of Management members
for fiscal year 2022 on the basis of the identified target
attainment and on the payout of the 2019 LTSP tranche.
At the meeting on May 9, 2023, the Board of Management informed us about the status of the preparations
for the upcoming virtual Annual Stockholder’s Meeting.
The Board of Management also gave us a full report onenvironmental protection and occupational and plantsafety, which was subsequently discussed by the fullSupervisory Board. In connection with a Board of Management personnel decision, we furthermore resolved toreappoint Matthias Zachert as a member and as Chairmanof the Board of Management of LANXESS AG for a further
five years with effect from April 1, 2024. We also amended
Frederique van Baarle’s service contract in connection
with her assumption of additional functions in the U.S.

Financial Statements

Further Information

At the meeting on August 3, 2023, the Board of Management gave us a full report on the FORWARD! project
initiated in response to the company’s difficult economic
situation. The immediate measures introduced with the
project are intended to lower costs and stabilize earnings.
In the medium term, the business excellence program isalso to be refined with the help of business excellence
initiatives as part of the project. In addition, we obtained
information about the structure of LANXESS’s global
purchasing organization and the strategic purchasing
processes that have been implemented. We held adetailed discussion with the Board of Management
about the development of costs for raw materials, energy,
and logistics. Finally, we attended to human resources
matters on the Board of Management and resolved upon
the mutually agreed termination of Michael Pontzen’s
appointment as a member of the Board of Managementwith effect from August 31, 2023, which Michael Pontzen
had sought ahead of time, and the conclusion of a termination agreement. We appointed Oliver Stratmann tosucceed Michael Pontzen as Chief Financial Officer for aperiod of three years with effect from September 1, 2023.
At the meeting on November 8, 2023, the Board ofManagement again informed us about the status of the
FORWARD! cost reduction and stabilization project. We
also addressed sustainability management and ESGtargets at LANXESS. We obtained information about theimplementation of the sustainability targets adopted in2018 and the internal management structure established
for this purpose. We then discussed significant sustainability issues with the Board of Management. The Board

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of Management also informed us about the succession
planning system at LANXESS and the processes implemented for this purpose. Finally, the Board of Management
explained the financial policy targets and measures tosecure the company’s financial stability even in times ofcrisis.
At its meeting on December 15, 2023, the Supervisory
Board reviewed in full and approved the corporate planningfor 2024 proposed by the Board of Management. After
reviewing compliance with the recommendations andsuggestions of the German Corporate Governance Code
(GCGC), we resolved to issue a declaration of compliance.
The Board of Management also informed us about thebusiness development of Envalior, the joint company with
Advent International. The Supervisory Board also defined
the conditions for the Board of Management’s variable
compensation components and target total compensation
for fiscal year 2024.
All members of the Supervisory Board and its committees
performed their duties diligently and conscientiously. The
stockholder representatives and employee representatives
to the Supervisory Board always worked together in a spiritof trust. They regularly held separate meetings at which
they prepared the meetings of the full Supervisory Board.
At its meetings, the Supervisory Board also regularly met
without the Board of Management.

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The members of the Supervisory Board autonomously
undertake the training necessary for their duties andare supported in their efforts by the company. New
members of the Supervisory Board can meet membersof the Board of Management and specialist managers
for an exchange on fundamental and current topics,
thus obtaining an overview of the relevant topics for thecompany (onboarding). The company also offers training
sessions.

Financial Statements

Further Information

The attendance at meetings of the Supervisory Boardand its committees was 100%. All meetings were heldin person, apart from two meetings of the Nominations
Committee, which were held by video conference. The
attendance of Supervisory Board members at meetingsof the Supervisory Board and the committees is disclosed
individually:

Individual Disclosure of LANXESS AG Supervisory Board Members’ Meeting Attendance in Fiscal Year 2023
Supervisory Board
members

Supervisory
Board

Presidial­Committee

Audit
Committee

Attendance %Attendance %Dr. Matthias L. Wolfgruber,
Chairman

5/5

100

5/5

100

Ralf Sikorski,
Vice Chairman

5/5

100

5/5

100

5/5

100

Nominations­Committee

Attendance %Birgit Bierther

5/5

100

Armando Dente

5/5

100

4/4

100

4/4

100

Dr. Hans-Dieter Gerriets

5/5

100

Dr. Heike Hanagarth

5/5

100

Pamela Knapp

5/5

100

4/4

100

Lawrence A. Rosen

5/5

100

4/4

100

4/4

100

Iris Schmitz

5/5

100

Manuela Strauch

5/5

100

5/5

100

Hans van Bylen

5/5

100

5/5

100

Dr. Rainier van Roessel

5/5

100

5/5

100

4/4

100

Total

Attendance %Attendance %

3/3

13/13

100

10/10

100

100

10/10

100

9/9

100

9/9

100

3/3

100

8/8

100

9/9

100

3/3

100

12/12

100

9/9

100

10/10

100

14/14

100

10/10

100

Annual Report 2023 | LANXESSContents

To Our Stockholders

Strategy

Sustainability

LANXESS on the Capital Market

WORK OF THE COMMITTEESThe Supervisory Board has four committees: the Presidial
Committee, the Audit Committee, the Nominations
Committee and the Committee formed pursuant to
Section 27, Paragraph 3 of the German Codetermination
Act. The committees are tasked with preparing the topics
and resolutions to be discussed at meetings of the fullSupervisory Board. They also, at times, exercise decisionmaking powers conferred on them by the Supervisory
Board.
The Presidial Committee convened five times during thereporting year to prepare the meetings of the Supervisory
Board and the decisions to be reached by the full Super­visory Board at its meetings concerning human resources
measures in the company’s Board of Management.
The Audit Committee met four times during the year.
The Audit Committee dealt in particular with the annual
financial statements of LANXESS AG, the consolidated
financial statements and the combined management
report for fiscal year 2022, the quarterly statements
issued during fiscal year 2023, and the condensed
consolidated financial statements and interim management report included in the 2023 half-year financial report.
It reviewed the company’s risk management and internal
control systems. The Audit Committee also dealt with the

94

Corporate GovernanceManagement Reportconcept for approving non-audit services and the non-financial Group report 2022. Other topics discussed were
the significant findings by the internal audit department,
corporate planning and compliance, the perception of
LANXESS on the capital market, and the determinationof the principal areas of focus for the audit of the 2023
financial statements. Utilization of production capacity wasanother regular topic. The Committee also found out aboutchanges in equity, LANXESS’s liquidity management, theGroup’s pension systems, strategies to hedge currency
risks, and the recent audit of OTC derivatives contracts
pursuant to Section 32 of the German Securities Trading
Act. Finally, there was detailed discussion of the development of energy and raw material prices, including hedging.
The external auditor reported on the auditing activities at
two of the four Audit Committee meetings.

Financial Statements

Further Information

CORPORATE GOVERNANCE AND
DECLARATION OF COMPLIANCE
The Supervisory Board also dealt with the company’s
corporate governance in the past fiscal year. The joint
declaration of compliance made by the Board of Management and Supervisory Board pursuant to Section 161of the German Stock Corporation Act can be viewed bystockholders at any time on the company’s website. As
expressed in the declaration, LANXESS AG currently
complies with all the GCGC’s recommendations bar
one exception. No conflicts of interest on the part ofSupervisory Board members became known last year.
Further information about corporate governance can befound in the Board of Management’s declaration pursuant
to Sections 289f and 315d of the German Commercial
Code.

The Nominations Committee met three times in fiscal year
2023. It prepared the Supervisory Board’s nominations
to the Annual Stockholders’ Meeting of stockholder
representatives for the Supervisory Board elections. The
Committee formed pursuant to Section 27, Paragraph 3of the German Codetermination Act did not need toconvene.
The chairmen of the committees each reported on themeetings and the work of the committees at the meetingsof the full Supervisory Board.

Annual Report 2023 | LANXESSContents

To Our Stockholders

Strategy

Sustainability

LANXESS on the Capital Market

ANNUAL AND CONSOLIDATED­FINANCIAL STATEMENTS
The annual financial statements prepared by the Boardof Management of LANXESS AG in accordance with therules of the German Commercial Code, the consolidated
financial statements prepared in accordance with theInternational Financial Reporting Standards (IFRS)
and the combined management report for fiscal year
2023 were audited by PricewaterhouseCoopers GmbH
Wirtschaftsprüfungsgesellschaft, Frankfurt am Main, theauditor appointed for the last time by the Annual Stockholders’ Meeting on May 24, 2023, and engaged by
the Supervisory Board. The auditor issued an unqualified
opinion in each case. The auditor carried out the audit inaccordance with Section 317 of the German ­Commercial
Code and Regulation (EU) No 537/2014 of the European
Parliament and of the Council of 16 April 2014 on specificrequirements regarding statutory audit of public-interest
entities and repealing Commission Decision 2005/909/EC
according to a selection procedure implemented by thecompany. The auditor responsible for the audit was
Folker Trepte.
The Supervisory Board convinced itself of the independence of the auditor and the persons acting on theauditor’s behalf.

Corporate GovernanceManagement Report

Financial Statements

Further Information

The audit reports and the documents relating to the financial statements were discussed at length with the Boardof Management and the auditor at the Audit Committee
meeting held on March 12, 2024. They were also
discussed in detail on the basis of the required documents
and notes at the Supervisory Board’s financial statements
meeting held on March 13, 2024. The responsible auditor
was present for the discussions concerning the financial
statements of LANXESS AG and the consolidated financial
statements of the LANXESS Group. He reported on thescope, focus areas and significant findings of the audits
and went into particular detail on the key audit matters.
He was also available to the Audit Committee and fullSupervisory Board to provide additional information.

CHANGES IN MANAGEMENT

Based on the recommendation of the Audit Committee
as well as on its own review and in-depth discussions
about the financial statements of LANXESS AG, theconsolidated financial statements of the LANXESS Group,
the combined management report and the proposal for
appropriation of the profit, the Supervisory Board endorsed
the auditor’s conclusions and had no objections to raise.
The Supervisory Board has approved the annual financial
statements of LANXESS AG and the consolidated financial
statements of the LANXESS Group, which were preparedby the Board of Management. The Supervisory Board
endorsed the Board of Management’s proposal for useof the distributable profit after close examination andextensive deliberations that carefully weighed the bestinterests of the company and the stockholders.

The composition of the Supervisory Board did not change
in fiscal year 2023.

There were changes in the composition of the Boardof Management of LANXESS AG in fiscal year 2023.
On the basis of the Supervisory Board resolution ofNovember 8, 2022, Frederique van Baarle joined theBoard of Management of LANXESS AG with effectfrom April 1, 2023. Frederique van Baarle also holds
the office of Labor Director. Oliver Stratmann was
appointed as a member of the Board of Management asof September 1, 2023, succeeding Michael Pontzen as
Chief Financial Officer. Dr. Anno Borkowsky retired andstepped down from the Board of Management as of theend of December 31, 2023.

The Supervisory Board thanks the members of the Boardof Management, all of the Group’s employees around theworld and the employee representatives for their dedication and service in the extraordinarily difficult fiscal
year 2023.
Cologne, March 13, 2024
The Supervisory Board

Dr. Matthias L. Wolfgruber
Chairman95

Annual Report 2023 | LANXESSContents

COMBINED­MANAGEMENT REPORT97

FUNDAMENTALS OF THE GROUP

97

Group Structure

97

Business Activities

100

Strategy

101

Value Management and ­Control System

104

Business Processes and ­Employees

107

ECONOMIC REPORT107

Legal Environment

107

Business Conditions

108

Key Events Influencing the Company’s Business

109

Comparison of Forecast and Actual Business

110

Business Performance of the LANXESS Group

115

Business Trends by Region

116

Segment Information

119

Notes on EBIT and EBITDA (Pre Exceptionals)

120

Statement of Financial ­Position and Financial­Condition

127

Management’s Summary of Business Development
and the Fiscal Year129

Key Business Data – Multi-Period Overview

129

Earnings, Asset and Financial Position of
LANXESS AG

132

REPORT PURSUANT TO ­SECTIONS
289A, 315A OF THE GERMANCOMMERCIAL CODE (HGB)135

REPORT PURSUANT TO ­SECTIONS
289F AND 315D OF THE GERMANCOMMERCIAL CODE (HGB)135

REPORT ON FUTURE­PERSPECTIVES, RISKS ANDOPPORTUNITIESContents

To Our Stockholders

Strategy

Sustainability

LANXESS on the Capital Market

Corporate Governance

Company nameand domicile

Function

Segments

BUSINESS ACTIVITIESLANXESS India Private
Limited, Thane, India

Production
and sales

Consumer Protection/
Specialty Additives/­
Advanced Intermediates

Material Changes in the Group Portfolio
and Business Organization

LANXESS Sales
Netherlands B.V., Venlo,
Netherlands

Sales
organization Specialty Additives

MC (US) 3 LLC,
Wilmington, U.S.

Sales
organization Consumer Protection

LANXESS S.r.l., Milan,
Italy

Production
and sales

LANXESS Trademark
GmbH & Co. KG,
Leverkusen, Germany

Holding

FUNDAMENTALS OF THE GROUP
GROUP STRUCTURE
Legal Structure
LANXESS AG is the parent company of the LANXESSGroup and functions largely as a management holding
company. LANXESS Deutschland GmbH is a wholly
owned subsidiary of LANXESS AG and in turn controls
the other domestic and foreign subsidiaries and affiliates.
LANXESS AG directly or indirectly holds 100% of theshares in the following major companies:
Principal Direct or Indirect Subsidiaries
of LANXESS AG

97

Company nameand domicile

Function

Segments

LANXESS Corporation,
Wilmington, U.S.

Production
and sales

Consumer Protection/
Specialty Additives/­
Advanced Intermediates

LANXESS DeutschlandGmbH, Cologne,
Germany

Production
and sales

Consumer Protection/
Specialty Additives/­
Advanced Intermediates

Saltigo GmbH,
Leverkusen, Germany

Production
and sales

Consumer Protection

LANXESS Chemical B.V., Production
Rotterdam, Netherlands
and sales

Consumer Protection

Management Report

Consumer Protection/
Specialty Additives/­
Advanced Intermediates

Management and Control Organization
LANXESS AG has a two-tier management structure
consisting of the Board of Management, which manages
the company, and the Supervisory Board, which oversees
the Board of Management with the support of an Audit
Committee formed from among its members to advise
on financial matters. The Board of Management shapes
Group strategy and manages resource allocation, infrastructure and organization. As the Group managementcompany, LANXESS AG is responsible for financing andfor communication with the company’s key stakeholders.

Financial Statements

Further Information

LANXESS is counteracting the global economic weaknessof the chemicals industry since the start of the year andthe still strained economic situation in the short and longterms with its FORWARD! action plan. FORWARD! isa collection of measures for the prompt stabilizationof earnings for 2023, sustainable cost reduction via
structural adjustments, and the further refinement of
LANXESS’s business models in 2024 and 2025. A
number of immediate measures were already taken in
the second half of the year. According to internal reporting,one-time savings of around €50 million as a result of cost
reductions and €50 million as a result of lower investments
were realized in the reporting year. Specific structural
measures were also initiated in order to permanently
reduce costs by €150 million by 2025. In addition to
870 job cuts worldwide and the refinement of businessmodels, market access is to be improved. This is intended
to strengthen LANXESS’s businesses in the long termin order to increase the earnings level and permanently
improve the earnings margin. In the current reporting year,
there were one-time exceptional charges in connection
with with the FORWARD! action plan, especially humanresources measures, of €111 million.

Annual Report 2023 | LANXESSContents

To Our Stockholders

Strategy

Sustainability

LANXESS on the Capital Market

On April 1, 2023, LANXESS and Advent International(“Advent”) established a new company for high-­
performance engineering polymers. The company, called
Envalior, combines the Engineering Materials businessof the Dutch group Royal DSM with LANXESS’s High
Performance Materials business unit. LANXESS currently
holds 40.94% of the new company. The final ownershipinterest depends on the final valuation of the business
contributed by LANXESS.
With 18 production sites, 14 research locations andaround 4,000 employees, Envalior – on the basis of preliminary information – generated total sales of approximately€2 billion in the nine months of fiscal year 2023 after it
was formed.
LANXESS received a payment of around €1.27 billion forcontributing the High Performance Materials business unit
to Envalior, which was used primarily to reduce net financial debt. The deconsolidation of the High Performance
Materials business unit resulted in a gain of approximately€1.37 billion. Starting in the second quarter of 2023, theminority interest in Envalior GmbH, Cologne, Germany,is included in the LANXESS consolidated financial
statements using the equity method. The amount of thegain on the deconsolidation and of the income from the98

Corporate GovernanceManagement Reportminority stake in Envalior accounted for using the equity
method was influenced by retrospective adjustments of
the opening balance as of April 1, 2023, which were madewithin the one-year measurement period in analogous
application of IFRS 3. As of December 31, 2023, the valueof the investment accounted for using the equity method
was therefore €776 million.

Financial Statements

Further Information

retired. There are no plans to appoint a successor forthe time being. His responsibilities were assumed by theremaining Board of Management members: Frederique
van Baarle took responsibility for the Specialty Additives
segment with the Polymer Additives, Lubricant Additives
Business and Rhein Chemie business units. CFO Oliver
Stratmann took responsibility for the EMEA region and
Dr. Hubert Fink for the Asia-Pacific region.

Most recently and until the contribution to Envalior, theHigh Performance Materials business unit was reported
as a discontinued operation in accordance with IFRS 5.
The earnings contributions were shown in the income
statement in a single line item as income from discontinued operations.
Frederique van Baarle was appointed to the Board ofManagement as of April 1, 2023, and took responsibility for the Human Resources Group function and theduties of the Labor Director. Starting October 1, 2023,
she also assumed Board of Management responsibility
for the Americas region. Michael Pontzen left theBoard of Management as of August 31, 2023. He was
succeeded as Chief Financial Officer and member ofthe Board of Management by Oliver Stratmann as of
September 1, 2023. Dr. Anno Borkowsky left the Boardof Management as planned on December 31, 2023, andAnnual Report 2023 | LANXESSContents

To Our Stockholders

Strategy

Sustainability

LANXESS on the Capital Market

The Segments in Brief
LANXESS bundles its business with consumer protection
products and the custom synthesis of specialty active
ingredients in the Consumer Protection segment.
Consumer Protection
Business Units

Material Protection Products
Flavors & Fragrances

Specialty Additives
Business Units

Rhein Chemie
Sites

Porto Feliz, Brazil

Latina, Italy
Toyohashi, Japan

Singapore, Singapore

Elmira, West Hill, Canada

Institute, Kalama, Memphis, Pittsburgh, St.
Charles, U.S.

Bushy Park, Chardon, Charleston, East
Hanover, El Dorado, Fords, Little Rock, U.S.

Agrochemicals

Pharmaceuticals

99

Kaohsiung, Taiwan

Applications

Colorants, polymer additives

Sydney, Australia
Porto Feliz, Brazil
Liyang, Ningbo, China
Bergkamen, Brunsbüttel, Dormagen,Krefeld-Uerdingen, Leverkusen, Germany
Branston, Great Britain
Vilassar de Mar, Spain

Jhagadia, India

Rotterdam/Botlek, Netherlands

Advanced Industrial Intermediates
Inorganic Pigments

Sites

Deeside, Trafford Park, Great Britain

Jhagadia, Nagda, India

Products for water treatment

Business Units

Epierre, France

Sudbury, Hull, Widnes, Great Britain

Further Information

Advanced Intermediates

Brunsbüttel, Krefeld-Uerdingen,
Leverkusen, Mannheim, Germany

Laval, France

Financial Statements

LANXESS bundles its businesses in the field of chemicalintermediates for industry and the manufacturing ofchemical precursors in the Advanced Intermediates
segment.

Nantong, Qingdao, China

Bitterfeld, Dormagen, Krefeld-Uerdingen,
Leverkusen, Wietmarschen, Germany

Disinfection, preservation and material
protection products

Burzaco, Merlo, Argentina
Antwerp, Belgium

Jarinu, Brazil

Flavors and fragrances

Polymer Additives
Lubricant Additives Business

Liquid Purification Technologies

Applications

Management Report

Our solutions based on specialty additive chemicals are
combined in the Specialty Additives segment.

Saltigo
Sites

Corporate Governance

Baytown, Burgettstown, U.S.
Applications

Agrochemicals
Automotive
Construction
Aromas and flavors
Color pigments
Semiconductors and photovoltaics

Lubricants and lubricant additives
Phosphorous-based or brominated flame
retardants

Annual Report 2023 | LANXESSContents

To Our Stockholders

Strategy

Sustainability

LANXESS on the Capital Market

Management Report

STRATEGY

Transformation for a Sustainable­Economy

On account of the uncertain macroeconomic situation, operating crisis management was a priority for
LANXESS in 2023. Nonetheless, we continued topursue our strategy for long-term transformation into a
climate-neutral and circular economy with fair conditions
for people and nature.

Sustainability is anchored at the core of our strategy. Asa chemicals company, we rely on a wide range of vital
ecosystem resources and services, such as air, water,and energy. We are aware that our business activity
creates both opportunities and risks for biodiversity. Oursustainability strategy is therefore holistic and contributes
to the protection of biodiversity on the one hand, while
the individual measures and targets are geared towardspecific action areas such as climate change mitigationor the protection of water as a resource and have a
medium-term impact on the other.

Our primary strategic objective is to be a profitablespecialty chemicals company with stable growth. In theearly summer of 2023, we reacted to the weak businessperformance with the FORWARD! action plan. The firsttwo phases of FORWARD! focus on cost reductions
and efficiency gains. From 2024, the third FORWARD!
phase is characterized by transformation and will further
refine the business model as a pure specialty chemicals
company. At the end of 2023, we initiated the process
to sell our Urethane Systems business unit (All othersegments), the final polymer business remaining at
LANXESS, and thus entered an important new stage
on the journey to become a pure specialty chemicals
company.

100

Corporate Governance

Financial Statements

Further Informationof the products by our customers. Our additives make itpossible to use materials for longer and thus reduce thecarbon footprint of these products. They offer potential
for the circular economy and ensure that materials canbe used in a second lifecycle. The Consumer ­Protection
segment’s products help people live in a changing
world – whether with highly effective disinfectants thatsafeguard against the risk of bacteria and other germs
or through our contribution to the development of betteradapted pesticides to protect the food chain.

To this end, we consistently gear our product portfolio
to the needs of a sustainable world that has been transformed by climate change. For example, we determine
our products’ carbon footprints and continuously reduce
emissions. The Advanced Intermediates segment offers
particularly high potential for reduction. Besides theirown carbon footprint, the material protection additives of
the Specialty Additives segment focus on sustainable use

Annual Report 2023 | LANXESSContents

To Our Stockholders

Strategy

Sustainability

LANXESS on the Capital Market

Corporate GovernanceManagement Report

VALUE MANAGEMENT AND­CONTROL SYSTEM
Financial Performance Indicators
2019

2020

2021

2022

2023

€ million

1,019

862

815

930

512

%

15.0

14.1

13.4

11.5

7.6

€ million

5,588

5,272

7,606

8,1883)

6,659

%

10.0

7.5

6.6

4.83)

(0.8)

Days of sales in inventory (DSI)

Days

65.7

64.1

70.6

84.9

85.2

Days of sales outstanding (DSO)

Days

42.3

44.6

45.4

39.1

38.4

Net financial liabilities€ million

2,522

1,012

2,345

3,814

2,498

Net financial liabilities after deduction ofshort-term money market investments andsecurities€ million

1,742

1,012

2,245

3,814

2,498

1.7x

1.2x

2.2x

4.1x

4.9x

7.5

7.5

6.9

5.0

4.9

1) Figures from 2021 onward not including High Performance Materials business unit.
2) Capital employed adjusted as of December 31 of each year. Details can be found under
3) Prior-year figure restated.

“Profitability.”

EBITDA pre exceptionals1)
EBITDA margin pre exceptionals1)
Capital employed2)
ROCE

Net financial debt ratio
Investment ratio1)%

To achieve our strategic goals, we use indicators tomeasure the outcomes of our activities. The mostimportant indicator of our financial performance – andthus the company’s key controlling indicator – is EBITDA(operating earnings before depreciation, amortization,
write-downs, and reversals) pre exceptionals. We viewother financial performance ratios such as return on
capital employed (ROCE), days of sales in inventory(DSI), days of sales outstanding (DSO) and the net
financial debt ratio as company specific leading indicators
or as a basis for monitoring.

101

In addition to these performance indicators, non-financial
performance indicators relating to our sustainability
targets also play an increasingly important role forus. These are also taken into account in the variable
compensation of the Board of Management and the firstmanagement level below the Board of Management.
Specifically, we examine the level of CO2e emissions
from our own processes and purchased energy (Scope 1
and Scope 2) and the lost time injury frequency rate
(LTIFR) for accidents with days lost. The LTIFR is theratio of the number of occupational accidents withcalendar days lost to the number of hours worked,
expressed as multiples of a million hours. It reflects
the high importance of employee and site safety for
LANXESS. After 1,994 thousand metric tons in the

Financial Statements

Further Information

previous year, CO2e emissions in continuing operations
came to 1,722 thousand metric tons in fiscal year 2023.
We achieved an LTIFR of 0.6 after 0.5 in continuing
operations and 0.6 including discontinued operationsin the previous year.

LTIFR =

Number of occupational accidents
with calendar days lost
Number of hours workedx

1,000,000
hours

Earning PowerThe key indicator for steering the earning power of the
LANXESS Group and the individual segments is EBITDA
pre exceptionals. It is calculated from EBIT by adding
back depreciation and impairments of property, plantand equipment as well as amortization and impairments
of intangible assets, subtracting reversals of impairment
charges on property, plant, equipment and intangible
assets, and excluding exceptional items. The latterare effects that, by nature or extent, have a significant
impact on the earnings position, but for which inclusionin the evaluation of business performance over several
reporting periods does not seem to be appropriate.
Exceptional items may include write-downs, reversalsof impairment charges or the proceeds from the disposalof assets, certain expenses for strategic projects in thefields of IT and digitalization, restructuring expenses
and income from the reversal of provisions establishedin this context, and reductions in earnings resulting from
portfolio adjustments or purchase price allocations.
Grants and subsidies from third parties for the acquisition and construction of property, plant and equipment

Annual Report 2023 | LANXESSContents

To Our Stockholders

Strategy

Sustainability

LANXESS on the Capital Market

Management Report

are accounted for as deferred income using the grossmethod. In this respect, no adjustments other than forgross depreciation and amortization are made whencalculating EBITDA pre exceptionals.

the EBITDA margin (pre exceptionals) is calculated as theratio of EBITDA (pre exceptionals) to sales and serves as
an indicator to compare relative earning power at Grouplevel and for the individual segments.

Every operational decision or achievement is judged
in the short and long term by its sustainable impact
on EBITDA pre exceptionals. As part of annual budget
planning, targets are set for this benchmark of ourcompany’s success, which are then taken into accountin determining variable income components for the
Board of Management, senior executives and the restof the workforce.

Company-Specific Leading Indicators

Simple revenue data such as net sales are not among
the Group’s controlling parameters because they do
not permit any direct conclusions about our profitability.
Volatile raw material and energy prices are a hallmark
of our industry and their fluctuation throughout the year
impacts our selling prices. This influences sales and, inturn, relative margins. Other than through short-termalignment effects, however, this generally has no impact
on the absolute earnings contributions that are key toearning power. We therefore set sales targets for neither
the short nor medium term.
The earnings margins are calculated from the ratios of
the respective earnings indicators to sales. For example,

102

Corporate GovernanceLeading indicators support the timely identificationof material changes in the company’s earnings, asset
and financial position and the initiation of appropriate
measures.
Our annual budget planning process delivers key values
for the Group’s earning power and our ability to finance
operations from our own funds as the starting point
for steering the company. This information is used, forexample, to make financing and capital expendituredecisions. To ensure a timely response to changes inmarket conditions and the competitive environment, we
prepare operational forecasts twice a year as the basis
for updating the full-year budget and the associated key
values used to control the Group. In addition, forecastsof the key values for our earning power are preparedeach month in a semi-automated process.
Certain parameters used in budgets and forecasts aredefined centrally and applied uniformly as they havea major influence on the key values. Strategic raw
materials and energy have a crucial role in forecasting.

Financial Statements

Further Information

The development of procurement prices is significant
to the timely adjustment of selling prices. Even regional
differences in the availability of raw materials over a
specific period of time may become significant. Given
the regional diversification of our production sites andcustomer markets, exchange rate development also
affects the earning power resulting from sales and costtrends, with corresponding repercussions for pricing
and hedging strategies.

Profitability
Return on capital employed (ROCE) has been implemented as a profitability ratio at Group level that indicates
how efficiently we utilize our capital. This makes it animportant criterion in capital expenditure decisions, forexample.

ROCE =EBIT pre exceptionals
Capital employed

Capital employed =Total assets
Less deferred tax assets
Less interest-free liabilities

Interest-free liabilities comprise provisions (except thosefor pensions and other post-employment benefits),
income tax liabilities, trade payables and items included

Annual Report 2023 | LANXESSContents

To Our Stockholders

Strategy

Sustainability

LANXESS on the Capital Market

under “other liabilities.” In the reporting year 2023, theROCE was minus 0.8%. It was negatively impacted by
the fact that EBIT pre exceptionals was negative at minus€53 million in the reporting period and significantly
below the previous year’s figure of €389 million. The
capital employed of €6,659 million in the reporting
period was adjusted by €1,402 million for investments
accounted for using the equity method, investments
in shares of money market funds that can be sold at
any time, and a shareholder loan granted to EnvaliorGmbH in connection with the formation of Envalior. In theprevious year, the ROCE was 4.8% and capital employedamounted to €8,188 million. Capital employed was
adjusted by an amount of €1,425 million. This resulted
from assets allocated to discontinued operations in thestatement of financial position, the investment in sharesof money market funds that can be sold at any time, andinvestments accounted for using the equity method.

Cost of Capital
Borrowing costs are calculated from risk-free interest,
i.e. in our case, from the return on a long-term German
government bond plus a risk premium for industrial
companies in the same risk category as LANXESS. The
cost of equity reflects the return expected by investors
from an investment in LANXESS shares. Equity investors

103

Corporate GovernanceManagement Reportdemand a risk premium because of the greater risk
involved in acquiring shares rather than buying government bonds. This is known as a market risk premium
and is calculated using the long-term excess return
generated by a stock investment over an investment
in government bonds and adjusted by the beta factor
denoting the relative risk of an investment in LANXESS
stock compared with that of the market as a whole.

Capital Employment
To optimize our working capital at the operational level,
we use the key performance indicators: DSO (days ofsales outstanding) and DSI (days of sales in inventory).
These show receivables and inventories in relation tosales for the previous quarter. In fiscal year 2023, DSI
was at 85.2 days (previous year: 84.9 days) and DSO at
38.4 days (previous year: 39.1 days). Expenditures forproperty, plant and equipment are subject to rigorous
capital discipline and are systematically aligned withthe product areas that show the greatest potential for
success. We prioritize investment projects on the basis offinancial indicators such as pay-back period, net present
value and ROCE. The investment ratio is an indicatorthat describes cash outflows for capital expenditures
divided by sales.

Financial Statements

Further Information

Debt
Net financial liabilities are the total of current and­non-­current financial liabilities less liabilities for accrued
interest, cash, cash equivalents and near-cash assets.
As of the end of the reporting year, they amounted to€2,498 million. The near-cash assets included in thisitem amounted to €350 million. As in the previous
year, no further short-term money market investments
and securities were held. The comparative figure as ofDecember 31, 2022, was €3,814 million. The decrease in
net financial liabilities resulted primarily from the payment
received in connection with the formation of Envalior. The
cash received was used in particular for the repaymentof the hybrid bond utilizing the first redemption option on
June 6, 2023, and the repayment of various bilateral bankloans. Another reason was the amount of capital tied up
in net working capital, which was successfully reduced in
the reporting year, and the resulting cash inflow. The net
financial debt ratio, which we use solely at Group level,
is defined as net financial liabilities divided by EBITDA
pre exceptionals. On the basis of net financial liabilities
after deduction of short-term money market investments
and securities, the net financial debt ratio rose to 4.9
as of December 31, 2023, after 4.1 at the previous
year’s reporting date. Although debt has decreased inabsolute terms, the net financial debt ratio is increased as

Annual Report 2023 | LANXESSContents

To Our Stockholders

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Corporate GovernanceManagement Report

Financial Statements

Further Informationof December 31, 2023, due to the earnings decline as aresult of the global economic weakness of the chemicals
industry.

BUSINESS PROCESSES AND­EMPLOYEES
Procurement

multiple sourcing. In the reporting period, the availabilityof logistics capacity improved considerably compared tothe previous year, due among other things to the morestable global supply chains and a weaker world economy.

At Group level, we also consider provisions for pensions
and other post-employment benefits to be components
of debt. Compared with the end of 2022, they increasedby €131 million to €498 million. Including this additional
component of debt, adjusted for related deferred tax
assets of €145 million (previous year: €65 million) andreduced by the receivables relating to pension obligationsof €23 million (previous year: €24 million), which wererecognized under other non-current assets, the total net
debt ratio in relation to EBITDA pre exceptionals was 5.5,
compared with 4.4 at the previous year’s reporting date.

LANXESS uses its centrally managed global procurement organization – Global Procurement & Logistics – tosecure a reliable supply of raw and other materials, energy
and services. “Global Categories” closely coordinate withour business units to pool LANXESS’s requirements in
the raw materials, packaging materials, technical goods,
energy, services and logistics segments. Our worldwide
procurement network facilitates purchasing synergies,
so that we can move efficiently in the market and exploit
price advantages. We avoid delivery bottlenecks orreliance on individual suppliers using strategies like

Procuring chemical raw materials is a high priority at
LANXESS. Our aim is to secure our supplies on the basisof long-term contracts. The availability of raw materials
has always been a crucial factor in facility location
decisions. We procure key raw materials and utilities,
such as biomass, from the immediate vicinity at severalof our production sites. In this way, we not only minimize
the costs and environmental impact of our transportation
activities, but also reduce the risk of delivery shortfallscaused by transportation issues.

Net Financial Liabilities€ million

2019

2020

2021

2022

2023

Non-current financial liabilities

2,777

2,265

2,829

3,417

2,938

66

566

675

830

72

Current financial liabilities

Our biggest suppliers of chemical raw materials in 2023
included BASF, BP, Covestro, Enterprise Products,
Evonik, ExxonMobil, INEOS, OQ Chemicals, Sasol,
Shell and Total.

Less:

104

Liabilities for accrued interest

(25)

(25)

(25)

(30)

(16)

Cash and cash equivalents

(296)

(271)

(643)

(324)

(146)

Near-cash assets

0(1,523)

(491)

(79)

(350)

Net financial liabilities

2,522

1,012

2,345

3,814

2,498

after deduction of short-term money market investments
and securities

(780)

0

(100)

0

0

Net financial liabilities after deduction of short-termmoney market investments and securities

1,742

1,012

2,245

3,814

2,498

Among the most important strategic raw materials forour production operations in fiscal year 2023 wereaniline, benzene, chlorine and caustic soda, cyclohexane,
nitric acid and toluene. In total, strategic raw materials
accounted for a procurement volume of €1.7 billion
in fiscal year 2023 (previous year: €2.2 billion). Thisequates to around 75% of our total procurement
spend for raw materials and goods in 2023, whichamounted to €2.2 billion (previous year: €3.4 billion).
The procurement volume was significantly below theprevious year’s level. This resulted in particular fromdecreased raw material prices and less raw material
needed due to reduced production volumes. Our total
procurement spend in 2023 was €4.2 billion (previous
year: €5.7 billion).

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Production
LANXESS is a global producer of specialty chemicals.
Our production facilities make anywhere from very small
batches of custom-synthesized products to intermediates and specialty and fine chemicals in quantities ofseveral ten thousand metric tons.
Our production facilities are organizationally assigned
to individual business units. The most important
production sites are located in Leverkusen, Dormagen,the Uerdingen district of Krefeld, Brunsbüttel andBergkamen, Germany; Antwerp, Belgium; Trafford
Park, Great Britain; Rotterdam/Botlek, Netherlands;
Baytown, Charleston, El Dorado and Kalama, U.S.;
Elmira, Canada; Porto Feliz, Brazil; Jhagadia andNagda, India; and Nantong and Qingdao, China. For adetailed breakdown of our production sites by segment,
please see“The segments in brief” in this combined
management report.

Sales Organization
We sell our products globally, to several thousand
customers in around 150 countries across all continents.
LANXESS’s long-standing customer base includes leadersin each of its user industries. We have well-establishedcustomer relationships in all sales regions. To meet ourcustomers’ needs, we have set up flexible marketing andsales structures. We manage our sales throughout theworld through 70 companies owned by LANXESS itself.
In countries where we do not yet have our own company,
we work with local sales partners.

105

Corporate GovernanceManagement Report

To keep as close as possible to customers and support
them individually, each of our business units manages its
own sales organization. Another competitive advantage
is derived from having 55 of our own production sites in
17 countries. Wherever possible, customers are supplied
from production sites in the same region, so that they
benefit from advantages in terms of time and costs.

Sales Markets
Because of our broad offering, we have business relationships with a large number of customers all over the world.
We offer them an individualized, well-focused approach,which we are able to provide because of our sales organizations, which are managed through business units.
LANXESS serves the following industries in particular:
chemicals, mobility, agriculture, animal health, nutrition,
health, consumer goods, energy, natural resources,industrial applications and construction.
Shares of Sales by Industry Sector%

2023

Chemical industry~ 20

Mobility1)~ 10Agriculture and animal health~ 20

Nutrition, health and consumer goods~ 20

Energy, natural resources and industrial
applications~ 20

Construction~ 101) Includes sales in the automotive, aviation and shipping industries including
relevant electronic components.

Financial Statements

Further Information

In fiscal year 2023 and in the previous year, our top
ten customers accounted for about 22% of total sales.
None of our customers accounted for more than 6%of Group sales. Particularly due to lower procurement
prices for raw materials and energy, which resulted in
reduced selling prices and thus lower sales, the numberof customers with annual sales exceeding €20 million
decreased from 61 in the previous year to 46 in fiscal
year 2023. No segment can be considered dependent
on just a few customers.

Research and Development
Research and development makes an important contribution toward increasing our competitiveness andexpanding our product portfolio through the development of innovative products and processes as well as theongoing optimization of existing production processes.

Organizational focus
Our research programs are aligned with the needs ofcustomers in the end markets. We have therefore consolidated our product innovation activities in the respective
business units.
The business units focus their activities on optimizing
products and product quality, as well as on developing
new products.
The Global Technology & Innovation department within
our Production, Technology, Safety & Environment Groupfunction supports and complements the business units’

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research and development activities, with the focus onprocess innovation. The emphasis here is on planning
new processes and integrating new technologies into
existing production processes with the aim of achieving
cost and technology leadership. Group-wide issues are
identified and coordinated by the Corporate Development
Group function.
Our main research and development units are at thesites in Leverkusen, the Uerdingen district of Krefeld
and Mannheim, Germany, and in Naugatuck, Kalama
and Wilmington, U.S. We also operate a pilot technicalcenter at the site in El Dorado, U.S., and the modern
Asian Application Development Center at the Shanghai
Chemical Industry Park in China. At our research anddevelopment sites, we test new formulations for disinfectants and fragrances, new and optimized ion exchange
resins, sustainable lubricant additives, and innovative flame
retardants, for example.

Corporate GovernanceManagement Report

Research and Development Expenses 
2019

2020

Research and development expenses(€ million)

2021

2022

114

% of sales

1.7

2023

108

95

102

99

1.8

1.6

1.3

1.5

Figures from 2021 onward not including High Performance Materials
business unit.

106

Further Information

The results of our innovation activities are protectedby patents, where this is possible and expedient. In thecourse of 2023, we submitted 49 priority applications
worldwide. As of December 31, 2023, the full patentportfolio included approximately 660 patent families
covering around 5,430 property rights.

Employees

At the end of 2023, 472 people – against 490 in theprevious year – were employed in our research anddevelopment laboratories worldwide.
Number of Employees in Research and Development
2019

2020

2021

2022

2023

Year end

516

517

456

490

472

% of Group­employees

3.6

3.6

3.5

3.7

3.7

Figures from 2021 onward not including High Performance Materials
business unit.

Cost trend and employees
Research and development expenses in 2023 totaled€99 million, or 1.5% of sales (previous year: €102 million
or 1.3%). The Material Protection Products, Saltigo,
Polymer Additives and Lubricant Additives business
units accounted for the largest share of these expenses.
Urethane Systems, Material Protection Products, Saltigo
and Liquid Purification Technologies were the business
units with the highest research intensity as measured by
the ratio of research and development expenses to sales.

Financial Statements

Fields of activity and patent strategy
We focus our research and development activities onmarket-driven projects with a short-to medium-termtime horizon. The total number of projects in 2023
was 241 compared to 223 in the previous year, 157(previous year: 140) of which aimed to develop new
products and applications or improve existing ones. The
remaining 84 projects (previous year: 83) concerned
process technology issues with a view to reducing costs,
increasing efficiency or improving sustainability.

The LANXESS Group had 12,849 employees as ofDecember 31, 2023, against 13,126 employees in theprevious year. The number of employees declined in all
regions, primarily due to the human resources measuresalready carried out in the reporting period as part of the
FORWARD! action plan.
Employees by Region
2022

2023

EMEA (excluding Germany)

1,306

1,242

Germany

7,099

7,069

Americas

2,975

2,862

Asia-Pacific

1,746

1,676

13,126

12,849Personnel expenses in the reporting year increased
from €1,369 million to €1,404 million, primarily due tomeasures in connection with the FORWARD! action planand pay adjustments, with wages and salaries accounting
for the majority of this figure at €1,121 million. Lower
expenses for performance-based variable compensation
had an opposite effect.

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Personnel Expenses€ million

2022

2023

Wages and salaries

1,080

1,121

Social security contributions

185

191

Retirement benefit expenses

91

79

Social assistance benefits

13

13

1,369

1,404

ECONOMIC REPORTLEGAL ENVIRONMENT
There were no changes in the legal environment in fiscal
year 2023 that would have had a material impact on theearnings, asset and financial position of the LANXESSGroup or LANXESS AG.

BUSINESS CONDITIONS

107

Management Report

In most economies, inflation had already fallen sharply
compared to the previous year. This was particularly
driven by the development of energy prices, but core
inflation also declined in many places.
In terms of the economy as a whole, global growth was
lower than in the previous year. The weakest growth wasrecorded by the EMEA region (including Germany) at
just 1.0%, while Germany even slid into a minor recession with a 0.3% contraction. The Asia-Pacific region
generated the biggest increase in its gross domestic
product at 4.5%.
At 2.0%, the global chemical industry’s growth in fiscal
year 2023 was slightly lower than in the previous year
but was driven exclusively by an increase of 5.0% in the
Asia-Pacific region. The chemical industry declined inboth Europe and the Americas. Germany in particular
saw a further decline of 7.5%.
Gross Domestic Product and Chemical Industry
in 2023

The Economic Environment
Fiscal year 2023 was primarily characterized by theongoing impact of the war in Ukraine and in the second
half of the year by the conflict in Israel/Palestine. This
impact was additionally exacerbated in some areas bycontinuing populist or protectionist tendencies andongoing trade conflicts, especially between the U.S.
and China.

Corporate GovernanceGross­domestic
product

Chemicalindustry

Americas

2.5

(2.5)

EMEA (incl. Germany)

1.0

(4.5)

Germany

(0.3)

(7.5)

Asia-Pacific

4.5

5.0

World

2.5

2.0

Change vs. prior year
in real terms (%)

Financial Statements

Further Information

In the U.S., falling inflation, driven by the Inflation Reduction Act, contributed to a relaxation of monetary policy,
the effects of which included the depreciation of the
U.S. dollar: One euro was worth US$1.11 at the end of2023. The value of the U.S. currency thus decreasedby 3.7% from the closing price of US$1.07 at the end of2022. The U.S. dollar was also slightly weaker on averageover the year at US$1.08 to the euro, against US$1.05
in the previous year. Due to the regional positioningof our business, a weaker U.S. dollar tends to have anegative effect on our earnings. Centralized hedging
activities limit any impact that cannot be neutralized byensuring that production and sales take place in thesame currency area.
Compared with the previous year, procurement prices for
raw materials and energy and freight and logistics costs
declined. The change in raw material costs particularlyreflects the more balanced supply and demand situation compared with the previous year. In addition, thedecline in freight and logistics costs corresponded tothe economic trend. These cost components have stabilized at a pre-COVID level. At the end of the reporting
period, however, new cost increases were triggered by
the Houthi militias’ attacks on merchant ships in the Red
Sea and by the increase in the truck toll in Germany asof December 1, 2023.

Sources: S&P Global Market Intelligence; German gross domestic productaccording to the Federal Statistical Office (Destatis).

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Development of Major Customer­Industries
Global automobile production was up 7.5% year-on-year
in the reporting year. This was chiefly attributable to theEuropean market, which grew by 9.0% – Germany byas much as 13% – while the American market grew by
4.5% and the Asia-Pacific region by 7.5%.
In 2023, agrochemicals saw a decline of 2.0%, driven
primarily by the Americas region, especially Brazil, which
dropped by 18%. The EMEA region, like Germany, also
declined by 5.0%. Only the Asia-Pacific region grewby 3.0%.
The global construction industry shrank slightly by 0.5%,
driven primarily by the Americas with a 5% decline. The
Asia-Pacific and EMEA (including Germany) regions
grew slightly, while Germany itself saw a decline of 1.5%.

Corporate GovernanceManagement Report

The global food industry stagnated in 2023, but with
regional differences. While the Asia-Pacific region
recorded slight growth of 1.0%, the Americas and the
EMEA region (including Germany) declined by minus
1.0% and minus 0.5%, respectively.
The global electrical/electronics industry grew by 3.5%.
This was primarily driven by the Asia-Pacific region at
4.0% and the EMEA region (including Germany) at 2.5%,
while the Americas region almost stagnated at 0.5%.
The industry for consumer staples grew by only 2.5%
worldwide, driven by the Asia-Pacific region at 4.5%
and the Americas region at 3.0%, while the EMEA
region (including Germany) even declined slightly atminus 0.5%, primarily due to a sharp decline of 9.5%
in Germany.
Overall, the development of many major customer industries fell short of expectations. This is also reflected inour business performance.

Development of Major Customer Industries in 2023
Change vs. prior year
in real terms (%)

Auto­motive

Agro­­chemicals1)Con­struction

Food

Electrical/­
electronics

Consumer­staplesAmericas4.5(11.5)

(5.0)

(1.0)

0.5

3.0

EMEA (incl. Germany)

9.0

(5.0)

0.5

(0.5)

2.5

(0.5)

Germany

13.0

(5.0)

(1.5)

(2.5)

3.0

(9.5)

Asia-Pacific

7.5

3.0

1.5

1.0

4.0

4.5

World

7.5

(2.0)

(0.5)

0.0

3.5

2.5

Financial Statements

Further Information

KEY EVENTS INFLUENCING THE
COMPANY’S BUSINESSBusiness was significantly influenced by the globally weakeconomic environment in the chemicals industry andthe still strained economic situation. Inventory reduction
among our customers, which continued into the second
half of the year, and generally weaker demand, especiallyin our Specialty Additives and Advanced Intermediates
segments, led to lower sales volumes, higher idle costs,
and thus a significant earnings decline and a negative
effect on our relative earnings margin. Lower ­procurement
prices for raw materials and energy were passed on
to customers via lower selling prices. Our Consumer­Protection segment saw a comparatively moderateearnings decline, due in part to the contribution of theMicrobial Control business acquired at the beginning ofJuly 2022.
With demand weaker than expected in places, there
are negative effects on the cash inflows expected in
the future. Because these cash inflows in individual
business units no longer reflected the respective carrying
amounts, impairment tests as of December 31, 2023,
resulted in write-downs of approximately €400 million,
which were recognized as exceptional items. The writedowns decrease the goodwill resulting from acquisitions
and relate to our Flavors & Fragrances business unit
(Consumer Protection segment) and Polymer Additives
business unit (Specialty Additives segment).

1) P esticides and other organic agrochemical products.
Sources: S&P Global Market Intelligence, development in construction costs according to Oxford Economics.

108

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The net income of the reporting year was particularly
influenced by the gain on the deconsolidation of theHigh Performance Materials business unit. The income
from the investment in Envalior accounted for using theequity method of minus €181 million had a negative
effect, which resulted in particular from high interest

Corporate GovernanceManagement Report

expenses and earnings effects due to the purchase priceallocation at the level of Envalior.
We used the funds received in connection with thecontribution of the High Performance Materials
business unit to Envalior to significantly reduce ourFinancial Statements

Further Information

net financial debt. Thanks to our holdings of cash andcash equivalents and liquidity reserves in the formof undrawn credit lines, we had sound liquidity as ofDecember 31, 2023.

COMPARISON OF FORECAST AND ACTUAL BUSINESS
Comparison of Forecast and Actual Business 2023

Business development:
Group
EBITDA pre
exceptionals

Business development:
segments
Consumer Protection

Forecast for 2023 in Annual Report 2022

Actual 2023

• At the previous year’s level• Positive contribution from the acquisition of the Microbial Control business• Effects from the more resilient business portfolio, improved by recent transactions• Improvement in the global supply chain situation• Recessionary business environment in the first half of the year with continuing
inventory reduction among our customers• High energy prices from the fourth quarter of 2022 affecting the start of 2023

• EBITDA pre exceptionals: €512 million (previous year: €930 million)•P ositive earnings contribution from the acquisition of the Microbial Control business in 2022
• Improvement in global supply chains following disruption in 2022
• Globally weak economic environment in the chemicals industry, inventory reduction by us andamong our customers, higher idle costs•L ower procurement prices for raw materials and energy resulting in lower selling prices• Development significantly above the previous year
• Positive portfolio effect from the contribution of the acquired Microbial Control
business• G ood performance in the agrochemicals business• EBITDA pre exceptionals slightly to moderately below the previous year:€310 million (previous year: €363 million)• Positive portfolio effect from the acquisition of the Microbial Control business in 2022•L ow demand in various end markets• Lower capacity utilization due partly to production difficulties on the part of two suppliers• EBITDA pre exceptionals significantly below the previous year’s level:€209 million (previous year: €479 million)• Weaker demand from the construction, electrical/electronics and automotive industries• EBITDA pre exceptionals significantly below the previous year’s level:€121 million (previous year: €291 million)• Demand even weaker than expected, especially from the construction sector• Inventory reduction by us and our customers, higher idle costs• Negative impact of higher energy and logistics costs was passed on• EBITDA pre exceptionals moderately to significantly better than in the previous year:
minus €128 million (previous year: minus €203 million)

Specialty Additives• Business development significantly below the previous year’s very good level• Development primarily due to weakness in the construction industry

Advanced Intermediates• Earnings at or slightly below the previous year’s level• Sluggish demand in the construction industry to particularly affect our inorganic
pigments business• Broadly diversified customer structure has a positive effect overall• Uncertainty over development of energy costs• C onsiderably better earnings compared to the previous year

All other segments

Capital expenditures
Cash outflows for capital• A round €400 million­expenditures
Environment and occupational
health and safety
CO2e emissions• At the previous year’s level• Target of LTIFR below 1.0
Lost time injury frequency rate
(LTIFR: accidents per million hours
worked) for accidents with days lost109

• €326 million (previous year: €407 million)• Reduction as part of the FORWARD! action plan

• CO2e emissions: 1,722 thousand metric tons (previous year: 1,994 thousand metric tons)•L TIFR: 0.6 (previous year: 0.6 or 0.5 in continuing operations)

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In the combined management report for fiscal year
2022, we expected EBITDA pre exceptionals to beat the previous year’s level in 2023. We adjusted our
guidance over the course of fiscal year 2023 and mostrecently anticipated EBITDA pre exceptionals of between€500 million and €550 million, significantly lower thanthe previous year’s figure of €930 million. The actual
earnings amounted to €512 million.
We had expected LANXESS AG’s net income according
to German commercial law in the reporting year to be
far worse than in the previous year. There was net
income of €15 million in the reporting period after net
income of €1,014 million in the previous year. The net
income in the previous year was shaped primarily byhigh income from investments due to the profit transfer
at LANXESS Deutschland GmbH. This income wassignificantly increased above all by the contribution of theHigh Performance Materials business unit to LANXESS
Performance Materials GmbH.

Corporate Governance

Financial Statements

Further Information

BUSINESS PERFORMANCE OF
THE LANXESS GROUP› Positive earnings contribution from the Microbial› Sustainable savings of €150 million by 2025 initiatedthe previous year’s figure of €930 million mainly as aresult of volumes› EBITDA margin pre exceptionals of 7.6% after 11.5%
in the previous year; primarily due to low capacity
utilization and associated idle costs› Net income from continuing operations ofminus €843 million significantly reduced by writedowns of around €400 million on goodwill fromacquisitions› Adjusted earnings per share from continuing
operations down from €3.72 to €0.13

by structural measures of the FORWARD! action plan
› Formation of Envalior as of April 1, 2023; funds
received reduce net financial debt
› Lower demand from nearly all end markets impacts
sales development in all segments› Group sales down significantly to €6,714 million fromprevious year’s €8,088 million› Substantial debt reduction against the previous year
due to proceeds from the contribution of the High
Performance Materials business unit to Envalior aswell as strong operating cash flow

Control business acquired in 2022

› EBITDA pre exceptionals of €512 million, down on

Key Financial Data
€ million

2022

2023

Change %

Sales

8,088

6,714

(17.0)

Gross profit

1,937

1,268

(34.5)

930

512(44.9)

11.5%

7.6%

–

EBITDA

826

328(60.3)

Operating result (EBIT) pre exceptionals

389

(53)

< (100)Operating result (EBIT)

280

(668)

< (100)EBIT margin

3.5%(9.9)%–

Financial result

(23)

(279)

< (100)

Income before income taxes

257

(947)

< (100)Net income from continuing operations

184

(843)

< (100)Net income from discontinued operations

66

1,286

> 100

Net income

250

443

77.2

Earnings per share (€)

2.90

5.13

76.9

Adjusted earnings per share from continuing operations (€)

3.72

0.13

(96.5)EBITDA pre exceptionals
EBITDA margin pre exceptionals

110Management Report

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Sales
Sales of the LANXESS Group amounted to €6,714 million
in the reporting period, down by €1,374 million, or 17.0%,
from the previous year’s figure. In the previous year, thesales amounted to €8,088 million. This sales development in the reporting year was particularly influenced
by inventory reduction among our customers, which
continued into the second half of the year, albeit at adiminishing level, and exacerbated weak demand in large
parts of the industry. Sales were also negatively affectedby lower selling prices driven by raw material and energy
prices.
Shifts in exchange rates, especially due to a weaker U.S.
dollar, also reduced sales. The portfolio changes dueto the contribution from the Microbial Control businessacquired at the beginning of July 2022 had a positiveeffect on sales at Group level. Adjusted for currency andportfolio effects, the LANXESS Group recorded a 17.8%
decrease in operational sales in fiscal year 2023.
Group Sales

Corporate Governance€ million/%
8,088
–5.6%

2022

Price

–12.2%–1.6%

VolumeCurrency

6,802

6,104

6,714

6,101

6,000

2,000
2019

2020

2021

2022

2023

Figures from 2021 onward not including High Performance Materials business unit.

111

2.4%

6,714

Portfolio

2023

%

2023

Price

(5.6)

Volume(12.2)

Currency(1.6)

Portfolio

Most of our business is not subject to long-term
agreements on fixed volumes or prices. Instead, ourbusiness is characterized by long-standing relationships
with customers and revolving master agreements. Our
activities are focused on demand-driven orders withrelatively short lead times, which do not provide abasis for long-term forward-looking statements about
our capacity utilization or volumes. Our business ismanaged primarily on the basis of regular Group-wide
forecasts with respect to the Group’s operating target.
For additional information, please see“Company-­
specific leading indicators” in this management report.
Any disclosure of the Group’s order book status at agiven reporting date therefore would not be indicative of
the Group’s short- or medium-term earning power. For
this reason, no such disclosure is made in this report.

2.4(17.0)

Change%Proportion ofGroupsales %

2,340

(1.1)

34.9

2,325

(21.7)

34.6

2,413

1,775

(26.4)

26.4

339

274

(19.2)

4.1

8,088

6,714

(17.0)

100.0€ million

2022

2023

Consumer Protection

2,366

Specialty Additives

2,970

Advanced Intermediates
All other segments

4,000

Further Information

Effects on Sales

10,000
8,088

Financial Statements

Order Book Status

Eﬀects on Sales

Sales by Segment€ million

8,000Management Report

Gross Profit
The cost of sales decreased by 11.5% year-on-year to€5,446 million. In the previous year, the cost of sales
amounted to €6,151 million. The decrease resulted
primarily from significantly lower sales volumes in theexisting business and lower procurement prices for raw
materials and energy. As in the previous year, emissions
rights were sold to compensate for high German energy
costs, which continue to distort international competition.
Shifts in exchange rates also led to lower manufacturingcosts. In contrast, the contribution from the Microbial
Control business acquired at the beginning of July
2022 resulted in a portfolio-related increase. Capacity
utilization of 58% was a significant 11 percentage points
lower than in the previous year, mainly because of weak

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demand and a reduction in our inventories. Gross profit
was €1,268 million, down by €669 million or 34.5%
from the previous year. In particular, lower sales volumes,
weaker capacity utilization and therefore higher idle costs,
and the change in exchange rates had a negative impact
on earnings performance. Reduced procurement prices
for raw materials and energy and the portfolio change
had a positive effect on earnings. The gross margin of
18.9% was significantly below the previous year’s figureof 23.9%.

EBITDA Pre Exceptionals andOperating Result (EBIT)
EBITDA and EBITDA Margin Pre Exceptionals€ million/%

1,250

15.0%
1,019

1,000

14.1%
862

13.4%
815

11.5%
930

750

7.6%
512

500
250

2019

2020

2021

2022

2023

Figures from 2021 onward not including High Performance Materials business unit.

112

Corporate GovernanceManagement Report

In a globally weak economic environment in the chemicals industry and a still strained economic situation,
the operating result before depreciation, amortization,
write-downs and reversals (EBITDA) pre exceptionals
decreased by €418 million, or 44.9%, to €512 million
in fiscal year 2023, after €930 million in the previous
year. The weaker demand and the associated reduction
in sales volumes and higher idle costs led to a significant
earnings decline, primarily in the Specialty Additives andAdvanced Intermediates segments. In addition, lower
procurement prices for raw materials and energy in these
two segments resulted in a decrease in selling prices.
In contrast, our Consumer Protection segment saw acomparatively moderate earnings decline and benefited
from the contribution of the Microbial Control businessacquired at the beginning of July 2022. The change inexchange rates, especially a weaker U.S. dollar, had anegative effect at Group level. Details on the individual
segments can be found in the table below and under“Segment Information.”
EBITDA Pre Exceptionals by Segment€ million

2022

2023

Change%Consumer Protection

363

310

(14.6)

Specialty Additives

479

209

(56.4)

Advanced Intermediates

291

121

(58.4)All other segments

(203)

(128)

36.9

930

512

(44.9)

Financial Statements

Further Information

All functional cost areas developed positively. This wasparticularly due to the volume-driven reduction in costs,
shifts in exchange rates, and initial cost savings as a resultof the FORWARD! action plan. The portfolio-driven cost
increase due to the Microbial Control business acquiredat the beginning of July 2022 was thus offset. Due inparticular to lower freight rates, selling expenses also fellby 12.3% to €933 million. Research and development
costs came to €99 million, compared to €102 million
in the previous year. General administration expenses
were €279 million after €319 million in the previous year.
The Group EBITDA margin pre exceptionals came in at
7.6%, against 11.5% in the previous year.
The operating result (EBIT) totaled minus €668 million
compared with €280 million in the previous year.
Depreciation, amortization and write-downs on intangible
assets and property, plant and equipment increased by€450 million compared with the figure for the previous
year to €996 million, primarily due to write-downs on
goodwill resulting from the impairment testing in the
Flavors & Fragrances and Polymer Additives business
units as of December 31, 2023, the adjustment of
the production network of the Advanced Industrial
Intermediates business unit as part of the FORWARD!
action plan, and the acquisition completed in 2022.
The write-downs amounted to €434 million, of which€431 million was attributable to exceptional items.
In the previous year, depreciation, amortization and

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Management Report

write-downs of €546 million included write-downs of€10 million, €5 million of which were exceptional items.
As in the previous year, no reversals of write-downs wererecognized.

The reconciliation of EBITDA pre exceptionals to theoperating result (EBIT) was as follows:

Other operating result, which is the balance between
other operating income and expenses, declined by€453 million to minus €625 million compared withminus €172 million in the previous year, particularly
due to the write-downs. Adjusted for exceptional items,
the figure was minus €10 million. This equates to an
improvement of €53 million compared with the previous
year’s balance. The previous year was negatively affectedin particular by currency hedges due to the strong development of the U.S. dollar.

€ million

2022

2023

Change%EBITDA pre exceptionals

930

512

(44.9)

Depreciation and amortization

(546)

(996)

(82.4)

Exceptional items in EBITDA

(104)

(184)

(76.9)

Operating result (EBIT)

280

(668)

< (100)

There were net negative exceptional items of €615 million
in the reporting year. Most of the exceptional items
related to write-downs on the goodwill from the acquisitions of the Flavors & Fragrances and Polymer Additives
business units. The exceptional items within EBITDA of€184 million related predominantly to expenses as part of
the FORWARD! action plan and expenses in connection
with digitalization projects, strategic IT projects, and
M&A and integration activities. In the previous year,
negative exceptional items of €109 million were incurred.
These affected EBITDA by a total of €104 million andresulted mainly from expenses in connection withstrategic IT projects, digitalization projects, and M&A
and integration activities. Details about the exceptional
items can be found under “Notes on EBIT and EBITDA(Pre Exceptionals).”

113

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Financial Statements

Further Information

by an effect resulting from the market valuation of
warrants for shares in the company Standard LithiumLtd., Vancouver, Canada.

Reconciliation of EBITDA Pre Exceptionals to EBIT

Income Before Income Taxes
Due in particular to the development of operating
earnings, write-downs, and income from investments
accounted for using the equity method, income before
income taxes deteriorated by €1,204 million to minus€947 million. Income before income taxes in the previous
year came to €257 million.

Financial Result

Income Taxes

The financial result for fiscal year 2023 amounted tominus €279 million, compared with minus €23 million forthe previous year. Income from the investment accounted
for using the equity method in Envalior GmbH, Cologne,
Germany, and in Viance LLC, Wilmington, U.S., came tominus €172 million in total. The income from Envalior
was negatively affected in particular by high interest
expenses and effects of the purchase price allocation.
LANXESS’s net interest result was minus €60 million
compared with minus €68 million in the previous year.
The other financial result amounted to minus €47 million
and resulted primarily from expenses in connection withthe measurement of a right to offer relating to the minority
interest in Envalior. Income from the measurement of ashareholder loan granted to Envalior GmbH in connection
with the formation of Envalior had the opposite effect. In
the previous year, the other financial result of €42 million
stemmed primarily from the income from the settlementof interest rate hedges of €83 million. This was offset

There was tax income of €105 million in fiscal year 2023,
compared to tax expenses of €72 million the year before.
Particularly because the write-downs on goodwill do
not trigger tax effects and the income from investments
accounted for using the equity method is not offset byincome taxes at LANXESS level, the effective tax rateof 11.1% was considerably lower than the previous
year’s 28.0%.

Net Income
Due especially to the gain on the deconsolidationof the High Performance Materials business unit inconnection with the formation of Envalior, net income
and net income from discontinued operations weresignificantly higher than in the previous year. Net income
from continuing operations was significantly below theprevious year’s figure, primarily due to the developmentof operating earnings and the write-downs on goodwill
acquired in earlier acquisitions. Net income for the

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reporting year amounted to €443 million, of which minus€843 million was attributable to continuing operations.
Net income from discontinued operations amounted to€1,286 million in the reporting year. In the previous year,€184 million of the net income of €250 million was attributable to continuing operations, and €66 million was
attributable to the discontinued operations of the High
Performance Materials business unit. Non-controllinginterests accounted for earnings of €1 million in fiscal
year 2023 and in the previous year, which is allocable
to continuing operations.
Reconciliation of EBIT to Net Income€ million

2022

2023

Change%Operating result (EBIT)

280

(668)

< (100)

Income from investments a­ ccounted
for using the equity method

Corporate GovernanceManagement Report

Earnings Per Share/Adjusted Earnings
Per Share from Continuing Operations
Earnings per share are calculated by dividing net incomeby the weighted average number of LANXESS shares
outstanding during the reporting period. Earnings per
share were €5.13, higher than the €2.90 recorded in
the previous year. Earnings per share from continuing
operations were minus €9.76 against €2.13 in theprevious year.
Net Income and Earnings per Share
2022

2023

Net income (€ million)

250

443

from continuing operations(€ million)

184

(843)

from discontinued operations(€ million)

66

1,286

86,346,303

86,346,303

Weighted average number of shares
outstanding

3

(172)

< (100)Net interest expense

(68)

(60)

11.8

Other financial income and expense

42

(47)

< (100)Earnings per share (€)

2.90

5.13

Financial result

(23)

(279)

< (100)from continuing operations (€)

2.13(9.76)

Income before income taxes

257

(947)

< (100)from discontinued operations (€)

0.77

14.89

Income taxes

(72)

105

> 100

Income after income taxes
from continuing operations

1851)(842)1)< (100)

Income after income taxes
from discontinued operations

66

1,286

> 100

Income after income taxes

251

444

76.9

1

1

0.0

Income attributable to­non-controlling interests
Net income fromcontinuing operations

184

(843)

< (100)Net income fromdiscontinued operations

66

1,286

> 100

Net income

250

443

77.2

1) Including income attributable to non-controlling interests of €1 million.

Financial Statements

Further Information

We also calculate adjusted earnings per share fromcontinuing operations, which are not defined by­International Financial Reporting Standards. Thisvalue was calculated from the earnings per share fromcontinuing operations adjusted for exceptional items,
amortization of intangible assets, attributable tax
effects, and the non-recurring earnings effects from thesettlement of interest rate hedges in the third quarterof 2022. As a result of our minority stakes, we do nothave a controlling influence on the operational businessof investments accounted for using the equity method.
Therefore, we also adjust earnings per share for thereporting year and the previous year for income frominvestments accounted for using the equity method.
Adjusted earnings per share from continuing operations
were €0.13 against €3.72 in the previous year.

Reconciliation of Net Income from Continuing Operations to Adjusted Earnings per Share from Continuing Operations€ million

2022

2023

Net income from continuing operations

184

(843)

Exceptional items1)

109

615

Amortization of intangible assets1)

153

163

Income in connection with the settlement of interest rate swaps

(83)

–

Income taxes1)

(39)

(96)

Income from investments accounted for using the equity method

(3)

172

Adjusted net income from continuing operations

321

11

86,346,303

86,346,303

3.72

0.13

Weighted average number of shares outstanding
Adjusted earnings per share from continuing operations (€)1) Excluding items attributable to non-controlling interests.

114

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BUSINESS TRENDS BY REGION
Sales by Market
2022

2023

€ million%€ million%

Change%EMEA (excluding Germany)

2,364

29.2

1,972

29.4

(16.6)

Germany

1,366

16.9

1,098

16.3

(19.6)

Americas

2,694

33.3

2,362

35.2

(12.3)

Asia-Pacific

1,664

20.6

1,282

19.1

(23.0)

8,088

100.0

6,714

100.0

(17.0)

Sales by Market

6.104
8,088

%
EMEA (excluding Germany)

7.557
6,714

20.6

19.1

33.3

35.2

16.9

16.3

29.2

29.4

Germany
America
Asia-Paciﬁc2022

Corporate GovernanceManagement Report

Financial Statements

Further Information

EMEA (Excluding Germany)

Americas

Sales in the EMEA region (excluding Germany)
decreased by €392 million, or 16.6%, to €1,972 million.
After adjustment for small portfolio and currency effects,
sales declined by 17.8%. All segments were affected
and recorded a sales decline of a low double-digit
percentage. The negative development in the region
resulted primarily from the business performance in
Italy, Switzerland and France.

Sales in this region came to €2,362 million, down by€332 million, or 12.3%, on the previous year. After adjustment for considerable portfolio and currency effects, thesales decline amounted to 14.6%. The Specialty Additives
and Advanced Intermediates segments made a significant
contribution to this with a decline of a low double-digit
percentage. The Consumer Protection segment also
saw negative business development of a mid-single-digit
percentage. The region was chiefly influenced by thedevelopment in the United States.

Germany
In Germany, the Group generated sales of €1,098 million,
down by €268 million, or 19.6%, on the previous year.
After adjustment for minor portfolio effects, sales
decreased by 20.0%. The declining business development particularly related to the Advanced Intermediates
segment and, to a much lesser extent, the Specialty
Additives segment, which posted a relative sales declineof a low double-digit percentage. Sales in the Consumer
Protection segment dropped by a mid-single-digit
percentage.

Asia-Pacific
Sales in the Asia-Pacific region decreased by€382 million, or 23.0%, to €1,282 million. After adjustment for currency and portfolio effects, the decline cameto 21.4%. Business performance was driven by theSpecialty Additives segment and, to a lesser extent, theAdvanced Intermediates segment, each with a decline
by a low double-digit percentage. The businesses of theConsumer Protection segment saw a sales decline bya low single-digit percentage. The significant negative
impetus in the region came from China, Korea and Japan.

2023

The reporting year includes a portfolio effect from theMicrobial Control business acquired at the beginningof July 2022, which influenced the Consumer Protection segment. It affected all regions, but especially theAmericas.

115

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SEGMENT INFORMATION

Consumer Protection› Consumer Protection: Comparatively stable sales

Overview of Key Dataand earnings development despite massive inventory
reduction by customers› Specialty Additives: Lower capacity utilization due
to inventory reduction, weaker demand and lower
prices result in sales and earnings decline› Advanced Intermediates: Business development
characterized by lower sales volumes due toinventory reduction, weak demand and lower selling
prices in nearly all end industries
Sales by Segment

8,088

%
Consumer Protection
Specialty Additives

6,714

4.2

4.1

29.8

26.4

Advanced Intermediates
All other Segments

34.6

36.7

34.9

29.3

2022

116

Corporate Governance

2023

2022
€ million
Sales

Management Report

2023

Margin%2,366€ million

Margin%2,340

Change%(1.1)

EBITDA pre
exceptionals

363

15.3

310

13.2

(14.6)EBITDA

338

14.3

296

12.6

(12.4)

Operating ­result (EBIT)
pre exceptionals

195

8.2

110

4.7

(43.6)

Operatingresult (EBIT)

170

7.2

(163)

(7.0)

< (100)Cash outflows
for capital
expenditures

129

87

(32.6)

Depreciation
and amortization

168

459

> 100

Employees(as of Dec. 31)

3,566

3,555

(0.3)

In our Consumer Protection segment, sales amounted
to €2,340 million in fiscal year 2023, close to the prioryear figure of €2,366 million. The previous year’s level
was almost reached in particular because of the portfoliochange in the Material Protection Products business unit,
which reported higher sales from the Microbial Control
business acquired as of July 1, 2022. Overall, there was apositive portfolio effect of 8.4% at segment level. This wasoffset by lower sales volumes due to weaker demand fromvarious end markets, ongoing inventory reduction among
our customers, and lower capacity utilization, particularly
because of the limited availability of raw materials andsteam as a result of production difficulties on the part oftwo suppliers of the Flavors & Fragrances business unit.

Financial Statements

Further Information

At segment level, sales decreased by 7.2% due to lower
volumes. Shifts in exchange rates also had a negative
effect on all business units, which totaled 1.5% in thesegment. At segment level, lower selling prices reduced
sales by 0.8%. Sales in the Americas and Asia-Pacificregions were above, in all other regions below the levelof the previous year.
EBITDA pre exceptionals in the Consumer Protection
segment decreased by €53 million, or 14.6%, to€310 million, compared with the previous year’s figureof €363 million. Lower sales volumes in all business units,
due in particular to weaker demand, higher idle costs asa result of lower capacity utilization, and lower selling
prices had a negative effect on earnings and margindevelopment. Shifts in exchange rates also had a slightly
negative effect on earnings. Lower procurement prices
for raw materials and energy, decreased freight costs,
and the positive earnings contribution from the Microbial
Control business acquired at the beginning of July 2022,
which was integrated into the Material Protection Products
business unit, had a positive effect. The EBITDA margin
pre exceptionals decreased from 15.3% to 13.2%.
In the reporting year, negative exceptional items of€273 million were attributable to the segment, €14 millionof which impacted EBITDA. Most of the exceptional items
related to write-downs on the goodwill of the Flavors &Fragrances business unit. The exceptional items within
EBITDA mostly related to expenses incurred in connection with the FORWARD! action plan. In the previous
year, the segment recorded negative exceptional itemsof €25 million, which impacted EBITDA. The exceptional
items of the previous year essentially related to theAnnual Report 2023 | LANXESSContents

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strategic realignment of the specialty chemicals businessand the associated integration of the acquired businesses.
Further details can be found under“Notes on EBIT
and EBITDA (Pre Exceptionals).”

Specialty Additives
Overview of Key Data2022
€ million
Sales

117

2023

Margin%2,970€ million

Margin%2,325

Change%(21.7)EBITDA pre
exceptionals

479

16.1

209

9.0

(56.4)EBITDA

474

16.0

189

8.1

(60.1)

Operating ­result (EBIT)
pre exceptionals

290

9.8

25

1.1

(91.4)

Operatingresult (EBIT)

284

9.6

(142)

(6.1)

< (100)Cash outflows
for capital
expenditures

125

122

(2.4)

Depreciation
and amortization

190

331

74.2

Employees(as of Dec. 31)

2,985

2,945

(1.3)

Corporate GovernanceManagement Report

Our Specialty Additives segment posted sales of€2,325 million in fiscal year 2023, down by 21.7% on
the previous year’s figure of €2,970 million. Particularly
due to weaker demand from the construction, electrical/
electronics and automotive industries, all business unitsof the segment generated lower sales. Volumes fell
short of the previous year and reduced sales by 15.1%
at segment level. The Lubricant Additives business unit
maintained its selling prices at the previous year’s level,
while the lower selling prices generated by the segment’s
other two business units led to a sales decline totaling
4.5% at segment level. Shifts in exchange rates also hada negative impact in all business units and reduced thesegment’s sales by 2.1%. Sales in all regions were below
the level of the previous year.
EBITDA pre exceptionals for the Specialty Additives
segment was €209 million, down €270 million, or
56.4%, from the prior-year level. Lower sales volumes
due to weaker demand and lower selling prices had anegative impact on earnings. Compared with the goodearnings of the previous year, which primarily resulted

Financial Statements

Further Informationfrom price recoveries due to higher raw material andenergy prices, the Polymer Additives and Rhein Chemie
business units in particular saw lower selling prices in
the reporting year. Targeted inventory reduction, which
exacerbated the low capacity utilization, likewise had anegative impact on earnings and the margin. Shifts in
exchange rates had a slightly positive effect on earnings.
The EBITDA margin pre exceptionals was 9.0%, against
16.1% in the previous year.
In fiscal year 2023, negative exceptional items totaled€167 million, €20 million of which impacted EBITDA.
Most of the exceptional items related to write-downs
on the goodwill of the Polymer Additives business
unit. The exceptional items within EBITDA primarily
related to initial expenses incurred in connection with
the FORWARD! action plan. The previous year’s exceptional items amounted to €6 million, of which €5 million
impacted EBITDA, and mainly related to the adjustmentof the production network in the North America region.
Further details can be found under“Notes on EBIT
and EBITDA (Pre Exceptionals).”

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Advanced Intermediates
Overview of Key Data2022
€ million
Sales

2023

Margin%2,413€ million

Margin%1,775

Change%(26.4)EBITDA pre
exceptionals

291

12.1

121

6.8

(58.4)EBITDA

291

12.1

88

5.0

(69.8)

Operating ­result (EBIT)
pre exceptionals

172

7.1

11

0.6

(93.6)

Operatingresult (EBIT)

172

7.1

(42)

(2.4)

<
(100)

Cash outflows
for capital
expenditures
Depreciation
and amortization
Employees(as of Dec. 31)

95
119
3,010

80
130
2,941

(15.8)
9.2(2.3)

Our Advanced Intermediates segment recorded salesof €1,775 million in fiscal year 2023, down 26.4% fromthe figure for the previous year. Both sales volumes andselling prices of the segment’s two business units were
below the previous year’s level. The sales decline wasparticularly influenced by the significantly lower sales
volumes in the business units, which were below theprevious year as a result of weaker demand – due in part

118

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Financial Statements

Further Information

to inventory reduction – especially from the construction
and chemical industries, but also from other customer
industries. Overall, there was a negative volume effect of
13.2% at segment level. The lower procurement prices
for raw materials and energy resulted in lower selling
prices, which had a negative effect on sales of 12.3% atsegment level. In addition, shifts in exchange rates had
a negative effect on both business units and decreased
the segment’s sales by 0.9% in total. Sales in all regions
were below the level of the previous year.

for human resources measures as part of the FORWARD!
action plan and expenses by the Advanced Industrial
Intermediates business unit in connection with theplanned closure of hexane oxidation production at thesite in Krefeld-Uerdingen, Germany. Expenses also
resulted from the closure of the site in Mapleton, U.S.,
which was already initiated in 2021. There were no
negative exceptional items in operating earnings in theprevious year. Details can be found under“Notes on
EBIT and EBITDA (Pre Exceptionals).”

EBITDA pre exceptionals in the Advanced Intermediates segment decreased by €170 million, or 58.4%, to€121 million, compared with the previous year’s figureof €291 million. In particular, the lower selling prices inboth business units, due to generally weak demand, andcapacity utilization had a negative impact on earnings
and the margin. The lower procurement prices for raw
materials and energy also resulted in reduced selling
prices, and the shift in exchange rates had a negative
effect on earnings. The sale of emissions rights helped tomitigate the negative effects of persistently high energy
costs. The EBITDA margin pre exceptionals was 6.8%,
against 12.1% in the previous year.

All Other Segments

In the reporting year, the segment incurred negative
exceptional items of €53 million, €33 million of which
impacted EBITDA. These primarily related to expenses

Employees(as of Dec. 31)

Overview of Key Data
2022

2023

€ million€ million

Change %

Sales

339

274

(19.2)EBITDA pre­exceptionals

(203)

(128)

36.9

EBITDA

(277)

(245)

11.6

Operating result (EBIT)
pre exceptionals

(268)

(199)

25.7

Operating result (EBIT)

(346)

(321)

7.2

Cash outflows forcapital expenditures58

37(36.2)

Depreciation andamortization

69

76

10.1

3,565

3,408

(4.4)

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The sales reported in “All other segments” for thereporting year and the previous year mainly relate to
the business of the Urethane Systems business unit.
EBITDA pre exceptionals came to minus €128 million,
compared with minus €203 million in the previous year,
and resulted mainly from expenses for the activitiesof the corporate functions. The decline in expenses
related in particular to the absence of expenses fromcurrency hedges in the previous year and savings
measures in the current fiscal year. In the reporting
year, net negative exceptional items of €122 million wereincurred, €117 million of which impacted EBITDA. The
exceptional items related primarily to expenses as partof the FORWARD! action plan and expenses in connection with digitalization projects, strategic IT projects
and M&A activities. Net negative exceptional items
totaling €78 million were incurred in the previous year,€74 million of which impacted EBITDA. These resulted
primarily from expenses in connection with strategic IT
projects and M&A activities, primarily stemming fromthe acquisition of the Microbial Control business anddigitalization projects. Further details can be found under“Notes on EBIT and EBITDA (Pre Exceptionals).”

Corporate GovernanceManagement Report

NOTES ON EBIT AND EBITDA(PRE EXCEPTIONALS)
In order to better assess our operational business and tosteer earning power at Group level and for the individual
segments, we additionally calculate the earnings indicators EBITDA, and EBITDA and EBIT pre exceptionals,
none of which are defined by International Financial
Reporting Standards. These indicators are viewed as
supplementary to the data prepared according to IFRS;
they are not a substitute.

Financial Statements

Further Information

EBITDA is calculated from the operating result (EBIT) byadding back depreciation and impairments of property,
plant and equipment as well as amortization and impairments of intangible assets and subtracting reversals of
impairment charges on property, plant, equipment andintangible assets.
EBIT pre exceptionals and EBITDA pre exceptionals
are EBIT and EBITDA before exceptional items.

Reconciliation to EBIT/EBITDA€ million

EBIT
2022

EBIT
2023

EBITDA
2022

EBITDA
2023

EBIT/EBITDA pre exceptionals

389

(53)

930

512

Consumer Protection

(25)

(273)

(25)

(14)

Write-downs on goodwill1)

0

(259)

0

0

FORWARD!2)

0

(11)

0

(11)

Strategic realignment3)

(25)

(3)

(25)

(3)

Specialty Additives

(6)

(167)

(5)

(20)

Write-downs on goodwill1)

0

(147)

0

0

FORWARD!2)

0

(17)

0

(17)

Strategic realignment

0

(2)

0

(2)

Adjustment of the production network

(6)

(1)

(5)

(1)

Advanced Intermediates

0

(53)

0

(33)

FORWARD!2)

0

(46)

0

(31)

Adjustment of the production network4)

0

(7)

0

(2)

(78)

(122)

(74)

(117)

FORWARD!2)

0

(37)

0

(37)

Strategic realignment

0

(9)

0

(9)

(32)

(24)

(32)

(23)

All other segments

Strategic IT projects (SAP S/4HANA and other IT applications)
M&A costs, digitalization and otherTotal exceptional items
EBIT/EBITDA

(46)

(52)

(42)

(48)

(109)

(615)

(104)

(184)

280

(668)

826

328

1) T he exceptional items related to write-downs on goodwill, which resulted from impairment testing in the Flavors & Fragrances and Polymer Additives business
units as of December 31, 2023.
2) T he exceptional items relating to the FORWARD! action plan particularly related to human resources measures and expenses in the Advanced Intermediates
segment in connection with the planned closure of hexane oxidation production at the site in Krefeld-Uerdingen, Germany.
3) T hese exceptional items mainly related to integration activities in connection with the Microbial Control business acquired in 2022.
4) T hese exceptional items mainly related to the closure of the site in Mapleton, U.S., which was already initiated in 2021.

119

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LANXESS on the Capital Market

STATEMENT OF FINANCIAL­POSITION AND FINANCIAL­CONDITION
Assets and Liabilities€3,814 million to €2,498 million, mainly due to theproceeds from contributing the High Performance
Materials business unit to Envalior and a targeted
reduction of net working capital› Increase in equity ratio from 39.2% to 46.6%
Structure of the Statement of Financial Position
Dec. 31, 2022

Dec. 31, 2023€
million%€million%Non-current
assets

6,437

57.0

6,756

69.9

5.0

Current assets

4,850

43.0

2,909

30.1

(40.0)

Total assets

11,287

100.0

9,665

100.0

(14.4)

Equity (including
non-controllinginterests)

4,427

39.2

4,507

46.6

1.8

Non-current
liabilities

4,434

39.3

3,984

41.2

(10.1)

Current liabilities

2,426

21.5

1,174

12.1

(51.6)

Total equity
and liabilities

11,287

100.0

9,665

100.0

(14.4)

Change%ASSETSEQUITY AND
LIABILITIES

120Management Report

Structure of the Statement of
Financial Position› Significant reduction in net financial liabilities from

Prior-year figures restated.

Corporate Governance

As of December 31, 2023, the LANXESS Group’s
total assets stood at €9,665 million, €1,622 million or
14.4% lower than at the end of the previous year. Thisdevelopment resulted in particular from the repaymentof various bilateral bank loans and the repayment of thehybrid bond of €500 million, which was made possibleby the payment received for the contribution of the High
Performance Materials business unit to Envalior and thesignificant reduction in net working capital.
Non-current assets increased by €319 million to€6,756 million. The increase is particularly attributable toa minority interest in Envalior GmbH, Cologne, Germany,acquired in connection with the formation of Envalior,
which is included in the consolidated financial statements
using the equity method. As of December 31, 2023, it
was valued at €776 million. Intangible assets decreased
from €3,331 million to €2,721 million. Property, plantand equipment decreased from €2,750 million to€2,620 million. Cash outflows for purchases of property,
plant and equipment and intangible assets amounted
to €326 million, compared with €407 million in theprevious year. Depreciation, amortization and writedowns increased to €996 million compared with theprevious year’s figure of €546 million, primarily due towrite-downs of €434 million and the acquisition of theMicrobial Control business at the beginning of July 2022.

Financial Statements

Further Information

The write-downs resulted in particularly from the impairment testing in the Flavors & Fragrances and Polymer
Additives business units as of December 31, 2023,
and from the adjustment of the production network of
the Advanced Industrial Intermediates business unit aspart of the FORWARD! action plan. Other investments
decreased from €20 million to €14 million, particularly
due to the performance of the share of Standard LithiumLtd., Vancouver, Canada. Other non-current financial
assets increased by €185 million from €77 million
to €262 million. This change was largely due to ashareholder loan granted to Envalior GmbH, Cologne,
Germany, in connection with the formation of Envalior.
Deferred tax assets increased by €111 million from theprevious year’s figure of €54 million to €165 million,
while other non-current assets decreased by €4 million
from €63 million to €59 million. The ratio of non-current
assets to total assets increased from 57.0% to 69.9%.

Annual Report 2023 | LANXESSContents

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Strategy

Structure of the Statement of
Financial Position – Assets€ million

Sustainability

11,287

1,728
403
Intangible assets and property,
plant and equipment
Other non-current assets
Inventories and receivables

2,719
356

9,665 440
496
1,973
1,415

Cash and cash equivalents
Other current assets

6,081

2022

5,341

2023

Structure of the Statement of Financial
Position – Equity and Liabilities€ million

11,2871,596
830
EquityNon-current ﬁnancial liabilities
Other non-current liabilities
Current ﬁnancial liabilities

1,017
3,417

9,665
1,102
72
1,046
2,938

Other current liabilities

4,427

2022

121

4,507

2023

LANXESS on the Capital Market

Corporate GovernanceManagement Report

Current assets decreased by €1,941 million, or 40.0%,
compared with December 31, 2022, to €2,909 million.
This decline resulted primarily from the completion of
the full transaction for the formation of Envalior and theresulting disposal of assets from the “Assets held for saleand discontinued operations” item. The €245 million or
28.6% decline in trade receivables to €613 million was
mainly due to the demand-driven decline in sales. At
38.4, days of sales outstanding (DSO) were below theprevious year’s figure of 39.1 days. Inventories decreasedby €501 million, or 26.9%, to €1,360 million. The decline
in inventories was driven in particular by active inventory
management and the lower production volumes due todeclining demand. At 85.2, days of sales in inventory (DSI)
were slightly above the previous year’s figure of 84.9 days.
Cash and cash equivalents decreased from €324 million
to €146 million, while near-cash assets increased from
€79 million to €350 million as a result of the investment
in shares of money market funds that can be sold at any
time. The ratio of current assets to total assets was 30.1%,
compared with 43.0% as of December 31, 2022.
Equity increased by €80 million, or 1.8%, to €4,507 million
compared with December 31, 2022. The increase resulted
in particular from the net income influenced by the gainon the deconsolidation of the High Performance Materials
business unit. In particular, the exchange differences on

Financial Statements

Further Informationtranslation of operations outside the eurozone recognized in other comprehensive income and effects of theremeasurement of the net defined benefit liability had the
opposite effect. The ratio of equity to the Group’s total
assets was 46.6% as of December 31, 2023, comparedwith 39.2% in the previous year.
Non-current liabilities decreased by €450 million to€3,984 million. Provisions for pensions and otherpost-employment benefits increased by €131 million to€498 million. This increase resulted in particular from thelower discount rates for pension obligations and increased
inflation expectations in Germany. Other non-current provisions came to €299 million, compared with €296 million
in the previous year. Other non-current financial liabilities
decreased mainly as a result of the repayment of the hybrid
bond of €500 million utilizing the first redemption option
on June 6, 2023. The ratio of non-current liabilities tototal assets was 41.2%, compared with 39.3% as ofDecember 31, 2022.
Current liabilities came to €1,174 million, downby €1,252 million, or 51.6% , compared with
December 31, 2022. Other current financial liabilities
decreased from €830 million to €72 million. The decline
primarily reflected the repayment of various bilateral bankloans. In addition, other current provisions decreased by

Annual Report 2023 | LANXESSContents

To Our Stockholders

Strategy

Sustainability

LANXESS on the Capital Market€50 million to €338 million. The decrease is mainly due
to lower personnel-related provisions. Trade payables
declined by a total of €125 million to €584 million,
primarily due to lower procurement prices for raw
materials and energy and the demand-driven decline
in production. Another material effect resulted from thecompletion of the full transaction for the formation of
Envalior and the associated disposal of liabilities fromthe “Liabilities directly related to assets held for sale anddiscontinued operations” item. The ratio of current liabilities to total assets was 12.1% as of December 31, 2023,
after 21.5% at the end of 2022.
At €2,498 million at the end of 2023, net financial liabilities
were significantly below the figure of €3,814 million as ofDecember 31, 2022. As in the previous year, no short-termmoney market investments and securities were held in
the reporting year. The Group’s key ratios developed asfollows:

Corporate GovernanceManagement Report

Capital Expenditures
In 2023, our capital expenditures for property, plantand equipment and intangible assets decreased from€447 million in the previous year to €400 million due
primarily to the targeted reduction of spending as partof the FORWARD! action plan. Cash outflows made up€326 million of this total (previous year: €407 million). In
the same period, depreciation and amortization totaled€996 million (previous year: €546 million) and included
write-downs of €434 million (previous year: €10 million),
which primarily related to impairment testing and the
FORWARD! action plan. The increase in depreciation
and amortization also resulted from the acquisition of theMicrobial Control business in the previous year.
In light of the strained economic situation, we reviewed
our planned investment projects again in the past fiscal
year as part of our FORWARD! action plan. Capital
expenditures therefore focused on the following areas:

Ratios
%

2019

2020

2021

20222)

2023

30.4

33.8

35.7

39.2

46.6

58.3

54.3

58.3

57.0

69.9

52.3

62.2

61.3

68.8

66.7

142.4

146.3

132.7

137.7

125.7

24.5

31.0

35.2

35.4

22.8

Equity1)
Equity ratio

Total assets
Non-current assets

Non-current asset ratio

Total assets

Financial Statements

Further Information› Maintenance› Targeted optimization and expansion of plants› Projects to improve plant safety, enhance quality
and comply with environmental protection
requirements
Around one-fifth of the capital expenditures in 2023 went
toward expansion or efficiency improvement measures,
while the rest went to maintain existing facilities.
In regional terms, 51% of our capital expenditures in thereporting period were made in Germany, 27% in theAmericas, 16% in the EMEA region (excluding Germany),
and 6% in Asia-Pacific. Capital expenditures in Germany
mostly comprised our investments in maintenance andin expansions initiated in previous years in all segments,
but especially investments in the Advanced Industrial
Intermediates, Saltigo, Lubricant Additives Business andInorganic Pigments business units. Capital expendituresin the North America region included investments in the
production network for the Polymer Additives business
unit’s flame retardants. In EMEA (excluding Germany),
they included the Flavors & Fragrances business unit’s
investments at the site in Rotterdam/Botlek, ­Netherlands.
In the Asia-Pacific region, LANXESS invested in additional
production capacity for Naugalube® 438L products in
the Lubricant Additives business unit in Taiwan.

Equity1)
Asset coverage I

Non-current assets
Equity1) and non-current liabilities

Asset coverage II

Non-current assets
Current liabilities

Funding structure

Total liabilities

1) Equity includes non-controlling interests.
2) Prior-year figures restated.

122

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LANXESS on the Capital Market

In the Consumer Protection segment, capital expen­
ditures came to €112 million (previous year: €141 million),€87 million (previous year: €129 million) of whichwere cash outflows. Depreciation, amortization andwrite-downs increased to €459 million (previous year:€168 million), primarily due to a write-down on goodwill
in the Flavors & Fragrances business unit. For example,
the cash flows related to several capital expendituresby the Saltigo business unit in connection with contract
manufacturing. In addition, LANXESS commissioned a
new bottling system for the Material Protection Products
business unit’s cold sterilization agent Velcorin® at thesite in Krefeld-Uerdingen, Germany. At the site in Kalama,
U.S., LANXESS completed the capacity expansion for
the Flavors & Fragrances business unit’s benzyl alcohol.
Production capacity was doubled in order to serve thegrowing customer base in the Americas region.
Capital expenditures of €133 million were madein the Specialty Additives segment (previous year:€137 million). Cash outflows made up €122 million ofthis total (previous year: €125 million). By contrast, depreciation and amortization stood at €331 million (previous
year: €190 million). The increase resulted primarily fromthe write-down on the goodwill of the Polymer Additives
business unit. LANXESS investments included the expansion of the Lubricant Additives business unit’s plants at
the Mannheim site in Germany to increase its production capacity for light sulfur carriers by several kilotons.
LANXESS’s Additin® EP light sulfur carriers are mainly
used in lubricants for metal processing. To meet thegenerally growing demand, LANXESS invested a sum inthe low double-digit millions in euros. The expansion wascompleted at the end of 2023; the additional volumes
will be available from 2024.

123

Corporate GovernanceManagement Report

Cash Outﬂows for Capital Expenditures by Segment€ million

Specialty Additives
Advanced Intermediates

58

The statement of cash flows shows inflows and outflows ofcash and cash equivalents by type of business operation.

€ million

2022

2023

Change37

Income before income taxes

257

(947)

(1,204)80

Depreciation and amortization

546

996

450

Other items

(145)

226

371

Net cash provided by operating
activities – continuing
operations before change innet working capital

658

275

(383)

Change in net working capital

(471)

577

1,048

Net cash provided by operating
activities – continuing operations

187

852

665

Net cash used in (provided by)investing activities – continuing
operations

(996)

429

1,425

Net cash provided by (used in)financing activities – continuing
operations

326

95

All other Segments

125
122
129

2022

Further Information

Statement of Cash Flows

407
Consumer Protection

Financial Statements

87

2023

Capital expenditures in the Advanced Intermediates
segment amounted to €94 million (previous year:€106 million). The cash outflows of €80 million (previous
year: €95 million) compare with depreciation and amortization of €130 million (previous year: €119 million). The
capital expenditures also included cash outflows inconnection with maintenance in the Inorganic Pigments
and Advanced Industrial Intermediates business units atthe site in Krefeld-Uerdingen, Germany.

Financial Position

617(1,465)(2,082)

Change in cash and cash equivalentsfrom continuing operations
(192)

(184)

8

Change in cash and cash equivalentsfrom discontinued operations

(21)

66

Cash and cash equivalents
as of Dec. 31

(87)
360

146

(214)

of which continuing operations

324

146

(178)

of which discontinued operations

36

0

(36)

› Strong operating cash flow due to significant
reduction in net working capital› Cash flow from investing activities positively

The following comments on the statement of cash flows
relate to LANXESS’s continuing operations.

influenced by proceeds from the contribution of
the High Performance Materials business unit to
Envalior› Liquidity position remains solid

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LANXESS on the Capital Market

Management Report

Cash provided by operating activities, before changes
in net working capital, decreased by €383 million to€275 million in fiscal year 2023. Income before income
taxes declined from €257 million to minus €947 million.
This was adjusted for the income from investments
accounted for using the equity method of minus€172 million, which is included in the “Other items”
line. This also includes tax payments of €53 million. At€996 million, non-cash depreciation, amortization andwrite-downs were €450 million higher than the previous
year’s figure of €546 million, primarily due to write-downs
resulting from the impairment testing in the Flavors &Fragrances and Polymer Additives business units as ofDecember 31, 2023.

business unit to Envalior. Cash outflows for financial
assets and other assets held for investment purposes
resulted from the acquisition of shares of money market
funds that can be sold at any time as well as the grantingof a shareholder loan to Envalior GmbH, Cologne,
Germany. Cash inflows from financial and other assets
held for investment purposes from the sale of sharesof money market funds that can be sold at any time
had the opposite effect. Cash outflows for purchasesof intangible assets and property, plant and equipment
amounted to €326 million, down on the prior-year figureof €407 million. Interest and dividends received totaled€23 million, up €11 million from the previous year’s figureof €12 million.

The change in net working capital against December 31,
2022, resulted in a cash inflow of €577 million after acash outflow of €471 million in the previous year. The
inflow in the reporting period resulted in particular from
active inventory management and the lower production
volumes and trade receivables due to declining demand.
The drop in trade payables due to lower procurement
prices for raw materials and energy and the demanddriven decline in production had the opposite effect.
The net cash provided by operating activities totaled€852 million, significantly above the previous year’s
figure of €187 million.

There was cash outflow from financing activities of€1,465 million, compared to cash inflow of €617 million
the year before. The net cash used was primarily due
to the repayment of various bilateral bank loans andthe repayment of the hybrid bond of €500 million. Theinterest payments and other financial disbursements
amounted to €71 million, compared with €65 million
in the previous year. The dividend payment made to
LANXESS stockholders amounted to €91 million, as in
the previous year. This was countered by the borrowingof bilateral bank loans.

Investing activities resulted in a cash inflow of€429 million in fiscal year 2023, compared with a cash
outflow of €996 million in the prior-year period. The
cash inflow of the current year resulted primarily frompayments of €1,267 million received in connection withthe contribution of the High Performance Materials

124

Corporate GovernanceThe decrease in cash and cash equivalents fromcontinuing operations in fiscal year 2023 was€184 million after €192 million in the previous year. Aftertaking into account currency related and other changesof €9 million, cash and cash equivalents at the closing
date amounted to €146 million, against €360 million at
the previous year’s closing date.

Financial Statements

Further Information

Free cash flow – the difference between the cash inflows
from operating activities and the cash used for capital
expenditures for property, plant and equipment andintangible assets – improved by €746 million from minus€220 million to €526 million.

Principles and Objectives ofFinancial Management
LANXESS pursues a conservative financial policy
characterized by the forward-looking management offinancial risks. Our aim is to be able to provide sufficient liquidity to our business operations at all times,
regardless of cyclical fluctuations in the real economy
or financial markets. The debt level is largely alignedwith the ratio systems of the leading rating agencies forinvestment grade companies and, along with free cash
flow, is the focus of financial management. In addition
to liquidity risk, financial management also covers otherfinancial risks, such as interest and foreign exchangerisks. Here too, we aim to mitigate the financial risks thatarise and thereby increase planning reliability, partly byusing derivative financial instruments. Detailed information about the management of these risks is containedin the“Opportunity and risk report.”

LANXESS Group Ratings
Access to the capital markets and good relations withGerman and international commercial banks are essential for achieving our financial management objectives.
Accordingly, ongoing dialog and communication withbanks, investors and rating agencies are of crucial
importance. The earnings decline as a result of the
global economic weakness of the chemicals industry
led to a deterioration in the indicators used by the rating

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Strategy

Sustainability

LANXESS on the Capital Market

agencies. In November 2023, Moody’s lowered its ratingby one notch from “Baa2” to “Baa3” with a negative
outlook. The rating from Scope Ratings was unchanged
at “BBB+” as of the reporting date, but the outlook was
adjusted to “negative.” In February 2024, the rating wasdowngraded to “BBB” with a negative outlook. The rating
agencies highlight the comparatively high debt in relation
to EBITDA and cash flow. At the same time, they recognize the efforts made by LANXESS to improve the rating
indicators again in the future via various measures suchas the FORWARD! action plan, the planned divestmentof the Urethane Systems business unit, and proposing adividend reduction to the Annual Stockholders’ Meeting.
LANXESS ended its collaboration with Standard & Poor’s inDecember 2022 as a cost-saving measure. The rating wastherefore withdrawn by the rating agency in January 2023.

Corporate GovernanceManagement Report

Financing Analysis
In fiscal year 2023, LANXESS retained a balanced
financing structure and a solid liquidity position. The
next significant maturity is for a €500 million bond in May
2025. The other bond maturities are spread very evenly
over the years 2026 to 2029. The existing debt issuanceprogram allows the flexible placement of bonds on thecapital market. As of December 31, 2023, €2.8 billionof the €5.0 billion financing facility had been utilized
to issue bonds and private placements. The volume ofthe debt issuance program can be adjusted flexibly inline with future requirements so as to ensure financial
headroom. Capital market financing is a central component in LANXESS’s financing mix, which is subject toregular review to ensure the adequate diversificationof our financing sources and our strategic alignment.

Financial Statements

Further Information

On December 31, 2023, LANXESS had a small amountof financing items that were not reported in the statementof financial position in the form of short-term leases andleases of low-value assets.
The Group’s total financial liabilities, net of accrued
interest, decreased from €4,217 million at the end of2022 to €2,994 million as of December 31, 2023.
This decline primarily resulted from the repayment of
the hybrid bond of €500 million and the repayment ofvarious bilateral bank loans totaling €700 million. The
funds for repaying the debts primarily came from thepayment received in connection with the contribution of
the High Performance Materials business unit to Envaliorand the significant reduction in net working capital.

Development of LANXESS Ratings and Rating Outlook Since 2019

125

2019

2020

2021

2022

Standard & Poor’s

BBB/stable
Sep. 5, 2019

BBB/stable
Jul. 29, 2020

BBB/stable
Jul. 22, 2021

BBB/negative
Sep. 15, 2022

2023

Moody’s Investors Service

Baa2/stable
Aug. 26, 2019

Baa2/stable
Aug. 31, 2020

Baa2/stable
Jul. 28, 2021

Baa2/stable
Jul. 14, 2022

Baa3/negative
Nov. 17, 2023

Scope Ratings

BBB+/stable
Jul. 23, 2019

BBB+/stable
Mar. 12, 2020

BBB+/stable
Aug. 4, 2021

BBB+/stable
Jul. 7, 2022

BBB+/negativeJun. 27, 2023

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Strategy

Sustainability

LANXESS on the Capital Market

Net financial liabilities are the total of current andnon-current financial liabilities less liabilities for accrued
interest, cash, cash equivalents and near-cash assets.
At €2,498 million at the end of the reporting year, they
were significantly below the figure of €3,814 million
as of December 31, 2022. Cash and cash equivalents
amounted to €146 million on December 31, 2023
(previous year: €324 million). As of December 31, 2023,
near-cash assets of €350 million were held, which were
invested in shares of money market funds that can besold at any time. As in the previous year, no further
short-term money market investments and securities
were held. Of the total financial liabilities, almost 100%bear a long-term fixed interest rate over the term of thefinancing, which is more than in the previous year. Interest
rate changes do not have a material effect considering
the current financing structure. The proportion of loans
and bonds denominated in euros was almost 100% in
the reporting year, as in the previous year. The weighted
average interest rate for our financial liabilities in euros
was 1.1% at year-end 2023, down from the previous
year’s figure of 1.5%.

126

Corporate GovernanceManagement Report

Financial Statements

Further Information

The following overview shows LANXESS’s financing
structure as of December 31, 2023, in detail, including
its principal liquidity reserves.
Financing Structure
Instrument

Amount€ million

TermInterest
rate %

Financialcovenant

Eurobond 2018/2025 (€500 million)502

May 2025

1.125

No

Eurobond 2016/2026 (€500 million)499

October 2026

1.000

No
No

Eurobond 2021/2027 (€500 million)

497

September 2027

0.000

Eurobond 2022/2028 (€600 million)

605

March 2028

1.750

No

Eurobond 2021/2029 (€600 million)

594

December 2029

0.625

No

Private placement 2012/2027 (€100 million)

102

April 2027

3.950

No

Finance lease

204

n/a

No

7

n/a

No

Other
Less liabilities for accrued interest
Total financial liabilities

(16)
2,994

Cash and cash equivalents

146≤ 3 months

Near-cash assets

350≤ 3 months

Total liquidity
Net financial liabilities

496
2,498

The other loans include financial commitments to
High-Tech Gründerfonds II and III and the use of bankaccount overdrafts in a small amount. No refinancing
risks existed at the time these financial statements wereprepared.

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Strategy

Sustainability

LANXESS on the Capital Market

Liquidity Analysis
In addition to cash and cash equivalents of €146 million
which are partly held in companies in regulated
capital markets, LANXESS holds near-cash assets of€350 million in companies with no restrictions on foreignexchange and capital transfers, which comprise sharesof money market funds that can be sold at any time.
There are also additional liquidity reserves in the formof undrawn credit lines.
Due to our good liquidity position, our solvency was
assured at all times in fiscal year 2023.
By far the most important of LANXESS’s credit lines is the
syndicated credit facility of €1 billion, which was signed
in December 2019 and has a term until December 2026.
The terms of the credit facility are tied to ESG (“environmental, social and governance”) criteria. The interest
rate terms depend in part on the successful reductionof Scope 1 and Scope 2 greenhouse gas emissions andthe increase in the proportion of women at the top threelevels of management.
The credit facility remained undrawn in 2023. It is
designed as an operating line of credit and to provide
funds for capital investment and complies with the market
requirements of the European syndicated loan market forinvestment-grade companies with a BBB rating. None of127

Corporate GovernanceManagement Report

our major loan agreements contains a financial covenant.
In total, we had undrawn committed credit facilities of€1.8 billion as of December 31, 2023.
The total of liquid assets and undrawn credit lines gives
us available liquidity of around €2.3 billion. In addition,
LANXESS can utilize revocable loan commitments for
short-term money market borrowings in the low threedigit millions in euros.

MANAGEMENT’S SUMMARYOF BUSINESS DEVELOPMENT
AND THE FISCAL YEARThe LANXESS Group’s sales of €6,714 million in thereporting period were 17.0% lower than the previous
year’s figure of €8,088 million and were influenced inall segments primarily by the negative effects of the
weak demand and the inventory reduction among ourcustomers, which continued throughout large parts offiscal year 2023. Sales were also negatively affected bylower selling prices driven by raw material and energy
prices. Moreover, shifts in exchange rates, especially aweaker U.S. dollar, had a negative influence on sales
development in all segments. The contribution from theMicrobial Control business acquired on July 1, 2022,
had a positive effect on sales in the Consumer Protection
segment.

Financial Statements

Further Information

In a globally weak economic environment in the chemicals industry and a still strained economic situation,
EBITDA pre exceptionals decreased by €418 million
from €930 million to €512 million in fiscal year 2023.
While the Consumer Protection segment saw a comparatively moderate earnings decline and benefited from
the Microbial Control business’s portfolio contribution,
the EBITDA pre exceptionals of our Specialty Additives
and Advanced Intermediates segments were significantly
below the previous year’s level.
Net income and earnings per share increased from€250 million to €443 million and from €2.90 to €5.13,
respectively. Net income from discontinued operations
increased from €66 million to €1,286 million. The main
reason for the increase was the gain on the deconsolidation of the High Performance Materials business
unit in connection with the formation of Envalior. Net
income from continuing operations was significantly
below the previous year’s figure of €184 million andamounted to minus €843 million, mainly as a result of
the development of operating earnings, the write-downs
on the goodwill of the Flavors & Fragrances and Polymer
Additives business units, and the negative result fromthe investment accounted for using the equity method in
Envalior. Earnings per share from continuing operations
likewise declined to minus €9.76 against €2.13 in theprevious year.

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LANXESS on the Capital Market

We retained our accounting and financing policy in2023 and, in accordance with the consistency principle,
essentially applied the same measurement methods andexercised the same discretion as in the previous year.
The equity ratio increased from 39.2% to 46.6%. Total
assets decreased from €11,287 million to €9,665 million.
Near-cash assets increased from €79 million to€350 million as a result of the investment in sharesof money market funds that can be sold at any time.
Additional liquidity reserves in the form of undrawn credit
lines are also available. Of the total financial liabilities,
almost 100% bear a fixed interest rate over the term of
the financing. Our material financial liabilities are free offinancial covenants. Our statement of financial positionshows that our liquidity position remains solid.
After deduction of short-term money market investments
and securities, our net financial liabilities amounted to€2,498 million, lower than the previous year’s figure of€3,814 million. The decline in the reporting year resulted
primarily from the proceeds from contributing the High128

Corporate GovernanceManagement Report

Financial Statements

Further Information

Performance Materials business unit to Envalior. Anotherreason was the smaller amount of capital tied up in net
working capital as a result of the targeted reductionof our inventories and the demand-driven decline inproduction volumes. While Scope Ratings confirmed its“BBB+” rating for LANXESS’s creditworthiness as of thereporting date, Moody’s lowered its rating by one notchfrom “Baa2” to “Baa3.” Both rating agencies changed
their outlook to “negative.” In February 2024, however,
Scope Ratings downgraded the rating to “BBB.”
Due to the globally weak economic environment, theeconomic situation is strained. Earnings performance
was very unsatisfactory overall, but we still consider
our economic situation to be stable. Through structural
measures as part of our FORWARD! action plan, we
intend to achieve permanent savings of €150 million
by 2025, and still see ourselves as on track to becomea profitable specialty chemicals company with stable
growth, stronger cash flow, and a more competitive,
more sustainable portfolio.

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Corporate GovernanceManagement Report

Financial Statements

Further Information

KEY BUSINESS DATA –MULTI-PERIOD OVERVIEWEARNINGS, ASSET AND FINANCIAL
POSITION OF LANXESS AG

Indicators

LANXESS AG serves primarily as the management
holding company for the LANXESS Group. The
principal management functions for the entire Groupare performed by the Board of Management. The Boardof Management shapes Group strategy and manages
resource allocation, infrastructure and organization.
The Group management company is also responsible
for financing and communication with LANXESS’s
key stakeholders. The economic performance of
LANXESS AG depends principally on the operating
business entities in the LANXESS Group and on thedevelopment of the chemical industry. The balanceof income and losses from investments in affiliatedcompanies resulting from profit or loss transfers anddividends from affiliated companies is of key importancefor the future ability of LANXESS AG to pay a dividend.
Therefore, especially the statements made in the“Opportunity and risk report” in this management
report apply in principle to LANXESS AG as well.

€ million

2019

2020

2021

2022

2023

Sales1)

6,802

6,104

6,101

8,088

6,714

EBITDA pre exceptionals1)

1,019

862

815

930

512

EBITDA margin pre exceptionals1)

15.0%

14.1%

13.4%

11.5%

7.6%

Earnings performance

EBITDA1)

910

757

668

826

328

EBIT pre exceptionals1)

557

396

361

389

(53)

EBIT1)

407

253

211

280

(668)

EBIT margin1)

6.0%

4.1%

3.5%

3.5%

(9.9)%Net income
Weighted average number of shares outstanding

205

885

267

250

443

88,334,641

86,587,838

86,346,303

86,346,303

86,346,303

2.32

10.22

3.09

2.90

5.13

Earnings per share (€)
Financial position
Cash flow from operating activities1)

634

594

368

187

852

Depreciation and amortization/reversals of impairment charges1)

503

504

457

546

996

508

456

424

407

326

Net financial liabilities

2,522

1,012

2,345

3,814

2,498

Net financial liabilities after deduction of short-term money market
investments and securities

1,742

1,012

2,245

3,814

2,498

Cash outflows for capital expenditures1)

Assets and liabilities
Total assets

8,695

8,880

10,528

11,2872)

9,665

Non-current assets

5,065

4,823

6,139

6,4372)

6,756

Current assets

3,630

4,057

4,389

4,8502)

2,909

Net working capital

1,308

1,134

1,675

2,010

1,389

Equity (including non-controlling interests)

2,647

2,999

3,762

4,427

4,507

Provisions for pensions and other post-employment benefits

1,178

1,205

877

367

498

The financial statements of LANXESS AG are preparedin accordance with the German Commercial Code (HGB)and the German Stock Corporation Act (AktG).

Indicators
ROCE3)

10.0%

7.5%

6.6%

4.8%2)(0.8)%

Equity ratio

30.4%

33.8%

35.7%

39.2%

46.6%

Non-current asset ratio

58.3%

54.3%

58.3%

57.0%

69.9%

Asset coverage I

52.3%

62.2%

61.3%

68.8%

66.7%

Net working capital/sales

19.2%

18.6%

22.2%

24.9%

20.7%

Employees (as of Dec. 31)

14,30414,30914,866

13,126

12,8491) Figures from 2021 onward not including High Performance Materials business unit.
2) Prior-year figure restated.
3) Capital employed adjusted as of December 31 of each year. Details can be found under

129“Profitability.”

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Sales and Earnings of LANXESS AG
LANXESS AG Income Statement in Accordance with
the German Commercial Code (HGB) – Abridged€ million

2023

Change
%

Sales

6

6

0.0

Cost of sales

(6)

(5)

16.7

Gross profit
General administration expenses

0

1

–

(48)

(36)

25.0

Other operating income

2

3

50.0

Other operating expenses

(1)

(16)

< (100)Operating result

(47)

(48)

(2.1)

Income from investments inaffiliated companies

988

(88)

< (100)

Income from other securities andloans held as financial assets

7

10

42.9

Net interest expense

86

151

75.6

Write-downs on financial assets­securities classified as current
assets

(4)

0

100

Miscellaneous financial expense
and income

(12)

8

> 100

Financial result

1,065

81

(92.4)(4)(18)< (100)

Income after income taxes

1,014

15

(98.5)Net income for the year

1,014

15

(98.5)

11

427

> 100

Income taxes

Carryforward to new account

130

2022

Addition to other retained
earnings

(507)

0

100

Distributable profit

518

442

(14.7)

Corporate GovernanceManagement Report

The earnings of LANXESS AG are largely determined byprofit or loss transfers from LANXESS subsidiaries, net
interest and general administration expenses.
Sales at LANXESS AG stood at €6 million, which wason a par with the previous year. They related mainly toservices provided to LANXESS Deutschland GmbH.
After deducting the cost of sales, which consisted mostlyof personnel expenses and appropriate shares of thegeneral administration expenses, gross profit amounted
to €1 million.
General administration expenses declined year-onyear by €12 million, or 25.0%, to €36 million. They
principally comprised lower personnel costs and otherbusiness expenses not directly related to the services
provided to Group companies. Other operating expenses
increased from €1 million to €16 million due to expenses
in connection with the FORWARD! action plan. In total,
the operating result amounted to minus €48 million,
compared with minus €47 million in the previous year.
The financial result, which comprises the balanceof income and losses from investments in affiliatedcompanies, the net interest position, income from loans

Financial Statements

Further Information

included in financial non-current assets, write-downs on
securities classified as current assets, and other financial
income and expense, decreased from €1,065 million
to €81 million. This change was largely due to the­absorption of losses from LANXESS DeutschlandGmbH after a profit transfer in the previous year. The
result for this company in the previous year was primarily
influenced by the contribution of the High Performance
Materials business unit to LANXESS Performance
Materials GmbH, Cologne, Germany, with disclosure ofhidden reserves, which did not affect the tax result. The€65 million improvement in the net interest position to€151 million is primarily attributable to the rise in thegeneral interest rate level.
Income taxes resulted in expenses for previous yearsof €18 million.
Net income for fiscal year 2023 was €15 million after€1,014 million in the previous year.
As of December 31, 2023, the company reported a
distributable profit of €427 million taking into accountthe profit carryforward of €442 million. In the previous
year, a distributable profit of €518 million was posted.

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Corporate GovernanceManagement Report

Asset and Capital Structure of­L ANXESS AG
LANXESS AG Statement of Financial Position in Accordance with the German Commercial Code (HGB) – Abridged
Dec. 31, 2022
€ million

Dec. 31, 2023%

€ million

Change%%ASSETS
Financial assets

896

9.4

899

11.4

0.3

Non-current assets

896

9.4

899

11.4

0.3
(22.0)

Receivables from affiliated companies

8,427

88.2

6,569

83.1

Other assets

44

0.5

43

0.5

(2.3)

Liquid assets and securities

156

1.6

381

4.8

> 100

8,627

90.3

6,993

88.4

(18.9)

31

0.3

17

0.2

(45.2)

9,554

100.0

7,909

100.0

(17.2)

Current assets
Prepaid expenses
Total assets
EQUITY AND LIABILITIES
EquityProvisions
Bonds
Liabilities to banks

28.8

2,678

33.9

147

1.5

160

2.0

(2.8)
8.8

3,300

34.5

2,800

35.4

(15.2)

730

7.7

16

0.2

(97.8)

2,618

27.4

2,254

28.5

(13.9)

Liabilities

5

0.1

1

0.0

(80.0)

Payables

6,653

69.7

5,071

64.1

(23.8)

Total equity and liabilities

9,554

100.0

7,909

100.0

(17.2)

Payables to affiliated companies

In view of its function as a strategic holding company,
the statement of financial position of LANXESS AG
is dominated by financial assets and liabilities and byreceivables from, and payables to, subsidiaries.
LANXESS AG had total assets of €7,909 million as ofDecember 31, 2023, which was €1,645 million, or 17.2%,

131

2,754

below the prior-year figure. Non-current assets increasedslightly by €3 million to €899 million as a result ofinvestments in the pension trust. They primarily included
the carrying amount of the investment in LANXESS
Deutschland GmbH, which stands at €739 million,
and loans to subsidiaries of €99 million. The share of
non-current assets in total assets increased from 9.4%

Financial Statements

Further Information

to 11.4%. Current assets decreased by €1,634 million,or 18.9%, to €6,993 million and accounted for 88.4% of
total assets, compared with 90.3% in the previous year.
Receivables from subsidiaries accounted for 83.1% of
total assets and related principally to short-term loans andfinancial transactions. They declined in particular due tothe incoming payment for the receivable recognized in
the previous year as a result of the profit or loss transferfrom LANXESS Deutschland GmbH. Other receivables
largely consisted of tax claims and accounted for 0.5%of total assets, as in the previous year. The share of bankbalances and securities in total assets increased from
1.6% to 4.8% or from €156 million to €381 million.
Equity fell by €76 million to €2,678 million, largely due
to the dividend payment for 2022 of €91 million. The
net income for 2023 of €15 million had the opposite
effect. The equity ratio was 33.9%, after 28.8% at theend of 2022.
The provisions increased by €13 million to €160 million
and related in particular to commitments to employees,
statutory and contractual obligations, and income taxes.
Liabilities decreased by €1,582 million to €5,071 million.
This development is due among other things to the repayment of a bond of €500 million and the repayment ofliabilities to banks of €700 million in the reporting year.
In addition, payables to affiliated companies decreasedby €364 million year-on-year to €2,254 million.

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Management Report

REPORT PURSUANT TO­SECTIONS 289A, 315A OF THE
GERMAN COMMERCIAL CODE
(HGB)

5.	Employees hold a direct interest in the capital of
LANXESS AG through stock programs. There are
no restrictions on directly exercising the voting rights
arising from these shares.

Pursuant to Section 289a, Sentence 1, Nos. 1 to 9, andSection 315a, Sentence 1, Nos. 1 to 9, of the German
Commercial Code, we hereby make the following
declarations:

6. Sections 84 and 85 of the German Stock Corporation Act and Section 31 of the German Codetermination Act apply to the appointment and dismissalof Board of Management members. Under theprovisions of these sections, Board of Management
members are appointed by the Supervisory Board
for a term not exceeding five years. Such appointment may be renewed or the term of office may
be extended, provided that the term of each such
renewal or extension shall not exceed five years.
Appointments require a majority of at least two
thirds of the Supervisory Board members’ votes.
Section 6, Paragraph 1 of the articles of association
states that the Board of Management must consistof at least two members. The number of membersof the Board of Management is determined by theSupervisory Board. The Supervisory Board may
appoint a chairman of the Board of Management
and a vice chairman of the Board of Management.
Alternative members of the Board of Management
may be appointed. The Supervisory Board may
revoke the appointment of a member of the Boardof Management or the appointment of a member
as Chairman of the Board of Management for cause(Section 84, Paragraph 4 of the German Stock
Corporation Act).

1.	The capital stock of LANXESS AG amounted to€86,346,303 as of December 31, 2023, and iscomposed of 86,346,303 no-par bearer shares.
The capital stock and the number of shares are
therefore unchanged as against the end of theprevious year. All shares carry the same rights andobligations. One vote is granted per share, and profit
is distributed per share. The rights and obligations
arising from the shares are governed by the German
Stock Corporation Act (AktG).
2. We are not aware of any restrictions affecting voting
rights or the transfer of shares. However, shares
allocated under employee stock plans are subject
to a vesting period before they may be sold.
3. On October 24, 2023, Capital Group Companies,
Inc., based in Los Angeles, U.S., notified us thatits participating interest had fallen below thethreshold of 15% and that, at that time, it held atotal of 14.89% of the voting rights in the capitalof LANXESS AG via indirect investments.
4.	N o shares carry special rights granting control
authority.

132

Corporate Governance

Financial Statements

Further Information

to the articles of association. Pursuant to Section
17, Paragraph 2 of the articles of association,
resolutions of the Annual Stockholders’ Meeting
require a simple majority of the votes cast and, if acapital majority is required, a simple majority of thecapital stock, unless otherwise required by law orprovided by the articles of association. The articles
of association contain no further provisions in thisregard. Section 10, Paragraph 9 of the articles ofassociation of LANXESS AG authorizes the Supervisory Board to resolve on amendments relating
solely to the form of the articles of association.
7. The Board of Management of LANXESS AG has beenauthorized to issue or repurchase shares as follows.

Own shares n May 23, 2019, the Annual Stockholders’ MeetingOof LANXESS AG resolved to issue an authorization
for the purchase and utilization of own shares by the
Board of Management. The authorization allows
the Board of Management to acquire shares in thecompany representing up to 10% of the capitalstock until May 22, 2024, and to utilize them for any
purpose permitted by law. This authorization may also
be utilized by subsidiaries of the company or by third
parties on behalf of the company or its subsidiaries.
At the discretion of the Board of Management, suchshares may be acquired either on the market or via
a public tender offer. The Board of Management isauthorized to use them for any purpose permitted bylaw, especially the purposes listed in the authorization.

	Section 179 of the German Stock Corporation
Act provides that a resolution of the Annual Stockholders’ Meeting is required for any amendment

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 he Board of Management of the company resolved
T
on March 10, 2020, to exercise its stock repurchaseauthorization and, within 24 months, to buy own
shares on the stock exchange at a total volume of
up to €500 million (excluding incidental expenses)
for the purpose of withdrawing them.
In fiscal year 2020, LANXESS AG repurchased a
total of 1,101,549 shares, or 1.26% of the company’s
capital stock of €87,447,852 at that time, on the basisof this resolution. All 1,101,549 repurchased shareswere canceled in fiscal year 2021, reducing thecompany’s capital stock by way of a simplified capital
reduction in accordance with Section 71 Paragraph
1, No. 8 Sentence 6 AktG. The above authorization of
the Board of Management therefore also allows thepurchase and utilization of up to 7,533,081 sharesor 8.72% of the company’s capital stock as of theend of fiscal year 2023 until May 22, 2024.
 t this time, neither the company nor dependent orAmajority-owned entities, or third parties acting forthe account of the company or for the account ofdependent or majority-owned entities, held sharesin the company.

Conditional capital	The Annual Stockholders’ Meeting of LANXESS AG
on May 24, 2023, authorized the Board of Management until May 23, 2026, with the approval of theSupervisory Board, to issue – in one or more installments – warrant bonds and/or convertible bonds
and/or income bonds or a combination of these
instruments (collectively referred to as “bonds”) –as either registered or bearer bonds – with a total

133

Corporate GovernanceManagement Reportnominal value of up to €1,000,000,000, with orwithout limited maturity, and to grant option rights
to, or impose exercise obligations on, the holders
or creditors of warrant bonds or income bonds withwarrants, and/or to grant conversion rights to, or
impose conversion obligations on, the holders or
creditors of convertible bonds or convertible income
bonds in respect of bearer shares of the company
representing a total pro rata increase of up to€8,634,630 in the company’s capital stock on theterms to be defined for these bonds. Pursuant to
Section 4, Paragraph 5 of the articles of association,
the capital stock of LANXESS AG is thus conditionally increased by up to €8,634,630 (Conditional
Capital).
	The conditional capital increase shall only be implemented to the extent that the holders or creditorsof, or persons obligated to exercise, warrants orconversion rights pertaining to warrant bonds and/or convertible bonds and/or income bonds (or acombination of these instruments) issued by thecompany or a dependent company against cash
contributions, or issued against cash contributions
and guaranteed by the company or a dependentcompany, on or before May 23, 2026, on the basisof the authorization granted to the Board of Management by the Annual Stockholders’ Meeting on May
24, 2023, exercise their warrants or conversion
rights or, where they are obligated to do so, fulfill
such obligation, or to the extent that the company
elects to grant shares in the company in place of
all or part of the cash amount due for payment.
The conditional capital increase shall not be implemented if cash compensation is granted or if the

Financial Statements

Further Informationcompany’s own shares, shares issued out of authorized capital or shares in another listed company areused to service the warrant or conversion rights.
 he Board of Management is authorized, withT
the approval of the Supervisory Board, to exclude
subscription rights in certain cases, which aredetailed in the authorization. The Board of Management will consider other capital measures withstockholders’ subscription rights disapplied in its
decision to disapply stockholders’ subscription
rights when issuing convertible bonds and/or bonds
with warrants and/or income bonds (or combinations of these instruments). The authorization toissue bonds has not yet been utilized.

Authorized Capital I
Pursuant to Section 4, Paragraph 3 of LANXESS AG’s
articles of association, the Annual Stockholders’Meeting on May 24, 2023, authorized the Boardof Management until May 23, 2026, with theapproval of the Supervisory Board, to increase
the capital stock on one or more occasions by
issuing new no-par bearer shares against cash
or contributions in kind up to a total amount of€17,269,260 (Authorized Capital I). Stockholders
are generally entitled to subscription rights when
Authorized Capital I is utilized. However, pursuant
to Section 4, Paragraph 3 of LANXESS AG’s
articles of association and with the approval of theSupervisory Board, the Board of Management can
exclude these subscription rights when, for example,
the com­­­pany’s capital stock is increased against
contributions in kind, particularly for the acquisition of companies. Subscription rights can also be

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excluded if the issue price of the new shares is not
significantly lower than the stock market price at thetime the issue price is fixed and the issued shares
do not exceed 10% of the company’s capital stock.

Authorized Capital II urthermore, pursuant to Section 4, ParagraphF
4 of LANXESS AG’s articles of association, theAnnual Stockholders’ Meeting on May 24, 2023,
authorized the Board of Management until May
23, 2025, with the approval of the Supervisory
Board, to increase the capital stock on one or more
occasions by issuing new no-par bearer sharesagainst cash contributions up to a total amount of€8,634,630 (Authorized Capital II). Stockholders
are generally entitled to subscription rights when
Authorized Capital II is utilized. These rights canbe excluded in certain cases which are defined in
Section 4, Paragraph 4 of the articles of associationof LANXESS AG.
	Any shares issued with subscription rights disapplied on the basis of the aforementioned Authorized
Capitals I and/or II may not, together with suchshares issued or to be issued as part of conditional
capital to service warrants or conversion rights or
obligations, provided the warrants or conversion
rights or obligations were granted or imposed
during the term of the authorization with subscription rights disapplied, exceed 10% of the capitalstock of LANXESS AG at the time the respective
authorization becomes effective.

134

Corporate GovernanceManagement Report o date, neither Authorized Capital I nor AuthorizedT
Capital II has been utilized.
8. T he service contracts between the company
and the members of the Board of Managementof LANXESS AG contain provisions regarding
the potential departure of the members of theBoard of Management in the context of a changeof control due to a takeover. Such agreements,
albeit with different terms, also exist between thecompany and members of the first level of upper
management. In addition, the terms for placing
bonds under the company’s existing debt issuanceprogram may contain a change-of-control clausethat gives bondholders the right to redeem the bondshould certain events occur that affect its rating.
The terms for a private placement with a volumeof €100 million made by LANXESS Finance B.V.
under the debt issuance program in fiscal year
2012 contain a corresponding change-of control
clause. This placement has now been takenover by LANXESS AG. Equally, the terms of thebonds with a volume of €500 million (maturity
2026) issued by LANXESS AG in fiscal year 2016
under the debt issuance program, bonds with avolume of €500 million (maturity 2025) issued
by LANXESS AG in fiscal year 2018, the bonds
with a volume of (i) €500 million (maturity 2027)
and (ii) €600 million (maturity 2029) issued by
LANXESS AG in fiscal year 2021 and the bonds
with a volume of €600 million (maturity 2028)
issued in fiscal year 2022 contain corresponding

Financial Statements

Further Information

change-of-control clauses. The company hasentered into an agreement with a syndicate of banks
concerning a credit facility with a current volume of€1,000 million. This agreement can be ­terminatedwithout notice if another company or person takes
control of more than 50% of LANXESS AG. There arealso change of control clauses in five bilateral agreements for credit lines of €50 million, €100 million,€150 million, €150 million and €200 million
between LANXESS AG and five different banks. A
further agreement for a credit line of €150 million
can be terminated if the aforementioned agreement
for a credit line, currently of €1,000 million, canbe terminated on account of a change of control.
Furthermore, according to agreements between
the company and LANXESS Pension Trust e.V.,
the company is obligated to make considerable
payments to LANXESS Pension Trust e.V. in theevent of a change of control.
9.	The service contracts between the company andthe members of the Board of Management of
LANXESS AG as well as between the company andmembers of the first and second levels of upper
management of LANXESS AG contain compensationagreements applicable in the event of a change ofcontrol, as such change is more particularly describedin the respective contracts.

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REPORT PURSUANT TO­SECTIONS 289F AND 315D OF
THE GERMAN COMMERCIAL
CODE (HGB)The Board of Management and Supervisory Board haveissued the corporate governance declaration pursuant
to Sections 289f and 315d of the German Commercial Code (HGB). This has been made available to thestockholders and can be found atwww.lanxess.com
in the Investors section under Corporate Governance.

REPORT ON FUTURE­PERSPECTIVES, RISKSAND OPPORTUNITIESIn the economic outlook below, we describe our expectations for economic development. Following the reporton future perspectives, we discuss the opportunities andrisks that may result in deviations from our predictions.

ECONOMIC OUTLOOKFiscal year 2023 was primarily characterized by uncertain conditions due to the ongoing war in Ukraine andthe conflict in Israel/Palestine. Although the global
supply chain situation generally improved, this waspartly due to the weak growth of the global economy.

135

Corporate GovernanceManagement Report

Weak demand and customers’ inventory reduction,
which continued throughout large parts of fiscal year
2023 – also in businesses with otherwise stableconsumer products – had noticeable negative effects
on our business. There were also uncertainties arisingfrom continuing populist or protectionist tendencies insome areas and ongoing trade tensions between the
U.S. and China.
We expect the global economy to recover in 2024,
albeit at a low level, driven chiefly by the Asia-Pacificregion. However, the consequences of the loss ofpurchasing power due to price increases in recent years
and the rise in interest rates over this period are likely tocontinue weighing on private consumption and curbing
investment activity at first, before the economy picks
up the pace again later in 2024. We therefore assume
that the demand situation in Europe in particular willremain strained at least in the first half of the year andthat the challenge of excessive energy costs in Germany– compared to the competition – will negatively impact
the chemical industry.
While growth of 4.0% is forecast in the Asia-Pacificregion, we anticipate much lower growth rates for
Europe and the Americas. Overall, we therefore foreseea slight recovery of 2.0% for the global economy in2024. We still see China and India as the two main
drivers here.

Financial Statements

Further Information

We expect slight growth for the global chemicalindustry, primarily driven by the development in
the Asia-Pacific region. For Germany, Verband derChemischen Industrie e.V. (VCI) forecasts a sales
decline in the chemical industry (not including pharmaceuticals) of 5.0% in 2024. For agrochemicals, we
anticipate growth of 3.0% for 2024, while we expect
continued inventory reduction among our customers
especially. In terms of global sales in the ­constructionindustry, we expect to see a further decline of 0.5%
this year as a result of a 2.0% decline in Asia. A
small increase of 0.5% – if at all – is expected for the­automotive industry in 2024. For the food industry,
we expect a slight recovery versus 2023 with growthof 2.0%. We also expect an improvement on 2023 withgrowth of 5.5% in the electrical/electronics industry
and 3.0% in consumer goods.
Expected Growth in 2024
Change vs. prior year
in real terms (%)1)

Grossdomestic
product

Chemicalindustry

Americas

1.50.0

EMEA (incl. Germany)

1.0

1.0

Asia-Pacific

4.0

4.5

World

2.0

3.0

1) Rounded to the nearest 0.5%.
Source: S&P Global Market Intelligence.

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Expected Development of Major Customer Industries in 2024
Auto­motiveAgro­chemicals2)Con­struction

Food

Electrical/
electronics

ConsumerstaplesAmericas

2.0

3.0

1.5

0.0

2.5

0.0

EMEA (incl. Germany)

0.0

2.5

1.0

1.0

3.5

1.5

Asia-Pacific

0.0

3.0

(2.0)

3.5

6.0

5.0

World

0.5

3.0

(0.5)

2.0

5.5

3.0

1) Rounded to the nearest 0.5%.
2) Pesticides and other organic agrochemical products.
Sources: S&P Global Market Intelligence, development in construction costs according to Oxford Economics.

FUTURE PERSPECTIVES
Expected Development of the
LANXESS GroupFor 2024, we expect earnings moderately above thelevel of the multi-crisis-hit previous year, but significantly  
below the average level of preceding years. This is essentially due to the following effects:› We assume that the inventory reduction among ourcustomers is complete, with the exception of the
agrochemicals sector. Although we will continue
to strictly control our current assets, the volume
of inventory reduction that negatively affected ourearnings in 2023 is not expected to repeat itself.
› In addition, we anticipate permanent cost savings
from our FORWARD! action plan amounting
to €90 million in 2024, of which around net€40 million will contribute to earnings, after the136

Further Information

Earnings performance

The following table shows the anticipated developmentof our selling markets.

Change vs. prior year
in real terms (%)1)

Financial Statements

one-time savings in 2023. In total, FORWARD! isexpected to reduce costs by €150 million by theend of 2025.
› We generally expect the environment to remainchallenging. We assume that the demand situation
will continue to be difficult in the first half of the year
and expect a recovery no earlier than the second
half.
For the most important raw materials and energy types,
we anticipate a price level below that of the previous year.
The effects of the war in Ukraine and the conflicts in the
Middle East as well as continuing populist or protectionist
tendencies in some regions and countries remain sourcesof uncertainty.
The earnings forecast relates to the forecast EBITDA pre
exceptionals of the LANXESS Group.

We expect the Consumer Protection segment to perform
at the previous year’s level. The Consumer Protection
segment remained relatively stable in the previous year,
so the recovery is also expected to be less marked than in
our other two segments. The end of the two production
stoppages by suppliers will have a positive impact. On theother hand, we expect a slower recovery in demand in
the agrochemicals industry due to the delayed inventory
reduction among customers in this sector.
For our Specialty Additives segment, we expect businessdevelopment in 2024 to slightly to moderately exceed
the previous year’s level. This improvement will be visible
primarily in the second half of the year, because the firstquarter of the previous year was still at a high level.
We anticipate earnings significantly above the previous
year’s level for our Advanced Intermediates segment in
the 2024 reporting year. This development is likely tobe supported in particular by the fact that the ­inventory
reduction by us and our customers, which had a­significant negative impact on the previous year, will
not be repeated, thus enabling a significant earnings
increase. We assume that Advanced Intermediates willrecord the most visible recovery of all our segments.
In “All other segments,” we expect earnings at theprevious year’s level.
The U.S. dollar will remain the key foreign currency forour businesses.

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Management Report

Against the background of the expected performanceof our segments, we expect that EBITDA pre exceptionals for the full year 2024 will be moderately above
the previous year’s level but still significantly below theaverage level of preceding years. EBITDA pre exceptionals amounted to €512 million in fiscal year 2023.

short-term bank loans, the necessity of which we
decide upon depending on the liquidity situation. We
will continue our efforts aimed at securing long-term
funding as part of a conservative financing policy.

Liquidity situation

In fiscal year 2024, we expect CO2e emissions to be on apar with the previous year, in which emissions amounted
to 1,722 thousand metric tons.

LANXESS will continue to pursue a forward-looking andconservative financial policy in the current year. Witharound €2.3 billion in cash and undrawn credit lines asof the end of 2023, as described under“Financial
position” in this management report, we have a very
comfortable liquidity and financing position. This ensures
our corporate flexibility to implement LANXESS’s
strategy.

Capital expenditures
As in fiscal year 2023, our capital expenditures will be
primarily directed toward the maintenance of existingproduction facilities as well as efficiency improvements
and the expansion of existing plants. We plan total cash
outflows for capital expenditures of around €350 million
in 2024. Up to the reporting date, orders totaling€130 million were issued for this purpose, which canbe paid out of existing liquidity.

Financing measures
LANXESS is in a good position due to the long-term
nature of its financing. No bonds mature in fiscal year
2024. There is always the possibility of borrowing

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Environment and occupational health andsafetyIn fiscal year 2023, the lost time injury frequency rate
(LTIFR: accidents per million hours worked) for accidents
with days lost was 0.6. After prior-year figures of 0.5 incontinuing operations and 0.6 including discontinued
operations, this is another very good figure. Despite every
effort, not all influencing factors can be controlled, andthe LTIFR is difficult to forecast. For fiscal year 2024, weare again striving for an LTIFR less than 1.0.

Expected Earnings Position of­L ANXESS AG
In fiscal year 2024, we expect the annual financial statements of LANXESS AG to show a net result at the previous
year’s level. The net result in the reporting period wasshaped primarily by negative income from investments
and the expenses as part of the FORWARD! action plan.
The negative income from investments in the reporting
period is mainly due to the general economic development, but also includes positive earnings contributions
from subsidiaries with the opposite effect. In addition to the

Financial Statements

Further Information

administration expenses the company incurs in performing
its tasks as a strategic management holding company, net
income is essentially dependent on the financial result,especially the net interest position and the balance ofincome and losses from investments in affiliated companies. The balance of income and losses from investments
in affiliated companies and the corresponding ability of
LANXESS AG to pay a dividend will significantly dependon the profit transfers and dividends paid by the othercompanies of the LANXESS Group.

Dividend Policy
We aim to pay a stable or increased dividend each year.
For each year’s proposal, we will take certain factors, suchas the economic situation and our financial leverage, into
consideration. We will however always pay a dividend.
Given the weak business performance and in order tofurther lower our net financial debt, we plan to reducethe dividend this year. At the Annual Stockholders’Meeting on May 24, 2024, the Board of Management
and Supervisory Board will therefore propose a dividendof €0.10 per share for fiscal year 2023.

Summary of the Group’s Projected­Performance
Due to the factors described, we expect our businessto perform moderately better than in 2023, which wasaffected by crises, but not yet return to the average levelof preceding years. At the same time, we still anticipatea challenging environment and only slightly higher
demand.

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We will be continuing the strategic realignment of theGroup in 2024 with the aim of achieving a more stable
and less cyclical business profile. Our FORWARD!
action plan will play a major role here. Another aspect
will be harnessing synergies from the acquisitions
made. LANXESS will also keep working continuously on
optimizing its production platform and pursuing projects
geared toward organic growth.

OPPORTUNITY AND RISK REPORT
Opportunity and Risk Management
SystemOur success is significantly dependent on identifying
opportunities and risks in our business activities andactively managing them. The goal of the management
system is to safeguard the company’s existence for thelong term and ensure its successful and sustainableongoing development by identifying opportunities andrisks at an early stage and, depending on their nature,
appropriately considering these in strategic and operational decisions. Opportunities and risks are understoodas possible future developments or events that may resultin either positive or negative deviations from forecasts
or business objectives.
Our management system is based both on internalorganizational workflows that are managed by way ofcontrol and monitoring mechanisms and on early warning
systems that are used to closely observe changes inexternal conditions and systematically implement theappropriate measures. This approach applies equallyto opportunities and risks.

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Structural basis
The principles of our opportunity and risk management
system are set forth in a Group directive. The management system, which uses the COSO (Committee ofSponsoring Organizations of the Treadway Commission)model as the enterprise risk management framework,
comprises many different elements that are incorporated
into business processes via the company’s organizational
structure, workflows, planning, reporting, communication
systems, as well as a set of detailed management policies
and technical standards.
The system is based on an integration concept. In otherwords, the early identification of opportunities and risks
is an integral part of the management system and not
the object of a separate organizational structure. The
management of opportunities and risks is therefore a

Financial Statements

Further Information

primary duty of the heads of the business units andGroup functions, as well as the country managers. This
is why our opportunity and risk management is basedon clearly defined business processes, the precise
assignment of responsibilities, and reporting systems that
ensure the timely provision of the information requiredfor decision-making for the Board of Management andthe subordinate management levels.

Roles and responsibilities
The organizational structure of our opportunity and risk
management system is illustrated below using the threelines of defense model.
Our operating units are the first line of defense. These
include our business units, which conduct operations
with global profit responsibility. Group functions support

Roles and Responsibilities in the Opportunity and Risk Management System – Three Lines of Defense Model
Supervisory Board/Audit Committee
Board of Management
First line of defense

Second line of defense

Risk management and internal
control system at operating levels:• Corporate Risk Committee• Compliance management system• Other management systems• Business units• Group functions• Countries

Operating risk management

Controlling & monitoring

Third line of defense• Corporate Audit

Independent audit

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the business units by providing financial, legal, technicaland other centralized services. Complementing thisglobal alignment of the business units and Groupfunctions, the country organizations ensure the required
proximity to markets and the necessary organizational
infrastructure. Since opportunities and risks primarily
arise in the operating business, they must be identified
and controlled there as part of the internal control system(ICS) and the risk management system.
In line with this division of duties, we have assigned
responsibilities for the following:› Identification and assessment of opportunities andrisks› Implementation of control measures (measurestaken to exploit or enhance opportunities and to
avoid or minimize risks)› Monitoring the development of opportunities andrisks (e.g. on the basis of performance indicators
and, perhaps also, early warning indicators)› Communication of the key opportunities and risks to
the management committees of the business units
and Group functions
The Corporate Risk Committee, commissioned by the
Board of Management and headed by the Chief Financial
Officer, is responsible for the structure and implementation of the Group-wide risk management process as partof the second line of defense. It is made up of representatives of selected Group functions and analyzes theprincipal opportunities and risks and their developmentfrom the viewpoint of the entire company. It examines

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existing measures to counter risks, initiates additional
measures as required and instigates further analyses ofindividual opportunities and risks if necessary.
The Corporate Risk Committee has two subcommittees –the Financial Risk Committee and the Information Security
Committee – that deal with specific risk areas in orderto enable a fast and flexible response to changing situations and their impacts. Accordingly, the Financial Risk
Committee, headed by the Chief Finance Officer andmade up of representatives of the Treasury & Investor
Relations Group function, manages transactions centrally,
particularly for the transfer of financial but also operatingrisk (hedging transactions or insurance). On the Information Security Committee, headed by the Chief Information
Security Officer (CISO) and made up of representatives
from the Information Technology (IT) Group function, theProduction, Technology, Safety and Environment (PTSE)
Group function for Operational Technology (OT), andthe Legal & Compliance Group function, as well as from
Data Security, protection concepts are defined across allareas on the basis of risks.
The Corporate Controlling Group function coordinates
the Group-wide risk management process for the
Corporate Risk Committee and appoints a Group Risk
Management Coordinator for this purpose. This coordinator is responsible for collecting and aggregating key
opportunity and risk information across the Group. The
short-, medium- and long-term opportunities and risks
are identified twice a year in the context of the intra-year
forecasting process and the budget and planning process.

Financial Statements

Further Information

The Accounting Group function coordinates the Groupwide ICS self-assessment process, which is carried out
once a year, for the Corporate Risk Committee and as
part of the internal control system. The Accounting Groupfunction also appoints an Internal Control Coordinator
who is responsible for administering and coordinating
the entire process, among other roles. For additional
information, please see“Internal control system.”
The Board of Management has established a central
Compliance function for the LANXESS Group, which is
exercised by the Group Compliance Officer. In particular,
the Group Compliance Officer is responsible for professional support for the global compliance organization,
which consists of regional Compliance Officers and a
network of local Compliance Officers for the individual
countries. Further tasks include performing compliancerisk analyses, including providing advice and support
to the areas of the company originally responsible forcompliance, and monitoring and continuously improving
the compliance management system (CMS). This system
is a key component of the overarching risk management system at LANXESS and comprises all specificorganizational measures and regulations that serve to
reduce compliance risks. By way of the CMS, individual
misconduct is intended to be prevented at an early stage(prevention) or identified in time (identification) and
met with appropriate sanctions (reaction). The Group
Compliance Officer reports to the Board of Managementon the compliance situation in the LANXESS Group on aregular basis, or immediately in the event that he or she
becomes aware of significant compliance issues requiring
immediate reporting to the Board of Management.

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The third line of defense is provided by the Corporate
Audit Department within the Legal & Compliance Groupfunction, which is responsible for conducting independent
audits to assess the appropriateness and effectiveness ofoperating risk management, the internal control system set
up by the operating areas and risk management and the
ICS self-assessment process. A risk-based annual audit
plan is drawn up for this purpose. All findings are reported
to the Board of Management. Further information can befound under“Monitoring of risk management system
and internal control system.”
The Board of Management bears overall responsibility forthe appropriateness and effectiveness of opportunity andrisk management and reports to the Audit Committee or
Supervisory Board on this. At the same time, the Boardof Management delegates certain tasks and authorities
to lower levels of management and to central special
functions (e.g. the Corporate Risk Committee).

Reporting and assessing risks
and opportunities
Opportunity and risk management is integrated into theplanning and forecasting process and identifies opportunities and risks as potential deviations from planned
or forecast EBITDA pre exceptionals, from cash flow orfrom Group net income.
All opportunities and risks must be reported if theiranticipated impact is more than €1 million following
the implementation of measures. In addition, those risks
must be reported which have an anticipated impact

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Corporate GovernanceManagement Reportthat was reduced by more than €10 million through theimplementation of measures. These minimum thresholds
guarantee that the information gathered about opportunities and risks is comprehensive and that the collectionof information is not just limited to material risks or risks
that could jeopardize the future of the company as agoing concern. Only then, the Corporate ControllingGroup function centrally determines the top opportunities
and risks.
There is also provision for immediate internal reportingon specific risk issues such as unexpected operational
events with an impact of more than €5 million after the
implementation of countermeasures.
The reported opportunities and risks are managed
by means of risk management software and regularly
analyzed for the Corporate Risk Committee, the Boardof Management and the Supervisory Board. This ensuresthat when new opportunities and risks arise or when
existing ones change substantially, the necessary information can be communicated promptly to the Board ofManagement and therefore also be specifically integrated
into the general management of the company.
Depending on the type of opportunity or risk, different
calculation methods are applied in their assessment.
Distribution opportunities and risks are identified on thebasis of sensitivities in planning parameters (exchange
rates, raw material prices and energy prices). Changes
in these variables may result in either positive or negative
deviations from planned or forecast figures.

Financial Statements

Further Information

Event-based opportunities and risks (such as the failureof a supplier or the occurrence of an insured event) thatwould only impact earnings if they actually occurred are
evaluated on the basis of the expected probability of
their occurrence and effect on EBITDA pre exceptionals,
Group net income or cash flow.
The overall risk position is determined by aggregating
all opportunities and risks. To assess the risk-bearing
capacity, we compare it with the liquidity reserve asrisk coverage potential. In addition, we analyze potential
risks to the company’s continued existence due to overindebtedness. This is done by comparing the overall risk
position with Group equity.

Internal control system
The main goals of the internal control system are toensure the effectiveness and efficiency of the company’s
processes and compliance with applicable legal regulations. This also includes sustainability aspects, which
are continuously developed on the basis of regulatory
requirements. To this end, clear organizational, control
and monitoring structures have been established. Partof the standardized, structured ICS self-assessment
process performed once a year includes making statements on the appropriateness and effectiveness of theinternal control system for what the Group considers
material organizational units or business processes. This
self-assessment process is reviewed and modified on an
ongoing basis in terms of efficiency and effectiveness.

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The distinctive features of the chemical industry and therisk management tools we regularly use in this regard
are taken into account. This also includes the (Group)
accounting process in its narrower sense, the aforementioned structured budget and forecasting process, andextensive contract management.
The IT Group function ensures the integrity, confidentiality and availability of data and information and thetrouble-free operation of systems using various security
and monitoring tools and access restriction and authorization systems.
However, the effectiveness and reliability of the internal
control system can be restricted by discretionary
decisions, criminal acts, faulty controls or other circumstances. Thus, even if the system components used areapplied Group-wide, the correct and timely recording ofissues cannot be guaranteed with full assurance.
The internal control system we use is based on generally accepted standards (COSO model). There were nomaterial changes to this system during the reporting
period.

(Group) Accounting Aspects of the­Internal Control System
The aspects of the internal control system relating to the(Group) accounting process include the principles, procedures and measures required to ensure the effectiveness,
efficiency and propriety of the company’s accounting,and compliance with applicable legal regulations.

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The Accounting Group function, which reports to theChief Financial Officer, is responsible for the (Group)
accounting process and therefore for preparing theannual financial statements of LANXESS AG and theconsolidated financial statements of the LANXESSGroup. It is also responsible for ensuring the uniform
preparation of the financial statements of the subsidiaries
that are included in the consolidated financial statements.
The Board of Management prepares the annual financial
statements and the consolidated financial statements,
which are then forwarded to the Supervisory Board’s
Audit Committee without delay. Upon recommendationby the Audit Committee, the annual financial statements and the consolidated financial statements are
adopted and approved by the Supervisory Board at its
financial statements meeting. The Supervisory Board,and especially its Audit Committee, deals with major
questions relating to LANXESS’s accounting, opportunity
and risk management, the audit mandate and the areasof focus for the auditor’s audit of the annual financial
statements.
Quarterly statements are prepared for the first and third
quarters. The condensed consolidated interim financial
statements as of June 30 that are also prepared arereviewed, while the annual financial statements and theconsolidated financial statements are subjected to a fullaudit by the auditor of the company’s annual financial
statements and consolidated financial statements.
Our accounting in compliance with the German
Commercial Code is based on a structured process withFinancial Statements

Further Information

appropriate organizational structures and workflows,
including the related working instructions. In addition
to the segregation of duties, the dual-control principle
and continual plausibility testing serve as fundamental
monitoring tools during the financial statement preparation
process. On the IT side, the accounting process is supplemented by an integrated IT system that is based largely
on off-the-shelf software and is protected by security
measures against unauthorized access. The correctness of
the automatically generated postings and the master datarequired for them is regularly reviewed. Manual postings
are based on a systematic voucher system, documented
to the necessary extent and verified downstream.
The foundation for uniform and IFRS-compliant consolidated financial reporting at LANXESS is the Group
Financial Statements Guideline. This governs the way
the provisions of the International Financial ReportingStandards (IFRS) applicable to the Group are appliedby the subsidiaries as reporting entities. Moreover,the guideline also defines the chart of accounts thatis binding throughout the Group. On the IT side, theguideline is supplemented by a uniform, Group-wide
delivery and consolidation system that is based largely
on off-the-shelf software and is protected by security
measures against unauthorized access.
By controlling and monitoring LANXESS’s (Group)
accounting process, we ensure that generally accepted
accounting practices in line with the applicable laws andstandards are applied and guarantee reliable financial
reporting.

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Preparation of the consolidated financial statements
is based on a detailed process. A fixed component isregular reviews of the correctness and completeness ofthe scope of consolidation. The principle of the segregation of duties as expressed in structured authorization
and approval procedures and the dual-control principle
as well as continual plausibility testing on data is applied
end-to-end throughout the preparation and consolidation
process.
For the consolidated financial statements, all subsidiaries
subject to reporting requirements transmit their Group
reporting data using the above-mentioned consolidation
system. Validation rules integrated into the system ensure
on delivery that the data reported by the subsidiaries
are consistent. The accounting departments of the sub­­­
sidiaries are responsible for ensuring the correctness of
the reported data content, which is also tested by the
Accounting Group function. To this end, the department
evaluates standardized reports in which the companies
explain material facts relevant to financial reporting.
After the process-based controls have been applied,consolidation including currency translation is carriedout in the same system, without additional interfaces,
utilizing both automated and manual procedures. The
correctness of the automated consolidation steps
and of the master data necessary for this purpose isreviewed regularly. Consolidation information that must
be entered manually is posted separately, documented
to the extent required and verified downstream. This issupplemented by validation rules that are integrated into
the system. A regular exchange of information with otherGroup functions and operating business units assists thefinancial reporting process.

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Financial Statements

Further Information

Monitoring the Opportunity and
Risk Management System

Opportunities and Risks of
Future Development

LANXESS’s Corporate Audit Department within the
Legal & Compliance Group function oversees whether
the internal control system works and whether organizational safeguards are being observed. The planningof audits (selection of audit subjects) and the audit
methods applied are correspondingly aligned with risks.
To assess the effectiveness and appropriateness of theinternal control system, an annual self-assessment is also
carried out in major Group companies, operating units
and Group functions. The Supervisory Board exercises
control functions, including regular monitoring of theefficiency of the management systems described aboveby the full Supervisory Board and by its Audit Committee.
The Audit Committee reviews reports about the activities and findings of the Compliance function and the
Corporate Audit Department as well as the status of
the risk management and internal control systems. In
addition, the early warning system is evaluated by theexternal auditor as part of the audit of the consolidated
and annual financial statements.

Full identification of the LANXESS Group’s opportunities
and risks is performed on the basis of a catalog of categories, which are summarized in the eight groups below:

There are no indications that the internal control system orrisk management system is not appropriate or effective.1)

1) T his disclosure constitutes information extraneous to the management
report, which was not subject to the audit by PricewaterhouseCoopers
GmbH Wirtschaftsprüfungsgesellschaft.

Categories
Procurement markets
Human resources
Production and technology
Safety and the environment
IT and information security
Business environment
Finance
Legal environment and compliance

Subsequent reporting in respect of the main categories
is generally based on a planning horizon of one year.

Procurement markets
On the procurement side, the principal opportunities
and risks lie in the high volatility of raw material andenergy prices. An increase or decrease in the price ofthe materials we use directly results in higher or lower
production costs. If prices decrease, write-downs
may have to be recognized on inventories. In addition,changes in raw material prices result in higher or lower
selling prices – either immediately or after a delay. We
mitigate situations like this by following a sensible inventory and procurement policy. In order to avoid supply
bottlenecks, we have met large parts of the company’s
raw material needs by way of long-term supply contracts
and contracts containing price escalation clauses. On the
selling side, equivalent agreements are in place. We also

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have the option of hedging this risk via derivatives transactions if liquid futures markets are available for hedging
raw material and energy price risks. Further information
can be found in the “Finance” section of this opportunity
and risk report. Additionally, we are constantly looking
for ways to use our resources more efficiently so that we
can offset higher costs by raising productivity. Unfulfilledacceptance obligations may result in unscheduled costs
due to fines. To guard against possible supply bottlenecks
due to factors such as the failure of a supplier or of an
upstream operation at a networked site, we pursue anappropriate inventory strategy and line up alternative
sources of supply. Failures can be caused by factors
such as inadequate maintenance or insolvencies at the
supplier end. We endeavor to avoid supply bottlenecks
or reliance on individual suppliers using strategies like
multiple sourcing. If we were to be forced to utilize
alternative sources of supply in the context of contingency plans, this could result in, for example, higher
procurement prices or additional transportation costs.
Logistics, both of the goods and services that wepurchase and of those that we provide or render, issubject to increasing complexity. The growing pressure
on global supply chains and the resulting logisticalbottlenecks represent an increasing risk. We counter
these challenges with the coordinated management

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the quality of the supplied raw materials constitutes arisk factor that may negatively affect the quality of our
products. Detailed product specifications issued by us
define the properties to be fulfilled by suppliers. They
are checked via ongoing goods-in analyses.

Human resources
We see the increasing digitalization in HR as an opportunity. In the future, we will be able to provide moretargeted support for our corporate strategy here andrespond to HR trends more quickly and effectively bylaunching state-of-the-art products and solutions. Global,
user-friendly systems and standardized, digitalized
and transparent processes improve quality, service
and customer orientation and ultimately increase ourcompetitiveness. We expect that the digitalizationand standardization of processes will also reduce theemployees’ workload, which may positively influence
their motivation and health and thus ultimately also
increase productivity and reduce personnel expenses.
The risk of walkouts in connection with negotiations
concerning future collective pay agreements cannot
be ruled out. We also face increases in our personnel
expenses because of future wage increases. Such an

Financial Statements

Further Information

increase in the cost of human resources can be detrimental to earnings. We counter this risk by fostering
open communication with our employees and theirrepresentatives in a culture of active labor relations.
Particularly with regard to the challenges in the working
world from globalization and increasing digitalization,
we make continuous use of existing dialog platforms
such as the European Forum, which brings together theworks councils in Europe. We also actively seek dialog
with the representatives of our employees, the tradeunions and other interest groups in the other regions inwhich we operate, particularly concerning the acquisition
and integration of companies. We use legally sound andproven employment contracts and ensure legally securecollective agreements. When making acquisitions, wegive high priority to professional project management,
which encompasses detailed communication with
employees, fair consolidation processes and appropriate
severance packages. In the event of potential legal action,
the HR department monitors the situation very closely incoordination with the Legal and Communication departments to enable appropriate measures to be taken at
an early stage. With the above measures relating to thecorporate culture and attractive offers as an employer,
we promote a respectful relationship between managers
and (former) employees and thus try to avert the risk of
walkouts or lawsuits.

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Our employees’ expert knowledge of internal processes
and issues relating to their areas of specialization is a
critical factor in the efficiency of our business operations.
To mitigate the risk of a manpower shortage on the one
hand and a loss of knowledge on the other hand, we help
our employees to find an improved work-life balance aswell as offer attractive remuneration models, challenging
tasks and international career opportunities. In addition,
we deal with structured succession planning at annual
HR development conferences. With our global, crossdivisional and cross-hierarchical talent programs, we
retain particularly high-performing employees within
our company and can identify suitable successors for
key positions at an early stage. In order to make theimmense knowledge of our older employees available
to subsequent generations, we introduced a knowledgetransfer program in 2021. It aims to identify important
departing knowledge carriers at an early stage, systematically record their often implicit knowledge, and ensure
its structured transfer to subsequent generations – inboth analog and digital format. The knowledge transfer
program comprises various measures such as expert
debriefings, learning tandems and a digital, plant-specificknowledge database. This database has been introduced
at four LANXESS plants. It is available to all employeesof these plants as an intuitive reference work.

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We are increasingly seeing the risk of a shortage of skilledworkers in various fields. In this future, this risk could be
exacerbated by the FORWARD! action plan, because wemight appear less attractive as an employer to potential
applicants. We are countering this risk by strengthening
our recruitment organization, standardizing sourcing
processes and investing in an attractive employer brand.
We position our company as an attractive employer andseek early contact with highly talented young people
at events and conferences around the world, andincreasingly on social media. We cooperate closelywith research institutes, universities, high schools andpublic institutions. We provide students in Germany,
where we have the largest headcount, with both financial
and expert support with the Germany scholarship. In
addition, regular HR development conferences help
us to hone in-house skills. In addition, we continue toinvest in the next generation of employees, either with aconsiderable number of training opportunities in various
areas in Germany or through internship programs or our
corporate trainee program, which is well established interms of fostering upcoming management talents.
In terms of demographic change and the associatedaging of the population, along with a shortage of
qualified specialist employees, there is also the risk ofhealth-­related absence, outdated knowledge or lossof k­ nowledge. The loss of expert knowledge could be
exacerbated by the departure of experienced employees
as part of the FORWARD! action plan. In order toFinancial Statements

Further Information

counter the challenges of demographic change in a
structured way, we set up an extensive demographic
program. A whole host of initiatives have been initiatedand implemented since this program was launched. In
Germany, for example, additional training courses havebeen developed, workplace reintegration programs havebeen stepped up (reintegration after illness), workplace
healthcare offerings have been continuously expanded,
and working has been made more flexible. Our strategic
HR planning process also enables us to identify staff
shortages at an early stage and instigate appropriate
measures. In addition, we have been investing in our own
apprenticeship and management trainee programs foryears in order to cover our requirements for specialist
staff chiefly from our own ranks in the future. In thecontext of knowledge ­management, we are also stepping
up our efforts for successful knowledge transfer and tokeep crucial know-how within the company.
We see an opportunity in our engagement in the fieldof diversity & inclusion (D&I). We assume that this will
have a positive influence both on our innovation andearnings potential and on our attractiveness as an
employer. Numerous studies point to the positive effects
of a diverse, inclusive corporate culture. We also see D&I
as the key to an expanded talent pool and increased
employee engagement. This latter factor can also havea positive impact on employee loyalty and thus also on
the voluntary turnover rate. We therefore also counterthe above risks with our D&I strategy.

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Production and technology
A lack of plant availability due to disruptions can makeit impossible for us to meet production targets andadequately service demand, resulting in a loss of marginalincome. We use a comprehensive range of measures tocounter this scenario. These include proactive facility
maintenance, systematic training of our employees
and regular audits to analyze weak points. Systematic
safety appraisals and risk assessments also contributeto improving plant and process safety. Implementation
and application of the various measures are subject to
global compliance checks. We also counter the risk of
production stoppages by manufacturing certain products
at various sites worldwide.

Corporate GovernanceManagement Reportbusiness units. After review by an Investment Committee
set up for this purpose, the information is presented to
the Board of Management for a decision. By following
this procedure, we ensure that investments are in linewith our corporate strategy and satisfy our profitability
and security requirements.
Sales and earnings effects expected from our investments and from acquisitions completed by the reporting
date are already considered. These targeted investments
may also generate further operational opportunities
because they enable us to unlock new potential andimprove our positioning in key markets.

Safety and the environment
Unlocking and exploiting operational opportunities is
an important aspect of our entrepreneurial activities.
We are committed to using existing products andnew solutions to advance our sustainable growth andsustainably strengthen our position in global markets.
Investing in new plants as well as expanding the capacities and increasing the productivity of existing ones are
key elements in these efforts. The anticipated effects
are taken into account in our planning or are reported
as opportunities. In principle, we expect investments
to yield benefits, but they are also coupled with risks.
For example, the success of our investments depends
partially on energy costs and subsidy programs in various
countries and how these are expected to develop. The
preparatory work for investments that exceed a specified
significance threshold is the responsibility of the relevant

145

Although LANXESS applies high technical and safety
standards to the construction, operation and maintenance of production facilities, interruptions in operations – including those due to external factors suchas natural disasters or terrorism – cannot be ruled out
entirely. These could lead to fires and explosions, therelease of materials hazardous to health or accidents inwhich people, property or the environment are harmed.
In addition to systematically monitoring compliance withquality standards in order to avoid such stoppages andaccidents, we are also insured against the resulting
damage to the extent usual in the industry. In addition,risk engineering professionals commissioned by the
insurance companies perform regular inspections of oursites. To reflect the high importance of employee and site
safety for LANXESS, the lost time injury frequency rate

Financial Statements

Further Information(LTIFR: accidents per million hours worked) for accidents
with days lost is currently the non-financial performance
criterion for the short-term variable compensation of theBoard of Management and managers at the level below
the Board of Management.
Our product portfolio includes substances that areclassified as hazardous to health. To prevent possible
harm to health, we systematically test the propertiesof our products and draw our customers’ attention to
the risks associated with their use in the context of our
Responsible Care® activities. We also carry productliability insurance that is customary in our industry.
In line with our forward-looking approach, productmonitoring enables us to identify and evaluate potential
hazards associated with our product portfolio and initiate
suitable measures if applicable.
Regulatory measures may lead to the tightening of safety,
quality and environmental regulations and standards in
different areas. These may result in higher costs, production bans and liability risks. Particularly noteworthy in thisregard is compliance with the E.U. Regulation concerning
the Registration, Evaluation, Authorization and Restrictionof Chemicals (REACH). As well as direct costs that could
arise due to additional measures necessary to comply
with these standards, market structures could change toour disadvantage as a result of a shift by suppliers andcustomers to regions outside Europe. Additional requirements imposed by energy and environmental policy

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such as the new emissions trading regulations, newenvironmental taxes, the redistribution of costs associated with the transition to green energy, rising network
charges and the costs of ensuring energy security on
account of the war in Ukraine could result in higher
costs and in some cases substantial disadvantages
in international competition. With a view to mitigating
this risk, we engage in active energy management to
reduce the consumption of energy and secure energy
supply at competitive prices. We are also discussing the
economic consequences of increasing energy prices
with the authorities and government – either directly orin cooperation with other energy-intensive companies
via industry organizations.
LANXESS was and is responsible for numerous sites atwhich chemicals have been produced for periods thatin some cases exceed 150 years. This responsibility
also extends to waste disposal facilities. The possibility
cannot be ruled out that ground pollution occurred
during these periods that has not been identified to date.
We are committed to the Responsible Care® initiativeand pursue active environmental management andproactive environmental protection management. This
includes constant monitoring and testing of the soil,
groundwater and air as well as of various emissions. We
have set up sufficient provisions for necessary measuresfor containment or remediation in areas with identified
contamination. Additional information on our environmental provisions can be found in
Note [16] “Other
non-current and current provisions,” to the consolidated
financial statements.

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In LANXESS risk management, pandemic risks areallocated to safety and environmental risks. If they occur,
pandemic risks are comprehensively addressed via theactivation of appropriate contingency plans and in accordance with the regulations and practices established in
the last few years.

IT and information security
Our IT systems are part of the value chain and support our
global business activities with standardized processes.
We aim to provide efficient, resilient and scalable IT
services on the basis of standardized processes. We
support this by developing a uniform, integrated systemarchitecture and investing in the expansion and modernization of our IT services worldwide.
The handling of information assets, and particularly
the operation and use of IT systems, entails risks. For
example, networks or systems may fail, or data and information may be misused, falsified or destroyed becauseof operator and programming errors or external factors.
In particular, we are observing a growing threat to our
IT services resulting from outside attack (cyber risks).
All of this may lead to serious business interruptions,
reputational damage or the violation of laws such as theGeneral Data Protection Regulation (GDPR).
For this reason, we invest in measures to safeguard
information assets. Various security and monitoring
tools and access restriction and authorization systems
are used to support the integrity, confidentiality andavailability of data and information and the trouble-freeFinancial Statements

Further Information

operation of systems. Cyber risks identified are evaluatedand documented as part of corporate risk management,
including the measures planned and already in place. The
appropriateness and implementation of the preventive
measures is reviewed on an ongoing basis.
To support and constantly improve the measures,
LANXESS has established a Chief Information Security
Officer function. This function is responsible for the
implemented information security management system(ISMS), which defines security measures for IT, OT andinformation security.
The central ISMS committee is the Information Security
Committee (ISC), where the necessary decisions on
implementing measures are made across all areas on
the basis of risks – with the particular involvement of theIT, PTSE for OT and Legal & Compliance Group functions.
The data protection organization is also represented on
the ISC, with the aim of ensuring the implementation of
the necessary technical and organizational measures. ISC
representatives report to the Corporate Risk Committee
on the current cyber risk situation twice a year.
In addition to this central committee, a separate security
organization has also been established in each of theIT and PTSE Group functions, which helps define andimplement the protection concepts on the ISC. All
business units and Group functions have each appointed
information security coordinators who support the implementation of the measures in their units.

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As a result of the restructuring of IT that was planned in
2021 and took place at the beginning of 2022, cybersecurity has gained further significance and was includedin the IT strategy’s strategic goals. Our cyber security
experts regularly talk to other companies, associations
and specialized service providers to identify risks at an
early stage and take effective countermeasures.
Guidelines on handling information assets securely anddefining security-relevant processes have been implemented and communicated within the company. They
are based on the requirements of the internationallyrecognized standard ISO/IEC 27001.
We train the users of our IT systems on IT risks, appropriate conduct and preventive measures. We raise awareness of current issues surrounding IT security among our
employees on an ad hoc basis.
The LANXESS Group’s service providers demonstrate an
appropriate security level by way of recognized security
certificates, and their activities are regularly monitored
through defined service level agreements. To protect
against cyber risks, LANXESS has also concluded a cyber
insurance policy.

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Business environment
Our company is inherently exposed to general economic
developments and to political and geopolitical changes
in the countries and regions in which we operate. The
existing geopolitical conflicts between the U.S. andChina are the main source of uncertainty. We also see
the unchanged global tendency toward protectionist
measures, which would also impact the chemical industry
in particular, as a medium-term risk to growth andstability. The value chains in the chemical industry arehighly interconnected and on a global scale. Increased
protectionism would have a negative impact on growth.
Regional differences in economic performance and inflation, government aid programs and energy costs, as wellas the associated demand trends, can affect the Group’s
pricing and sales potential in its various geographicalmarkets, with corresponding positive or negative effects
on its earnings. Our global presence, which we arecontinuing to expand in growth markets, enables us
to participate in favorable regional developments and,at the same time, reduce our dependence on certain
regions. This approach is discussed in further detail inthe“Strategy” section of this management report.
The volatility and cyclicality that are typical of the
global chemical markets and their dependence on

Financial Statements

Further Information

developments in customer industries harbor uncertainties for our business. Additional and unplanned sales
opportunities may arise through access to new markets
or the acquisition of new customers. In the long term,
for example, we expect our value chains in the chemicalindustry (phosphorous, fluorine, iron) to benefit fromincreasing demand for electric vehicles and the lithium
batteries these require. In addition to being subject tothese demand-side market influences, our earning power
can be impacted by structural changes in markets, suchas the exit of existing competitors or the entry of newones and the availability of additional capacity, regional
shifts, the migration of customers to countries with lower
costs, and product substitution or market consolidation
trends in some sectors. Specific examples of such developments remain the environment-driven consolidation of
the Chinese chemical industry, the exodus of chemical
production from China to Southeast Asia (e.g. Vietnam)
as a result of the trade war with the U.S. and the Inflation
Reduction Act designed to bolster U.S. industry. We
counter these trends by systematically monitoring themarket and the competition and continuously adjusting
our product portfolio accordingly, sharpening its focus
and aligning our offering with innovative, sustainable
customer segments, which will enable us to operate
successfully in the long term.

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Corporate GovernanceManagement Report

FinanceFinancial opportunities and risks are recorded andmanaged centrally. Chief among these are the following:
Financial Opportunities and Risks
Price changes

Liquidity and­refinancing

Counter­party risks

Capital investments

Equity investments

Currencies

Availabilityof cashCustomers

Investments inpension assets

Interest rates

Access to multi- and­bilateral capital
markets

Banks

Earnings contributions
from investments
accounted for using
the equity method

Raw materials
Energies

At regular strategy meetings of the Financial Risk
Committee, there are reports on the outcome of financial
risk management, the current risk and further action.
The aim of financial risk management is to identify andevaluate risks so that their impact can be controlled and,if necessary, limited.
Price changes
Currencies
Since the LANXESS Group undertakes transactions invarious currencies, it is exposed to fluctuations in therelative value of these currencies. Associated risks are
partly hedged insofar as they are cash-effective. Fixedexchange rates were used in our planning for fiscal year
2024. The development of the U.S. dollar against the148

euro is of particular relevance. An appreciation of the
U.S. dollar compared with the exchange rate used inplanning would have a positive effect on our planned
EBITDA pre exceptionals (and vice versa).
Currency risks from potential declines in the value offinancial instruments due to exchange rate fluctuations(transaction risks) arise mainly when receivables andpayables are denominated in a currency other than thecompany’s functional currency. Such risks are always
fully hedged. Likewise, currency risks arising fromfinancial transactions, including the interest component,
are generally fully hedged through forward exchange
contracts. In the short term, therefore, the appreciation
or depreciation of the euro against other major currencies

Financial Statements

Further Information

can have no material impact on future cash flows. In
addition, translation risks exist from converting entries in
the financial statements from local currencies into euros
for inclusion in the LANXESS consolidated financial
statements. Unlike the effects of exchange rate fluctuations in the case of the transaction risk, the translation
risk has no impact on the company’s cash flows in local
currencies. In addition, material assets and liabilities inlocal currencies are subject to a long term currency risk,
which is regularly estimated and evaluated. However,currency hedging is only undertaken if LANXESS is
considering withdrawal from certain businesses andintends to repatriate the funds released as a result.
The opportunities and risks relating to operating activities
are systematically monitored and analyzed. To this end,
both sales and costs are planned in foreign currencies. In
the long term, exchange rate fluctuations could adversely
affect future cash flows should the LANXESS Groupnot be able to counter them, for example, by pricing its
products in the respective local currencies. This risk isminimized by partial hedging with derivative financial
instruments. Hedging is performed in line with principles
determined by the Board of Management and is subject
to continuous monitoring. We have already enteredinto hedging transactions for 2024, 2025 and 2026 tomitigate the effects of currency fluctuations.

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Interest rates
Market interest rate movements can cause fluctuationsin the fair value of a financial instrument. They affect bothfinancial assets and financial liabilities.
Since the majority of financial liabilities were enteredinto at fixed interest rates, changes in interest rates in
the coming years will have only a limited impact on the
LANXESS Group.
In the context of long-term planning, LANXESS regularly
decides on refinancing to cover the forecast liquidity
requirement. In the case of planned refinancing,
LANXESS decides on the use of hedges to limit interest
rate risks as needed.
Raw materials/energy
In the course of its business operations, the LANXESSGroup is exposed to changes in the market prices forenergy and raw materials. As a rule, these changes are
passed on to customers. Where certain market-pricerisks for energy and raw materials cannot be passed on
to customers in their entirety, they may be hedged ona case-by-case basis by forward commodity contracts
in order to reduce the volatility of cash flows. In fiscal
year 2023, LANXESS began in particular to hedge
market price risks for gas as an energy source. As of thereporting date, LANXESS had hedges for a portion of the
procurement portfolio in Germany up to 2028 as well asa small number of other forward commodity contracts.
The Board of Management of LANXESS AG has also

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Financial Statements

Further Information

resolved to implement a structured hedging concept toreduce energy price volatility in fiscal year 2024, similar
to the existing currency hedging concept.

be sold at any time. Accordingly, the LANXESS Group
has a solid liquidity position based on a broad range offinancing instruments.

Liquidity and refinancing
We ensure our access to the capital markets and oursolvency through a conservative financing policy anda target capital structure that is largely based on theratio systems used by leading rating agencies. Ourconservative financing policy takes into account the riskof a change to our rating and the associated effects onfinancial risk management, even though LANXESS has
no direct influence on the assessments by independent
rating agencies.

Counterparty risks
Counterparty risks (credit risks) arise from trade relationships with customers and dealings with banks and otherfinancial partners, especially with regard to the investment business and financial instrument transactions.

Our main liquidity reserve is a €1 billion syndicatedcredit facility, signed in December 2019, which remained
undrawn on the reporting date. In May 2021 and
September 2022, the original term of the credit facility
was extended by one year until December 2026. The
credit facility is tied to ESG (“environmental, social andgovernance”) criteria. The interest rate terms dependin part on the successful reduction of Scope 1 greenhouse gas emissions and the increase in the proportionof women at the top three levels of management. As wellas the syndicated credit facility, there were bilateral credit
lines of €800 million. The Group also had short-term
liquidity reserves of €146 million in the form of cash andcash equivalents. In addition to cash and cash equivalents,
LANXESS holds near-cash assets of €350 million, which
are invested in shares of money market funds that can

The objective of receivables management at LANXESS
is to collect all outstanding payments punctually and in
full, and thus to minimize the risk of default. Continuous
monitoring is computer-assisted, based on the payment
terms agreed with the customers. These are generally
based on the customary payment terms for the businessor country. Reminders are sent out at regular intervals if
payments are overdue. The maximum risk of default on
receivables, cash and cash equivalents, near-cash assets,
derivatives and other financial assets is reflected in theircarrying amounts in the statement of financial position(disregarding netting arrangements not reflected in thestatement of financial position).

Customer risks are systematically identified, analyzed andmanaged using both internal and external information
sources. Customer portfolios may be insured against
credit risks, especially where the risk profile is elevated.

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Credit risk relating to receivables from customers iscovered by opening letters of credit and collection
agreements in favor of the LANXESS Group for somecustomers and by agreeing prepayment with contractual partners. In addition, LANXESS has a contractuallyagreed title to goods until the contractual partner has
paid the full purchase price. The vast majority of receivables relate to customers with a very high credit standing.
The creditworthiness of the counterparty is a key criterion in the financial policy and credit risk managementof the LANXESS Group, especially in the selection ofbanks and financial partners for capital investments andtransactions involving financial instruments. LANXESS
therefore endeavors to undertake transactions with banks
and other financial counterparties that have at least an
investment-grade rating.
Credit risk management also includes global management of the counterparty risk relating to all existing
relationships with banks and financial partners. The
LANXESS Group pays particular attention to risk diversification to prevent any cluster risks that could jeopardize
its continued existence. Through master agreements, themarket values of open trading positions can be netted if
a partner becomes insolvent, thereby further reducing
risks.
Capital investments
Opportunities and risks associated with the investmentof pension assets are monitored by the Corporate
Pension Committee, which is made up of the Chief

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Financial Officer, the Board of Management member
responsible for human resources, and representatives
from the Treasury & Investor Relations, Accounting andHuman Resources Group functions.
Equity investments
LANXESS holds shares in companies accounted forusing the equity method. Earnings contributions frominvestments accounted for using the equity method
can fluctuate. In addition, the shareholder loan issued
to Envalior GmbH is subject to value fluctuations due themeasurement at fair value. The resulting opportunities
and risks are recorded and analyzed systematically.

Legal environment and compliance
We actively pursue the strategic and sustainable optimization of the enterprise. Our efforts include ongoing
efficiency enhancement, optimization of opportunities
and risks, strengthening of core businesses, active
portfolio management and proactive participation inindustry consolidation through partnerships, divestments
and acquisitions. Further details can be found under“Strategy” in this management report.
The success of the decisions associated with these
efforts is naturally subject to forecasting risk with respect
to predicting future (market) developments and thefeasibility of planned measures. For example, the entry
into or exit from a business segment could be basedon profitability or growth expectations that prove to be
unrealistic over time. We mitigate this risk by carefully andsystematically analyzing the information that is relevant toFinancial Statements

Further Information

decision-making and regularly checking developments.
During this process, the business units affected and theBoard of Management receive support from departmentswith the requisite expertise and, if necessary, also fromexternal consultants.
When information is gathered in the context of acquisitions, it is possible that certain facts required toassess an acquisition candidate’s future performanceor to determine the purchase price are not available orare not correctly interpreted. We address this risk byconducting well-structured due diligence analyses and,
where possible, by concluding appropriate agreementswith the sellers that minimize the residual risk. Insufficient
integration of acquired companies or businesses canresult in the expected value added not being generated.
For this reason, we have organizations and processes inplace with which full integration of acquired businesses isassured. If assumptions concerning future developments– such as the realization of synergies – do not materialize,
this might result in a write-down on assets. We monitor
this risk by carrying out impairment testing at least oncea year. The risk of the need to carry out impairment ofassets is assigned to the finance group.
Companies in the LANXESS Group are subject to legalrisks and are parties to various litigations. The outcomeof individual proceedings cannot be predicted withassurance due to the uncertainties always associatedwith legal disputes. To the extent necessary in light of
the known circumstances in each case, we have set up
risk provisions for the event that the outcome of such

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proceedings is unfavorable to LANXESS. Taking into
account existing provisions and insurance, as well as
agreements reached with third parties in respect ofliability risks arising from legal disputes, it is currently
estimated that none of these proceedings will materiallyaffect our planned EBITDA pre exceptionals.
As an approach to avoiding legal risks, LANXESS has
established an extensive CMS incorporating a rangeof preventive organizational measures. Among thematerial risks LANXESS has identified are those relating
to antitrust legislation and plant safety/environmental
protection. Within the framework of the CMS, theseissues are assigned as specific responsibilities to different
Group functions that have established relevant compliance programs. In the area of antitrust law, for example,
regular training is provided and an e-learning course
has been established as preventive measures. There isalso an antitrust law standard that defines principles ofconduct for matters relevant to antitrust law. In this way,
our employees are informed of the risk and awarenessis raised accordingly. All employees can contact theCompliance department of the Legal & ComplianceGroup function if they have any compliance-related
questions.
Further information can be found in the“Roles andresponsibilities” section of this opportunity and risk
report.

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Any violations of foreign trade regulations may resultin prohibitions and restrictions on LANXESS’s export
activities and the loss of its privileges with respect toexport procedures. In individual cases, this may also
result in fines, trade sanctions and loss of reputation.
The LANXESS Group ensures compliance in foreign
trade and export control through the global implementation and optimization of appropriate and stable control
instruments and automated screening processes. By
proactively monitoring trade policy developments, timely
information is provided to both the operating units andthe management organs concerning changes to foreign
trade and the associated opportunities and risks, andappropriate recommendations for action are made.
Tax matters are subject to a degree of uncertainty
in terms of their assessment by the tax authorities inGermany and other countries. Even if we believe that
all circumstances have been reported correctly andin compliance with the law, the possibility cannot be
ruled out that the tax authorities may come to a different
conclusion in individual cases.
Furthermore, we have investigated the impact of theongoing trade conflict between China and the U.S. on
LANXESS. The assessment found that only isolated
products in our portfolio are affected, and that the flowof goods between China and the U.S. is only weak.

Financial Statements

Further Information

Significance of Opportunities andRisks and Result of Opportunity and
Risk ­Assessment
The opportunities and risks of future and sustainable
development that we identify are categorized andgrouped, as described above. The significance of theopportunities and risks for the LANXESS Group lies intheir potential impact on planned EBITDA pre exceptionals. Individual categories in which the opportunity
or risk may produce a deviation of more than 5% fromour projected EBITDA pre exceptionals in the planning
year are considered to be of medium to high significance.
This also applies to groups in which this threshold isexceeded only on a cumulative basis across all thecategories assigned to each group.
Within the context of opportunity and risk management
for the planning year, the categories raw material andenergy prices from the procurement markets group,
macroeconomic development and geopolitics from thebusiness environment group, and cyber risks from theIT and information security group and the production
and technology group were considered to be of medium
to high significance. Based on the scenarios applied or
the assumed probability of occurrence, these categories
and this group could produce a positive or negative
deviation of up to 11% from our projected EBITDA pre
exceptionals, which is our key controlling parameter.
The Advanced Intermediates and Specialty Additives
segments are the areas mainly affected here.

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Summary of Overall Opportunities
and Risks
As well as the impact of the ongoing war in Ukraine,
global economic performance in fiscal year 2023 wasalso characterized in the second half of the year by the
conflicts in the Middle East. Although the global supply
chain situation generally improved, this improvement
was partly supported by the globally weak economic
environment in the chemicals industry. Although we
expect raw material and energy prices to keep falling, theeconomic situation continues to be strained. Ongoingtrade tensions, especially between the U.S. and China,
populist and protectionist tendencies in major economies
and the global problems of our time – such as climate
protection, scarcity of drinking water, and feeding a
growing global population – entail long-term risks andchallenges. Value-based, responsible and reliable action
combined with clear strategic guidelines serves as thecompass with which we continuously put our strategy
into practice and evolve into a sustainable company.
Our primary strategic objective is to be a profitablespecialty chemicals company with stable growth. With
our FORWARD! action plan, we have responded to
the weak business performance of 2023 and intend
to further refine our business model as a pure specialty
chemicals company.

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With our three segments Consumer Protection, Specialty
Additives and Advanced Intermediates, we are building
on a well-balanced portfolio that we believe provides
the right mix of resilience and flexibility to prevail in
turbulent times and volatile markets in the future. The
extensive portfolio measures of recent years for the­transformation into a specialty chemicals manufacturer
are largely complete. We used the funds received fromthe contribution of our High Performance Materials
business unit to Envalior, the company formed with
Advent International as of April 1, 2023, to further reduce
our net financial debt.
All planning is subject to a certain degree of forecastingrisk, which could necessitate flexible adjustments torapidly changing business conditions over the courseof the year. This is particularly true in view of the factthat planning and forecasts in general are somewhat
less reliable, for example due to the changes in our
procurement and customer markets.

Financial Statements

Further Information

In light of our present financing structures, our soundliquidity position and the measures initiated as part of the
FORWARD! action plan, we are confident of managing
any risks that may arise in the future.
In summary, the potential effects of geopolitical conflicts
and macroeconomic developments are the greatest
sources of uncertainty for our business performance,and corresponding risks are rated higher than in theprevious year. However, the opportunity and risk situation
as a whole has not fundamentally changed.
Based on an overall evaluation of risk management information, the Board of Management at the present timecannot identify any developments, sufficiently likely risks
or risk combinations that would jeopardize the continued
existence of LANXESS.

The development of the war in Ukraine and the conflictin Israel/Palestine with all of the knock-on effects on
economic relations and the economy as a whole aremajor uncertainty factors for our business performance.

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CONSOLIDATED FINANCIAL STATEMENTS
154

Statement of Financial Position

188 (5) Derivative Financial Instruments  213 (27) Other Operating Income

155

Income Statement

193 (6) Other Non-Current and Current ­Financial Assets

213 (28) Other Operating Expenses

155

Statement of Comprehensive Income

193 (7) Non-Current and Current Income Tax Receivables

214 (29) Financial Result

156

Statement of Changes in Equity

194 (8) Other Non-Current Assets

215 (30) Income Taxes

157

Statement of Cash Flows

194 (9) Inventories

216 (31) Earnings and Dividend per Share

194 (10) Trade Receivables

217 (32) Personnel Expenses

158

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS

195 (11) Near-Cash Assets
195 (12) Other Current Assets

217

OTHER INFORMATION

158

General Information

158

Structure and Components of the Consolidated
Financial Statements

158

Financial ­Reporting ­Standards and ­Interpretations
Applied197 (15) Provisions for Pensions and Other Post-Employment
Benefits  

159

Financial Reporting ­Standards Issued but not yet
Mandatory

205 (16) Other Non-Current and Current Provisions

218 (36) Compensation of the Board of ­Management and theSupervisory Board

159

Consolidation

210 (17) Other Non-Current and Current Financial Liabilities

219 (37) Leases

161

Currency Translation

211 (18) Non-Current and Current Income Tax Liabilities  

221 (38) Financial Instruments

162

Accounting Policies and ­Valuation Principles

211 (19) Other Non-Current and Current Liabilities

232 (39) Notes to the Statement of Cash Flows174

Estimation Uncertainties and the Exercise ofDiscretion

212 (20) Trade Payables

235 (40) Segment Reporting

212 (21) Further Information on Liabilities

238 (41) Audit Fees

179

Companies Consolidated

212

239 (42) Declaration of Compliance Pursuant to Section 161of the Stock Corporation Act

184

NOTES TO THE STATEMENT OFFINANCIAL POSITION

184(1) Intangible Assets  

186 (2) Property, Plant and Equipment
187 (3) Investments Accounted for Using the Equity Method  
188 (4) Investments in Other Affiliated ­Companies  

195 (13) Assets and Liabilities Held for Sale and Discontinued
Operations
195 (14) Equity

NOTES TO THE INCOME­STATEMENT

212 (22) Sales
212 (23) Cost of Sales
213 (24) Selling Expenses
213 (25) Research and Development E­ xpenses
213 (26) General Administration Expenses

217 (33) Employees
217 (34) Contingent Liabilities and Other Financial
Commitments
217 (35) Related Parties

239 (43) Utilization of Disclosure Exemptions
239 (44) Events after the Reporting Period

240

RESPONSIBILITY STATEMENT241

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Financial Statements

Further Information

Statement of Financial Position
LANXESS Group€ million

Note

Dec. 31, 2022

Dec. 31, 2023

Intangible assets1)

(1)

3,331

2,721

Property, plant and equipment

(2)

2,750

2,620

Investments accounted for using the equity method

(3)

71

845

Net income

250

443

Investments in other affiliated companies

(4)

20

14

Other equity components

(101)

(286)

Non-current derivative assets

(5)

14

10

Equity attributable to non-controlling interests

6

6

Other non-current financial assets

(6)

77

262

Equity

(14)

4,427

4,507

Non-current income tax receivables

(7)

57

60

Deferred taxes

(30)

54

165

Provisions for pensions and other post-employment benefits

(15)

367

498

Other non-current assets

(8)

63

59

Other non-current provisions

(16)

296

299

6,437

6,756

Non-current derivative liabilities

(5)

1

0

Other non-current financial liabilities

(17)

3,417

2,938
17

ASSETS€ million

Dec. 31, 2022

Dec. 31, 2023

Capital stock and capital reserves

1,317

1,317

Other reserves

2,955

3,027

Note

EQUITY AND LIABILITIES

Non-current assets
Inventories

(9)

1,861

1,360

Non-current income tax liabilities

(18)

28

Trade receivables1)

(10)

858

613

Other non-current liabilities

(19)

41

38

324

146

Deferred taxes

(30)

284

194

Non-current liabilities

4,434

3,984

Cash and cash equivalents
Near-cash assets

(11)

79

350

Current derivative assets

(5)

18

13

Other current financial assets

(6)

172

215

Other current provisions1)

(16)

388

338

Current income tax receivables

(7)

35

41

Trade payables

(20)

709

584

Other current assets

(12)

228

171

Current derivative liabilities

(5)

18

17

Assets held for sale and discontinued operations

(13)

1,275

–

Other current financial liabilities

(17)

830

72

Current assets

4,850

2,909

Current income tax liabilities

(18)

38

42

Total assets

11,287

9,665

Other current liabilities

(19)

125

121

Liabilities directly related to assets held for sale and­discontinued operations

(13)

318

–

Current liabilities

2,426

1,174

Total equity and liabilities

11,2879,6651) Prior-year figure restated.

154

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Income Statement
LANXESS Group

Corporate GovernanceManagement Report

Financial Statements

Further Information

Statement of Comprehensive Income
LANXESS Group€ million

Note

2022

2023

€ million

2022

2023

Sales

(22)

8,088

6,714

Income after income taxes

251

444

Cost of sales(23)(6,151)(5,446)

Items that will not be reclassified subsequently to profit or loss

1,937

1,268

Remeasurements of the net defined benefit liability for post-employment
benefit plans

528

(118)

(38)

(5)

–

(3)

Gross profit
Selling expenses(24)(1,064)(933)

Financial instruments fair value measurement

Research and development expenses

(25)

(102)

(99)

General administration expenses

(26)

(319)

(279)

Other comprehensive income (net of income tax) attributable toinvestments accounted for using the equity method

Other operating income

(27)

38

78

Other operating expenses

(28)

(210)

(703)

280

(668)

Items that may be reclassified subsequently to profit or loss
if specific conditions are met
Exchange differences on translation of operations outside the eurozone

Operating result (EBIT)

Income taxes

(141)

35

349

(91)

3

(172)

153

(173)

Interest income

710

Financial instruments fair value measurement

6(1)

Interest expense

(75)

(70)

Financial instruments cost of hedging(1)

1

Other financial income and expense

42

(47)

(23)

(279)

Other comprehensive income (net of income tax) attributable to investments
accounted for using the equity method

–

(39)

Income from investments accounted for using the equity method

Financial result

(3)

(29)

Income before income taxes

Income taxes

(2)

0

156

(212)

Other comprehensive income, net of income tax

505

(303)

Total comprehensive income

756

141

257

(947)

(72)

105

Income after income taxes from continuing operations

185

(842)

of which attributable to non-controlling interests

00Income after income taxes from discontinued operations

66

1,286

of which attributable to LANXESS AG stockholders

756

141

Income after income taxes

251

444

from continuing operations

700(1,152)

1

1from discontinued operations

56

1,293

250

443

from continuing operations

2.13(9.76)

from discontinued operations

0.77

14.89

from continuing and discontinued operations

2.90

5.13

Income taxes(30)of which attributable to non-controlling interestsof which attributable to LANXESS AG stockholders(net income)Earnings per share (basic/diluted) (€)

155

(31)

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Statement of Changes in Equity
LANXESS Group
Capitalstock

Capitalreserves

Other
reserves

Net income(loss)€ million
Dec. 31, 2021

86

1,231

2,401

267
(267)

Allocations to retained earnings

267

Dividend payments(91)

Total comprehensive income

378
378

Other comprehensive income, net of income tax
86

1,231

(257)

3,756

6

3,762

(91)

0

(91)

756

0

756

250

1

251

(1)

505

6

4,427

(91)

0

(91)

141

0

141

443

1

444

1

(302)

(1)

(303)

0

4,501

6

4,507

Fair value Cost of hedging­measurement
28

0

0
154

(25)

(1)

154

(25)

(1)

506

(103)

3

(1)

4,421

250
(250)

Allocations to retained earnings

250
(91)

Total comprehensive income

(87)

443

(87)

Other comprehensive income, net of income tax

(211)
(211)

0

Other changes
86

1,231

3,027

443

0

0
(5)

1

443

Income after income taxes

0

0

2,955

Dividend payments

156

Equity0

Other changes

Dec. 31, 2023

Equity­attributable
to non-­controllinginterests

Financial instruments

250

Income after income taxes

Dec. 31, 2022

250

Equity­ ttributable to ­a
LANXESS AG­stockholders

Other equity components
Currencytranslation
adjustment

(5)

27

3

(287)

1

0

30

30

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Financial Statements

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Statement of Cash FlowsLANXESS Group
2022

2023

€ million

2022

2023

Income before income taxes€ million

257

(947)

Amortization, depreciation and write-downs of intangible
assets and property, plant and equipment

Cash inflows from the sale of subsidiaries and other­businesses, less divested cash and cash equivalents

8

1,194

546

996

Interest and dividends received

12

23

(2)

Net cash used in (provided by) investing activities –continuing operations

(996)

429

Net cash used in investing activities –
discontinued operations

(55)

(6)

Note

Losses/gains on disposals of intangible assets and property,
plant and equipment

3

Note

(39)

Income from investments accounted for using the equity
method(3)

172

Financial losses (gains)

11

92

4

(53)

Net cash used in (provided by) investing activities –
total(1,051)

423

(403)

465

Proceeds from borrowings

1,379

383

Income taxes refunded/paid
Changes in inventories
Changes in trade receivables

62

230

Repayments of borrowings(689)(1,686)

Changes in trade payables

(130)

(118)

Interest paid and other financial disbursements

(65)

(71)

Changes in other assets and liabilities

(160)

17

Proceeds from interest rate hedges

83–

Dividend payments

(91)

(91)

Net cash provided by operating activities –continuing operations

187

852

Net cash used in operating activities –
discontinued operations

Net cash provided by (used in) financing activities –continuing operations

617(1,465)

(28)

(14)

Net cash provided by operating activities – total

159

838

Net cash used in financing activities –
discontinued operations

(4)

(1)

(326)

Net cash provided by (used in) financing activities –
total

613

(1,466)

(192)

(184)

Cash outflows for purchases of intangible assets and property,
plant and equipment
Cash inflows from sales of intangible assets and property,
plant and equipment
Cash outflows for financial and other assets held for­investment purposes
Cash inflows from financial and other assets held for­investment purposes
Cash outflows for the acquisition of subsidiaries and other­businesses, less acquired cash and cash equivalents

(39)

(407)
5
(910)
1,420
(1,124)

3

Change in cash and cash equivalents –continuing operations(1,823)

Change in cash and cash equivalents –discontinued operations

(87)

(21)

Change in cash and cash equivalents – total

(279)

(205)

643

360

1,358
0

Cash and cash equivalents as of Jan. 1
Exchange differences and other changes in cash andcash equivalents – total

(4)

(9)

360

146

of which continuing operations

324

146

of which discontinued operations

36–

Cash and cash equivalents as of Dec. 31

157

(39)

(39)

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Financial Statements

Further Information

Notes to the Consolidated Financial Statements
GENERAL INFORMATIONLANXESS AG is entered as a stock corporation in theCommercial Register of the Cologne District Court under
HRB 53652. Its registered office is at ­Kennedyplatz 1,
50569 Cologne, Germany.
The annual financial statements of LANXESS AG and theconsolidated financial statements of the LANXESS AG,
to which the auditors, PricewaterhouseCoopers GmbH
Wirtschaftsprüfungsgesellschaft, Frankfurt/Main, haveissued unqualified auditor’s reports, are publishedelectronically in the business register.
The consolidated financial statements of the LANXESSGroup for fiscal year 2023 were prepared by the Boardof Management of LANXESS AG on a going concern
basis and authorized for submission to the Supervisory
Board on March 8, 2024. It is the responsibility of theSupervisory Board to examine the consolidated financial
statements and declare whether it approves them.

STRUCTURE AND COMPONENTS
OF THE CONSOLIDATED FINANCIAL
STATEMENTS
The consolidated financial statements comprise thestatement of financial position, the income statement,
the statement of comprehensive income, the statementof changes in equity, the statement of cash flows and thenotes, which include the segment information.

The consolidated financial statements of the LANXESSGroup as of December 31, 2023, were prepared inaccordance with the International Financial ReportingStandards (IFRS) as endorsed by the European Union(E.U.) and the corresponding interpretations, together
with the additional requirements of Section 315e,
Paragraph 1, of the German Commercial Code (HGB).

The consolidated financial statements were prepared ineuro (€). Amounts are stated in millions of euro (€ million)
except where otherwise indicated. Assets and liabilities
are classified in the statement of financial position as
current or non-current. Further details of their maturities
are provided in the notes in certain cases.

The mandatory first-time application of the following
financial reporting standards in fiscal year 2023
currently has no impact, or no material impact, on the
LANXESS Group:

The consolidated financial statements were preparedon the basis of historical acquisition, construction or
production costs of the assets. Where different valuation
principles are prescribed, these are used and explained
separately in the section on accounting policies andvaluation principles.
The income statement was prepared using the cost-ofsales method.
The fiscal year for these consolidated financial statements
is the calendar year.

158

FINANCIAL ­REPORTING ­STANDARDSAND ­INTERPRETATIONS APPLIED

Standard
IAS 12

Amendments to IAS 12 – International Tax
Reform – Pillar Two Model Rules

IFRS 17

Amendments to IFRS 17 – Initial Application of
IFRS 17 and IFRS 9

IAS 12

Amendments to IAS 12 – Deferred Tax related
to Assets and Liabilities arising from a Single
Transaction

IAS 1

Amendments to IAS 1 – Disclosure of­Accounting Policies

IAS 8

Amendments to IAS 8 – Definition of­Accounting Estimates

IFRS 17

Insurance Contracts – including Amendments
to IFRS 17

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The LANXESS Group is within the scope of the OECDmodel rules (Pillar Two model rules). In Germany, thejurisdiction in which the parent company LANXESS AG
is registered, the Pillar Two legislation entered into force
on December 28, 2023, and applies from fiscal year
2024. For this reason, an analysis was carried out todetermine the fundamental impact and the jurisdictions
from which LANXESS is exposed to possible effects inconnection with a Pillar Two top-up tax. The first step
was to check whether the safe harbor regulations wereapplicable. If a country was not excluded from the Pillar
Two calculation after checking the safe harbor regulations, the effective tax rate was calculated on a simplified
basis. In this context, no countries were identified withpossible effects from the payment of a Pillar Two top-up
tax. The amounts calculated are immaterial for the
LANXESS Group. LANXESS applies the exception in
IAS 12 according to which an entity does not recognize
or disclose deferred tax assets and liabilities related to
the OECD Pillar Two income taxes.

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FINANCIAL REPORTING ­STANDARDSISSUED BUT NOT YET MANDATORY
In fiscal year 2023, the International AccountingStandards Board (IASB) issued financial reporting
standards whose application was not yet mandatory
for that year and which the LANXESS Group thus did
not yet apply. The application of these standards andinterpretations is in some cases contingent upon theirendorsement by the E.U. It is therefore possible that thedates for mandatory application may ultimately be later
than indicated below.

Financial Statements

Further Information

CONSOLIDATION
The financial statements of the consolidated companies
were prepared using uniform accounting policies andvaluation principles.
If the reporting year of a consolidated company does not
end on December 31, interim financial statements areprepared for the purpose of consolidation.
Intra-Group profits or losses, sales, income and expenses
as well as receivables and payables between consolidated
companies are eliminated.

The following financial reporting standards currently haveno impact, or no material impact, on the LANXESS Group:Standard

Date ofpublication

Mandatory for
LANXESS as of
fiscal year

Endorsed by
the E.U.

IAS 1

Amendments to IAS 1 –Classification of Liabilities as Current or Non-Current

Jan. 23, 2020
Jul. 15, 2020
Oct. 31, 2022

2024

Yes

IFRS 16

Amendments to IFRS 16 –Lease Liability in a Sale and Leaseback

Sep. 22, 2022

2024

Yes

IAS 7, IFRS 7

Amendments to IAS 7 and IFRS 7 –Supplier Finance Arrangements

May 25, 2023

2024

No

IAS 21

Amendments to IAS 21 –The Effects of Changes in Foreign Exchange Rates

Aug. 15, 2023

2025

No

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Scope of consolidation

Fully consolidated companies

The consolidated financial statements of the LANXESSGroup include LANXESS AG and all subsidiaries
under the control of LANXESS AG. Control exists if
LANXESS AG is exposed to variable returns from therelationship with a company and has power over thecompany. Power means that LANXESS AG has existingrights that give it the current ability to direct the relevant
activities of the company and thus exert a significant
influence over the variable returns. The ability to control
another company generally derives from direct or indirectownership of a majority of the voting rights. A company
is consolidated as of the date from which LANXESS AG
is able to exercise control and deconsolidated when thisis no longer the case.

Business combinations are accounted for using theacquisition method. The cost of a business combination is stated as the aggregate of the fair values, at thedate of acquisition, of the assets transferred, liabilities
incurred or assumed, and any equity instruments issued
in exchange for control of the acquiree. The fair valuesof assets and liabilities resulting from contingent consideration contracts are also taken into account.

Interests in joint ventures and interests in associates inwhich the LANXESS Group exerts a significant influence,
generally through an ownership interest between 20%
and 50%, are accounted for using the equity method.

160

Corporate GovernanceFor the first-time consolidation, the assets, liabilities
and contingent liabilities identified in the course of
the acquisition are measured at fair value as of theacquisition date.
For each business combination, there is an option to
include any shares not acquired either at their fair value
or at the pro rata share of the fair value of the acquiree’s
net assets. They are reported in the statement of financial position as equity attributable to non-controllinginterests.

In the case of jointly controlled entities, the LANXESSGroup usually holds 50% of the shares and exercises joint
control. These entities are recognized in the consolidated
financial statements as joint operations.

Acquisition-related costs – except those incurred toissue debt or equity securities – are recognized in profit
or loss.

Entities that are in aggregate immaterial to the Group’s
earnings, asset and financial position are not consolidated, but are included in the consolidated financial
statements at amortized cost.

Goodwill is measured as of the acquisition date as theexcess of the consideration transferred, the amount of
any non-controlling interests and the fair value of any
previously held equity interest over the fair value of the

Financial Statements

Further Information

net assets acquired. Negative goodwill is recognizedin the income statement.

Investments accounted for using theequity method
The cost of acquisition of an entity accounted for using
the equity method is adjusted annually by the percentage
of any change in its equity corresponding to LANXESS’s
percentage interest in the entity. If any decline in value
exceeds the carrying amount of the entity, write-downs
are recognized on the associated non-current assets.
Differences arising from the first-time accounting forinvestments using the equity method are determinedaccording to the same principles as for consolidated
subsidiaries. Any goodwill is included in the carrying
amount of the entity. The measurement period provided
by IFRS 3 for the finalization of the first-time measurement
or purchase price adjustment of business combinations
applies analogously.

Joint operations
Joint operations are arrangements in which the parties
that exercise joint control have rights to the assets andobligations for the liabilities relating to the arrangement.
LANXESS accounts for its share of the joint assets andjoint liabilities of such joint operations and its share of
the revenues and expenses, including its share of jointly
incurred expenses.

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Transactions with owners
Transactions with non-controlling interests, which do
not result in a loss of control, are treated as transactions
between shareholders of the LANXESS Group. Changes
in ownership interests are accounted for by adjusting thecarrying amounts of the controlling and non-­­controllinginterests. Differences between the adjustment to thecarrying amount of the non-controlling interests andthe fair value of the consideration paid or received arerecognized immediately in other reserves and thus
assigned to the equity attributable to the stockholdersof LANXESS AG.

CURRENCY TRANSLATIONIn the financial statements of the individual consolidated companies that form the basis for the consolidated financial statements of the LANXESS Group, allforeign currency assets and liabilities are translated atclosing rates, irrespective of whether they are hedged.
Forward contracts serving as economic hedges against
fluctuations in exchange rates are carried at fair value.
Exchange differences resulting from currency translation
are reported in profit or loss in the net exchange result
within other financial income and expense.
The financial statements of each foreign entity are valued
on the basis of the currency of the primary economic
environment in which the entity operates (functional
currency concept). For the vast majority of affiliatedcompanies, the functional currency is the respective local
currency. The assets and liabilities of these companies

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Corporate GovernanceManagement Report

are translated at closing rates, while income and expense
items are translated at average rates for the year.
Goodwill arising on the acquisition of a foreign entity isrecognized in the currency of the acquired entity andtranslated at the closing rate, irrespective of the dateon which it arose.
Equity is translated at historical rates, while income,expenses and other changes during the year are translated at average rates. The differences between the
resulting amounts and those obtained by translating at
closing rates are reported separately in other comprehensive income as exchange differences on translationof operations outside the eurozone.
If material, foreign currency transactions for which
advance consideration has been paid or received aretranslated at the exchange rate of the advance conside­
ration paid or received up to the amount of the advanceconsideration paid or received.
If a company is deconsolidated, the relevant exchange
differences are reversed and recognized in profit or loss.
IAS 29 has been applicable to the subsidiar y
LANXESS S.A., Buenos Aires, Argentina, since fiscal
year 2018. Non-monetary items in the statement offinancial position, components of equity and items of
the statement of comprehensive income are adjusted tothe actual price level using the price index published bythe ­Government Board of the Argentine Federation ofProfessional Councils of Economic Sciences (FACPCE)

Financial Statements

Further Information

at the end of each reporting period, and subsequently
translated at the closing rate at the end of the reporting
period. The retail consumer price index (IPC Nacional –INDEC) is used for inflation. The price index was at
1,134.59 points at the start of the fiscal year and3,533.19 points at the end of the fiscal year.
For accounting purposes, the Republic of Türkiye has
been classified as a hyperinflationary economy since
fiscal year 2022. An adjustment of non-monetary items inthe statement of financial position, components of equity
and items of the statement of comprehensive income tothe actual price level using an appropriate price index
is not made in the consolidated financial statements forreasons of materiality. This will be reassessed at the nextreporting date.
The principal exchange rates used for currency translation in the LANXESS Group were:
Exchange Rates
Closing rate
1 euroDec. 31,2022

Dec. 31,2023

Average rate
2022

2023

Argentina

ARS

188.92893.39137.12319.94

Brazil

BRL

5.57

5.35

5.44

5.40

China

CNY

7.36

7.85

7.08

7.66

Great Britain

GBP

0.89

0.87

0.85

0.87

India

INR

88.25

91.90

82.72

89.35

Japan

JPY

140.66156.33138.03151.95

U.S.

USD

1.07

1.11

1.05

1.08

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ACCOUNTING POLICIES AND­VALUATION PRINCIPLES
The accounting policies and valuation principles are thesame as those used in the previous fiscal year and havebeen consistently applied. However, certain changes
have resulted from the mandatory first-time application in fiscal year 2023 of new or amended financial
reporting standards and interpretations. These changes
are explained under“Financial Reporting Standards
and Interpretations Applied.”

Intangible assets
Intangible assets comprise goodwill and other intangible assets such as software, concessions, industrial
property rights, similar rights and assets, and licenses
to such rights and assets. Acquired intangible assets
with a definite useful life are recognized at cost andamortized over their respective useful lives using thestraight-line method. Amortization of intangible assets
other than goodwill is recognized on a straight-line basis
over three to 20 years. Amortization in the reporting
year is allocated to the respective functional areas.
Any further decline in value is recognized by means ofa write-down. Write-downs are reversed accordingly
if the reasons no longer exist, provided that this does
not cause the carrying amount of the assets to exceed
either the amortized cost at which they would have been
carried if they had not been written down or their current
recoverable amount. The lower of these two amounts
is recognized. Goodwill is not amortized, but tested
annually for impairment – or more frequently if events or

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Financial Statements

Further Information

changes in circumstances otherwise indicate a possible
impairment. Any impairment charges are recognizedin other operating expenses. Impairment charges on
goodwill are not reversed.

carrying amount of the assets to exceed either theamortized cost at which they would have been recognized if they had not been written down or their current
recoverable amount.

The costs incurred for in-house software development
at the application development stage are capitalized.
For development costs to be capitalized, it must be sufficiently certain that the development activity will generate
future economic benefits. These costs are amortizedover the expected useful life of the software from thedate it is completed.

The cost of self-constructed property, plant and equipment comprises the direct costs, as well as an appropriate share of the necessary material and manufacturing
overheads. It also includes the shares of depreciation
as well as of expenses for company pension plans anddiscretionary employee benefits that are attributable toproduction.

Emissions rights are recognized at cost. Rights allocatedfree of charge by the German Emissions Trading
Authority (DEHSt) or comparable authorities in other
European countries are capitalized at a value of zero.

Where an obligation exists to shut down or dismantle
assets at the end of their useful life or to restore a site toits original condition, the present value of the obligation iscapitalized along with the cost of acquisition or construction and a provision in the same amount is recognized.

Property, plant and equipment
Property, plant and equipment is carried at the cost of
acquisition or construction less usage-based depreciation. Write-downs are recognized for any reduction invalue that goes beyond ordinary depreciation. In compliance with IAS 36, impairment charges are measured
by comparing the carrying amount with the discounted
cash flows expected to be generated by the assets inthe future. Where it is not possible to allocate future
cash flows to specific assets, the impairment charge isassessed on the basis of the discounted cash flows forthe cash-generating unit to which the asset belongs.
Write-downs are reversed accordingly if the reasonsno longer apply, provided that this does not cause theIf the construction phase of property, plant or equipment
extends over a long period, the directly attributableborrowing costs incurred up to the date of completionare capitalized as part of the cost of acquisition orconstruction.
Expenses for current maintenance and repairs are in
general recognized directly in profit or loss. Subsequentacquisition or construction costs are capitalized if they
will result in future economic benefits and can be reliably
determined.

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Expenses for general overhauls of major large-scale
plants are recognized separately at the cost of theoverhaul as part of the related assets and depreciatedover the period between one general overhaul and thenext using the straight-line method.
Where assets comprise material components withdifferent purposes, different properties or different useful
lives, the components are capitalized individually anddepreciated over their useful lives.
Assets are depreciated using the straight-line method
based in general on the following useful lives:
Useful Lives
Buildings

20 to 50 years

Outdoor infrastructure

10 to 20 years

Plant installations

3 to 25 years

Machinery and equipment

8 to 15 years

Laboratory and research facilities

3 to 5 years

Storage tanks and pipelines
Vehicles10 to 20 years
5 to 8 years

Computer equipment

3 to 5 years

Fittings and equipment

5 to 10 years

There are currently no known effects of climate-related
issues that would lead to a change in the assumed useful
lives of the specified asset classes.
When property, plant or equipment is sold, the difference
between the net proceeds and the carrying amount isrecognized as a gain or loss in other operating income
or expenses.

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LeasesLessees generally recognize all leases as a right-of-use asset
and a lease liability in the statement of financial position on
the basis of the present value of the lease payments.
Lease liabilities are recognized as financial liabilities andinclude in general the fixed lease payments. Variable
payments that depend on an index or a rate and expected
residual value payments or residual value guarantees arealso included. If the exercise of a purchase option or the
exercise of an extension option is reasonably certain,
the exercise price or the corresponding lease payments
are included in the calculation of the lease liabilities.
Penalties for the termination of the lease are included if
their utilization is reasonably certain. The present value
is generally calculated at the interest rate implicit in
the lease. If there is no such interest rate, discounting
is performed at the incremental borrowing rate. The
incremental borrowing rate is calculated by using yields
with matching maturities on government bonds for therespective country in question in the respective currency
and adding credit risk premiums. Interest on the leaseliability is recognized in the interest expense of thefinancial result. Lease liabilities are remeasured when
specified events occur (e.g. change in the term of thelease or change in future lease payments resulting froma change in an index). In general, remeasurements oflease liabilities result in an adjustment of the carrying
amount of the right of-use asset.
Right-of-use assets are measured at cost and reported inproperty, plant and equipment. Cost includes the present
value of the aforementioned lease liabilities, advance

Financial Statements

Further Informationlease payments made, initial direct costs and asset
retirement obligations. Right-of-use assets are generally
depreciated on a straight-line basis over the shorter of theasset’s useful life and the term of the lease. If the exercise
of a purchase option is deemed to be reasonably certain,
the right-of-use asset is depreciated on a straight-line
basis over the asset’s useful life. Right-of-use assets fallwithin the scope of IAS 36, Impairment of Assets.
They are subsequently measured at amortized cost.
Costs of short-term leases and leases for low-value assets
are recognized as current expenses. The option to apply
the financial reporting standards for leases to leases forintangible assets has not been exercised. Lease andnon-lease components are generally separated provided
they are clearly identifiable and distinct.
Lease assets for which the lessee does not have substantially all the risks and rewards (operating leases) are
reported at amortized cost under property, plant andequipment. The lease payments received in the period
are recognized in sales. If substantially all the risks andrewards are transferred to the lessee (finance leases), theasset concerned is derecognized and a lease receivable
is recognized at an amount equal to the net investmentin the lease.
Leasing arrangements may be embedded in othercontracts. Where IFRS stipulates separation of theembedded leasing arrangement, the components ofthe contract are recognized and measured separately.

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Financial instruments
Financial instruments are contracts that give rise to afinancial asset of one entity and a financial liability or
equity instrument of another entity. Firstly, these include
primary financial instruments such as trade receivables
and payables or financial receivables and liabilities.
Secondly, they also include derivative financial instruments used to hedge the risks of changes in exchange
rates, raw material prices and interest rates.
Financial instruments are recognized as soon as the
LANXESS Group becomes the contracting party to them.
Financial assets are derecognized when the contractual
rights to receive payments expire or the financial assets
are transferred together with all significant risks andrewards. Financial liabilities are derecognized when thecontractual obligations are met or canceled, or when
they expire.
In the case of regular-way purchases and sales, thesettlement date is the relevant date for first-time recognition or derecognition of financial assets in the financial
statements.
Financial assets are initially recognized at fair value.
For subsequent measurement, depending on theirclassification, they are recognized at amortized cost

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Corporate GovernanceManagement Reportusing the effective interest method or at fair value inother comprehensive income or the income statement.
Classification is determined by the business modeland the characteristics of the cash flows. The possibleclassifications are as follows:
Under the “hold to collect” business model, financial
instruments are held until maturity. They are measured
at amortized cost if the cash flows are solely for payments
of principal and interest, or otherwise at fair value throughprofit or loss. The Group does not use the option formeasurement at fair value through profit and loss. Financial instruments not recognized at fair value throughprofit or loss are reduced by expected credit losses. Bothhistorical loss experience and future expected losses areused to calculate expected credit losses. A three-stage
assessment is generally applied to the expected credit
loss. In the first stage, the expected credit loss over the
next twelve months is assessed and the expected loss
is recognized. If the credit risk increases over the termof the financial instrument, the potential credit loss overthe entire term of the financial instrument is assessed
and the expected loss is increased on the basis of thismeasurement (second stage). In the event of a default,
the expected default amount is recognized (third stage)
and an expected loss is also taken into account for any
residual amount of the financial instrument. The effective

Financial Statements

Further Informationinterest method is then only applied to the residual
amount. For trade receivables and contract assets, thesimplified model for the entire term is used to calculate
the expected risk of default, and the expected loss overthe entire term of the financial instrument is measured
and recognized. Expected losses on trade receivables
and contract assets are recognized in other operating
expenses, taking into account reversals of any loss allowances established in prior periods. For all other financial
instruments not recognized at fair value through profit
or loss, the expected loss is recognized under “Other
financial result.”
Under the “hold to collect and sell” business model, an
entity intends both to hold financial instruments until theend of their term and collect the cash flows and to resell
the financial instruments during their term after a certain
holding period. Such financial instruments are measured
at fair value. Gains or losses on subsequent measurement are recognized in other comprehensive income if
the cash flows are solely for payments of principal andinterest, or otherwise at fair value through profit or loss.
In the event of impairment charges, the corresponding
effects are reclassified from other comprehensive income
to profit or loss.

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Financial instruments that are not measured at amortizedcost or at fair value in other comprehensive income arerecognized at fair value in the income statement.
Trade receivables and other financial receivables in the“hold to collect” business model are initially recognizedat fair value and subsequently accounted for at amortizedcost using the effective interest method. In the “hold tocollect and sell” business model, trade receivables aremeasured at fair value. Because of their short holding
period, the risk of default is the primary factor that determines their value. Since this risk is extremely small, thefair value corresponds to amortized cost. Gains or losses
on subsequent measurement are recognized in othercomprehensive income. For both business models, theexpected loss is calculated using the simplified modelfor the entire term on the basis of a past due matrix andtaking into account historical loss experience and future
expected losses. Both expected and incurred losses arerecognized in profit or loss through separate allowanceaccounts.
Other current and non-current financial receivables
that are accounted for under the “hold to collect”
business model are initially recognized at fair value and165

Corporate GovernanceManagement Reportsubsequently accounted for at amortized cost using theeffective interest method. These include financial assets
whose cash flows are solely for payments of principal
and interest, contract assets and other financial receivables. The expected loss is calculated according to thecounterparty’s future expected loss. Other current andnon-current financial receivables that are accounted forunder the “hold to collect” business model are measured
at fair value. Depending on whether they can be assigned
to the “hold to collect and sell” business model, the gains
or losses on subsequent measurement are recognizedthrough other comprehensive income, or otherwise
through profit or loss.
Equity instruments are recognized at fair value. For
subsequent measurement, it is determined irrevocably
at the level of the individual equity instrument whether
gains or losses and the gains on disposal are recognizedthrough other comprehensive income or through profit
or loss.

Financial Statements

Further Information

Investments in companies accounted for using the equity
method are recognized at the amounts corresponding
to LANXESS’s shares in their equity in accordance withIAS 28. Equity investments in which LANXESS holds amajority of the shares, and which are not fully consolidated for lack of materiality, are recognized at amortizedcost. Where objective evidence exists that such assets
may be impaired, an impairment loss is recognized on
the basis of an impairment test.
Primary financial liabilities are initially recognized at fairvalue less any transaction costs. They are subsequently
measured at amortized cost using the effective interest
method. LANXESS does not utilize the option of designating financial instruments as at fair value on initialrecognition and recognizing changes in their value in
profit or loss.

This does not include equity investments, which areaccounted for using the equity method, or entities inwhich LANXESS holds a majority of the shares, andwhich are not fully consolidated for lack of materiality.

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Derivative financial instruments andhedging transactions
The LANXESS Group recognizes derivative financial
instruments as assets or liabilities at their fair value on
the closing date. Changes in fair or market value are
generally recognized in profit or loss. Where foreign
currency derivatives or forward commodity contracts
used to hedge future cash flows from pending businessor forecast transactions qualify for hedge accounting
under the relevant financial reporting standard, thechanges in value or hedging costs of such instruments
are recognized separately in other comprehensive
income until the underlying transactions are realized. The
amounts recognized here for currency derivatives aresubsequently reclassified to other operating income or
cost of sales, as appropriate, when the hedged transaction is recognized in profit or loss. For forward commodity
contracts, the carrying amount of the hedged products
on acquisition is adjusted by the amounts recognizedin other comprehensive income and recognized in thecost of sales on processing of the same. Any portion of
the change in fair or market value of such derivatives
deemed to be ineffective with regard to the hedged
risk is recognized directly in profit or loss. Changes in
the fair or market value and hedging costs of interest
rate derivatives used to hedge long-term liabilities withvariable interest rates – provided such derivatives qualify
for cash flow hedge accounting – are recognized in other

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Financial Statements

Further Information

comprehensive income and subsequently reclassified
to profit or loss as interest income or expense at thesame time as the income from the hedged transaction
is recognized in profit or loss.

Contract assets are carried at nominal amount. If contract
assets contain significant financing components, they are
discounted using current interest rates. The fair values
accordingly correspond to the carrying amounts.

Contracts concluded for the purpose of receiving ordeli­v ering non-financial items based on expectedpurchases, sales or utilization and held for this purpose
are recognized not as financial derivatives but aspending transactions. If the contracts contain embedded­derivatives, the derivatives are accounted for separatelyfrom the host contract, provided that the economic
characteristics and risks of the embedded derivative
are not closely related to those of the host contract.

The fair value of financial assets is determined from theirmarket price on the closing date, disregarding transaction
costs.
The fair value of loans and liabilities to banks is calculatedon the basis of discounted future payments of principal
and interest.

The key methods and assumptions used in measuring
the fair value of financial instruments are outlined below:

The bonds are generally traded on an active, liquidmarket. Their fair values are the prices determined andpublished by the market. If no liquid market price is available for a bond, its fair value is determined on the basisof observable inputs, using a risk-related discount rate.

Trade receivables, other receivables and cash and cash
equivalents are generally due within one year. Their
carrying amount is therefore their fair value. Receivables
due in more than one year are discounted using current
interest rates to determine their fair value.

The fair value of trade payables and other primary financial liabilities due within one year is generally equal totheir carrying amount. The fair value of other liabilities
is determined by discounting to present value where
feasible.

The fair value of stock warrants is calculated on the basisof an option pricing model without taking transaction
costs into account.

The fair values of receivables and liabilities relating toleases are the present values of the net lease payments
calculated using the market rate for comparable leaseagreements.

Determination of fair value

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The derivative financial instruments used by LANXESS
are generally traded on an active, liquid market. The fairvalues as of the end of the reporting period predominantly
relate to forward exchange contracts and, to a small
extent, to forward commodity contracts. If information
on hedging costs is available, the fair values are derived
from their trading or listed prices using the forward-toforward method. If information on hedging costs is notavailable on a market, the fair values are calculated using
the spot-to-spot method, and hedging costs, including
the forward component, are separated. Where no market
price is available, values are determined using recognized
capital market pricing methods based on observable
market data. In determining the fair values, adjustmentsfor LANXESS’s own credit risk and counterparty credit
risk are made on the basis of the respective net positions.

Cash and cash equivalents
Cash and cash equivalents represent financial instrumentsthat are allocated to the “hold to collect” business modeland recognized at amortized cost. The risk of default
relating to cash and cash equivalents is calculated taking
into account the counterparty’s future expected loss
applying the three-stage model and recognized under“Other financial result.” Cash and cash equivalents
comprise checks, cash and balances with banks. Securities
with maturities of up to three months from the date ofacquisition are recognized in cash and cash equivalents
due to their high liquidity.

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Near-cash assets
Near-cash assets are assigned to the “hold to collectand sell” business model. They essentially consist ofinvestments in money market funds whose cash flows
are not solely payments of principal and interest. They
are measured at fair value based on market prices at theend of the reporting period. Transaction costs are nottaken into account in their measurement. Changes in fairvalue are recognized in the financial result.

Inventories
Inventories encompass assets held for sale in the ordinary
course of business (finished goods and merchandise),assets in the process of being manufactured for sale(work in progress) and assets used in the production
process (raw materials and supplies). They are valuedby the weighted-average method and recognized at thelower of cost and their respective net realizable value,
which is the estimated selling price in the ordinary courseof business less the estimated remaining production
costs and selling expenses.
The cost of production comprises the direct cost of
materials, direct manufacturing expenses and appropriate allocations of fixed and variable material andmanufacturing overheads at normal capacity utilization,
when attributable to production.

Financial Statements

Further Information

It also includes expenses for company pension plans,social services and voluntary social benefits that can beallocated to production. Administrative costs are included
where they are attributable to production.
Borrowing costs incurred in the course of production
are not included in the acquisition or production cost of
inventories as the products are not manufactured within
long-term production processes.
Given the production and distribution circumstancesof the LANXESS Group, work in process and finishedgoods are grouped together.

Provisions
Provisions are recognized and measured in accordancewith IAS 37 and, where appropriate, IAS 19 and IFRS 2,
using the best estimates of the amounts of the obligations. Non-current portions of material provisions due inmore than one year are discounted to present value if
the extent and timing of the obligation can be assessedwith reasonable certainty. The change in the provision
resulting from approaching the due date (interest effect)
is expensed in the other financial result.
If the projected obligation declines as a result of achange in the estimate, the provision is reversed by
the corresponding amount and the effect is recognizedin the functions in which the provision was originallyrecognized.

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Provisions for pensions and other post-employment
benefits are established for defined benefit pension plans.
The provision is measured according to the actuarial
present value of the obligation, calculated using the
projected unit credit method. This takes into accountnot only the known pensions and pension entitlements
as of the closing date, but also expected future salary andbenefit increases. Remeasurements of the net defined
benefit liability are fully recognized in other comprehensive income in the corresponding period and notreclassified to profit or loss in subsequent periods.
Personnel-related provisions mainly include those forannual bonus payments, payments under multi-yearcompensation programs and other personnel costs.
The stock-based employee compensation programs(Long-Term Stock Performance Plan – LTSP) provide
for cash settlement. Provisions are recognized for the
obligations entered into under such programs on thebasis of the proportionate fair value of the rights allocatedto employees. The fair value is determined using theMonte Carlo method, in which future price developments
are simulated and the expected payment is calculated
from the value of the rights based on a two-dimensional
standard distribution of yields. The fair value of the rights
is recognized in a pro rata provision during the vesting
period.

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Restructuring provisions are recognized if there is alegal or constructive obligation on the basis of a detailed
restructuring plan adopted by authorized management,
and the employees affected or their representatives havebeen informed. Such provisions contain the expenses
that are directly attributable to the restructuring and thatare necessary to implement these measures and do not
relate to the future operating business. If provisions for
restructuring later become liabilities or provisions forpensions and other post-employment benefits, they arereclassified to the corresponding items of the statementof financial position.
The LANXESS Group also recognizes provisions for
current or pending legal proceedings where the resulting
expenses can be reasonably estimated. These provisions
include all estimated fees and legal costs and the costof potential settlements. However, litigation expenses
are only included if it is assumed that they will have to
be borne by LANXESS. The amounts of such provisions
are based on information and cost estimates provided by
LANXESS’s legal advisers. LANXESS regularly reviews
and adjusts such provisions.

Financial Statements

Further Information

Contingent liabilities
Contingent liabilities are potential obligations to third
parties or existing commitments, the extent of whichcannot be reasonably estimated or which are unlikely
to lead to an outflow of resources. They are not recognized in the statement of financial position unless they
have been entered into in connection with a businesscombination.

Liabilities
Other current liabilities are recognized at repayment or
settlement amounts. Other non-current liabilities arerecognized at amortized cost.
Grants received from third parties for the acquisition
or construction of property, plant and equipment arereported in other liabilities and released to the respectivefunctional area of profit or loss over the underlying period
or expected useful life of the assets to which they relate.
Contract liabilities are also reported in other liabilities andrepresent advance consideration paid by the customer foroutstanding performance obligations.

Financial reporting in hyperinflationary
economies
A country must be classified as a hyperinflationary
economy if, in addition to other criteria, the cumulative
inflation rate over the past three years approaches orexceeds 100%. On classification as a hyperinflationary
economy, in that country non-monetary items in the

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statement of financial position, components of equity
and items in the statement of comprehensive income
are restated to the current price level using a suitableprice index. Restatements to the current price levelthat are attributable to prior reporting periods lead to adifference between the prior-year equity and the opening
balance of equity of the reporting period. These equity
differences are shown in other comprehensive income inthe currency translation adjustments from the translationof operations outside the eurozone. The changes arerecognized in the reporting period of the first assessmentof the country as a hyperinflationary economy. Changes
relating to the current reporting period are recognized asmonetary gains or losses under “Other financial result.”
In the statement of financial position, this applies inparticular to non-monetary assets and liabilities thatare recognized at amortized cost and therefore not at
the current price level. These are essentially intangible
assets, property, plant and equipment, inventories andadvance consideration paid and received. The restatement of prices is calculated from the date of the asset’s
historical acquisition or production to the end of thereporting period. Equity components, except retained
earnings, are restated to the current price level fromthe date of contribution. Statement of comprehensive
income items are restated from the dates when the items
of income and expenses were initially recorded in thefinancial statements.

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Corporate GovernanceManagement ReportNon-current assets and liabilities held
for sale and discontinued operations
Material assets are reported as held for sale if they canbe sold in their current condition and a sale is highly
probable. Such assets may be individual non-current
assets, groups of assets (disposal groups) or complete
business entities. A disposal group may also include
liabilities if these are to be divested together with theassets as part of the transaction.
The assets and liabilities in question are each reported ina separate line item in the statement of financial position.
Intangible assets and property, plant and equipment held
for sale are not subject to any further amortization or
depreciation, and are recognized at the lower of carrying
amount at the time of classification as held for sale andfair value less costs to sell. Intra-Group receivables andliabilities are eliminated in full. The previous year’s figures
are not restated.
Presentation in the income statement focuses on the
profit or loss from continuing operations and also
includes the profit or loss from assets and liabilities
held for sale. By contrast, earnings from discontinued
operations are shown under “Income after income taxes
from discontinued operations.” The elimination entries
as part of the consolidation of expense and income areassigned fully to discontinued operations. The prioryear period in the income statement is restated when

Financial Statements

Further Informationa discontinued operation is reported for the first time.
The gain or loss on deconsolidation is recognized underdiscontinued operations.
The notes to items of the statement of financial position
provide details of the reconciliation from values at thestart of the year to values at the end of the year. The
presentation of the reconciliations focuses on continuing
operations. Non-current assets and liabilities held for saleand discontinued operations are reported under “Adjustments in accordance with IFRS 5.” They include thereclassification of the carrying amounts for discontinued
operations at the start of the fiscal year and the reclassification of the carrying amounts of the non-current assets
and liabilities held for sale as of the reclassification datein accordance with IFRS 5.

Sales and other revenues
Sales in the course of ordinary activities are recognized
in revenue. These are essentially sales of internally generated chemical products or from tolling agreements forsuch products. In addition, research and development
work, sales- and product-related services and otherlong-term services are also recognized in revenue.
Services that do not relate to ordinary activities and thatare temporary are reported in other operating income.
Revenue is recognized depending on the transfer ofcontrol over products or services to the customer.

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Control can be transferred either at a point in time or overtime. Control has been transferred when the customer
has obtained the ability to direct the use of, and obtain
the remaining benefits from, the asset. There are typicallyno rights of return.
Depending on the terms and conditions of delivery,
revenue from the sale of chemical products is typicallyrecognized when the customer or a third party commissioned by the customer receives the products. At thistime, the risks and rewards have been transferred tothe customer, the customer has physically received thegoods and, normally, there are no longer any outstanding
performance obligations preventing the customer’s
acceptance of the product. The time at which the right toreceive payment and the time when legal title passes aregoverned by individual regulations and are referenced indetermining the timing of revenue. Revenue is measured
at the invoice amount after deducting transfer taxes andsales deductions.
Under the business model of manufacturing products on
the basis of long-term sales contracts with contractually
defined minimum purchase requirements, revenue isrecognized when the customer receives the goods.
Revenue is measured by estimating the total revenue
expected in the future from the sale of minimum amounts
over the full term of the contract and allocated to theindividual deliveries. Rebates and material rights to
procure expected additional purchase quantities aretaken into account in the total revenue from the sale.

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Differences from the invoice price arising as a result of
average pricing are recognized as contract assets or
liabilities that are reversed over the term of the contract.
Under the business model of manufacturing customer­specific products on the basis of long-term supply agreements with a contractually defined minimum purchaserequirement, within the meaning of the rules of IFRS 15,
the LANXESS Group has no alternative use for the
products manufactured under these contracts. Moreover,it has a contractually enforceable right to payment forthe minimum amount under the purchase requirement.
Revenue for finished goods and work in progress, andfor advance consideration paid by the customer, isrecognized over the manufacturing period. Revenue
for finished goods is measured based on the volumes
produced for the fiscal year. For finished products, thetotal revenue expected in the future from the sale ofminimum amounts over the full term of the contract isestimated and allocated to the individual production
units. Rebates and material rights to procure expected
additional purchase quantities are taken into accountin the total revenue from the sale. Revenue for work inprogress is measured based on the production costs
incurred, which are calculated using the input method
taking into account a pro rata margin for the end product(see remarks on inventories in this section for notes on
the calculation of production costs). Contract assets
are recognized for the corresponding receivables until
the products are delivered. The relevant inventories are
derecognized when revenue is recognized. When the

Financial Statements

Further Information

products are delivered, the contract assets are reversed
and trade receivables are recognized.
Under the business model sale of products includingorganizing freight services, control transfers to thecustomer on the basis of the agreed terms and conditions of delivery, essentially at the end of the freight
service. Thus, revenue is measured and recognized at
the invoice amount after deducting transfer taxes andsales deductions. The freight service is not treated as aseparate performance obligation.
Tolling agreements for chemical products, research anddevelopment work, sales and product-related services
and other long-term services are recognized in revenue
over the performance period and at the invoice amountafter deducting transfer taxes and sales deductions.
Customer rebates that are not attributable to the businessmodels of manufacturing products or customer-specificproducts on the basis of long-term sales contracts with
contractually defined minimum purchase requirements
are recognized in the period in which the revenue isrecognized.

Research and development expenses
According to IAS 38, research costs cannot be capitalized, whereas development costs must be capitalized
if, and only if, specific narrowly defined conditions are
fulfilled. Development costs must be capitalized if it issufficiently certain that the development activity will

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generate future economic benefits which will also cover
the associated development costs. However, since thedevelopment and optimization of products and processes
frequently involves uncertainty with regard to the ability
to realize future economic benefits, the conditions forcapitalization of development costs are generally not met.

Income taxes
This item comprises the income taxes paid or accruedin the individual countries, plus deferred taxes. Income
taxes are computed on the basis of local tax rates.
Income tax receivables and liabilities relate to both therespective reporting year and previous years. They
are assessed on the basis of the applicable legislation,
taking into account present legal practice judgments andprevailing expert opinion. Uncertain income tax items arerecognized provided that payment or reimbursement is
considered probable. They are measured individuallyat the most probable amount or the expected value,depending on which measurement provides the best
estimate of the uncertain tax item in question.
In accordance with IAS 12, deferred taxes are calculated
for temporary differences between the carrying amountsof assets or liabilities in the statement of financial position
and the tax base and for differences arising from consolidation measures or realizable tax loss carryforwards.
The calculations are based on tax planning calculations
and customary and realizable tax strategies. Deferredtaxes are calculated at the rates which are expected toapply in the individual countries at the time of realization,
taking into account the period for which deferred taxes
may be used and any constraints on the utilization of

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Corporate GovernanceManagement Reportloss carryforwards. These are based on the statutory
regulations in force, or already enacted in relation to
future periods, as of the closing date.
Deferred tax assets are reviewed at each closing dateand only the amount likely to be realizable due to futuretaxable income is recognized. Deferred tax assets fromloss carryforwards are recognized if it is probable thatthe carryforwards can be utilized.
Deferred tax assets and liabilities are netted if they relate
to income taxes levied by the same tax authorities.

Business acquisitions and divestments
Business acquisitions are accounted for using the acquisition method. At the time of initial control, the acquired
assets and liabilities are measured at fair value. The
incidental acquisition costs associated with the businessacquisition are recognized as an expense in the period
in which they are incurred.
Divestments of shares in subsidiaries resulting in the lossof control are generally recognized in profit or loss. In thecase of successive share disposals without loss of control,
the decline in the majority share is recognized throughother comprehensive income and results in an increase in
non-controlling interests in equity. If significant influence
continues to be exerted after loss of control, an interest
in an associate accounted for using the equity method
is recognized. As soon as there is no longer a significant
influence on financial and business policy, the remaining
interest is classified as a financial asset and changes in its
value are recognized at fair value in other comprehensive
income or in profit or loss.

Financial Statements

Further Information

Statement of cash flows
The statement of cash flows shows how cash inflows
and outflows during the reporting year affected the
cash and cash equivalents of the LANXESS Group.
Cash flows are classified by operating, investing andfinancing activities in accordance with IAS 7. The liquidity
reported in the statement of cash flows comprises cash
and cash equivalents.
The cash flows of continuing operations are reported
separately from the cash flows of discontinued operations. The cash flows of discontinued operations areshown combined in one line per area. When a discontinued operation is recognized for the first time, theprevious year’s figures are restated accordingly.
The cash flows from operating activities are calculatedusing the indirect method. This involves eliminating theeffects of currency translation, of the initial applicationof financial reporting standards and of changes in the
consolidated group from the changes recognized in theitems in the statement of financial position.
Therefore, the cash flows calculated by the indirect
method cannot be directly derived from the statementof financial position. Disbursements for the acquisitionof property, plant and equipment are included in the
cash flows for investing activities after deducting any
third-party subsidies. Investments involving leases,
along with capitalized borrowing costs, are not included.
Comparison therefore should not be made between
these items and the capital expenditures shown in theschedule of changes in property, plant and equipment.

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Disbursements made under leases where LANXESS is
the lessee are recognized as cash outflows for financing
activities, while cash inflows under finance leases where
LANXESS is the lessor are recognized as cash inflows
from investing activities. Payments for short-term leases
and leases for low-value assets are included in cash flows
from operating activities. Cash inflows from operatingleases where LANXESS is the lessee are also attributed
to operating activities.
Cash flows relating to the financing of pension obligations
where future pension payments will be made directly
out of external plan assets are allocated to cash flows
for operating activities.
Cash outflows in connection with contractual trust
arrangements (CTA) relating to the financing of pension
obligations are allocated to cash flows for operating
activities, analogously to pension payments made.
Resulting reimbursements of pension payments madeby LANXESS are reported in the cash flow statement
as cash flows from operating activities.
Cash inflows from financial assets or other assets held
for investment purposes are shown under investing
activities, analogously to cash outflows.
Purchase prices paid or received in connection withacquisitions or divestments of subsidiaries or otherbusiness entities are included in the investing cash flows

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Corporate GovernanceManagement Reportof continuing operations after deducting cash and cash
equivalents acquired or divested. They also include
purchase price payments for discontinued operations.
Interest and dividends received are also included ininvesting cash flows, while interest and dividends paid
as well as incoming and outgoing payments from interest
rate hedges are reported in financing cash flows.

Global impairment testing procedureand impact
In the LANXESS Group, the impairment testing of
non-current assets starts with an analysis to determine
whether impairment charges need to be recognized orpreviously recognized impairment charges reversed. If
there are indications that this is the case, the carrying
amount of each cash-generating unit is compared with
its recoverable amount. In the LANXESS Group theseanalyses are performed at least once a year.
For the impairment testing of assets, the LANXESSGroup generally defines its business units as cash-­generating units.
If there is reason to suspect impairment or reversals of
impairment of non-current assets below the level of the
cash-generating units, impairment testing is performedat this level and impairment charges or reversals of
impairment charges are recognized in profit or loss
where necessary.

Financial Statements

Further Information

Cash-generating units to which goodwill is allocated
are tested annually for impairment – or more frequently
if events or changes in circumstances otherwise
indicate a possible impairment. This generally occurs
as of September 30 at the level of the cash-generating
units. The carrying amount of each cash-generating
unit, including the goodwill allocated to it, is comparedagainst its recoverable amount.
Cash-generating units that have acquired goodwill in
the reporting year are also tested for impairment at theend of the reporting period.
The recoverable amount is the higher of the asset’s fairvalue less costs of disposal and the value in use. If thecarrying amount of a cash-generating unit exceeds therecoverable amount, impairment in the amount of thedifference must be recognized in certain circumstances.
The fair value less costs of disposal – which represents
the best estimate of the potential sale proceeds at thetime of the respective impairment test – is the amountobtainable from the sale of a cash-generating unit in anarm’s length transaction between knowledgeable, willing
parties, less the costs of disposal. The value in use isdefined as the present value of future cash flows basedon the continuing use of the asset and its retirement
at the end of its useful life. The first step in assessing
whether to recognize or reverse an impairment charge
is to determine the fair value less costs of disposal. If thisis lower than the carrying amount of the cash-­generating

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unit, the value in use is then determined. The fair valueless costs of disposal is generally calculated using a
net present value method which is allocated to Level 3of the fair value hierarchy (see under“Fair value
measurement” in Note [38]).
Determination of the recoverable amount based on
the fair value less costs of disposal generally relies on
a forecast of future net cash flows. This is based on theplanning approved by the management of LANXESS AG,
which contains estimates of expected market conditions
and other factors such as future raw material prices,energy costs, functional costs, exchange rates andcapital expenditures. The interactions between thesefactors are reflected in the expected net cash flows.
The estimates of future market developments on which
detailed planning is based are dependent on the respective customer industries and draw on management’s
past experience, taking account of internal and external
economic and industry-specific sources of information.
Capacity expansions, reorganization projects and theresulting synergies, provided these can also be usedby a third party, are reflected in future net cash flows
through estimates.
Determination of the value in use is based on a corresponding forecast of future net cash flows. However, cash
inflows and outflows relating to expansion projects that173

Corporate GovernanceManagement Report

Financial Statements

Further Information

have not yet commenced, restructuring that is planned
but has not yet been approved, and the associatedsynergies are not taken into account. Group functional
area costs are included if a potential acquirer would haveto bear them. The forecasts used to calculate the fairvalue less costs of disposal and to determine the value
in use typically cover a five-year period. The perpetual
annuity calculation is generally based on the last year
in the planning period. Due to the increased inflation
expectations, a growth rate of 1% is accounted for in theperpetual annuity in fiscal year 2023, as in the previous
year. Where necessary, adjustments are made to reflect
the so-called steady state of the perpetual annuity.
Future net cash flows are discounted using the weighted
average cost of capital, which is derived according to
IAS 36 from capital market models, taking into accountthe capital structure and business risks specific to thechemical industry, and is extrapolated from externalmarket information.

If the amount of impairment charges recognized in profit
or loss is determined as part of the impairment test, an
impairment charge is first recognized for any goodwill
assigned to the respective cash-generating unit. A
remaining impairment amount is allocated among theother non-current assets of the cash-generating unit inproportion to the carrying amounts on which the impairment test was based. The recoverable amount of any
non-current assets below the level of the cash-generating
unit is assessed and the loss is allocated, but only up
to the recoverable amount of these assets. Any further
impairment charge that would have been allocated tothese assets is allocated proportionately to the otherassets in the cash-generating unit.

The residual carrying amounts of the respective cash
generating unit include the right-of-use assets from leases
as part of property, plant and equipment. Lease liabilities
as financial liabilities are not included. When deriving thenet cash flows, cash flows are increased by depreciationof right-of-use assets but decreased by replacement
investments in right-of-use assets and lease payments
for short-term leases and leases of low-value assets.

If the impairment test on the cash-generating units
indicates a need to reverse impairment charges recognized on assets in previous years because the reasonsfor the impairment no longer exist or have changed, theimpairment charge is reversed only up to the amount thatwould have existed after depreciation or amortization if
the impairment had not been recognized. Impairment
charges on goodwill are not reversed. Reversals of

Impairment charges are fully recognized in the income
statement under other operating expenses and reported
in the expenses of the respective segments in segment
reporting.

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impairment charges are fully recognized in the income
statement under other operating income and reflectedin the segment reporting in the income of the respective
segments.
The results of the global impairment tests in fiscal years
2022 and 2023 are outlined in the following section.

ESTIMATION UNCERTAINTIES AND
THE EXERCISE OF DISCRETION
The preparation of consolidated financial statements inaccordance with IFRS entails the selection of accounting
policies and valuation principles and the use of forward
looking assumptions and estimates that may affectthe measurement of assets and liabilities, income andexpenses, contingent liabilities, and other financial
commitments.
All assumptions and estimates made in the consolidated
financial statements are based on management’s
expectations and take into account the informationand knowledge available as of the time of preparing
the consolidated financial statements. Information that
could alter these estimates is reviewed continually andmay result in adjustments to the carrying amounts of the

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Corporate GovernanceManagement Reportrespective assets and liabilities. This is particularly truein the context of the tense geopolitical situation over thecurrent international crises, such as the war in Ukraine
and the conflict in the Middle East. Because the further
course of the current geopolitical conflicts remains
difficult to predict, the future societal and economic
effects are associated with a high level of uncertainty.
Another business uncertainty factor is the challenging
macroeconomic environment. This is characterized
among other things by high interest and inflation rates,
persistent volatility in energy, logistics, raw material andselling prices in particular, supply chains impacted bygeopolitical conflicts, and a generally gloomy economic
outlook. Global climate change and the transition to a
low-carbon economy can also entail potential uncertainties for LANXESS. For example, national, international
and independent measures to combat climate change
can affect the nature and scope of the intended use
as well as the intrinsic value of non-current assets.
Moreover, such measures can also result in increasing
volatility of energy prices or generally infringe on theavailability of goods and raw materials. The increase in
extreme weather events can have an adverse impact
on LANXESS’s global supply chains. This can result inrising transport and logistics costs as well as disruption
to goods flows. The uncertainties caused by climatechange with regard to the plannability of certain revenue

Financial Statements

Further Informationand cost components in financial planning can affect thedetermination of the various values stated in the consolidated financial statements. The challenging geopoliticaland macroeconomic environment and the impact ofclimate change are sources of uncertainty for businessperformance. As a result, it cannot be ruled out that theassumptions and estimates made in these consolidated
financial statements may have to be adjusted in the
future and that these adjustments may have an impact
on the financial position or results of operations. The
management sees no indications that the assumptions
and estimates made do not appropriately reflect thesituation as of the time of preparing the consolidated
financial statements.
The areas in which assumptions and estimates are
significant are outlined below:
At least once a year, the LANXESS Group conducts
impairment tests on the cash-generating units to which
goodwill has been allocated. Impairment tests are also
conducted if there is an indication of a possible impairment (for further information see“Global impairment
testing procedure and impact”). To determine fair valueless costs of disposal, the impairment tests of assets
and goodwill are based on net present value methods,
which are allocated to Level 3 of the fair value hierarchy.

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Management ReportManagement’s assumptions and estimates used for the
impairment tests conducted on assets in fiscal year
2023 and for the goodwill impairment tests could differ
from the actual values in subsequent periods, necessitating subsequent valuation adjustments. Management’s
expectations of future net cash flows therefore have anindirect impact on the valuation of goodwill and otherassets. The planning assumes a recovery in global
demand and the end of the Ukraine war in the planning
period and subsequently expects a decline in inflation,energy prices and a general recovery of the businessenvironment. Additional opportunities are seen in thetransition to a low-carbon economy and the intensification of business activities in the “Green Products” sector.

after taxes was 7.6% (previous year: 8.1%). Because themarket environment remains challenging in 2024 anddue to management’s adjusted estimates regarding the
expected market recovery in the business areas affected,
this repeated impairment test resulted in the need torecognize an impairment charge of €259 million in
the Flavors & Fragrances cash-generating unit in theConsumer Protection segment and an impairment chargeof €147 million in the Polymer Additives cash-generating
unit in the Specialty Additives segment.

The annual impairment test for the goodwill items is
performed on the basis of fair value less costs of disposal.
The goodwill items are carried in local currency. The
annual goodwill impairment test as of September 30 isbased on a discount rate after taxes of 8.4% (previous
year: 7.5%). This annual goodwill impairment test did
not indicate any need for the recognition of impairment
charges.

The Flavors & Fragrances business unit operates globallyin the field of consumer goods. These include preservatives for use in food, household products and cosmetics,
flavors and fragrances as well as preservative products
for animal nutrition and animal health. In the long term,
additional market potential is to be unlocked throughorganic growth. In the consumer goods business, significantly stronger growth is also expected in the long termin the end markets, especially personal and home careand flavors and fragrances. Furthermore, it is assumed
that the “Green Products” sector will become much more
important. As a result, ten-year planning was used toderive the fair value less costs of disposal of the Flavors &Fragrances business unit.

As a result of the adjusted earnings forecast in the fourth
quarter of 2023 and the persistently weak demand situation in 2024, the assets of all cash-generating units were
tested for impairment again as of December 31, 2023.
At the end of the reporting period, the discount rate

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Corporate Governance

As in the previous year, the goodwill impairment test in
the other cash-generating units did not indicate any needfor recognition of impairment charges.

Financial Statements

Further Information

Induced by a market environment that remains
challenging in 2024 and is characterized by high inflation and lower-than-expected demand, changes in themarket and competitive environment are forecast for thebusiness of the Flavors & Fragrances cash-generating
unit. Consequently, the value arising on the basis of theten-year planning was examined over the entire assessment period in order to derive the recoverable amount,and the knowledge obtained was taken into considerationin the measurement. The recoverable amount of the
Flavors & Fragrances cash-generating unit is the fairvalue less costs of disposal and amounts to €776 million.
The resulting impairment charge was recognized in
the income statement under other operating expenses.
The full impairment charge relates to the goodwill of
the Flavors & Fragrances business unit. As of the endof the reporting period, this amounted to €182 million(previous year: €456 million). In addition, changes also
result from currency effects.
The business activities of the Polymer Additives
cash-generating unit comprise the production andsale of bromine, bromine derivatives and phosphorous
chemicals for the construction, electrical/electronics,
primary metal and food-processing industries.

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The still challenging market environment in 2024 andthe weaker-than-expected recovery of demand andselling prices in the markets relevant for the Polymer
Additives business unit resulted in an adjusted estimateof expected growth. Consequently, the value arising on
the basis of the five-year planning was examined over theentire assessment period in order to derive the recoverable amount, and the knowledge obtained was taken
into consideration in the measurement. The recoverable
amount of the Polymer Additives cash-generating unit
is the fair value less costs of disposal and amounts to€963 million.
The resulting impairment charge was recognized in
the income statement under other operating expenses.
The full impairment charge relates to goodwill. Goodwill
in the Polymer Additives business unit amounted to€184 million (previous year: €343 million) as of the endof the reporting period. In addition to the impairment,changes compared with the previous year also result
from currency effects.
In the previous year, goodwill of €468 million was
acquired through the acquisition of the Microbial Control
business from U.S. corporation International Flavors &Fragrances Inc. The acquired business was allocatedto the Material Protection Products business unit in the176

Corporate GovernanceManagement Report

Consumer Protection segment. In total, goodwill in the
Material Protection Products business unit amounted
to €638 million as of the end of the reporting period(previous year: €655 million). The changes comparedto the previous year are due to currency effects.
Additional material goodwill of €212 million (previous
year: €220 million) relates to the Lubricant Additives
business unit and €154 million (previous year:€160 million) to the Urethane Systems business unit.
Other business units account for goodwill of €15 million(previous year: €15 million). The changes compared tothe previous year are due to currency effects.
Information on calculating the net cash flows can befound in this section and the previous section.
The Material Protection Products business unit is a global
provider of products in the fields of biosafety, industrial
biocides and consumer protection. The ­L ubricant
Additives business unit essentially manufactures
additives for the construction, electrical/electronics,
primary metal and food-processing industries. Urethane
Systems produces elastomers on a urethane basis,
which are used in the automotive, electrical/electronics,
construction and various other industries.

Financial Statements

Further Information

The Material Protection Products business unit planned
annual sales growth of 8% (previous year: 5%), and the
Flavors & Fragrances business unit planned annual
sales growth of 5% (previous year: 2%). Annual sales
growth of 5% (previous year: 4%) was assumed for the
Urethane Systems business unit. Annual sales growth of
6% (previous year: 4%) was assumed for the Lubricant
Additives business unit and 5% (previous year: 3%) for
the Polymer Additives business unit.
A sensitivity analysis for the cash-generating units towhich goodwill has been allocated assumed a decline in
the future net cash flows of 10%, an increase in weighted
costs of capital of one percentage point or a decline
in the long-term growth rate by one percentage point.
The scenarios would not have resulted in impairment on
goodwill in any other cash-generating unit.
The impact of the ongoing trade conflict between China
and the U.S. on LANXESS was investigated. The assessment found that only isolated products in the LANXESS
portfolio are affected, and that there is only a low level ofgoods flows between China and the U.S. A significant andnegative impact on the business activities of LANXESS
is therefore not expected as a direct consequence of theconflict.

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In conjunction with accounting for leases, estimates are
made in particular to determine the term of leases. The
information available as of the end of the reporting period
concerning the economic incentives of exercising or not
exercising renewal or extension options is taken into
account. If implicit discount rates cannot be identified in
the underlying lease, estimates are also made in order todetermine appropriate incremental borrowing rates. The
latter are derived using yields with matching maturities
on government bonds for the country in question in therespective currency and adding credit risk premiums, andderived on a straight-line basis with regard to maturity
ranges.
The recognition and measurement of provisions are also
affected by assumptions as to the probability of utilization,
timing, the underlying discount rate and the absolutelevel of risk. The LANXESS Group performed sensitivity
analyses on provisions for the 2023 consolidated financial
statements, as required by IFRS. These involved calculating
the impact of isolated variations in the parameters used,especially the forecast probability of occurrence, discountrate and absolute level of risk. The outcome of these sensitivity analyses shows that variations in the assumptions
described above would not have a material impact on
the level of other provisions reported in the consolidated
financial statements of the LANXESS Group.

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Defined benefit pension plans also necessitate actuarial
computations and measurements. Further information on
the assumptions regarding the valuation parameters on
which the actuarial calculations and estimates were based
can be found under “Provisions for Pensions and Other
Post-Employment Benefits.” This section also contains
sensitivity analyses relating to provisions for pensions andother post-employment benefits (see­Note [15]).
The LANXESS Group is affected by legal disputes. As aninternational chemicals group, LANXESS is exposed toadministrative or court proceedings in the normal courseof business and may be again in the future. Administrative and court proceedings generally involve complex
technical and legal issues and are therefore subject
to a number of imponderables. The outcomes of any
current or future proceedings cannot be predicted withcertainty. It is therefore possible that legal judgments
could give rise to expenses that are not covered, or not
fully covered, by recognized provisions or equivalent
insurance and that could materially affect the business
operations, revenues, earnings or cash flows of the
LANXESS Group.
The establishment of provisions for environmental
protection and remediation measures also involves
uncertainty and requires calculations and estimatesof future costs. Please see
Note [16] for further
information.

Financial Statements

Further Information

There is also uncertainty surrounding the assessmentof certain tax situations by the tax authorities. Although
the LANXESS Group believes it has presented all
tax-relevant information correctly and in compliancewith the law, it is possible that the tax authorities may
occasionally reach different conclusions. Provisions havebeen established where changes in tax assessments
are probable. In addition, charges from tax risks fromprevious years are not considered to be likely. Whenassessing uncertain tax positions, it is assumed thatthe tax authorities have full knowledge of all related
information when making their examinations. In the eventof unfavorable developments, LANXESS could be facedwith additional charges in the low-to mid-double-digit
millions of euros. The calculations are principally basedon experience of the outcome of previous tax audits
and their impact on the subsequent periods and theapplicable legislation, taking into account present legal
practice and prevailing expert opinion. This could result
in deviations from the current estimates in the future.
Generally accepted measurement methodologies areused to calculate the fair values of financial instruments(see
Note [38]), within Level 2 and Level 3 of the fairvalue hierarchy. The generally accepted measurement
methodologies are essentially option pricing models tomeasure stock warrants. The results of such measurement models are dependent on the basic parameters
applicable at the end of the reporting period, such as
interest rate, volatility, unit price, term and exchange rate.

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The basic parameters will change during the term of theloan until the options are exercised, thereby causing
future changes in fair value.
Within financial instruments, there are also estimation
uncertainties regarding the accounting valuation of
LANXESS’s possibility to sell its shares in Envalior GmbH,
Cologne, Germany, to Advent for the first time three years
after the formation of Envalior under certain conditions.
A value can already be attributed to this possibility on
the valuation date if LANXESS is better off under thecontractual agreement than it would be in a comparable
arm’s length transaction at customary conditions basedon fair value. The main factor affecting the valuation is
the further business performance of the associate in
the coming years. The fair value of the right to offer isdetermined using an appropriate measurement model.
The result of the valuation is materially determined bybasic para­­meters underlying the model, such as businessplan, capital costs, volatility, and composition of thepeer group. There are therefore uncertainties resulting
in particular from the assumptions made as of thereporting date and the management’s expectations in thedetermination of the basic parameters. Corresponding
changes to these assumptions result in a future fair value
adjustment.

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However, the final selling price will depend on Envalior’s
EBITDA of the last twelve months when LANXESS utilizes
its possibility to offer its shares in Envalior for Adventto purchase after three years. Therefore, neither theaccounting measurement of the investment accounted
for using the equity method nor that of LANXESS’s
possibility to offer the shares for sale is decisive for theamount of the selling price actually achievable.
In the context of business acquisitions, the applicationof the acquisition method requires certain estimatesand assessments as of the acquisition date. This relates
in particular to the determination of the fair value, theestimation of useful lives of acquired intangible assets
and property, plant and equipment, and the determination of the fair values of assumed liabilities. The measurement is essentially based on future cash inflows andoutflows. Deviations between the actual cash inflows andoutflows and those assumed at the acquisition date cansignificantly influence future net income. Purchase priceallocation is generally performed in consultation withexternal experts. For smaller acquisitions, the purchaseprice allocation is essentially based on the Group’s
own estimates and measurements. The estimates andmeasurements are based on knowledge available on
and immediately after the acquisition date. They canbe adjusted within one year of the date of acquisition toreflect new information and findings.

Financial Statements

Further Information

The investment in Envalior GmbH, Cologne, Germany,is initially recognized at fair value in accordance withthe equity method. The measurement is primarily
derived from future cash inflows and outflows basedon assumptions and estimates. These are based on
management’s expectations and take into account the
information and knowledge available as of the time of
preparing the consolidated financial statements. Deviations between the actual cash inflows and outflows andthose assumed at the acquisition date can significantly
influence future net income. Both the initial recognition
and the subsequent measurement of the investment in
Envalior GmbH are based on financial information that asof the date of preparation of the LANXESS consolidated
financial statements represents preliminary informationthat is still being audited by the auditor of the consoli­
dated financial statements of Envalior GmbH. There
are therefore uncertainties over the carrying amounts
recognized and the subsequent measurement during theyear. As a result, it cannot be ruled out that the underlying
financial information of Envalior GmbH will be adjusted in
the future due to new information and findings, and thatthese adjustments may have an impact on the financial
position or results of operations of the LANXESS Group.
In some cases, estimates were made to calculate thevalues recognized for discontinued operations. Theseestimates are based on the information available at theclosing date, so changes may arise as a result of new
information or final sale agreements.

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When measuring revenue under the business model oflong-term sales contracts with a contractually definedminimum purchase requirement, the total revenue
expected in the future from sale of the minimum amountis estimated for the full term of the contract and allocatedto the individual deliveries, or in the case of the production of customer-specific products to the individual
production units. Estimates are based on the current
planning for forecast future sales prices and quantities.
In particular, sales prices can change over the term of acontract as a result of mechanisms for adjusting prices(formula prices for production factors, bulk prices, rebateagreements), hence deviations from current estimates
may arise in the future.
Other significant estimates and discretion are used toassess the useful lives of intangible assets and property,
plant and equipment, the capitalization of development
costs, the probability of collecting receivables and otherassets, the valuation of inventories and the ability torealize tax claims and deferred tax assets recognized
for temporary differences and tax loss carryforwards.

COMPANIES CONSOLIDATED
The consolidated financial statements of the LANXESSGroup include the parent company LANXESS AG and
all domestic and foreign affiliates.

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EMEA(excluding
Germany)

Financial Statements

Germany

Americas

Further Information

Asia-Pacific

Total

Fully consolidated companies(incl. parent company)
Jan. 1, 2023

51

14

25

36

126

Retirements

(9)

(2)

(4)

(6)

(21)

Mergers

(1)

(1)

(4)

(2)

(8)

Changes to companies consolidated

(1)

(1)

(1)

–

(3)

Dec. 31, 2023

40

10

16

28

94

Associates and joint operations
Jan. 1, 2023

0

1

2

0

3

Retirements

–

(1)

–

–

(1)

Changes to companies consolidated

–

1

–

–

1

Dec. 31, 2023

0

1

2

0

3

Non-consolidated companies
Jan. 1, 2023

2

3

2

3

10

Mergers

–

(1)

–

–

(1)

Changes to companies consolidated

1

–

1

–

2

Dec. 31, 2023

3

2

3

3

11

Total
Jan. 1, 2023

53

18

29

39

139

Retirements

(9)

(3)

(4)

(6)

(22)

Mergers

(1)

(2)

(4)

(2)

(9)

Changes to companies consolidated

0

0

0

–

0

Dec. 31, 2023

43

13

21

31

108

LANXESS and the private equity investor Advent­International (“Advent”) completed the formation of
Envalior as of April 1, 2023. Envalior GmbH, Cologne,
Germany, is included in the LANXESS consolidated
financial statements as an associate accounted forusing the equity method (seeNote [3]). LANXESS’s

share in its capital is 40.94%. In connection with theformation of Envalior and the associated contributionof the High Performance Materials business unit, a totalof 16 domestic and foreign investee companies were
deconsolidated.

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The other decline in fully consolidated companies in thereporting year resulted primarily from the integration ofcompanies acquired in previous years in the acquisitionsof the Microbial Control business and of the company
Emerald Kalama Chemical.
In addition, Viance LLC, Wilmington, U.S., is accounted
for as an associate in the consolidated financial statements using the equity method (seeNote [3]).
LANXESS’s share in its capital is 49.99%. The company
provides wood treatment technologies and services tothe wood preservation industry.
Rubicon LLC, Salt Lake City, U.S., is included in the
consolidated financial statements as a joint operationin accordance with IFRS 11 on a pro rata basis because
the partners exercise joint control and purchase all of
its output. LANXESS’s share in its capital is 50%. The
purpose of the company is essentially to produce aniline,
diphenylamines, methylene diphenyl isocyanates andpolyols for the joint owners and their affiliated companies.
This business relationship does not involve any material
risks for LANXESS.
Non-consolidated companies are immaterial to the
LANXESS Group’s earnings, asset and financial position,
since together they account for around 0.1% of Groupsales and around 0.1% of Group equity.

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Additions from acquisitions in the­previous year
With effect from January 1, 2022, LANXESS acquired
the distribution business of a German distribution
partner with around ten employees for the productVelcorin®. With this acquisition, LANXESS expanded
its distribution of cold sterilization and preservation
agents for the beverage industry in Europe. The business
was integrated into the Material Protection Products
business unit of the Consumer Protection segment. The
acquired distribution business generated sales in the
low double-digit millions in euros in 2021. The purchaseprice amounted to around €21 million and is mainly
attributable to acquired distribution rights and customer
relationships. The acquisition resulted in goodwill ofaround €7 million.

Financial Statements

Further Information

assets. The purchase price allocation was completed
within its measurement period and is considered final.
On the basis of new information and findings, othernon-current liabilities have increased by €14 million andthe purchase price has decreased by €8 million. Finally,
goodwill increased by €6 million.
The goodwill of €468 million resulting from the acquisition mainly reflects additional sales opportunities. This
goodwill is to be regarded as non-tax-deductible.
The following table shows the effects of the acquisitionof Microbial Control on the Group’s financial position:
Fair values
at first-time
consolidation€ million

On July 1, 2022, LANXESS completed the acquisitionof the Microbial Control business from U.S. corporation
International Flavors & Fragrances Inc. The business was
integrated into the Material Protection Products business
unit of the Consumer Protection segment. The purchaseprice amounted to €1,161 million and was paid out ofexisting liquidity.
The acquisition was accounted for as a business combination in accordance with IFRS 3. For the purchase priceallocation, the identifiable assets, liabilities and contingent liabilities of the business acquired were recognizedat fair value. The intangible assets are mainly customer
relationships, product registrations, and other intangible

Intangible assets

365

Property, plant and equipment

82

Inventories

147

Trade receivables

72

Cash and cash equivalents

47

Other assets

102

Total assets

815

Provisions for pensions and other post-employment benefits

1

Other non-current liabilities

57

Trade payables

49

Other current financial liabilities

2

Other current liabilities

13

Total liabilities (excl. equity)122

Net acquired assets (excl. goodwill)
Cost of acquisition
Goodwill

693
1,161
468

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Divestments
In fiscal year 2023, LANXESS terminated its activities in
Russia with the sale of the companies OOO LANXESS,
Moscow, Russia, and OOO LANXESS Lipetsk, Lipetsk,
Russia, to Nortex LLC, Moscow, Russia. The impaired
assets and liabilities to be disposed of had a net asset
value of €1.9 million. After offsetting against a loan
receivable due from LANXESS, the final purchase priceamounted to €1.6 million. The loss on the disposal of thebusiness in Russia amounted to €0.3 million.

Discontinued operation and transition
to investment accounted for using theequity method

Corporate GovernanceManagement Report

Performance Materials business unit were not subject tofurther depreciation or amortization and were recognizedat the lower of carrying amount as of June 1, 2022,
and fair value less costs to sell. Intra-Group receivables
and liabilities between LANXESS companies and thediscontinued operation were eliminated in full.
Due to the formation of Envalior as of April 1, 2023, andthe associated contribution of the High Performance
Materials business unit, the business unit was deconsolidated at the same time.
The carrying amounts of the assets and liabilities of theHigh Performance Materials business unit disposed ofare shown in the following table:

High Performance Materials business unit
On May 31, 2022, LANXESS and Advent agreed on a
strategic alliance. In addition to signing an agreement toacquire the engineering materials business of the Dutchgroup Royal DSM, LANXESS agreed to contribute its
High Performance Materials business unit to the strategic
alliance with Advent.
From June 1, 2022, the High Performance Materials
business unit was reported as a discontinued operationin accordance with IFRS 5. Under IFRS 5, intangible
assets and property, plant and equipment of the High

181

Carrying Amounts of Assets andLiabilities Disposed Of€ million

Financial Statements

Further Information

In detail, earnings from discontinued operations are as
follows:
Income Statement from Discontinued Operations€ million

2022

2023

Sales

1,924

396

Other income and expenses(1,813)

987

Income before income taxes

111

1,383

Income taxes

(38)

(89)

Income after income taxes

73

1,294

As a result of the deconsolidation of the High ­Performance
Materials business unit as of April 1, 2023, the sales
recognized in the income statement from discontinued
operations for fiscal year 2023 relate exclusively to thefirst quarter of fiscal year 2023. The gain on the deconsolidation of the High Performance Materials business
unit is included under “Other income and expenses.”

Apr. 1, 2023

Property, plant and equipment andintangible assets

556

Inventories and trade receivables

610

Other assets

159

Total assets

1,325

Provisions

98

Trade payables

173

Other liabilities

128

Total liabilities399

As part of the transaction, LANXESS received a paymentof €1,267 million on March 31, 2023. The cash andcash equivalents disposed of in this context amounted
to €74 million. The expense from income taxes to beconsidered at the time of the transition to an investment
accounted for using the equity method amounted to€7 million. In total, an income tax expense of €98 million
was incurred in connection with the transaction. Further

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LANXESS on the Capital Market

information on the shareholder loan issued in connection
with the formation of Envalior and the possibility to sell
the shares in Envalior GmbH, Cologne, Germany, toAdvent can be found in
Note [38].
Gain on the Disposal€ million

2023

Total consideration received

1,267

Net assets disposed(926)

Other effects

32

Fair value of the minority interest in Envalior

999

Gain on the disposal before income taxes

1,372

Income taxes
Gain on the disposal

(7)
1,365

The transaction resulted in a gain of €1,365 million. It
is reported in the LANXESS Group income statement
under “Income after income taxes from discontinued
operations.” The gain on the disposal is recognized in“income from discontinued operations” in the statementof comprehensive income.
As of December 31, 2023, LANXESS held a minority
interest of 40.94% in Envalior GmbH, Cologne, Germany.
The investment is included in the LANXESS consolidated financial statements using the equity method
Note [3]). On the basis of new information(see
and findings within the one-year measurement period,
the initial measurement of the minority interest as ofApril 1, 2023, was adjusted. The carrying amount of theinvestment decreased by €227 million to €999 million
and equals the fair value.

182

Corporate GovernanceManagement Report

The amount of the investment is subject to the final
valuation of the business contributed by LANXESS or
the determination of the final purchase price. Any futureadjustments resulting from this are to be recognized in“income from discontinued operations” in line with theinitial recognition.

Other information oncompanies consolidated
The following table lists the affiliated companies in­accordance with Section 313, Paragraph 2 of theGerman Commercial Code:Financial Statements

Further Information

Company Name and Domicile
Interest heldin %Chemtura France S.A.S., Fitz James, France

100

DDP Specialty Products Poland Sp.z.o.o.,
Warsaw, Poland

100

LANXESS Chemical B.V., KH Botlek,
Rotterdam, Netherlands

100

Emerald Kalama Chemical Holdings Ltd., St.
Helier, Jersey

100

LANXESS Chemical Ltd., Widnes, Great Britain

100

EUROPIGMENTS, S.L., Barcelona, Spain

52

Great Lakes Holding S.A.S., Fitz James, France

100

INTACE S.A.S., Courbevoie, France

100

LANXESS (Pty) Ltd., Modderfontein,South Africa

100

LANXESS Belgium NV, Kallo, Belgium

100

LANXESS Central Eastern Europe s.r.o.,Bratislava, Slovakia

100

Fully consolidated companies

LANXESS Chemicals S.L., Barcelona, Spain

100

LANXESS Epierre SAS, Epierre, France

100

Germany

LANXESS Holding UK Unlimited,
Manchester, Great Britain

100
100

Company Name and Domicile
Interest heldin %LANXESS AG, Cologne–
100

IAB Ionenaustauscher GmbH Bitterfeld,Bitterfeld-Wolfen

LANXESS Investments Netherlands B.V.,
Venlo, Netherlands

100

IMD Natural Solutions GmbH, Dortmund

100

LANXESS Kimya Ticaret Limited Şirketi,
Istanbul, Türkiye

100

LANXESS Deutschland GmbH, Cologne

100

LANXESS Limited, Manchester, Great Britain

100

LANXESS Global Business Services GmbH,
Cologne100

LANXESS Manufacturing Netherlands B.V.,
Venlo, Netherlands

100

LANXESS Organometallics GmbH, Bergkamen

100

LANXESS S.A.S., Courbevoie, France

100

LANXESS Trademark GmbH & Co. KG,
Leverkusen

LANXESS S.r.l., Milan, Italy

100

100

Saltigo GmbH, Leverkusen

100

LANXESS Sales Netherlands B.V.,
Venlo, Netherlands

100

THESEO Deutschland GmbH, Wietmarschen

100

LANXESS Solutions Italy S.r.L., Latina, Italy

100

LANXESS Solutions UK Ltd.,Manchester, Great Britain

100

CheMondis GmbH, Cologne

EMEA (excluding Germany)
Anderol B.V., Venlo, Netherlands

100

Antec International Ltd., Sudbury,
Suffolk, Great Britain

100

BIOLINK LIMITED, Hull, Great Britain

100

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Company Name and Domicile

Corporate Governance

LANXESS Urethanes UK Ltd., Baxenden NR
Accrington, Great Britain

100
100

100

LANXESS Solutions Japan Ltd., Tokyo, Japan

100

100

LANXESS Solutions Korea Inc.,
Seoul, Republic of Korea

100

100

LANXESS Specialty Chemicals Co., Ltd.,
Shanghai, China

100

100

MC (New Zealand) Technologies Ltd.,
Auckland, New Zealand

100

100

Microbial Control (Australia) Pty. Ltd.,
Sydney, Australia

100

Microbial Control (Hong Kong) Ltd.,
Hong Kong, Hong Kong

100

100

Microbial Control (India) Private Ltd.,
Thane, India

100

100

Microbial Control (Thailand) Co., Ltd.,
Bangkok, Thailand

100

100

Microbial Control Technologies (Shanghai) Co., Ltd.,
Shanghai, China

100

PT Blue Cube Indonesia, Jakarta, Indonesia

100

Rhein Chemie (Qingdao), Ltd., Qingdao, China

90

100

100

Nutrition & Biosciences Mexico S. de R.L. de C.V.,
Mexico City, Mexico

100

Nutrition & Biosciences USA 2, LLC,
Wilmington, U.S.

100

Rohm and Haas Wood Treatment LLC,
Wilmington, U.S.

100

Sybron Chemical Holdings Inc.,
Wilmington, U.S.

100

Asia-Pacific

Nutrition & Biosciences South Africa (Pty.) Ltd.,
Gauteng, South Africa

100

Chemtura China Holding Co. Ltd.,
Shanghai, China

Specialty Products FZE, Dubai, UAE

100

Sybron Chemical Industries Nederland B.V.,
Ede, Netherlands

Danisco Nutrition & Biosciences Malaysia Sdn. Bhd.,
Kuala Lumpur, Malaysia

100

Sybron Chemicals International Holdings Ltd.,Manchester, Great Britain

Danisco Nutrition & Biosciences Taiwan Limited,
Kaohsiung, Taiwan

100

THESEO FRANCE SAS, Laval, France

100

EPM Emerald Performance Hong Kong Ltd.,
Hong Kong, Hong Kong100

LANXESS (Liyang) Polyols Co., Ltd.,
Liyang, China

100

Chemtura Corporation Mexico, S. de R.L. de C.V.,
Mexico City, Mexico

100

LANXESS (Ningbo) Pigments Co., Ltd.,
Ningbo City, China

100

IPEL-Itibanyl Produtos Especiais Ltda.,
Jarinu, Brazil

100

LANXESS Additives Taiwan Ltd.,
Kaohsiung, Taiwan

100

LANXESS Canada Co./Cie, Halifax, Canada

100

LANXESS Corporation, Wilmington, U.S.

100

LANXESS Advanced Materials (Nantong) Co., Ltd.,
Nantong, China

100

LANXESS Indústria de Produtos Quimicos e
Plásticos Ltda., São Paulo, Brazil

100

LANXESS Chemical (China) Co., Ltd.,
Shanghai, China

100

LANXESS S.A. de C.V., Mexico City, Mexico

100

LANXESS S.A., Buenos Aires, Argentina

100

LANXESS Hong Kong Limited,Hong Kong, Hong Kong100

LANXESS Services US LLC, Wilmington, U.S.

100

LANXESS India Private Ltd., Thane, India

100

MC (US) 3 LLC, Wilmington, U.S.

100

LANXESS K.K., Tokyo, Japan

100

LANXESS Korea Limited,Seoul, Republic of Korea

100

Americas183

100

LANXESS Solutions India Private Ltd.,
Thane, India

100

Nutrition & Biosciences Colombia S.A.S.,
Bogotá D.C., Colombia

Nutrition & Biosciences (Finland) Oy,
Helsinki, Finland

100

LANXESS Solutions Australia Pty. Ltd.,West Gosford, Australia

Nutrition & Biosciences Canada Company,
Halifax, Canada

100

N&H International Holding 3 B.V.,
Oegstgeest, Netherlands

100

LANXESS Pty. Ltd., Granville, Australia

100

100

Microbial Control Sweden Technologies AB,
Stockholm, Sweden

Interest heldin %LANXESS Pte. Ltd., Singapore, Singapore

MC BRAZIL IMPORTAÇÃO E EXPORTAÇÃO
DE MICROBIÓTICOS LTDA.,
Bairro Cristais, Brazil

MC Turkey Teknoloji Ltd. Şirketi, Istanbul, Türkiye

Microbial Control France SAS,
Courbevoie, France

Further Information

Interest heldin %MC (Netherlands) 1 B.V., Oegstgeest,
Netherlands
Microbial Control (Switzerland) GmbH,
Frauenfeld, Switzerland

Financial Statements

Company Name and Domicile

Company Name and Domicile
Interest heldin %LANXESS Switzerland GmbH,
Frauenfeld, Switzerland

Management Report

Joint operations
Americas
Rubicon LLC, Salt Lake City, U.S.

50

Associates accounted for using theequity method
Germany
Envalior GmbH, Cologne

40.94

Americas
Viance LLC, Wilmington, U.S.

49.99

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Company Name and Domicile
Interest heldin %Immaterial non-consolidated subsidiaries
Germany
100

Neunte LXS GmbH, Cologne

100

EMEA (excluding Germany)

Nutrition & Biosciences (UK) Ltd.,Manchester, Great Britain
W. Hawley & Son Ltd., Manchester, Great Britain

Management Report

Financial Statements

Further Information

NOTES TO THE STATEMENT OFFINANCIAL POSITION
1 | Intangible Assets  
Changes in intangible assets were as follows:

LANXESS Trademark Management GmbH,
Leverkusen

Gulf Stabilizers Industries Sales FZCO,
Dubai, UAE

Corporate Governance

Changes in Intangible Assets in 2022
Acquired goodwill

Other intangible
assetsAdvance payments

Total€ million
52

1,339

1,642

132

3,113

Adjustments according to IFRS 5

(18)

(35)

(1)

(54)

100

Acquisitions1)

468

365

–

833

100

Capital expenditures

–

24

37

61

Disposals

–

(36)

0

(36)

Reclassifications

6

75

(81)

0

Adjustments in accordance with IAS 29

0

1

–

1

Exchange differences

62

35

1

98

1,857

2,071

88

4,016
(577)

Americas
Comercial Andinas Ltda.,
Santiago de Chile, Chile

100

Nutrition & Biosciences Chile SpA,Santiago de Chile, Chile

100

Rhein Chemie Uruguay S.A., Colonia, Uruguay

100Asia-Pacific
LANXESS Thai Co., Ltd., Bangkok, Thailand

100

LANXESS Vietnam Co., Ltd.,
Ho Chi Minh City, Vietnam

100

PCTS Specialty Chemicals Malaysia (M) Sdn. Bhd.,
Kuala Lumpur, Malaysia

100

Cost of acquisition or generation, Dec. 31, 2021

Cost of acquisition or generation,
Dec. 31, 2022
Accumulated amortization and write-downs,
Dec. 31, 2021

(8)

(570)

1

Adjustments according to IFRS 5

–

25

–

25

Amortization in 2022

–

(156)

0

(156)

–

0

–

0

Disposalsof which write-downs

–

36

–

36

Reclassifications

–

0

0

0

Adjustments in accordance with IAS 29

–

(1)

–

(1)

Exchange differences

0

(13)

1

(12)

Accumulated amortization and write-downs,
Dec. 31, 2022
Carrying amounts, Dec. 31, 2022

(8)

(679)

2

(685)

1,849

1,392

90

3,331

1) Prior-year figures restated184

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Corporate GovernanceManagement Report

Changes in Intangible Assets in 2023
€ million
Cost of acquisition or generation, Dec. 31, 2022

Total

1,857

2,071

88

4,016

Adjustments according to IFRS 5

–

(1)

0

(1)

Capital expenditures

–

22

26

48

Disposals

–

(2)

0

(2)

Reclassifications

–

19

(19)

0

Adjustments in accordance with IAS 29

–

1

–

1

(58)

(39)

(1)

(98)

1,799

2,071

94

3,964

(8)

(679)

2

(685)

–

1

–

1

(406)

(168)

–

(574)
(406)

Exchange differences
Cost of acquisition or generation,
Dec. 31, 2023
Accumulated amortization and write-downs,
Dec. 31, 2022
Adjustments according to IFRS 5
Amortization in 2023
of which write-downs

185

Other intangible
assetsAdvance payments

Acquired goodwill

(406)

–

–

Disposals

–

2

–

2

Adjustments in accordance with IAS 29

–

(1)

–

(1)

Exchange differences

0

14

–

14

Accumulated amortization and write-downs,
Dec. 31, 2023

(414)

(831)

2

(1,243)Carrying amounts, Dec. 31, 2023

1,385

1,240

96

2,721

Financial Statements

Further Information

The adjustments in accordance with IFRS 5 relate to thecontribution of the High Performance Materials business
unit to Envalior.
In the previous year, the changes from acquisitions related
to the acquisition of the Microbial Control business fromthe U.S. corporation International Flavors & Fragrances Inc.
The write-downs on goodwill result from the impairment
test of the cash-generating units as of December 31, 2023,
and are attributable to the Flavors & Fragrances andPolymer Additives business units. Further information
on impairment testing can be found in the“Estimation
Uncertainties and the Exercise of Discretion” section.
Other intangible assets include customer lists, trademark
rights, software and other rights.

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Corporate GovernanceManagement Report

Financial Statements

Further Information

2 | Property, Plant and Equipment
Changes in property, plant and equipment were as
follows:
Changes in Property, Plant and Equipment in 2022
Land andbuildings

Technical
equipment andmachinery

Other fixtures,
fittings andequipment

Advancepayments andassets underconstruction

Total

Cost of acquisition or­construction, Dec. 31, 2021

1,616

6,281

383

575

8,855

Adjustments according to
IFRS 5(1,323)€ million

(256)

(913)

(49)

(105)

Acquisitions

50

28

3

1

82

Capital expenditures

18

91

21

256

386

Disposals

(22)

(146)

(15)

(1)

(184)

Reclassifications

40

248

9

(297)

0

Adjustments in accordancewith IAS 29

9

6

2

0

17

Exchange differences

4

47

1

7

59

Cost of acquisition or­construction, Dec. 31, 2022

1,459

5,642

355

436

7,892

Accumulated depreciation andwrite-downs, Dec. 31, 2021

(901)

(4,510)

(287)

(4)

(5,702)Adjustments according to
IFRS 5

140

666

35

0

841

Depreciation in 2022

(67)

(290)

(34)

1

(390)

(1)

(10)

0

1

(10)

Disposalsof which write-downs

15

110

14

0

139

Reclassifications

0

0

0

0

0

Adjustments in accordancewith IAS 29

(6)

(3)

(1)

–

(10)

Exchange differences

0

(22)

1

1

(20)

(819)

(4,049)

(272)

(2)

(5,142)

640

1,593

83

434

2,750

Accumulated depreciation
and write-downs,
Dec. 31, 2022
Carrying amounts,
Dec. 31, 2022

186

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Corporate GovernanceManagement Report

Land andbuildings

Technical
equipment andmachinery

Other fixtures,
fittings andequipment

Advancepayments andassets underconstruction

Total

1,459

5,642

355

436

7,892
(14)

3 | Investments Accounted for Using theEquity Method€ million

Adjustments according to IFRS 5

(4)

(4)

(6)

0

Changes in companies c­ onsolidated

(2)

(1)

0

0

(3)

Capital expenditures

35

109

21

187

352

Disposals

(16)

(83)

(20)

0

(119)

Reclassifications

34

231

13

(278)

0

Adjustments in accordance with IAS 29

8

6

2

0

16

Exchange differences

(36)

(61)

(9)

(3)

(109)

Cost of acquisition or c
­ onstruction,
Dec. 31, 2023

1,478

5,839

356

342

8,015

Accumulated depreciation and­w rite-downs, Dec. 31, 2022

(819)

(4,049)

(272)

(2)

(5,142)
10

Adjustments according to IFRS 5

2

3

5

–

Changes in companies c­ onsolidated

2

1

0

0

3

(70)

(315)

(33)

(4)

(422)
(28)

Depreciation in 2023
of which write-downs

(3)

(20)

(1)

(4)

Disposals

13

74

20

–

107

Adjustments in accordance with IAS 29

(5)

(3)

(2)

–

(10)

Exchange differences

18

34

7

0

59

(859)

(4,255)

(275)

(6)

(5,395)

Accumulated depreciation and­write-downs, Dec. 31, 2023
Carrying amounts,
Dec. 31, 2023

619

The adjustments in accordance with IFRS 5 relate to thecontribution of the High Performance Materials business
unit to Envalior.
In the previous year, the changes from acquisitions related
to the acquisition of the Microbial Control business fromthe U.S. corporation International Flavors & Fragrances Inc.

187

Further Information

Directly attributable borrowing costs of €1 million(previous year: €2 million) were capitalized. An annual
average cost of debt for the LANXESS Group of 1.4%
(previous year: 1.7%) was used for capitalization.

Changes in Property, Plant and Equipment in 2023

Cost of acquisition or ­construction,
Dec. 31, 2022

Financial Statements

1,584

81

336

2,620

In fiscal year 2023, write-downs were recognized due
among other things to measures in connection with the
FORWARD! action plan, which particularly relate to thedecommissioning and closure of operating facilities.

LANXESS accounts for associates using the equity
method. These include the investment in Viance LLC,
Wilmington, U.S., acquired in the previous year and theinvestment in Envalior GmbH, Cologne, Germany, recognized for the first time as of April 1, 2023.
The following tables show the main items of the consolidated income statement, consolidated statement ofcomprehensive income and consolidated statement offinancial position of Envalior:
Data from the Consolidated Income Statement andConsolidated Statement of Comprehensive Incomeof Envalior
Apr.–Dec.
2023€ million
Sales

2,007

Operating result (EBIT)(132)

Income after income taxes(442)

Other comprehensive income, net of income tax(103)

Total comprehensive income(545)

In the previous year, write-downs were primarily­attributable to other value-decreasing events.

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Data from the Consolidated Statement of
Financial Position of Envalior€ million

Dec. 31,2023

Non-current assets

5,611

Current assets

1,405

Total assets

7,016

Non-current liabilities

4,352

Current liabilities

769

Total liabilities

5,121

Net assets

1,895

The table below shows the reconciliation to the recognizedcarrying amount of the investment in Envalior GmbH,
Cologne, Germany:
Reconciliation to the Carrying Amount of the­Investment in Envalior GmbH€ million
Net assets as of Apr. 1, 2023

Dec. 31,2023

Management Report(545)

Net assets as of Dec. 31

1,895

LANXESS share in %40.94

LANXESS share

776

Carrying amount as of Dec. 31

776

Both the initial recognition and the subsequent measurement of the investment in Envalior GmbH, Cologne,
Germany, are based on financial information that as of thedate of preparation of the LANXESS consolidated financial statements represents preliminary information thatis still being audited by the auditor of the c­ onsolidated
financial statements of Envalior GmbH. There are therefore uncertainties over the carrying amounts recognized
and the subsequent measurement during the year. As aresult, it cannot be ruled out that the underlying financial
information of Envalior GmbH will be adjusted in the

Further Information

The table below shows the reconciliation to the recognized carrying amount of the investment in Viance LLC,
Wilmington, U.S.:

The following tables show the main items of the income
statement, statement of comprehensive income andstatement of financial position Viance LLC, Wilmington,
U.S., adjusted for effects from the purchase price allo­
cation and subsequent measurement:

Reconciliation to the Carrying Amount of the­Investment in Viance LLC

Data from the Income Statement and Statement ofComprehensive Income of Viance LLC€ million

Dec. 31,2022

Dec. 31,2023

Net assets as of Jan. 1(previous year: Jul. 1)

47

45

Total comprehensive income

717

Dividend payments

(9)

(17)

€ million

Net assets as of Dec. 31
LANXESS share in %Jul.–Dec.
2022

45

45

49.99

49.99

2023

LANXESS share

22

22

Goodwill

49

47

Carrying amount as of Dec. 31

71

69

Sales

66

128

Operating result (EBIT)

7

16

Income after income taxes

7

17

Other comprehensive income,net of income tax––

Total comprehensive income

7

17

2,440

Total comprehensive income

Financial Statements

future due to new information and findings, and thatthese adjustments may have an impact on the financial
position or results of operations of the LANXESS Group.

Data from the Statement of Financial Position of
Viance LLC
Dec. 31,2022

Dec. 31,2023

Non-current assets

63

55

Current assets

15

22

Total assets

78

77

Non-current liabilities

1

15

Current liabilities

32

17

Total liabilities

33

32

Net assets

45

45€ million

188

Corporate Governance

4 | Investments in Other Affiliated­Companies
Investments in other affiliated companies of €14 million(previous year: €20 million) include shares in the listedcompany Standard Lithium Ltd., Vancouver, Canada, of€11 million (previous year: €17 million). In addition, thisitem contains interests in additional affiliated companies
totaling €3 million (previous year: €3 million).

5 | Derivative Financial Instruments
The derivative financial instruments held by the
LANXESS Group comprise forward exchange andforward commodity contracts as well as derivatives
not designated as hedging instruments. At LANXESS,
derivative financial instruments are chiefly used to hedge
items of the statement of financial position and to hedge
future sales and raw material purchases.
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Corporate Governance

As of the reporting date, derivative assets are capitalized
in the consolidated financial statements for fiscal year
2023 at a total fair value of €23 million (previous year:€32 million). Instruments with a negative fair value
totaling €17 million (previous year: €19 million) arerecognized as derivative liabilities.

Derivative Financial Instruments

Derivative Financial Instruments€ million

Positive
fair values

Positive
fair values

Negative
fair values

Current forward
exchange contracts

1,471

10

(10)

Current forward
commodity contracts

36

–

(7)

Current derivatives notdesignated as hedging
instruments

–

3

–

Negative
fair values

Non-current forward
exchange contracts

115

5

0

Non-current forward
commodity contracts

4

–

0

Current forward
exchange contracts

2,165

18

(18)

Current forward
commodity contracts

8

0

0

Non-current forward
exchange contracts

194

8

(1)

Non-current derivatives
not designated as hedging
instruments

Dec. 31, 2023
NominalamountDec. 31, 2022
NominalamountManagement Report

–

6

–

2,367

32

(19)

€ million

Non-current derivatives
not designated as hedging
instruments

Further Information

The remarks below relate exclusively to transactions
that qualify for hedge accounting and are recognizedaccordingly:

Currency hedges

–

5

–

1,626

23

(17)

Current derivatives not designated as hedging instruments in the amount of €3 million (previous year:
non-current derivatives not designated as hedging
instruments of €6 million) include options for shares in
the company Standard Lithium Ltd., Vancouver, Canada.
The non-current derivatives not designated as
hedging instruments of €5 million recognized as ofDecember 31, 2023, relate to a right to offer in connection with the minority interest in Envalior GmbH, Cologne,
Germany. Further information on the right to offer canbe found under
 ­“Financial Instruments” in the “Fairvalue measurement” section.

189

Financial Statements

Currency hedges in the form of forward exchange
contracts are used for the future revenue of companiesof the LANXESS Group when the currency in which
the planned revenue is denominated differs from thecompany’s functional currency and significant foreign
currency positions are expected. Set hedging ratios havebeen defined for subsequent years. The hedges are due
to mature in the respective planning months. The hedges
could become ineffective as a result of revenue possiblydeferred to other periods. There are currently no casesof changes in the timing of revenue in excess of thehedged volume.

Forward commodity contracts
Hedges on the prices of raw materials can be used for
future purchases of raw materials and energy by thecompanies of the LANXESS Group where planned
procurement volumes are based on existing procurement agreements. The hedges are forward commodity
contracts and based on a monthly planned procurement
volume. Unscheduled production facility shutdowns
could reduce procurement volumes and cause thehedges to become ineffective.

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Forward interest rate contracts
Interest rate risks for future refinancing of the LANXESSGroup can be hedged with interest rate swaps. For
this purpose, the hedging instruments are concluded
with matching maturities on the basis of a planned
refinancing requirement. The hedges can generally
become ineffective if the refinancing date is moved.
The forward interest rate contracts from fiscal year 2017
were recognized in other comprehensive income on theissue of a new bond in May 2018. The amounts recognized in other comprehensive income will be reclassified
to profit or loss until May 2024. The forward interest
rate contracts from fiscal year 2021 were recognizedin other comprehensive income on the issue of a newbond in December 2021. The amounts recognized inother comprehensive income will be reclassified to profit
or loss until December 2029. In fiscal year 2022, theinterest rate hedges concluded in the preceding fiscal
year 2021 for a financing volume of €500 million weresettled through profit or loss due to the abandonmentof planned refinancing intention. The corresponding
derecognition from other comprehensive income
resulted in income in the financial result of €83 million
in fiscal year 2022.

Corporate GovernanceManagement Report

Financial Statements

Further Information

Forward Exchange and Forward Commodity Contracts in 2022
Nominalamount€ million

Carrying amountLine item in statement offinancial position

Positive
fair values

Negative
fair values

13

(9)

Current and non-current
derivative assets/liabilities
Current derivative assets/
liabilities

Change invalue of hedged
item1)

Change invalue of hedging­instrument1)(7)

7

Forward exchange
contracts
EUR/USD
Forward commodity
contracts

486
8

0

0

494

13

(9)

0

0

(7)

7

Change invalue of hedged
item1)

Change invalue of hedging­instrument1)

1) Changes in value are changes in the hedged component in the period.

Forward Exchange and Forward Commodity Contracts in 2023
NominalamountCarrying amountLine item in statement offinancial position

Positive
fair values

Negative
fair values

296

8

0

Current and non-current
derivative assets/liabilities

(9)

9

6

–

0

Current derivative liabilities

00

Current and non-current
derivative liabilities

7

(7)

(2)

2

€ million
Forward exchange
contracts
EUR/USD
Forward commodity
contracts
Kerosene
Gas

17

–

(7)

319

8

(7)

1) Changes in value are changes in the hedged component in the period.

190

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Financial Statements

Further Information

Maturities and Average Prices 2022
2023

> 2023
Average rate1)€

Nominal amount€ million

Average rate1)
€

293

1.10

193

1.06

8

843.50––Nominal amount€ million
Forward exchange contracts
EUR/USD
Forward commodity contracts

301

193

1) For forward commodity contracts, the average hedging rate corresponds to the fixed side of the contract.

Maturities and Average Prices 2023
2024

> 2024

Nominal amount€ million

1)

Average rate€

Nominal amount€ million

Average rate1)
€

181

1.09

115

1.09

Kerosene

6735.35

–

–

Gas

13

55.13

4

34.40

Forward exchange contracts
EUR/USD
Forward commodity contracts

200

119

1) For forward commodity contracts, the average hedging rate corresponds to the fixed side of the contract.

The hedged cash flows will be realized within the next
three fiscal years for the forward exchange contracts andwithin the next five fiscal years for the forward commodity
contracts.

191

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Hedge Accounting Reconciliation Other Comprehensive Income (Before Taxes) 2022
Cash flow hedges

Cost of hedging

Sum other
comprehensive
incomeCurrency
hedging
contracts

Forwardcommodity
contracts

Forwardinterest rate
contracts

Total

Forward-­toForward

Spot-to-Spot

Total

Jan. 1

(6)

0

4

(2)

0

0

0

(2)

Changes other­comprehensive income

10

0

(4)

6

(1)

0

(1)

5

of which reclassifi­
cation to profit or loss

37

–

(83)

(46)

–

–

–

(46)

4

0

0

4

(1)

0

(1)

3

€ million

Dec. 31

Hedge Accounting Reconciliation Other Comprehensive Income (Before Taxes) 2023
Cash flow hedges

Sum other
comprehensive
incomeCurrency
hedging
contracts

Forwardcommodity
contracts

Forwardinterest rate
contracts

Total

Jan. 1

4

0

0

4

(1)

0

(1)

3

Changes other­comprehensive income

9

(11)

1

(1)

1

0

1

0

3

–

0

3

–

–

–

3

13

(11)

1

3

0

–

0

3

€ millionof which reclassifi­
cation to profit or loss
Dec. 31

The adjustments to the carrying amounts of the hedged
item (basis adjustment) necessary in connection withhedges on the prices of raw material purchases increase
equity by €5 million and are included in other changes
in equity outside other comprehensive income.

192

Cost of hedging
Forward-­toForward Spot-to-Spot

Total

Financial Statements

Further Information

equity to profit or loss (previous year: reclassification of
unrealized gains of minus €4 million in fiscal year 2023,€5 million in fiscal year 2024 and €3 million in fiscal
year 2025).
In fiscal year 2023, some hedges for planned sales weresettled. The income from the settlement of €4 million
remains in other comprehensive income until the hedged
item is recognized. The reclassification to profit or loss
will occur in financial year 2024.
The unrealized gains of €1 million recognized on interest
rate hedges as of the reporting date will be reclassified
to profit or loss by fiscal year 2029.
In fiscal year 2022, currency hedges of €43 million
in connection with the payment of the purchase pricefor the Microbial Control business were reclassified
from other comprehensive income to “Goodwill” in thestatement of financial position as of the acquisition date.
Information on the maturity structure of derivative assets
and liabilities is given in
Note [38].

The LANXESS Group expects that, of the unrealized
gains on currency hedges recognized in other comprehensive income up to the reporting date, €4 million
in fiscal year 2024, €5 million in fiscal year 2025 and€0 million in fiscal year 2026 will be reclassified from

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6 | Other Non-Current and Current­Financial Assets
Other non-current and current financial assets break
down as follows:
Other Financial Assets
Dec. 31, 2022
€ million
Contract assets
Other financial­receivablesNon-­current

Current

Total

70

153

223

7

19

26

77

172

249

Other Financial Assets
Dec. 31, 2023
Non-­current

Current

Total

Contract assets

46

201

247

Shareholder loan
Envalior GmbH

207

–

207

€ million

Other financial­receivables

9

14

23

262

215

477

Other non-current financial assets include €207 million
for a shareholder loan granted to Envalior GmbH,
Cologne, Germany, in connection with the formationof Envalior.
Miscellaneous other financial receivables include claims
from transactions that do not result directly from the saleof chemical products and services in normal operations.
These include investments in High-Tech Gründerfonds

193

Corporate GovernanceManagement Report

Financial Statements

Further Informationand other financial receivables. Other current andnon-current financial assets are reduced by expectedcredit losses in the amount of €0 million (previous year:€5 million).

The adjustments in accordance with IFRS 5 in theprevious year resulted from the presentation of the High
Performance Materials business unit as a discontinued
operation.

The non-current contract assets relate to revenue
measured at the average contract price for the manufacture of products with contractually defined minimumpurchase requirements. Differences between average
pricing and the invoice prices are shown as contract
assets and reversed over the remaining term of thecontract. Current contract assets essentially relate torevenue recognized at the average contract price forthe manufacture of customer-specific products with­contractually defined minimum purchase requirements
as of the production date that are not expected to bedelivered to the customer until the next reporting year.
The development in comparison to the previous year isdue on the one hand to selling price adjustments as aresult of volatile raw material and energy costs, and on theother hand to a year-on-year increase in pre-­­productionin the context of customer-specific manufacturing.

€6 million (previous year: €88 million) of the cumulative catch-up adjustments to revenues relate to earlier
periods. The additions essentially relate to the businessmodel of manufacturing customer-specific products on
the basis of long-term supply agreements with contractually defined minimum purchase requirements. They
comprise revenue already recognized in the reporting
year as of the production date. When the manufactured
customer-specific products are delivered, the amounts
recognized as contract assets are reclassified as tradereceivables. In addition, the reclassifications to tradereceivables include the recognition of the values forthe quantities delivered in the reporting year from thebusiness model of manufacturing products on the basisof long-term supply agreements with a contractually
defined minimum purchase requirement, which areincluded in the opening balance.

Change in Contract Assets

7 | Non-Current and Current Income Tax
Receivables  € million

2022

2023

Jan. 1

143

223

Adjustments according to IFRS 5

(11)

–

Cumulative catch-up adjustments
to revenues

58

(5)

Additions

132

187

Reclassifications to trade­receivables

(98)

(158)

Exchange differences(1)0

Dec. 31

223

247

The non-current income tax receivables of €60 million(previous year: €57 million) essentially comprise uncertain tax positions where reimbursement is considered
probable.
The current income tax receivables of €41 million(previous year: €35 million) essentially include tax
prepayments.

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8 | Other Non-Current Assets

Management Report

Financial Statements

Further Information

Inventories of €168 million (previous year: €260 million)
are recognized at net realizable value. The year-on-year
decline in inventories is primarily due to active inventory
management and a reduction in production volumes in
response to lower demand. Inventories also decreased
as a result of lower prices for raw materials and energy.

10 | Trade Receivables

Other non-current assets are generally carried atamortized cost less any write-downs. In contrast,
receivables in connection with pension obligations aremeasured at fair value through other comprehensive
income. As in the previous year, no write-downs weremade in fiscal year 2023.

Due to inflation adjustments in accordance with IAS 29,
inventories increased by €2 million (previous year: lessthan €1 million).

9 | Inventories

Write-Downs of Inventories

Since June 2022, LANXESS has been a contractual
partner to a factoring agreement for the revolving
sale of trade receivables up to a maximum volume of€150 million. The agreement has a minimum term until
June 2024 and is renewed for a further year unlessterminated. LANXESS can freely decide whether andto what extent the revolving nominal volume is utilized.
The relevant risks for the disposal of the receivables
are credit risk and the risk of late payment. As part ofthe program, the credit risk is fully and the late payment
risk partially transferred. As of December 31, 2023,
this allocation of opportunities and risks resulted ina recognized continuing involvement of €3 million(previous year: €2 million). In connection with thefactoring agreement, LANXESS recognized expenses of€3 million (previous year: €1 million) in fiscal year 2023.
As of December 31, 2023, receivables of €125 million(previous year: €130 million) had been sold under thefactoring agreement.

Other non-current assets of €59 million (previous year:€63 million) essentially include receivables in connection
with pension obligations, periodic accruals and otherreimbursement claims.

The inventories of the LANXESS Group comprise:
Inventories€ million
Raw materials and supplies
Work in progress, finished goods
and merchandise

194

Corporate GovernanceDec. 31,2022

Dec. 31,
2023

418

279

1,443

1,081

1,861

1,360

The changes in write-downs of inventories were as
follows:€ million

2022

2023

Jan. 1

(67)

(102)

Adjustments according to IFRS 5

10–Additions charged as expenses

(68)

(22)

Reversals/utilization

22

25

Exchange differences

1

2

(102)

(97)

Dec. 31

The adjustments in accordance with IFRS 5 in theprevious year resulted from the presentation of the High
Performance Materials business unit as a discontinued
operation.

All trade receivables – totaling €613 million (previous
year: €858 million) – are due within one year. The
decrease resulted primarily from the demand-driven
decline in sales.

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Loss allowances of €12 million were recognized as of theend of the reporting period (previous year: €13 million).
Further information on the loss allowance for tradereceivables and the maturity structure classes for theloss allowance in fiscal years 2022 and 2023 can befound under“Credit risk management” in Note [38].

11 | Near-Cash Assets
Near-cash assets include shares of money market funds
that can be sold at any time in the amount of €350 million(previous year: €79 million).

12 | Other Current Assets
Other current assets totaling €171 million (previous year:€228 million) are carried at amortized cost less any writedowns. The other current assets essentially comprisemiscellaneous claims for tax refunds, mainly for VAT, of€115 million (previous year: €141 million). €92 million(previous year: €123 million) of this amount is expected
to be refunded within one year and €23 million (previous
year: €18 million) at a later date. Furthermore, there areother reimbursement claims from goods and service
transactions of €40 million (previous year: €48 million).
This item included write-downs of €2 million (previous
year: €3 million) as of December 31, 2023.

195

Corporate GovernanceManagement Report

Financial Statements

Further Information

13 | Assets and Liabilities Held for Saleand Discontinued Operationsof the articles of association of LANXESS AG. Authorized
Capital I has not yet been utilized.

In the previous year, the High Performance Materials
business unit was reported as a discontinued operation.
Further information can be found under“Companies
consolidated.”

Authorized Capital II

The capital stock of L ANXESS AG amounts to€86,346,303 as of December 31, 2023, and iscomposed of 86,346,303 no-par bearer shares. The
capital stock and the number of shares are therefore
unchanged as against the end of the previous year. All
shares carry the same rights and obligations. One voteis granted per share, and profit is distributed per share.

Furthermore, pursuant to Section 4, Paragraph 4 of
LANXESS AG’s articles of association, the Annual
Stockholders’ Meeting on May 24, 2023, authorized
the Board of Management until May 23, 2025, withthe approval of the Supervisory Board, to increase thecapital stock on one or more occasions by issuing new
no-par bearer shares against cash contributions up
to a total amount of €8,634,630 (Authorized Capital
II). Stockholders are generally entitled to subscription
rights when Authorized Capital II is utilized. These rights
can be excluded in certain cases which are defined in
Section 4, Paragraph 4 of the articles of association of
LANXESS AG. Authorized Capital II has likewise not yet
been utilized.

Authorized Capital I

Conditional capital

Pursuant to Section 4, Paragraph 3 of LANXESS AG’s
articles of association, the Annual Stockholders’ Meetingon May 24, 2023, authorized the Board of Management
until May 23, 2026, with the approval of the Supervisory
Board, to increase the capital stock on one or more
occasions by issuing new no-par bearer shares against
cash or contributions in kind up to a total amount of€17,269,260 (Authorized Capital I). Stockholders are
generally entitled to subscription rights when Authorized
Capital I is utilized. These rights can be excluded incertain cases which are defined in Section 4, Paragraph 3

Conditional capital was composed as follows as ofDecember 31, 2023:

14 | Equity
Capital stock

The Annual Stockholders’ Meeting of LANXESS AG on
May 24, 2023, authorized the Board of Management
until May 23, 2026, with the approval of the Supervisory
Board, to issue – in one or more installments – warrant
bonds and/or convertible bonds and/or income bonds or
a combination of these instruments (collectively referred
to as “bonds”) – as either registered or bearer bonds –with a total nominal value of up to €1,000,000,000,

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with or without limited maturity, and to grant option
rights to, or impose exercise obligations on, the holders
or creditors of warrant bonds or income bonds withwarrants, and/or to grant conversion rights to, or impose
conversion obligations on, the holders or creditors ofconvertible bonds or convertible income bonds inrespect of bearer shares of the company representing
a total pro rata increase of up to €8,634,630 in thecompany’s capital stock on the terms to be defined forthese bonds. Pursuant to Section 4, Paragraph 5 of thearticles of association, the capital stock of LANXESS AG
is thus conditionally increased by up to €8,634,630(Conditional Capital). The Board of Management isauthorized, with the approval of the Supervisory Board,
to exclude subscription rights in certain cases which aredetailed in the authorization. The Board of Management
will consider other capital measures with stockholders’subscription rights disapplied in its decision to disapply
stockholders’ subscription rights when issuing convertible bonds and/or bonds with warrants and/or income
bonds (or combinations of these instruments). The
authorization to issue bonds has not yet been utilized.
Any shares issued with subscription rights disappliedon the basis of the aforementioned Authorized Capitals
I and/or II may not, together with such shares issued
or to be issued as part of conditional capital to service
warrants or conversion rights or obligations, provided
the warrants or conversion rights or obligations were
granted or imposed during the term of the authorization
with subscription rights disapplied, exceed 10% of thecapital stock of LANXESS AG at the time the respective
authorization becomes effective.

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Corporate GovernanceManagement Report

Treasury shares and their purchase andutilization
As of December 31, 2023, neither the company nor
dependent or majority-owned entities, or third parties
acting for the account of the company or for the accountof dependent or majority-owned entities, held shares in
the company or had taken shares in the company as apledge. On May 23, 2019, the Annual Stockholders’Meeting of LANXESS AG resolved to issue an authorization for the purchase and utilization of own sharesby the Board of Management. The authorization allows
the Board of Management to acquire shares in thecompany representing up to 10% of the capital stock
until May 22, 2024, and to utilize them for any purpose
permitted by law. This authorization may also be utilizedby subsidiaries of the company or by third parties onbehalf of the company or its subsidiaries. The Board ofManagement utilized this authorization when, in fiscal
year 2020, a total of 1,101,549 of the company’s shareswere repurchased. All repurchased shares were canceledin fiscal year 2021, reducing the company’s capital stockby way of a simplified capital reduction in accordancewith Section 71 Paragraph 1, No. 8 Sentence 6 AktG.
The above authorization of the Board of Management
also allows the purchase and utilization of treasury sharesof up to 8.72% of the company’s capital stock as of theend of fiscal year 2023 until May 22, 2024.

Financial Statements

Further Information

Other reserves
The €72 million increase in other reserves to €3,027 million
is mainly due to the increase in retained earnings from
€2,797 million to €2,869 million.
Retained earnings comprise prior years’ undistributed
income of companies included in the consolidated financial statements. They also contain remeasurements of
the net defined benefit liability from post-employment
benefit plans and the related tax effects. In addition, theearnings remaining in other equity components fromequity instruments measured through other comprehensive income are transferred to retained earnings ontheir disposal or liquidation.
The effects of the remeasurement of the net defined
benefit liability amounted to minus €118 million in
fiscal year 2023 (previous year: €528 million). The tax
effects to be taken into account amounted to €34 million(previous year: €151 million), resulting in a net effect ofminus €84 million for the reporting year. Net effects fromthe remeasurement of the net defined benefit liability atinvestments accounted for using the equity method ofminus €3 million were also taken into account. With thecontribution of the High Performance Materials business
unit to Envalior, effects of the remeasurement of the net
defined benefit liability amounting to €2 million andresulting tax effects of minus €1 million were disposed of.

Capital reserves
The capital reserves of LANXESS AG are unchanged
year-on-year at €1,230,828,913.

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Other equity components
The other equity components mainly comprise exchange
differences from the translation of operations outside theeurozone, remeasurements of derivatives for purposesof cash flow hedge accounting and the corresponding
hedging costs. The disposal of the High Performance
Materials business unit increases the reserves fromexchange differences by €27 million.

Corporate GovernanceManagement Report

15 | Provisions for Pensions andOther Post-Employment Benefits  
Most employees in the LANXESS Group are entitled toretirement benefits on the basis of contractual agreements or statutory regulations. These are provided
through defined contribution or defined benefit plans.

Financial Statements

Further Information

Bayer-Pensionskasse is a legally independent private
insurance company and is therefore subject to theGerman Insurance Supervision Act. As the ­obligationsof the participating entities are not confined to paymentof the contributions for the respective fiscal year, Bayer-­Pensionskasse constitutes a defined benefit multi-­
employer plan and therefore would generally have tobe accounted for pro rata as a defined benefit plan.

Defined contribution plans
Capital management
The main purpose of capital management in the
LANXESS Group is to maintain the long-term viabilityof the business operations and achieve an attractive
return on capital compared with the chemical industry
average. LANXESS’s financial policy defines an additional
condition for capital management, which is to maintainan investment-grade rating. To achieve this goal, theGroup has to meet indicators set by the rating agencies.
These are essentially calculated from the statement offinancial position, the income statement or the statementof cash flows. Further information can be found under“Value Management and Control System” in the
combined management report for fiscal year 2023. Capitalmanagement in the LANXESS Group entails decisions by
the relevant internal bodies on the capital structure shownon the statement of financial position, the appropriatenessof the company’s equity, the use of the distributable profit,
the amount of the dividend, the financing of capital expenditures, and thus on issuances or repayments of debt. The
articles of association of LANXESS AG do not contain any
specific capital requirements.

197

Under defined contribution plans, the company pays
contributions into separate pension funds. These
contributions are included in the functional cost items
as expenses for the respective year, and thus in theoperating result. Once the contributions have been
paid, the company has no further payment obligations.
Payments to defined contribution plans in fiscal year
2023 totaled €42 million (previous year: €41 million).

Multi-employer plans
The pension plan in Germany financed throughBayer-Pensionskasse is also accounted for in the consolidated financial statements as a defined contribution plan.
The above amounts include contributions of €18 million(previous year: €19 million) to Bayer-Pensionskasse.
Contributions of about the same amount are expected
for fiscal year 2024.

Bayer-Pensionskasse is financed not on the principle ofcoverage for individual benefit entitlements, but on theactuarial equivalence principle, based on totals for thewhole plan. This means that the sum of existing plan
assets and the present value of future contributions mustbe at least equal to the present value of the future benefits
payable under the plan. The LANXESS Group is therefore exposed to the actuarial risks of the other entities
participating in Bayer-Pensionskasse. Thus no consistentor reliable basis exists for allocating the benefit obligation,plan assets and costs that would enable LANXESS toaccount for Bayer-Pensionskasse as a defined benefit
plan in accordance with IAS 19. As contributions are
based on future coverage of the total obligation, allparticipating entities pay contributions at the same rates
based on the employee income levels on which social
security contributions are payable. Bayer-Pensionskasse
is therefore accounted for as a defined contribution planand not as a defined benefit plan.

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There are no minimum funding requirements, nor isthere any information that could be used to estimate
the future contributions on the basis of current under- or
overfunding. The statutes do not provide for the sharingof any surplus or shortfall in the event that Bayer-Pensionskasse is dissolved or LANXESS ceases to participate.
LANXESS’s share of the total contributions to Bayer-­Pensionskasse is 15% (previous year: 14%). Bayer-­Pensionskasse has been closed to new members since
January 1, 2005.

Defined benefit plans
The global post-employment benefit obligations arecalculated at regular intervals by an independent actuaryusing the projected unit credit method. A period of
three years is not exceeded. Comprehensive actuarial
valuations are generally undertaken annually for all major
post-employment benefit plans.
Contractually based defined benefit pension plans exist
primarily in Germany, the U.S., and Great Britain.
The defined benefit pension obligations in Germany
mainly relate to lifelong benefits payable in the event

198

Corporate GovernanceManagement Reportof death or disability or when the employee reaches
retirement age. Benefits are determined on the basis of
the total annual pension increments earned during theperiod of employment and vary according to employees’
individual salaries. Additional pension entitlements
exist that are related to salary components set aside
by employees and are payable when they reach retirement age. Alongside direct commitments, the pension
adjustment obligation assumed by Bayer-Pensionskasse
is accounted for in a separate defined benefit plan inaccordance with Section 16 of the German Occupational
Pensions Improvement Act (BetrAVG). A new pension
plan was agreed for employees joining from fiscal year2017 in the form of a congruently defined benefit scheme
which is funded on the basis of life insurance policies.
The employer’s obligation is fulfilled by the payment of
the contribution to the covering life insurance policies.
The covering life insurance policies are carried as plan
assets via a CTA.
In the U.S. and Great Britain, the defined benefit obligations comprise, in particular, lifelong pension benefits,
which are payable in the event of disability or death orwhen the employee reaches retirement age. The levelof these benefits is determined from the total annual

Financial Statements

Further Information

pension increments earned during the period of employment, depending on the employee’s individual salary andthe actual date of retirement. The existing defined benefit
pension plans are closed to new employees. In some of
the closed pension plans, no new pension entitlements
are accrued and the employees are transferred to adefined contribution plan.
Only limited defined benefit pension obligations exist
on the basis of statutory regulations. These principally
comprise obligations to make a lump-sum payment if
employment is terminated. The amount of this payment
mainly depends on years of service and final salary.
The other post-employment benefit obligations primarily
relate to the reimbursement of retirees’ healthcare costsin North and South America. The other post-employment
benefit obligations in Germany comprise other long-term
benefits payable to employees and benefits payable
upon termination of employment. These are mainly
early-retirement benefits and collectively agreed salarycomponents granted in the form of pension benefits.
They are included in pension provisions as they are by
nature pension entitlements.

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LANXESS on the Capital Market

Financing of the defined benefit pension obligations
is achieved both internally through provisions andexternally through legally independent pension funds.
The pension obligations in Germany are partly covered
on a voluntary basis via LANXESS Pension Trust e.V.,
Leverkusen, Germany. The allocation of funds to the
LANXESS Pension Trust e.V. is dependent on future
decisions by the company. In the U.S. and Great Britain,
it is mandatory to primarily finance pension obligations
through pension funds. Allocations to pension funds
in the U.S. and Great Britain are determined by theregulatory environments and the need to comply withfunding regulations. Contributions are paid mainly by theemployer. The investment strategy is determined principally by the LANXESS Corporate Pension Committee
and is designed to protect the capital, optimally manage
risks, take into account changes in pension obligations
and ensure the timely availability of pension assets. At
the regional level, the strategy is generally directly coordinated and monitored by representatives of LANXESS
via the relevant committees of the pension funds or of
LANXESS Pension Trust e.V., taking regulatory requirements into account. On the basis of local regulations, thepension assets in Great Britain are managed by external
trustees in close coordination with LANXESS.

199

Corporate GovernanceManagement Report

Funding surpluses from defined benefit plans are recognized as receivables relating to pension obligations to
the extent that they can be used to reduce future contributions, taking into account the asset ceiling. Defined
benefit pension plans with asset ceilings essentially exist
in the U.S. and Great Britain. The respective calculations
are based on actuarial valuations. Minimum funding
requirements for defined benefit plans may exist in GreatBritain and other countries. These depend on the local
regulatory framework and are recognized as additional
pension provisions.
In fiscal year 2023, total expenses of €51 million(previous year: €61 million) for defined benefit plans
were recognized in profit or loss and are split between
the operating result and the financial result as follows:

Financial Statements

Further Information

Expenses for Defined Benefit Plans

Pension plans

Other post-­
employment
benefit plans

2022

2023

2022

2023

Current service cost

41

30

1

1

Past service cost

5

3

0

–

Administration­expenses/taxes

3

2

0

0

Actuarial gains andlosses

–

–

(2)

0

Net interest

9

10

4

5

Amounts recognizedin profit or loss

58

45

3

6

€ million
Operating result

Financial result

Administration expenses in the operating result containexpenses from the investment of assets that are notdirectly attributable to the earning of income on plan
assets. The costs of managing the plan assets that are
directly attributable to the earning of income on plan
assets are recognized in other comprehensive income.
The actuarial gains and losses relate to other non-­­current employee benefits or termination benefits thatare reported under other post-employment benefits on
account of their nature as retirement benefits.

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LANXESS on the Capital Market

The net interest is the balance of the interest expensefrom compounding the defined benefit obligation, theinterest expense from changes in the effects of the asset
ceiling, and interest income from plan assets.

€ million
Return on plan assets
excluding amounts
included in interest
Actuarial gains/losses
from changes in demographic assumptions
Actuarial gains/losses
from changes in financial
assumptions

200

2022

2022

(139)

(2)

642

2023

87

7

(184)

(7)

0

18

The change in the net defined benefit liability for post-­
employment benefit plans is shown in the following table:
Changes in Net Defined Benefit Liability

Pension plans€ million

2022

2023

2022

2023

Net defined benefit­liability, Jan. 1

753

257

112

86

Adjustments according
to IFRS 5

(56)

–

(4)

–

Amounts recognized in
profit or loss

58

45

3

6

Amounts recognized inother comprehensive
income

(481)

113

(20)

4

Employer contributions

(18)

(16)

(1)

0

Benefits paid

(6)

(6)

(11)

(10)

Acquisitions

2

–

0

–

(1)

Other addition

2

0

–

0

Exchange differences

3

(2)

7

(2)

(2)

Net defined benefit
liability, Dec. 31

257

391

86

84

Amounts recognizedin the statement offinancial position
Receivables frompension obligations andother post-employment
benefits

(24)

(23)

0

0

Provisions for pensions
and other post-­
employment benefits

281

414

86

84

Net defined benefit
liability, Dec. 31

257

391

86

84

Amounts Recognized in Other Comprehensive Income

Pension plans

Management Report

Other post-­
employment
benefit plans

The table shows the amounts recognized in othercomprehensive income rather than profit or loss in thereporting year:

Other post-­
employment
benefit plans

Corporate Governance

2023

4

Actuarial gains/­losses
from experience­adjustments

(36)

(24)

3

0

Changes in effects of theasset ceiling

16

1

6

(5)

Amounts recognizedin other comprehensive income

481

(113)

20

(4)

Financial Statements

Further Information

The adjustments in accordance with IFRS 5 in theprevious year resulted from the presentation of the High
Performance Materials business unit as a discontinued
operation.
The acquisitions in the previous year related to theacquisition of the Microbial Control business from U.S.
corporation International Flavors & Fragrances Inc. andthe acquisition of the distribution business of a German
distribution partner for the product Velcorin®.
The expected cash outflows for employer contributions
and benefit payments in fiscal year 2024 are €15 millionand €17 million, respectively, based on year-end 2023
exchange rates. In the previous year, the expectedcash outflows for employer contributions and benefit
payments in fiscal year 2023 were €15 million and€22 million, respectively, based on exchange rates atthe end of fiscal year 2022.
The components of the reconciliation of the net recognized liability are explained in the following tables, whichshow the development of the defined benefit obligation,
the external plan assets and the effects of the asset
ceiling and explain the major changes.

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Corporate GovernanceManagement Report

The defined benefit obligation developed as follows:

Other post-employment
benefit plans

Pension plans
2022

2023

2022

2023
96

Defined benefit obligation for pension commitments
Defined benefit obligation, Jan. 1

2,490

1,812

126

Adjustments according to IFRS 5

(88)

–

(6)

–

Current service cost

41

30

1

1

Interest expense

37

72

4

6

Actuarial gains/losses from changes in demographic assumptions
Actuarial gains/losses from changes in financial assumptions

(7)

0

1

184

(20)

2
0

Actuarial gains/losses from experience adjustments

36

24

(3)

5

3

0

–

Settlements paid

–

(16)

–

–

Employee contributions

1

0

0

0

(82)

(75)

(13)

(11)

Acquisitions

5

–

0

–

Other additions/disposals

2

(4)

–

0

Administration expenses/taxes

(1)

0

0

0

Exchange differences
Defined benefit obligation, Dec. 31

The adjustments in accordance with IFRS 5 in theprevious year resulted from the presentation of the High
Performance Materials business unit as a discontinued
operation.
Of the defined benefit obligation for pensions, Germany
accounts for 79% (previous year: 75%), Great Britain for
9% (previous year: 11%) and the U.S. for 10% (previous
year: 11%).

201

2
(642)

Past service cost

Benefits paid

Further Information

assumptions due to the application of the adopted
CMI 2022 (previous year: CMI 2021) mortality­improvement tables in Great Britain.

Changes in Defined Benefit Obligation€ million

Financial Statements

6

(4)

7

(2)

1,812

2,019

96

93

The other post-employment benefit obligations
comprise €75 million (previous year: €76 million) for
the reimbursement of health care costs and €18 million(previous year: €20 million) for miscellaneous otherbenefit commitments.

In fiscal year 2023, actuarial gains from changes indemographic assumptions for other post-employment
benefits resulted primarily from the updated demographic
assumptions in Brazil.
Remeasurements of the defined benefit liability due tochanges in actuarial gains and losses resulting fromchanges in financial assumptions are mainly attributable to changes in the discount rates for defined
benefit obligations in the main countries of relevancefor LANXESS and the adjustment of interest rates for
inflation.
In the reporting year, the actuarial gains/losses fromexperience adjustments in the defined benefit plans
primarily include losses from the adjustments of thepension trend for inflation that has already occurred inexcess of the assumed pension increase rate and fromthe update of capitalization factors between annuity
and single payments in Germany. In contrast, actuarial
gains resulted from experience adjustments in GreatBritain. In the previous year, the actuarial gains/losses
from experience adjustments in the defined benefit plansincluded effects of the adjustments of the pension trend
in Germany.

In the past fiscal year, actuarial gains and losses fromchanges in demographic assumptions for pension
obligations resulted from the updated demographic

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In fiscal year 2023, the past service cost for pension
obligations results from the defined benefit plans inGermany. In the previous year, the past service cost for
pension obligations resulted from the defined benefit
plans in Great Britain.
The settlements paid for defined benefit pension obligations in fiscal year 2023 relate to two Canadian plans.

Corporate GovernanceManagement Report

The change in external plan assets is shown in thefollowing table:

The exchange differences pertaining to defined benefit
obligations mainly resulted from changes in the exchange
rates for the U.S. dollar and the British pound.

Of the plan assets, Germany accounts for 76% (previous
year: 72%), Great Britain for 12% (previous year: 13%)and the U.S. for 10% (previous year: 11%).

€ million

The settlements paid for defined benefit pension plansin fiscal year 2023 relate to two Canadian plans.

Pension plans

Other post-­
employment
benefit plans

2022

2023

2022

2023

Plan assets, Jan. 1

1,763

1,564

43

36

Adjustments according
to IFRS 5

(32)

–

(2)

–

Interest income

28

62

1

2

(139)

87

(7)

4

–

(16)

–

–

Employer contributions

18

16

1

0

Employee contributions

1

0

0

0

Benefits paid

(76)

(69)

(2)

(1)

Acquisitions

3

–

–

–

Other disposals

–

(4)

–

0

Administration
expenses/taxes

(4)

(2)

0

0

Exchange differences

2

(2)

2

(1)

Plan assets, Dec. 31

1,564

1,636

36

40

Return on plan assets
excluding amounts
included in interest
Settlements paid

The adjustments in accordance with IFRS 5 in theprevious year resulted from the presentation of the High
Performance Materials business unit as a discontinued
operation.

202

Further Information

Changes in External Plan Assets

Plan assets at fair value

The acquisitions in the previous year related to theacquisition of the Microbial Control business from U.S.
corporation International Flavors & Fragrances Inc. of€4 million in the defined benefit pension obligations.
Due to the acquisition of the distribution business of a
German distribution partner for the product Velcorin®,
the defined benefit pension obligations increased by€1 million.

Financial Statements

Employer contributions are used both for externalfunding of pension obligations where LANXESS iseligible for reimbursements of pension payments andfor external funding of pension obligations where subsequent pension payments will be made directly out of
external plan assets.
External funding where subsequent pension payments
are made directly out of external plan assets totaled€16 million (previous year: €18 million). External funding
where LANXESS can assert reimbursement claims
mainly pertains to LANXESS Pension Trust e.V.
The acquisitions in the previous year related to theacquisition of the Microbial Control business from U.S.
corporation International Flavors & Fragrances Inc. of€3 million in the defined benefit pension obligations.
The exchange differences pertaining to plan assets
mainly resulted from changes in the exchange rates for
the U.S. dollar and the British pound.

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Changes in the effects of the asset ceiling are shown in
the following table:

Corporate GovernanceManagement Report€ million
Cash and cash equivalents

Other post-­
employment
benefit plans

Pension plansof which quoted in an active market
Equity instruments€ million

2022

2023

2022

2023

Jan. 1

26

9

29

26

Interest expense

0

0

1

1

of which quoted in an active market
Government bondsof which quoted in an active market
Corporate bonds

Additions (+)/
reversals (–)

(16)

(1)

(6)

5

Exchange differences

(1)

0

2

(1)

Dec. 31

9

8

26

31

of which quoted in an active market
Investment fundsof which quoted in an active market
Real estateof which quoted in an active market

Changes in the effects of the asset ceiling essentiallyrelate to the British defined benefit pension plans andthe North American defined benefit obligations for otherpost-employment benefits.

Change in effects of minimum funding­requirements
There were no minimum funding requirements fordefined benefit plans in fiscal year 2023, as in theprevious year, and there were no effects from minimum
funding requirements.

203

Insurance contractsof which quoted in an active market
Otherof which quoted in an active market

Further Information

The following weighted discount rates were used to
calculate the defined benefit obligation and determine
the pension expense:

The fair value of plan assets comprises:
Breakdown of Plan Assets as of December 31

Changes in Effects of the Asset Ceiling

Financial Statements

2022

2023

21

25

21

25

407

466

407

466

120

164

120

164

584

592

584

592

159

186

57

47

20

14

20

14

229

216

152

130

60

13

59

13

1,600

1,676

The plan assets do not include any real estate used by
the company. No share (previous year: 2%) of the plan
assets is attributable to financial instruments owned by
the company. Index products could conceivably include
LANXESS securities.

Discount Rates as of December 31

Pension plans

Other post-­
employment
benefit plans

%

2022

2023

2022

2023

Discount rate

4.07

3.55

5.93

5.83

Germany

3.70

3.20

3.70

3.20

U.S.

5.50

5.20

5.51

5.13

Great Britain

4.80

4.50

–

–

The following weighted measurement assumptions wereused for the other parameters:
Valuation Assumptions as of December 31

Pension plans

Other post-­
employment
benefit plans

2022

2023

2022

2023

Expected salary
increases

2.6

2.6

5.1

5.4

Expected benefit
increases

2.2

2.3

–

–

Expected increases
in medical costs

–

–

6.9

6.7

Expected long-term
increases in medical
costs

–

–

5.2

5.3

%

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The assumptions are weighted on the basis of the defined
benefit obligation at year end. The discount rates used
for Germany, the U.S. and Great Britain are derived fromhigh-quality fixed-interest corporate bonds with the same
maturities.

Management Report

A change in the principal valuation parameters would
result in the following percentage changes in the defined
benefit obligation:
Sensitivities of Defined Benefit Obligations
as of December 31

The long-term cost increase for medical care is expected
to take place within five years (previous year: six years).
The 2018 G Heubeck mortality tables form the biometricbasis for the computation of pension obligations inGermany. Current national biometric assumptions areused to compute benefit obligations at other Group
companies.

Corporate GovernancePension plans

Other post-­
employment
benefit plans

2022

2023

2022

2023

+0.5% pt

(6.3)

(6.7)

(3.8)

(4.0)

–0.5% pt

7.1

7.5

4.1

4.3

in %
Discount rate

Expected salary
increases+0.25% pt

0.0

0.1

0.3

0.4

–0.25% pt

0.0

(0.1)

(0.3)

(0.3)

Expected benefit
increases+0.25% pt

3.7

3.9

–

–

–0.25% pt

(3.6)

(3.8)

–

–

3.2

3.4

2.6

2.9

+1% pt

–

–

4.2

4.9

–1% pt

–

–

(3.6)

(4.1)

Mortality–10%
Expected increases inmedical costs

The sensitivity of the mortality rates was calculated forthe countries with material pension obligations. A reduction in mortality increases the individual life ­expectancy

204

Financial Statements

Further Informationof beneficiaries. A 10% reduction would increase theaverage life expectancy of employees of retirement age
in the countries of importance for LANXESS by about
one year.
Sensitivity is calculated by altering one parameter whileleaving all the others unchanged. The method used is thesame as for the actuarial valuation of benefit obligations.
However, sensitivity calculations depend on interest
rate effects and the absolute change in the parameter.
Moreover, it is unlikely in practice that only one para­meter
would change, so the change in a ­parameter could
correlate with other assumptions. Where the expecteddevelopment of the parameter used in the sensitivity
calculation was based on a different variation in theparameter, the stated change in the benefit obligation
was approximated using the straight-line method.
The weighted average duration of defined benefit pension
obligations was 15 years (previous year: 15 years).
This figure was based on weighted average durationsof 16 years (previous year: 16 years) for Germany,
7 years (previous year: 9 years) for the U.S. and 13 years(previous year: 14 years) for Great Britain. The weighted
average duration of the defined benefit obligations forother post-employment benefits was 9 years (previous
year: 9 years).

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The funded status is reported in the following table as
the underfunding or overfunding of the defined benefit
obligation after deduction of plan assets, without taking
into account changes in the effects of the asset ceilingor minimum funding requirements:
Funded Status, December 31

Pension plans

Other post-­
employment
benefit plans

2022

2023

2022

2023

Defined benefit obligation for funded plans

1,714

1,911

13

12

External plan assets(1,564)(1,636)

(36)

(40)

€ million

Corporate Governance

Financial Statements

On December 31, 2023, the LANXESS Group hadother current provisions of €338 million (previous
year: €388 million) and other non-current provisions of€299 million (previous year: €296 million). The maturity
structure of other provisions is shown in the following
table:
Other Provisions
Dec. 31, 2022

150

275

(23)

(28)

Defined benefit obligation for unfunded plans

98

108

83

81

Funded status,
Dec. 31

248

383

60

53

Further Information

16 | Other Non-Current andCurrent Provisions

Funded status

Underfunding/­
overfunding offunded plans

Management Report

Dec. 31, 2023

€ million

Up to
1 year1 to 5years

Over 5
years

Total

Up to
1 year1 to 5years

Over 5years

Personnel

142

26

16

184

66

19

18

103

Environmental protection

32

43

99

174

28

40

101

169

Trade-related commitments1)

117

1

–

118

125

1

-

126

Asset retirement obligations

8

12

61

81

9

11

54

74

Restructuring

9

16

1

26

44

23

1

68

Miscellaneous

Total

80

12

9

101

66

18

13

97

388

110

186

684

338

112

187

637

1) Prior-year figures restated.

205

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Corporate GovernanceManagement Report

Changes in Other Provisions in 2023
Addition

Utilization

Release

67

1

(128)

(12)

(3)

103

17

7

(14)

(7)

(8)

169

1

(87)

(15)

1

126

1

(2)

(7)

(1)

74

0

(5)

0

(3)

68

Adjustments
according to
IFRS 5

Personnel

184

(6)

Environmental protection

174

0Trade-related commitments1)

118

–

108

Asset retirement obligations

81

0

2

Restructuring

26

–

50

Exchangedifferences,reclassi­
fications

Dec. 31,2023

Interest
effectJan. 1,
2023

Miscellaneous

101

0

33

1

(23)

(13)

(2)

97

684

(6)

277

11

(259)

(54)

(16)

637

1) Prior-year figures restated.

The adjustments in accordance with IFRS 5 relate to thecontribution of the High Performance Materials business
unit to Envalior.

206

Further Information

Multi-year compensation programs

In total, other provisions decreased from €684 million to€637 million in fiscal year 2023. The changes in otherprovisions were as follows:€ million

Financial Statements

Personnel-related provisions
As of the reporting date, personnel-related provisions
relate to measures in connection with the FORWARD!
action plan, multi-year compensation programs and otherpersonnel costs.

Stock-based compensation
LANXESS AG offers a stock-based compensation
program to members of the Board of Management andtop-level managers. The program provides for cash
settlement. The existing Long-Term Stock Performance
Plans (LTSP) were introduced in fiscal years 2014, 2018and 2022.

Under the LTSP 2014–2017 program introduced infiscal year 2014, rights were granted for the years
2014–2017. Awards are based on the performance of
LANXESS stock relative to the MSCI World Chemicals
Index. The total term of all tranches is generally sevenyears. The vesting period is four years for each tranche.
The base price of the stock and the benchmark index
for the LTSP programs are calculated using a volumeweighted average of the closing prices on the first ten
trading days in January of the year of issue of the tranche.
If LANXESS stock outperforms the index, a payment ofat least €0.75 per right is made. For each percentage
point by which the stock outperforms the index, €0.125
is paid in addition. The maximum possible payment per
right, however, is €2.00.

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LTSP 2018–2021 was introduced in Germany and the
U.S. in fiscal year 2018. The tranche has a total term offour years and exclusively comprises the vesting period.
The issue date for the rights granted and still outstanding
is January 1 of each year. For each year during the termof the LTSP plan, the basic price of the company’s stockis calculated from the average closing prices for the stockin Xetra® trading on the Frankfurt Stock Exchange. To
calculate the average, for each tranche year the closing
prices of the last ten trading days in the calendar monthof December of the previous year and the closing prices
for the first ten trading days of the calendar month ofJanuary of the current tranche year are calculated. The
value of a right is dependent on the average performanceof LANXESS stock relative to the MSCI World C­ hemicals
Index during the vesting period. The performance relative
to the index is calculated individually for each of thefour years of the vesting period. The values for the four
fiscal years falling in the respective tranche are thenadded together and averaged. Rights are exercised
automatically at the end of the vesting period. If thestock outperforms the index by 85 percentage points or
more, at least €0.50/US$0.50 is paid out. An additional€0.03/US$0.03 is paid out for each percentage point
up to a performance of 100 percentage points. If thestock outperforms the index by between 100 and

207

Corporate GovernanceManagement Report

115 percentage points, a further €0.06/US$0.06 will
be paid per percentage point, resulting in a maximum
possible payment of €2.00/US$2.00.
The LTSP 2022–2025 program introduced in fiscal
year 2022 is essentially identical to the LTSP 2018–2021.
Unlike the previous compensation program, awards
under LTSP 2022–2025 are based on the performanceof LANXESS stock relative to the FTSEurofirst 300
Eurozone Chemicals.

Financial Statements

Further Information

The relevant risk-free interest rate in the reporting year
was 1.91% (previous year: 2.50%).
The expected volatilities of the share and the correlation
with the index are based on the prices and index valuesof the past four years.

Obligations arising from the stock-based compensation are valued on the basis of the following principal
parameters:
Principal Parameters as of December 31
in %

2022

2023

Expected share price volatility

40.0

42.0

Expected dividend payment

2.0

2.0

Expected volatility of
MSCI World Chemicals Index

20.0

20.0

Correlation between
LANXESS stock and
MSCI World Chemicals Index

69.0

64.0

Expected volatility of
FTSEurofirst 300 Eurozone
Chemicals Index

22.0

22.0

Correlation between
LANXESS stock and
FTSEurofirst 300 Eurozone­Chemicals Index

76.0

73.0

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Corporate GovernanceManagement Report

The following table provides information on the tranches
outstanding:Financial Statements

Further Information

The adjustments in accordance with IFRS 5 relate to thecontribution of the High Performance Materials business
unit to Envalior.

Long-Term Stock Performance PlanLTSP
2014 – 20172017
trancheLTSP
2018 – 2021
2019
tranche2020
trancheLTSP
2022 – 2025
2021
tranche2022
tranche2023
trancheDuration

7 years

4 years

4 years

4 years

4 years

4 years

Vesting period

4 years

4 years

4 years

4 years

4 years

4 years

31.01.2020

–

–

–

–

–

Initial LANXESS share priceLock-up period for personal investment shares€64.84€42.57€59.39€63.01€55.30€40.10Initial MSCI World Chemicals Index price276.04points280.46points326.83points376.38points––4,152.40
points

Initial FTSEurofirst 300 Eurozone Chemicals Index
price

–

–

–

–

4,907.86
pointsFair value per right as of Dec. 31, 2022

€0.00

€0.741)€0.351)€0.471)€0.771)–

Fair value per right as of Dec. 31, 2023

€0.00

–

€0.001)€0.151)€0.361)€0.481)

7,360,819

10,929,051

11,668,928

12,689,565

14,145,822–

11,718–72,142

84,275112,253–
15,739,275

Change in number of outstanding rights
Outstanding rights as of Dec. 31, 2022
Adjustments according to IFRS 5
Rights granted

–

–

–

–

–

Rights exercised– (10,785,741)

–

–

–

–

Rights compensated–(73,500)(330,080)(337,914)(1,290,577)(1,239,035)

Rights forfeited(548,435)(69,810)(940,273)(988,843)(189,487)(59,755)

Outstanding rights as of Dec. 31, 2023

6,824,102

0

10,470,717

11,447,083

12,778,011

14,440,485

1) The same payment amount in USD applies to the tranches of the U.S. plans.

208

LANXESS shares were trading at €28.37 (previous year:€37.70) as of the end of 2023. The MSCI World ­Chemicals
benchmark index stood at 415.26 points (previous year:
370.08) while FTSEurofirst 300 Eurozone Chemicals was
at 4,795.58 points (previous year: 4,002.54).
Due to the performance of the LANXESS share relative
to the benchmark and to the granting, settlement orforfeiture of rights, the net income in fiscal year 2023 was€3 million (previous year: net expense of €4 million). A
provision of €5 million existed as of December 31, 2023
(previous year: €16 million). In the current reporting
year, as in the previous year, the rights exercisable asof the end of the reporting period had an intrinsic valueof €0 million.

Environmental provisions
The LANXESS Group’s activities are subject to extensive
legal requirements in the jurisdictions in which it does
business. Compliance with environmental laws may
require LANXESS to remove or mitigate the effects of
the release or disposal of chemical substances at various
sites. Under some of these laws, a current or previous

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site owner or plant operator may be held liable for thecosts of removing hazardous substances from the soil
or groundwater on its property or neighboring areas,or rendering them harmless, without regard to whether
the owner or operator knew of or caused the presenceof the contaminants, and often regardless of whether
the practices that resulted in the contamination werelegal at the time they occurred. As many of LANXESS’s
production sites have a long history of industrial use, it is
not always possible to accurately predict the effects suchsituations may have on the LANXESS Group in the future.

209

Corporate GovernanceManagement Report

the U.S. authorities or private individuals consider suchcompanies to be potentially responsible parties underSuperfund or related laws. At some sites, LANXESS may
be the sole responsible party. Remediation measures
have already been initiated at most of the sites concerned.

As LANXESS is a chemical company, the possibility
therefore cannot be excluded that soil or groundwatercontamination may have occurred at its locations in thepast. Claims in this regard could be brought by government agencies, private organizations or individuals. Suchclaims would then relate to the remediation of sites orareas of land owned by the LANXESS Group where
products were manufactured by third parties undercontract manufacturing agreements or where wastefrom production facilities operated by the LANXESSGroup was treated, stored or disposed of.

The existing provisions for environmental remediation
costs relate primarily to the rehabilitation of contaminatedsites, recultivation of landfills, and redevelopment andwater protection measures. The provisions for environmental remediation costs are stated at the present valueof the expected commitments where environmental
assessments or clean-ups are probable, the costs canbe reasonably estimated and no future economic benefit
is expected to arise from these measures. Costs are
estimated based on significant factors such as previous
experience in similar cases, environmental assessments,
current cost levels and new circumstances affecting
costs, current environmental laws and regulations, thenumber of other potentially responsible parties at eachsite and the identity and financial position of such parties
in light of the joint and several nature of the liability, andthe remediation methods likely to be employed.

Potential liabilities exist with respect to various sites underlegislation such as the U.S. environment law commonly
known as “Superfund.” At locations in the U.S., numerous
companies, including LANXESS, have been notified that

It is difficult to estimate the future costs of environmental
protection and remediation particularly because of many
uncertainties concerning the legal requirements andthe information available about conditions in the various

Financial Statements

Further Information

countries and at specific sites. This is especially true
because global climate change and the transition to a
low-carbon economy mean that new legal requirements
to protect the environment and combat climate change
can be introduced at any time. Subject to these factors,
but taking into consideration experience gained to datewith matters of a similar nature, LANXESS believes theprovisions to be adequate based upon currently available
information. However, the possibility that additional costs
could be incurred beyond the amounts accrued cannot
be ruled out. LANXESS nevertheless estimates that such
additional costs, should they occur, would not materially
impact the Group’s earnings, asset and financial position.

Provisions for trade-related commitments
The provisions essentially relate to energy services not
yet invoiced and outstanding invoices for performancecompleted to date. They also comprise provisions for
impending losses and onerous contracts.

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Provisions for restructuring
Provisions for restructuring totaled €68 million(previous year: €26 million) as of December 31, 2023,
comprising €51 million (previous year: €5 million) for
human resources measures, €16 million (previous
year: €20 million) for environmental protection
measures, €1 million (previous year: €0 million) for
other restructuring provisions, and €0 million (previous
year: €1 million) for demolition work required to fulfill
environmental obligations and other expenses. The
increase in provisions for restructuring for humanresources measures is attributable to the measures of
the FORWARD! action plan.

Miscellaneous provisions
In particular, miscellaneous provisions comprise provisions for onerous contracts, for legal disputes and forother obligations.

Corporate GovernanceManagement Report

Financial Statements

Further Information

Other Financial Liabilities as of December 31, 2022
Current€ million2023

Non-current
2024

2025

2026

2027

> 2027

Total non-­current
3,268

Bonds

29

–

497

497

595

1,679

Liabilities to banks

741

–

–

–

–

–

–

Lease liabilities

45

35

28

23

18

43

147

Other primary financial liabilities

15

0

1

–

–

1

2

830

35

526

520

613

1,723

3,417

Other Financial Liabilities as of December 31, 2023
Current

Non-current€ million

2024

2025

2026

2027

2028

> 2028

Total non-­current
2,783

Bonds

16

498

498

596

597

594

Liabilities to banks

2

–

–

–

–

–

–

Lease liabilities

50

41

34

25

11

43

154

Other primary financial liabilities

4

0

0

–

–

1

1

72

539

532

621

608

638

2,938

17 | Other Non-Current and Current
Financial Liabilities  
The following tables show the structure and maturitiesof other financial liabilities:

Liabilities to banks decreased to €2 million (previous
year: €741 million), primarily due to the repayment ofvarious bilateral bank loans.
Lease installments of €227 million (previous year:€213 million) are payable to the respective lessors in
subsequent years. The interest component included
amounts to €23 million (previous year: €21 million).
In the LANXESS Group, the following bonds were
outstanding on December 31, 2023:

210

Bonds
Issuance

Nominalamount€ million

Carrying
amount€ million

Interest
rate%

Maturity

April
2012

100

102

3.950

April
2027

October
2016

500

499

1.000

October
2026

May
2018

500

502

1.125

May
2025

September
2021

500

497

0.000

September
2027

December
2021

600

594

0.625

December
2029

March
2022

600

605

1.750

March
2028

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The hybrid bond of €500 million included in the previous
year was repaid in fully utilizing the first redemption
option on June 6, 2023.
Accrued interest amounts to €16 million (previous
year: €30 million), of which €16 million (previous year:€29 million) is included in the carrying amounts of thebonds.
Information on the fair values of financial liabilities andthe contractually agreed payments, especially interest
payments, is given in
Note [38].

18 | Non-Current and Current Income
Tax Liabilities  
The non-current income tax liabilities of €17 million(previous year: €28 million) essentially comprise
uncertain tax positions for ongoing tax proceedings.
The decrease resulted primarily from completed audits.
Current income tax liabilities of €42 million (previous
year: €38 million) essentially include taxes incurred forthe fiscal year but not yet paid.

19 | Other Non-Current andCurrent Liabilities  
Other non-current liabilities break down as follows at theend of the reporting period:

211

Corporate GovernanceManagement Report

Other Non-Current Liabilities

Financial Statements

Further Information

Contract liabilities are recognized in accordance withIFRS 15 primarily for advance consideration received forwhich performance has not yet been rendered.

Dec. 31,2022

Dec. 31,2023

Asset subsidies granted bythird parties

15

12

Contract liabilities

1212Social security liabilities

7

7€ million

2022

2023

Miscellaneous liabilities

7

7

41

38

Jan. 125

22

Adjustments according to IFRS 5(1)–

Cumulative catch-up adjustments torevenues(9)2Additions

31

23

Revenue recognized that was includedin the beginning balance

(24)

(16)

Changes to companies consolidated–(1)

Exchange differences

00Dec. 3122

30€ million

The asset subsidies granted by third parties include
government grants that are contingent upon themaintenance of employment or the use of assets forthe company’s own production purposes over defined
periods of time.

Contract Liabilities

Other Current Liabilities
Dec. 31,2022

Dec. 31,2023

Other tax liabilities

50

41

Payroll liabilities

11

25

Contract liabilities

10

18

Social security liabilities

16

15€ million

Miscellaneous liabilities

38

22

125

121

Other tax liabilities include not only Group companies’
own tax liabilities, but also taxes withheld for payment
to the authorities on behalf of third parties. Payroll­liabilities relate to obligations to employees. The increasein fiscal year 2023 resulted primarily from measuresin connection with the FORWARD! action plan. Social
security liabilities include, in particular, social insurance
contributions that had not been paid by the closing date.
Miscellaneous liabilities essentially comprise accrualsfor outstanding invoices relating to the reporting period.

The adjustments in accordance with IFRS 5 in the previous
year resulted from the presentation of the High Performance Materials business unit as a discontinued operation.
Minus €8 million (previous year: minus €9 million)of the cumulative catch-up adjustments to revenues
relate to earlier periods. The additions essentially relate
to advance payments from customers for outstanding
performance obligations. The revenue recognizedfrom the opening balance mainly relates to prior-year
payments from customers and the recognition of thevalues for the quantities delivered in the reporting year
from the business model of manufacturing productson the basis of long-term supply agreements with acontractually defined minimum purchase requirement,
which are included in the opening balance.

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20 | Trade Payables  In fiscal year 2023, trade payables amounted to€584 million (previous year: €709 million) and were due
within one year, as in the previous year. The year-on-year
decline resulted primarily from reduced procurement
prices and purchase volumes for raw materials andenergy.

Corporate GovernanceManagement Report

the change in sales by segment and region is given in
the segment information (seeNote [40]).
Type of Revenues€ million

2022

2023

Sales of goods

7,919

6,603

Services

169

111

8,088

6,714

21 | Further Information on Liabilities  
Revenue Recognition€647 million of total liabilities (previous year:€1,732 million) have maturities of more than five years.
The year-on-year decline resulted primarily from a bondwith a nominal volume of €600 million switching maturity
band to less than five years and from the early repaymentof the hybrid bond with a nominal volume of €500 million,
which in the previous year was recognized as maturing
in December 2076.

NOTES TO THE INCOME­STATEMENT
22 | Sales
Sales, which amount to €6,714 million (previous year:€8,088 million), mainly comprise sales of internallygenerated chemical products less discounts and rebates.
The services relate to sales- and product related services,
tolling agreements and other long-term services. The
decline in sales from the sale of products resulted
primarily from lower demand and lower selling prices
driven by raw material prices. A breakdown of sales and212€ million

2022

2023

Point in time

7,430

6,075

Over time

658

639

8,088

6,714

Financial Statements

Further Information

requirements, there were unfulfilled performanceobligations of €2,064 million as of December 31, 2023
(previous year: €2,235 million). The associated sales are
expected to be as follows:
Maturity Structure of Revenues€ million

2022

2023

Up to 1 year

652

620

1 to 2 years

404

419

2 to 3 years

284

329

3 to 4 years

243

248

4 to 5 years

205

156

Over 5 years

447

292

2,235

2,064

23 | Cost of Sales
The sales recognized over time relate to the businessmodel of manufacturing customer-specific products on
the basis of long-term sales contracts with contractually
defined minimum purchase requirements of €528 million(previous year: €489 million) and to services renderedover time of €111 million (previous year: €169 million).
For information on the effects of changes in contract
assets and contract liabilities on sales, please refer tothe respective reconciliations in
Note­s [6] and [19].
Under the business models of manufacturing products orcustomer-specific products on the basis of long-term sales
contracts with contractually defined minimum purchase

The cost of sales breaks down as follows:
Cost of Sales€ million

2022

2023

Expenses for raw materials and­merchandise

3,535

2,993

Direct manufacturing and other­production costs

2,616

2,453

6,151

5,446

The manufacturing costs include, among other costs,
those for personnel, depreciation, amortization, write
downs, energy, and goods and services procured. The
other production costs particularly comprise inventory
valuation effects.

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The decrease resulted primarily from lower sales volumes
and lower procurement prices for raw materials andenergy. As in the previous year, emissions rights werealso sold to compensate for high energy costs. Shifts in
exchange rates also led to lower manufacturing costs.
A portfolio-driven increase due to the Microbial Control
business acquired at the beginning of July 2022 had an
opposite effect.

Management Report26 | General Administration Expenses

Other Operating Expenses

The breakdown of selling expenses is as follows:

27 | Other Operating Income

Selling Expenses

Other operating income breaks down as follows:€ million

2022

2023

593

583

Outward freight charges and otherselling expenses

471

350

1,064

933

25 | Research andDevelopment ­Expenses
The research and development expenses of €99 million(previous year: €102 million) mainly include the costs
incurred to gain new scientific and technical knowledge,

Further Information

28 | Other Operating Expenses

24 | Selling Expenses

Marketing costs

Financial Statements

expenses relating to the search for alternative products
and production processes, and costs for applying theresults of research.

The general administration expenses, amounting to€279 million (previous year: €319 million), comprisecosts not directly related to operational businessprocesses and the costs for the country organizations.

The selling expenses essentially comprise those for theinternal and external marketing and sales ­organization,
freight charges, warehousing, packaging and the­provision of advice to customers.

213

Corporate Governance

Other Operating Income€ million

2022

2023

Income from non-core business

7

35

Income from the reversal of provisions

4

3

Exceptional items

01

Miscellaneous operating income

27

39

38

78

Income from non-core business primarily includes
income in connection with administrative services
performed for Envalior.
Exceptional items include income from the reversal ofprovisions recognized as exceptional items in previous
years. Based on economic relevance, they comprise€1 million (previous year: €0 million) allocated to generaladministrative expenses.

Other operating expenses break down as follows:€ million

2022

2023

Exceptional items

109

616

Expenses for non-core business

8

35

Expenses for hedging with derivative
financial instruments

37

3

Loss allowance on trade receivables
and other current assets

30

Miscellaneous operating expenses

53

49

210

703

In fiscal year 2023, the exceptional items include thewrite-downs on the goodwill of the Flavors & Fragrancesand Polymer Additives business units of €406 million
resulting from the impairment testing of cash-generating
units as of December 31, 2023. Further informationon the background and scope of the impairment canbe found in the“Estimation Uncertainties and theExercise of Discretion” section. In addition, exceptional
items included expenses of €111 million in connection
with the FORWARD! action plan. Furthermore, there
were exceptional items of €25 million for strategic IT
projects and of €14 million for the strategic realignment.
There were also exceptional items of €8 million for
restructuring measures to adapt the production networkand of €52 million for M&A activities, digitalization andother measures.

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Corporate GovernanceManagement Report

Of the exceptional items of €616 million in fiscal year 2023
(previous year: €109 million), based on economic
relevance €406 million (previous year: €0 million) related
to other operating expenses, €33 million (previous year:€6 million) related to the cost of sales, and €177 million(previous year: €103 million) related to general administration expenses.

29 | Financial Result

2022

2023

Income from investments accounted
for using the equity method

3

(172)

In the previous year, exceptional items included costs
for strategic IT projects of €32 million. In addition, there
were exceptional items for the strategic realignmentof €25 million, which also included exceptional items
in connection with the integration of the Microbial
Control business. There were also exceptional itemsof €6 million for restructuring measures to adapt the
production network and of €46 million for M&A activities,
digitalization and other measures.

Interest income

7

10

Expenses for non-core business primarily include
expenses in connection with administrative services
performed for Envalior.

The financial result breaks down as follows:
Financial Result€ million

Interest expense

(75)

(70)

Net interest expense

(68)

(60)

Interest expense from compounding
interest-bearing provisions

(15)

(26)

Net exchange gain/loss

5

11

Miscellaneous financial expense andincome55(32)

Dividends and income from otheraffiliated companies(3)0

Other financial income andexpenseFinancial result

42

(47)

(23)

(279)

Of the income from investments accounted for using
the equity method of minus €172 million (previous
year: income of €3 million), an expense of €181 million
is attributable to the subsequent measurement of theinvestment in Envalior GmbH, Cologne, Germany, andincome of €9 million (previous year: €3 million) is attributable to the subsequent measurement of the investment
in Viance LLC, Wilmington, U.S.

214

Financial Statements

Further Information

Interest expense includes in particular payments ofbond interest adjusted for capitalized borrowing costsof €1 million (previous year: €1 million). Interest expense
also includes the interest portion of the lease payments
under leases, amounting to €5 million (previous year:€3 million).
Other financial expenses and income include incomeof €33 million resulting from the measurement of ashareholder loan to Envalior GmbH at fair value. The
shareholder loan with a nominal amount of €200 million
was granted in connection with the formation of Envalior.
The measurement of a right to offer in connection withthe minority interest in Envalior resulted in expenses of€68 million. Further information on the right to offer canbe found under“Financial Instruments” in the “Fairvalue measurement” section. Other financial expenses
and income also include expenses of €3 million (previous
year: €20 million) from the measurement of financial
instruments in connection with the company Standard
Lithium Ltd., Vancouver, Canada. In addition, this item
includes income of €6 million (previous year: expenses of€2 million) from the measurement of near-cash financial
assets at fair value and the monetary loss of €1 million(previous year: €6 million) from restating the price levelin the context of financial reporting in hyperinflationary
economies.

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In the previous year, the other financial result included
income from the settlement of interest rate hedges of€83 million.

30 | Income Taxes

Corporate GovernanceManagement Report

In calculating the expected tax expense for the
LANXESS Group, the aggregated tax rate of 29.0%(previous year: 29.3%) for the income tax group of
LANXESS AG was applied. This comprises a corporation
tax rate of 15.0%, plus the solidarity surcharge (5.5% ofcorporation tax) and trade tax.

This item comprises the income taxes paid or accruedin the individual countries, plus deferred taxes. Income
taxes are computed on the basis of local tax rates.

The reconciliation of the expected tax result to the actual
tax result is as follows:

The breakdown of income taxes by origin is as follows:

Reconciliation to Actual Tax Result

Income Taxes by Origin€ million

2022

2023

Current taxes

(20)

(18)

Deferred taxes
temporary differences

(42)

83

statutory changes in tax rates(2)0loss carryforwards

(8)

40

(72)

105

Income taxes€ million

2022

2023

Income before income taxes

257

(947)

Aggregated income tax rate of
LANXESS AG (tax group)

29.3%

29.0%

(75)

275

Expected tax resultTax difference due to differences
between local tax rates and the­hypothetical tax rate
Reduction in taxes due to tax-freeincome and reduction of tax bases

23

(7)

The actual tax income for fiscal year 2023 was€105 million (previous year: tax expense of €72 million).
This was €170 million (previous year: €3 million) lessthan the expected tax income of €275 million (previous
year: tax expense of €75 million).

The other tax effects of minus €32 million (previous
year: minus €9 million) essentially result from taxes
for previous years. In the previous year, these primarily
included taxes for previous years and reversals of impairment on deferred taxes, which had the opposite effect.
The deferred tax assets and liabilities are allocable tothe various items of the statement of financial position
as follows:
Deferred Taxes
Dec. 31, 2022

€ million

Dec. 31, 2023

Less
­deferred
tax assets

Deferredtax­liabilities

Less
deferredtax assets

Deferredtax­liabilities

6

209

19

245

Property, plant andequipment

4

258

4

211

(125)

Inventories

32

10

52

6
91

3

13

(7)
(7)

(19)

Receivables andother assets

70

90

49

Other tax effects

(9)

(32)

Pension provisions

65

0

145

0

Actual tax result

(72)

105

Other provisions

64

0

75

2

Effective tax rate

28.0%

11.1%

Liabilities

32

1

35

0

Loss carryforwards

88

–

124

–

374

604

490

519

unrecognized deferred taxes on tax
losses and temporary differences

The non-tax-deductible expenses primarily relate toimpairment on the goodwill of the Flavors & Fragrancesand Polymer Additives cash-generating units. Further
information on impairment testing can be found in215

Further Information

the“Estimation Uncertainties and the Exercise ofDiscretion” section.

Intangible assets

Increase in taxes due tonon-tax-deductible expenses

Financial Statementsof which
non-current
Set-off

176

508

279

425

(320)

(320)

(325)

(325)

54

284

165

194

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The change in deferred taxes is calculated as follows:
Changes in Deferred Taxes€ million

2022

2023

Deferred taxes, Jan. 1

(31)

(230)

3

–

Tax income/expense recognized in theincome statement

(52)

123

Changes in companies consolidated

(6)

40

Deferred taxes recognized in othercomprehensive income

(142)

36

Adjustments according to IFRS 5

Exchange differences
Deferred taxes, Dec. 31

(2)

2

(230)

(29)

The adjustments in accordance with IFRS 5 in theprevious year resulted from the presentation of the High
Performance Materials business unit as a discontinued
operation. In this context, only the deferred taxes that will
be disposed of when the interest is sold were reclassified.
The deferred taxes recognized in other comprehensive income comprised €35 million (previous year:
minus €149 million) relating to remeasurements of the
net defined benefit liability for post-employment benefit
plans and €1 million (previous year: €7 million) relating
to financial instruments. In addition, other comprehensive income contains current taxes of minus €1 million(previous year: minus €1 million).

216

Corporate GovernanceManagement Report

Deferred tax assets of €140 million (previous year:€11 million), which exceed the reversal of taxable
temporary differences, relate to tax jurisdictions inwhich losses were incurred in fiscal year 2023 or theprevious year. Deferred taxes assets of €134 million(previous year: €0 million) are attributable to the German
tax group, which primarily result from the different tax
valuation of pension provisions. In addition, deferred tax
assets exceeding the earnings effects from the reversalof taxable temporary differences include €81 million(previous year: €3 million) in deferred taxes on loss
carryforwards. Based on tax planning calculations andstrategies, LANXESS assumes that it will generate sufficient taxable income in the future to realize the deferred
tax assets.
Based on tax planning calculations and strategies,
deferred tax assets of €124 million (previous year:€88 million) were recognized on the €396 million(previous year: €274 million) in tax loss carryforwards
that represent income likely to be realized in the future.
This amount included deferred taxes of €87 million(previous year: €54 million) on loss carryforwards withan unlimited carryforward period.
Deferred taxes were not recognized for €249 million(previous year: €871 million) of tax loss carryforwards. Of
this amount, €107 million (previous year: €124 million)
can theoretically be used over more than five years. No
deferred tax assets were recognized in fiscal year 2023
for tax-deductible temporary differences of €82 million(previous year: €80 million). Accordingly, deferred taxes

Financial Statements

Further Information

on loss carryforwards of €67 million (previous year:€220 million) and deferred tax assets on tax-deductible
temporary differences of €21 million (previous year:€21 million) were not recognized.

31 | Earnings and Dividend per Share
Earnings per share for fiscal year 2023 amount to €5.13,
consisting of minus €9.76 from continuing operationsand €14.89 from discontinued operations. The values
were calculated by dividing net income by the weighted
average number of LANXESS shares outstanding during
the reporting period. As of December 31, 2023, a totalof 86,346,303 shares were outstanding. Since there
are currently no equity instruments in issue that could
dilute earnings per share, basic and diluted earnings
per share are identical. Further information on equity
instruments that could dilute earnings per share in theNote [14].
future is contained in
Earnings per Share2022
Net income (€ million)

2023

250

443

from continuing operations

184

(843)

from discontinued operations

66

1,286

86,346,303

86,346,303

Weighted average numberof shares outstanding
Earnings per share(basic/diluted) (€)

2.90

5.13

from continuing operations

2.13(9.76)

from discontinued operations

0.77

14.89

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LANXESS AG reported a distributable profit of€442 million for fiscal year 2023 (previous year:€518 million). The dividend payment made to stockholders of LANXESS AG for fiscal year 2022 amounted
to €1.05 per share (previous year: €1.05 per share).

Corporate GovernanceManagement Report

OTHER INFORMATION
33 | Employees

32 | Personnel Expenses

The average number of employees in the LANXESS Group
in 2023 was 13,030 (previous year: 13,023). The breakdown of employees is as follows:

The breakdown of personnel expenses is as follows:

Employees by Function

Financial Statements

Further Information

Financial commitments resulting from orders alreadyplaced under purchase agreements relating to plannedor ongoing capital expenditure projects in the area ofproperty, plant and equipment and intangible assets
totaled €130 million (previous year: €140 million). All ofthese payments are due in fiscal year 2024.

Description of the master agreement

Personnel Expenses€ million

2022

2023

Wages and salaries

1,080

1,121

Social security contributions

185

191

Retirement benefit expenses

91

79

Social assistance benefits

13

13

1,369

1,404

2022

2023

Production

9,182

9,155

Administration

1,953

1,925

Marketing and sales

1,420

1,470

Research and development

468

480

13,023

13,03034 | Contingent Liabilities andOther Financial Commitments
The increase in personnel expenses in fiscal year 2023
is primarily attributable to measures in connection
with FORWARD! and pay adjustments. Lower
performance-related compensation had the opposite
effect. The personnel expenses shown here do notcontain the interest expenses for compounding
personnel-related provisions, especially pension
provisions, which is reflected in the financial result  (see Note [29]).

Contingent liabilities result from guarantees and similar
instruments assumed on behalf of third parties. They
represent potential future commitments in cases
where the occurrence of certain events would create
an obligation that was uncertain as of the closing date.
An obligation to perform under such contingent liabilities
arises in the event of delayed settlement or insolvencyof the debtor.
As of December 31, 2023, contingent liabilities to third
parties totaled €0 million (previous year: €13 million).
The decline is primarily attributable to the recovery of
the guarantees relating to the chrome ore business inSouth Africa, which was sold in fiscal year 2021.

217

Under the master agreement concluded between
Bayer AG and LANXESS AG together with the Spin-Off
and Takeover Agreement, Bayer AG and LANXESS AG
agreed, among other things, on commitments regarding
mutual indemnification for liabilities in line with therespective asset allocation and on special arrangements
allocating responsibility to deal with claims in the areasof product liability, environmental contamination andantitrust violations. The master agreement also contains
arrangements for the allocation of tax effects relating to
the spin-off and to the preceding measures to create thesubgroup that was subsequently spun off.

35 | Related Parties
In the course of its operations, the LANXESS Groupsources materials, inventories and services from a large
number of business partners around the world. These
include companies in which LANXESS AG has a direct
or indirect interest (see “Companies consolidated”).
Transactions with these companies are carried out on
an arm’s length basis.

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The LANXESS Group generated sales of €56 million
and other operating income of €36 million from transactions with affiliated companies, of which sales of€25 million and other operating income of €36 million
are attributable to relationships with Envalior GmbHand its affiliated companies. The services purchased
by LANXESS in 2023 in the amount of €8 million are
based on trade relationships with Envalior GmbH and
its affiliated companies.
As of December 31, 2023, these trade relationships aswell as leasing, financing, and other transactions resulted
in receivables of €235 million and liabilities of €4 million.
These comprise receivables of €224 million and liabilitiesof €4 million from transactions with Envalior GmbH and
its affiliated companies.
Since Envalior was founded as of April 1, 2023,
Envalior GmbH, Cologne, Germany, has been includedin the LANXESS consolidated financial statements using
the equity method. In connection with the formation of
Envalior, Envalior GmbH received a shareholder loan
at a nominal amount of €200 million from LANXESS.
LANXESS also has the possibility to sell its shares in
Envalior GmbH to Advent for the first time three years
after the formation under certain conditions. Further information can be found under“Financial Instruments” inthe “Fair value measurement” section.
In addition, members of the Board of Management
and the Supervisory Board as well as their close family
members were identified as related parties. As in theprevious year, there were no business transactions
subject to reporting requirements in fiscal year 2023.

218

Corporate GovernanceManagement Report

Information on the compensation of the Board ofManagement and Supervisory Board can be found in
the next section.

36 | Compensation of the Board of­Management and the Supervisory Board
In addition to the fixed compensation, compensation for
Board of Management members also comprises shortterm and long-term variable compensation components.
The two variable compensation components – theAnnual Performance Payment (APP) for the Board ofManagement and the Long-Term Incentive (LTI) – arelinked to LANXESS’s annual performance and performance over a number of years and thus reward thesustainable, value-oriented development of the company.
The short-term variable compensation component APP
includes a financial and a non-financial performance
criterion. Currently, the financial performance criterion
is EBITDA (operating earnings before depreciation,amortization, write-downs and reversals) pre exceptionals and the non-financial performance criterion is
the lost time injury frequency rate (LTIFR: accidents per
million hours worked) for accidents with days lost. The
long-term variable compensation component consistsof the Long-Term Performance Bonus (LTPB), which
ended on December 31, 2023, and was replaced by
the Sustainability Performance Plan (SPP), and theLong-Term Stock Performance Plan (LTSP). The SPP
considers a non-financial sustainability criterion, which
for the 2021–2024, 2022–2025 and 2023–2026
assessment periods is the amount of CO2e emissions.
The LTSP is based on the price performance of the
LANXESS stock against a reference index.

Financial Statements

Further Information

The composition of the Board of Management changed
as follows in fiscal year 2023: Frederique van Baarle wasappointed as a member of the Board of Management of
LANXESS AG and Labor Director for a period of three years
with effect from April 1, 2023. In addition, Oliver Stratmann
was appointed as a member of the Board of Management fora period of three years with effect from September 1, 2023.
As the new Chief Financial Officer, he succeeded Michael
Pontzen, who stepped down as of August 31, 2023.
Dr. Anno Borkowsky left the Board of Management asplanned and retired on December 31, 2023. There are
currently no plans to appoint a successor.
For fiscal year 2023, total compensation in accordance with Section 314 Paragraph 1 No. 6a) HGB of€6,778 thousand (previous year: €10,763 thousand)was paid to the members of the Board of Managementof LANXESS AG, comprising €4,442 thousand (previous
year: €7,279 thousand) in short-term compensation (fixedannual salary, APP, benefits in kind and other) and otherlong-term compensation components of €160 thousand(previous year: €1,130 thousand) as part of the LTPB.
The total also includes compensation paid under the
LTSP. A total of 2,501,042 (previous year: 2,354,022)
compensation rights were granted to the members of theBoard of Management in fiscal year 2023. The fair valueof these rights at the grant date was €2,176 thousand(previous year: €2,354 thousand). In fiscal year 2023,
the LTSP resulted in income of €437 thousand (previous
year: expense of €761 thousand).
In addition, service costs of €1,593 thousand (previous
year: €1,828 thousand) relating to defined benefit
pension plans were incurred in fiscal year 2023 formembers of the Board of Management in office as ofAnnual Report 2023 | LANXESSContents

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December 31, 2023, as part of their compensation
package. The present value of the defined benefit obligation was €19,847 thousand as of December 31, 2023
(previous year: €20,208 thousand). The service costsin accordance with IFRS for Michael Pontzen, who leftthe Board of Management, amount to €291 thousand.
In accordance with IAS 24, the total net expense for thecompensation of the members of the Board of Management in fiscal year 2023 was €6,392 thousand (previous
year: €13,152 thousand). The balances outstanding
to members of the Board of Management as ofDecember 31, 2023, totaled €4,919 thousand (previous
year: €10,572 thousand), comprising provisions of€1,117 thousand (previous year: €3,680 thousand) for the
APP, €1,468 thousand (previous year: €3,214 thousand)for the LTPB, €1,441 thousand (previous year:€1,099 thousand) for the SPP and €893 thousand(previous year: €2,579 thousand) for the LTSP.
Payments in accordance with Section 314 Paragraph 1
No. 6b) HGB totaling €1,560 thousand (previous year:€1,505 thousand) and relating to pension benefits weremade to former members of the Board of Management in fiscal year 2023, €318 thousand (previous
year: €318 thousand) of which related to one-time
capital payments. The total pension obligation toward
former members of the Board of Management as ofDecember 31, 2023, was €37,949 thousand (previous
year: €28,466 thousand).
The total compensation of the Supervisory Board
members in fiscal year 2023 included fixed annualcompensation and compensation for work on

219

Corporate GovernanceManagement Report

Financial Statements

Further Informationcommittees and totaled €1,905 thousand (previous year:€1,903 thousand), including attendance allowances. It
is paid at the start of the following year.

received benefits or assurances of benefits from third
parties with respect to their duties as members of theBoard of Management.

In addition, the employee representatives on the Supervisory Board who are on LANXESS’s payroll received
remuneration under their employment contracts. The
amounts of these salaries represented appropriatecompensation for the employees’ functions and tasks
within the Group.

No loans were granted to members of the Board ofManagement or the Supervisory Board in fiscal year 2023
or the previous year.

37 | Leases
The LANXESS Group rents land, office buildings andwarehouses for its business activities. In addition, rail
tankers and tank containers are leased to transport raw
materials and goods. The right-of-use assets recognizedin this context developed as follows:

In accordance with the contractual agreements, partsof Frederique van Baarle’s compensation were paid by
the U.S. subsidiary LANXESS Corporation. In the pastfiscal year, no other member of the Board of Management
Change in Right-of-Use Assets from Leases 2022
Land and buildings€ million

Technical equipment Other fixtures, fittingsand machineryand equipment

Total

Cost of acquisition or construction, ­Dec. 31, 2021

227

64

68

359

Adjustments according to IFRS 5

(23)

(1)

(6)

(30)

Acquisitions

43

–

3

46

Additions

4

19

14

37

Retirements

(2)

(6)

(6)

(14)

Exchange differences

0

0

2

2

Cost of acquisition or construction,
Dec. 31, 2022

249

76

75

400

Accumulated depreciation and­w rite-downs, Dec. 31, 2021

(72)

(38)

(39)

(149)

Adjustments according to IFRS 5

4

1

3

8

(28)

(17)

(13)

(58)

Retirements

2

6

5

13

Exchange differences

0

0

(1)

(1)

Accumulated depreciation and­write-downs, Dec. 31, 2022

(94)

(48)

(45)

(187)

Carrying amounts, Dec. 31, 2022

155

28

30

213

Depreciation in 2022

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Change in Right-of-Use Assets from Leases 2023
€ million

Land and buildings

Total

Cost of acquisition or construction,
Dec. 31, 2022

249

76

75

Adjustments according to IFRS 5

1

(1)

0

0

Additions

24

35

15

74

Retirements

(8)

(8)

(8)

(24)

Exchange differences

(4)

0

(2)

(6)

Cost of acquisition or construction,
Dec. 31, 2023

262

102

80

444

Accumulated depreciation and­w rite-downs, Dec. 31, 2022

(94)

(48)

(45)

(187)

Adjustments according to IFRS 5

(1)

1

0

0

Depreciation in 2023

(30)

(17)

(14)

(61)

Retirements

7

8

8

23

Exchange differences

1

0

1

2

Accumulated depreciation andwrite-downs, Dec. 31, 2023

(117)

(56)

(50)

(223)

Carrying amounts, Dec. 31, 2023

145

46

30

221

The adjustments in accordance with IFRS 5 relate to thecontribution of the High Performance Materials business
unit to Envalior.
The changes from acquisitions in the previous year
related to the acquisition of the Microbial Control
business from U.S. corporation International Flavors &Fragrances Inc.
In fiscal year 2023, interest expenses for lease liabilitiesof €5 million (previous year: €3 million) were recognizedin the income statement. The expected future payments
for lease liabilities amount to €227 million (previous year:

220

Technical ­equipment Other fixtures, ­fittingsand machineryand equipment

400€213 million). Information on agreed undiscounted cash
flows and the division of these cash flows into payments
of principal and interest is given in
Note­[38]. Disclosures regarding the remaining terms and maturities ofthe lease liabilities can be found in
Note [17].
In fiscal year 2023, expenses for short-term leases
amounted to €6 million (previous year: €6 million) and
expenses for leases for low-value assets amounted to€5 million (previous year: €4 million). This essentiallyequals the payments made for these leases. Disbursements made under leases totaled €72 million in thereporting year (previous year: €69 million).

Financial Statements

Further Information

The leases in the LANXESS Group may contain options
to extend or terminate the lease in order to ensure thegreatest possible operational flexibility. Leases arenegotiated individually and contain differing terms
and conditions. Extension options are included in thecalculation of the lease liability if they are reasonably
certain to be exercised. Potential future lease paymentsfrom extension options whose exercise is not reasonably certain amount to €185 million (previous year:€209 million). They essentially relate to the global
leasing of office buildings and land. For leases of indefinite duration (evergreen leases), the next extension
option was accounted for in each instance.
In fiscal year 2023, leases with a volume of €7 million
were concluded that will commence in later fiscal
years. As in the previous year, there were no sale andleaseback transactions.
The LANXESS Group is the lessor in financial leases toa limited extent. Income of €8 million from operatingleases in which LANXESS is the lessor was recognizedin the reporting year (previous year: €7 million). Lease
payments of €6 million are expected in the following
year (previous year: €6 million), of €5 million from 2025
to 2028 (previous year: €5 million from 2024 to 2027)
and €13 million after 2028 (previous year: €5 million
after 2027).

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38 | Financial Instruments
The“Report on Future Perspectives, Risks andOpportunities” in the combined management reportoutlines the LANXESS Group’s risk management system,
including its objectives, methods and processes, andthe material financial risks such as currency, interest
rate, counterparty, liquidity and raw material price risks.
The risk that the fair value or the future cash flows of afinancial instrument could change due to fluctuations inmarket prices is described below for the three market
risks:
Currency risks
A hypothetical appreciation or depreciation of 5%in the exchange rate of the euro against the hedged
currencies as of the reporting date would have altered
the fair value of derivatives by €13 million (previous
year: €23 million). This would mainly have affected othercomprehensive income by increasing or reducing thereported gain correspondingly. This effect mainly relates
to the U.S. dollar. Because of the risk strategy, there werealso no or only immaterial risks for the income statement.
Further information can be found under“Report on
Future Perspectives, Risks and Opportunities” in the
combined management report for fiscal year 2023.
Interest rate risks
As of the reporting date, variable-rate financial instruments are recognized almost exclusively in the form ofmoney market investments from available liquidity. In
contrast, borrowings mainly related to fixed-rate bonds.

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Corporate GovernanceManagement Report

Due to this relationship, the LANXESS Group’s net
interest position would improve if interest rates were to
rise. A general change of one percentage point in interest
rates as of December 31, 2023, would have altered thefinancial result by €4 million (previous year: €3 million).
Raw material price risks
A hypothetical increase or reduction in the hedgedcommodity prices of 10% as of the reporting date would

Financial Statements

Further Information

have increased or decreased other operating incomeby €1 million (previous year: €0 million) as a result ofchanges in the fair value of hedging instruments.
The following tables show the contractually agreed(undiscounted) cash flows for primary financial liabilities,
the interest components thereof and derivative financial
instruments:

As of December 31, 2022
€ million

2023

2024

2025

2026

2027

> 2027

Bonds

(80)

(51)

(551)

(546)

(641)

(2,821)of which interest

(80)

(51)

(51)

(46)

(41)

(1,121)

Liabilities to banks

(743)

–

–

–

–

–

of which interest

(2)

–

–

–

–

–

(709)

–

–

–

–

–

Trade payablesof which interest
Lease liabilitiesof which interest

–

–

–

–

–

–

(48)

(38)

(30)

(25)

(19)

(53)

(3)

(3)

(2)

(2)

(1)

(10)

(15)

0

(1)

–

–

(1)

(1)

–

–

–

–

–

Disbursements

(174)

(50)

–

–

–

–

Receipts

163

48

–

–

–

–

Other primary financial liabilitiesof which interest
Derivative liabilities
Hedging instruments that qualify for hedge accounting

Other hedging instruments
Disbursements

(889)

–

–

–

–

–

Receipts

879

–

–

–

–

–

Disbursements

(127)

(90)

(52)

–

–

–

Receipts

130

93

53

–

–

–

Disbursements

(886)

–

–

–

–

–

Receipts

908

–

–

–

–

–

Derivative assets
Hedging instruments that qualify for hedge accounting

Other hedging instruments

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Financial Statements

Further Information

As of December 31, 2023
€ million

2024

2025

2026

2027

2028

> 2028

Bonds

(29)

(529)

(523)

(618)

(614)

(604)

of which interest

(29)

(29)

(23)

(18)

(14)

(4)

Liabilities to banks

(2)

–

–

–

–

–

of which interest

0

–

–

–

–

–
–

Trade payablesof which interest
Lease liabilitiesof which interest

(584)

–

–

–

–

–

–

–

–

–

–

(55)

(45)

(36)

(27)

(12)

(52)

(5)

(4)

(2)

(2)

(1)

(9)

(4)

0

–

–

–

(1)

–

–

–

–

–

–

Disbursements

(24)

–

0

0

0

–

Receipts

17

–

–

–

–

–

Disbursements

(832)

–

–

–

–

–

Receipts

822

–

–

–

–

–

Disbursements

(162)

(94)

(19)

–

–

–

Receipts

164

97

19

–

–

–

Disbursements

(433)

–

–

–

–

–

Receipts

439

–

–

–

–

–

Other primary financial liabilitiesof which interest
Derivative liabilities
Hedging instruments that qualify for hedge accounting

Other hedging instruments

Derivative assets
Hedging instruments that qualify for hedge accounting

Other hedging instruments

222

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Financial Statements

Further Information

Carrying amounts, measurement and fairvalues of financial instruments
The following tables show the carrying amounts of theindividual classes of financial assets and liabilities andtheir fair values. The basis of measurement is also shown:
Carrying Amounts, Measurement and Fair Values of Financial Instruments as of December 31, 2022
IFRS 9 Carrying amount
Dec. 31, 2022
­measurement
category

Measurement according to IFRS 9
Amortized cost

€ million

Fair value(other comprehensive income)Fair value(profit or loss)

Measurement
according to
IFRS 16

Fair value
Dec. 31, 2022

Financial assets
Trade receivables1)

AC

829

829

–

–

–

829

Trade receivables

FV OCI

29

–

29

–

–

29

Other financial receivables
Other financial receivables

AC

9

9

–

–

–

9

Other financial receivables

FV P&L

17

–

–

17

–

17

Contract assets

AC

223

223

–

–

–

223

Near-cash assets

FV P&L

79

–

–

79

–

79

AC

324

324

–

–

–

324

FV OCI

17

–

17

–

–

17

Cash and cash equivalents
Equity instruments measured at fair value through other comprehensive income
Derivative assets
Hedging instruments that qualify for hedge accounting

–

13

–

13

–

–

13

Other hedging instruments

FV P&L

13

–

–

13

–

13

Derivatives not designated as hedging instruments

FV P&L

6

–

–

6

–

6

Bonds

AC

(3,297)(3,297)–––(2,975)

Liabilities to banks

AC

(741)

(741)

–

–

–

(741)

Trade payables

AC

(709)

(709)

–

–

–

(709)

Lease liabilities

–

(192)

–

–

–

(192)

–

AC

(17)

(17)

–

–

–

(17)

–

(9)

–

(9)

–

–

(9)

FV P&L

(10)

–

–

(10)

–

(10)

Financial liabilities

Other primary financial liabilities
Derivative liabilities
Hedging instruments that qualify for hedge accounting
Other hedging instruments
1) Prior-year figures restated.
AC
FV OCIFV P&L

223

Financial assets/liabilities at amortized cost
Financial assets at fair value through other comprehensive income
Financial assets/liabilities at fair value through profit and loss

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Carrying Amounts, Measurement and Fair Values of Financial Instruments as of December 31, 2023
IFRS 9­measurement
category

Carrying
amountDec. 31, 2023

Amortized cost

Measurement according to IFRS 9

Trade receivables

AC

593

Trade receivables

FV OCI

20

Measurement
according to
IFRS 16

Fair value
Dec. 31, 2023

–

–

593

–

–

20

Fair value(other comprehensive income)Fair value(profit or loss)

593

–

–

20

€ million
Financial assets

Other financial receivables
Other financial receivables

AC

15

15

–

–

–

15

Other financial receivables

FV P&L

212

–

–

212

–

212

–

3

–

–

–

3

–

Contract assets

Lease receivables

AC

247

247

–

–

–

247

Near-cash assets

FV P&L

350

–

–

350

–

350

AC

146

146

–

–

–

146

FV OCI

11

–

11

–

–

11

Cash and cash equivalents
Equity instruments measured at fair value through other comprehensive income
Derivative assets
Hedging instruments that qualify for hedge accounting

–

8

–

8

–

–

8

Other hedging instruments

FV P&L

7

–

–

7

–

7

Derivatives not designated as hedging instruments

FV P&L

8

–

–

8

–

8

Bonds

AC

(2,799)(2,799)

–

–

–

2,553

Liabilities to banks

AC

(2)

(2)

–

–

–

(2)

Trade payables

AC

(584)

(584)

–

–

–

(584)

–

(204)

–

–

–

(204)

–

AC

(5)

(5)

–

–

–

(5)

–

(7)

–

(7)

–

–

(7)

FV P&L

(10)

–

–

(10)

–

(10)

Financial liabilities

Lease liabilities
Other primary financial liabilities
Derivative liabilities
Hedging instruments that qualify for hedge accounting
Other hedging instruments
AC
FV OCIFV P&L224

Financial assets/liabilities at amortized cost
Financial assets at fair value through other comprehensive income
Financial assets/liabilities at fair value through profit and loss

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Fair value measurement of the bonds is allocated to
Level 1 of the hierarchy outlined under “Fair value
measurement.” However, one bond with a fair value of€108 million (previous year: €102 million) is allocatedto Level 2 of the hierarchy as there is no liquid market
for it. The fair value of liabilities allocated to Level 2 iscalculated using discounted cash flows, taking observed
market interest rates into account.

Corporate GovernanceManagement Report

Fair value measurement
The measurement of fair value is based on a hierarchy
reflecting the significance of the measurement inputs.
The fair value measurement hierarchy for an asset or
liability comprises three levels:
Level 1	Quoted prices (unadjusted) in active markets
for identical assets or liabilities on the measurement date

Carrying Amounts by Measurement Category€ million
Financial assets measured
at amortized cost1)
Financial assets measured at fairvalue through other comprehensive
income (debt instruments)
Equity instruments measured at fairvalue through other comprehensive
incomeFinancial assets required to bemeasured at fair value through profit
or loss

Dec. 31,
2022
1,385

Dec. 31,2023

Level 329

17Dec. 31, 2022
€ million

Level 1

Level 2

Level 3–

Non-current assets
Investments in other affiliatedcompanies17–

Non-current derivative assets

–

14

–

Other non-current financial assets

–

1

4

Current derivative assets

–

18

–

Other current financial assets

–

–

12

Trade receivables

–

–

29

Near-cash assets

79

–

–

–

1

–

–

18

–

Current assets

Non-current liabilities
Current liabilities
Current derivative liabilities

20

11

115

577

1,546

1,609

Financial liabilities measured
at amortized cost

(4,764)(3,390)Financial liabilities

Unobservable inputs for the asset or liability

Further Information

Assets and Liabilities Measured at Fair Value

Non-current derivative liabilities

1,001

Financial assets

Financial liabilities required to bemeasured at fair value through profit
or loss

Level 2	Inputs other than quoted prices included within
Level 1 that are observable for the asset or
liability, either directly or indirectly

Financial Statements

(10)

(10)

(4,774)(3,400)The following tables show the volumes of assets andliabilities that were measured at fair value on a recurring
basis as of the end of the reporting period and the levelsof the fair value hierarchy into which the measurement
inputs were categorized. Reclassification between thelevels is reviewed as of each reporting date. As in theprevious year, there were no reclassifications in fiscal
year 2023. Assets and liabilities measured at fair value
break down as follows:

1) Prior-year figures restated.

225

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Assets and Liabilities Measured at Fair Value
Dec. 31, 2023
€ million

Level 1

Level 2

Level 3

Non-current assets
Investments in other affiliatedcompanies

11

–

–

Non-current derivative assets

–

5

5

Other non-current financial assets

–

208

4

Current derivative assets

–

13

–

Other current financial assets

–

–

–

Trade receivables

–

–

20

Near-cash assets

350

–

–

–

0

–

–

17

–

Current assets

Non-current liabilities
Non-current derivative liabilities
Current liabilities
Current derivative liabilities

Level 1 of the fair value hierarchy includes near-cash
assets of €350 million (previous year: €79 million).
These relate to shares of money market funds that canbe sold at any time.
Investments in other affiliated companies of €11 million(previous year: €17 million), which are assigned to
Level 1 of the measurement hierarchy, relate to sharesin the listed company Standard Lithium Ltd., Vancouver,
Canada. In accordance with the exercise of the option,
the shares are recognized at fair value through othercomprehensive income. The corresponding measurements reduced other comprehensive income in the pastfiscal year by €5 million (previous year: €38 million).

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Corporate GovernanceManagement Report

Warrants for shares in Standard Lithium Ltd., Vancouver,
Canada, were recognized in addition to the shares
mentioned. In the amount of €3 million (previous year:€6 million), these form part of the current derivative
assets at Level 2 of the measurement hierarchy. The
fair value of the warrants was calculated on the basis of
a warrant pricing model.
Other non-current financial assets at Level 2 of themeasurement hierarchy include €207 million for ashareholder loan granted to Envalior GmbH, Cologne,
Germany, in fiscal year 2023 in connection withthe formation of Envalior. The nominal amount of
the loan is €200 million. The fair value is calculatedusing discounted cash flows, taking observed market
interest rates into account. The earnings effect from thedifference between the issue amount of €200 million
and the initial carrying amount of €174 million comesto €26 million (expense) and is recognized in income
from discontinued operations. The subsequent measurement as of December 31, 2023, resulted in income of€33 million, which is part of the other financial result.
In addition to the purchase price payment, LANXESS
also received a minorit y interest of 40.94% inEnvalior GmbH, Cologne, Germany, in connection
with the formation of the joint company. LANXESS has
the possibility to sell the minority interest to Adventfor the first time three years after the formation of
Envalior under certain conditions. The right to offer,
which is recognized in non-current derivative assets,

Financial Statements

Further Informationis measured at fair value and assigned to Level 3 of thefair value hierarchy.
A value can be attributed to the right to offer if LANXESS
is better off under the contractual agreement than it would
be in a comparable arm’s length transaction at customary
conditions based on fair value. The main factor affecting
the valuation is the further business performance ofEnvalior in the coming years. The fair value of the rightto offer is determined with a measurement model usinga Monte Carlo simulation. The result of the valuation ismaterially determined by basic parameters underlying themodel, such as business plan, capital costs, volatility, andcomposition of the peer group. Envalior’s enterprise value
is calculated using the discounted cash flow (DCF) method
and is based on estimated future cash flows, which arediscounted using the weighted average cost of capital(WACC). The fair value determined as of initial recognition
on April 1, 2023, amounts to €73 million and is includedin the “other effects” of the gain on disposal resulting fromthe deconsolidation of the High ­Performance Materials
business unit (see“Discontinued operations”). As of
December 31, 2023, the fair value amounted to €5 million.
The change of €68 million is exclusively due to valuation
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A sensitivity analysis for the fair value of the right to offer
simulated a reduction in EBITDA, the relevant factor for
the future cash flows, by 10% per year. A 10% increase
in Envalior’s annual EBITDA figures would have resulted
in a fair value of €2 million as of December 31, 2023.
A corresponding decrease would have resulted in a fairvalue of €21 million.
A further sensitivity analysis for the fair value of theright to offer simulated a 10% change in the annual
growth rate of the EBITDA figures. A 10% increase in
the annual EBITDA growth rate would have resulted ina fair value of €1 million as of December 31, 2023. A
corresponding decrease would have resulted in a fairvalue of €21 million.
As of December 31, 2022, other current financial assetsof €12 million were assigned to Level 3 of the measurement hierarchy. This figure related to outstanding conditional purchase price payments in connection with thesale of the organic leather chemicals business and wasbased on the achievement of performance indicators
by fiscal year 2023 and a potential profit participation
if the acquirer sells on the business disposed of. The
determination of fair value was based on planned
performance indicators, and their achievement wasweighted by probability. The reassessment of the planned
performance indicators results in a measurement of€0 million in the statement of financial position as ofDecember 31, 2023. The expense from the reduction

227

Corporate GovernanceManagement Reportof €12 million is recognized in income from discontinued operations. Simulated 10% higher performance­indicators would result in no further change, nor would
10% lower performance indicators.
The trade receivables of €20 million (previous year:€29 million) at Level 3 of the measurement hierarchy arereceivables intended for sale on the basis of a factoring
agreement.
Likewise at Level 3 of the measurement hierarchy, othernon-current financial assets also include investments in
High-Tech Gründerfonds, which are measured based on
the amount of the equity interests held. The fair values
amount to €4 million (previous year: €4 million).

Credit risk management
On initial recognition of financial assets measured atamortized cost or fair value through other comprehensive
income, the Group calculates a loss allowance on thebasis of probabilities of default. During the fiscal year,
factors are observed that could indicate a significant
increase in the risk of default. In order to assess whether
there has been a significant increase in the risk of default,
the risk of default at the end of the reporting period iscompared to the risk of default on initial recognition.
The indicators used include internal and external credit
ratings, internal and external probabilities of default,material changes in business, financial and economic
circumstances and material changes in operating
earnings.

Financial Statements

Further Information

For cash and cash equivalents and other financial
receivables, expected defaults for the next twelve
months are used to calculate loss allowances provided
there is no increased risk of default on contractual
payments.
If contractual payments are more than 30 days past due,
the loss allowance is based on the expected defaults
for the entire term. An event of default occurs whencontractual payments are more than 180 days past due.
These are then written down to the expected repayment
amount. Legal action is initiated over impaired assets inorder to achieve full or partial repayment. Receivables are
written down in full if insolvency proceedings are opened.
No increased risk of default was ascertained for the financial assets listed. Thus, their risk of default was generally
calculated based on the next twelve months. The loss
allowance recognized in previous years in connection
with outstanding purchase price receivables of €5 million
was utilized in the current fiscal year and derecognizedaccordingly.

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Financial Statements

Further Information

Carrying Amounts and Loss Allowances
Dec. 31, 2023

Dec. 31, 2022
€ million

Gross carrying amountLoss­allowances

Net carrying
amountGross carrying amountLoss­allowances

Net carrying
amountCash and cash equivalents

324

0

324

146

0

146

Other financial assets

14

(5)

9

18

0

18

The simplified model based on the lifetime expectedcredit losses is applied to trade receivables. These arecalculated in a multi-stage process that analyses the
economic circumstances, maturity structure and risk
classes and then recognizes impairments if necessary.
Trade receivables are written down by 50% if more than
120 days past due and by 100% if more than 180 days
past due, if default is probable. Receivables are written
down in full if insolvency proceedings are opened.

Furthermore, loss allowances are calculated based ona past due matrix that takes into account historical loss
rates for certain maturity structure classes and futureprobabilities of default on the basis of credit default
swaps.
The maturity structure of unimpaired trade receivables
and their respective probabilities of default for eachmaturity class are as follows:

Aging Structure and Loss Allowances (Simplified Model) December 31, 2022
€ million

Not
past due

1–30 days
past due

31–60 days
past due

61–90 days
past due>90 dayspast due

Total
858

Net carrying amount of trade receivables1)

699

113

22

11

13

Default rates calculated

0.0%

0.3%

1.5%

5.2%

10.5%

61–90 days
past due>90 dayspast due

Total
613

1) Prior-year figures restated.

Aging Structure and Loss Allowances (Simplified Model) December 31, 2023
€ million

228

Not
past due

1–30 days
past due

31–60 days
past dueNet carrying amount of trade receivables

499

87

18

4

5

Default rates calculated

0.0%

0.2%

1.6%

4.9%

9.6%

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Financial Statements

Further Information

The total carrying amounts and loss allowances for tradereceivables and contract assets are as follows:
Carrying Amounts and Loss Allowances
Dec. 31, 2023

Dec. 31, 2022
Gross carrying amountLoss­allowances

Net carrying
amountGross carrying amountLoss­allowances

Net carrying
amountTrade receivables1)

871

(13)

858

625

(12)

613

Contract assets

224

(1)

223

248

(1)

247

€ million

1) Prior-year figures restated.

Loss allowances for contract assets are calculated basedon the counterparty’s individual probability of default
applying the simplified model for the entire term.

The following tables show the development of loss
allowances for all financial assets from their opening
value to the end of the reporting period for fiscal years
2022 and 2023:

Reconciliation Loss Allowance 2022

€ million

Expected loss allowance forcash and cash equivalents andother financial receivables1)

Expected loss allowance fortrade receivables
and contract assets

12 months

Lifetime – simplified model

Expected loss allowance for­credit-impaired
assets at ­acquisition

Total

Jan. 1

5

10

1

16

Adjustments according to IFRS 5

–

(2)

–

(2)

Newly acquired financial assets2)

0

6

3

9

Release

0

(2)

0

(2)

Financial assets derecognized in the period –sale, repayment, modification

0

(1)

(1)

(2)

Currency or other differences

0

0

0

0

Dec. 31

5

11

3

19

1) Cash and cash equivalents and other financial receivables are not presented separately for reasons of materiality.
2) Prior-year figures restated.

229

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Financial Statements

Further Information

Reconciliation Loss Allowance 2023

€ million

Expected loss allowance forcash and cash equivalents andother financial receivables1)

Expected loss allowance fortrade receivables
and contract assets

Expected loss allowance for
credit-impaired
assets at ­acquisition

Total

19

12 months

Lifetime – simplified modelJan. 1

5

11

3

Newly acquired financial assets

0

4

–

4

Release

0

(3)

(1)

(4)

Financial assets derecognized in the period –sale, repayment, ­modification

(5)

(1)

0

(6)

Currency or other differences

0

0

0

0

Dec. 31

0

11

2

13

1) Cash and cash equivalents and other financial receivables are not presented separately for reasons of materiality.

The adjustments in accordance with IFRS 5 in theprevious year resulted from the presentation of the High
Performance Materials business unit as a discontinued
operation. The acquired, impaired financial assets as ofDecember 31, 2023, relate to trade receivables acquiredin the acquisition of the Microbial Control business from

230

U.S. corporation International Flavors & Fragrances Inc.
in the previous year. The change in the expected credit
losses for trade receivables and contract assets resultsfrom ordinary operations. Due to a large and diversified
customer structure, there is no material credit risk for
trade receivables.

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Offsetting of financial assets andfinancial liabilities

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position. The following tables show how legally enforceable netting arrangements impact, or could impact, theGroup’s financial position:

Offsetting was not used for the financial assets andfinancial liabilities recognized in the statement of financial

Financial Statements

Further Information

Either contracting party may offset on a net basis the positive
and negative fair values arising from past-due derivative
asset or liability contracts with the same counterparty.

Net results by measurement category
Offsetting of Financial Assets and Financial Liabilities as of December 31, 2022

€ million

Carrying amount Related amounts not offset in the ­statementof financial positionof financial­instruments
Financial instruments
Financial collateral

Net amount

Net Results by Measurement Category

Financial assets
Trade receivables1)

858

–

–

858

Derivative assets

32

(7)

–

25

Financial liabilities
Trade payables

(709)

–

–

(709)

Derivative liabilities

(19)

7

–

(12)

1) Prior-year figure restated.

€ million

Related amounts not offset in the­s tatement of financial position

2022

2023

Financial assets measured atamortized cost

(3)

10

Financial assets and liabilities required
to be measured at fair value throughprofit or loss

(10)

(23)

Equity instruments measured at fairvalue through other comprehensive
income

0

0

(73)

(62)

(86)

(75)

Net amountFinancial instruments

Financial collateral

Financial assets
Trade receivables

613

–

–

613

Derivative assets

23

(5)

–

18

Financial liabilities

231€ million

Financial liabilities measured at­amortized cost

Offsetting of Financial Assets and Financial Liabilities as of December 31, 2023
Carrying amountof financial­instruments

The following table provides an overview of the net
results based on the measurement categories according
to IFRS 9:

Trade payables

(584)

–

–

(584)

Derivative liabilities

(17)

5

–

(12)

Net gains and losses essentially comprise interest income
and expense, results from fair value measurement, andrealized and unrealized exchange gains and losses. Total
interest revenue for financial assets that are measured
at amortized cost amounts to €8 million (previous year:€4 million); the total interest expense for financial liabilities that are not measured at fair value through profit orloss is €66 million (previous year: €71 million).

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In fiscal year 2022, there was also income from the settlement of interest rate hedges of €83 million in addition to
the net results shown. This was recognized in the “otherfinancial result” and not assigned to a measurement
category.
Fees of €15 million (previous year: €9 million) wereincurred in connection with financial instruments. These
are likewise not included in the amounts presented bymeasurement category.

Collateralization of financial liabilities
There were no financial liabilities collateralized by
mortgages or by other property claims in fiscal year
2023 or the previous year.

Mezzanine financing
Mezzanine instruments such as profit participationrights, convertible bonds or warrant bonds have notbeen issued. Information on the possible issuance ofsuch instruments is given in
Note­ [14].

232

Corporate GovernanceManagement Report39 | Notes to the Statementof Cash Flows
Explanation of the method used to calculate
and present cash flows
For a general explanation, please see the commentson the statement of cash flows under“Accounting
policies and valuation principles.”Net cash provided by operating activities
The net cash flows from operating activities are determined by deducting the financial result, depreciation,amortization, write-downs, reversals of write-downs andnon-cash items from income before income taxes. A
further adjustment is made for the change in other assets
and liabilities. Income before income taxes, which is thestarting point for the statement of cash flows, amounted
to minus €947 million in the reporting year (previous
year: €257 million). Income before income taxes
includes depreciation, amortization and write-downsof €996 million (previous year: €546 million), of which€406 million is attributable to write-downs on goodwill
in the current fiscal year. It also includes expenses frominvestments accounted for using the equity method of€172 million (previous year: income of €3 million), which
in fiscal year 2023 primarily related to the investment
in Envalior GmbH, Cologne, Germany. Income taxesof €53 million were paid (previous year: €4 million
reimbursed). The change in net working capital resulted

Financial Statements

Further Informationin cash inflows of €577 million (previous year: outflowsof €471 million). The sale of trade receivables undera factoring agreement was at the previous year’s level
and therefore had no significant influence on the change
in the current fiscal year (previous year: €130 million).
Taking into account the change in other assets and liabilities of €17 million (previous year: minus €160 million),cash inflows provided by operating activities fromcontinuing operations amounted to €852 million in thereporting year (previous year: €187 million). Cash usedin the operating activities of discontinued operations
amounted to €14 million (previous year: €28 million).

Net cash provided by investing activities
Purchases of property, plant and equipment and intangible assets led to cash outflows of €326 million in fiscal
year 2023 (previous year: €407 million). Cash inflows
from the sale of subsidiaries and other businesses of€1,194 million primarily resulted from the transaction
for the formation of Envalior. In the reporting year,
cash outflows for and cash inflows from financial andother assets held for investment purposes particularly
related to cash flows in connection with the formationof Envalior. The net cash inflow from the investing activities of continuing operations amounted to €429 million(previous year: outflow of €996 million). Discontinued
operations resulted in cash outflows from investing
activities of €6 million (previous year: €55 million).

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Financial Statements

Further Information

Net cash used in financing activities
Net repayment of €1,303 million (previous year: net
borrowing of €690 million) was attributable to financial
liabilities as follows:
Reconciliation of Borrowings 2022
Dec. 31, 2021

Adjustments
according to
IFRS 5

CashchangesNon-cash changes
Acquisitions

Lease liabilities
new additions

Dec. 31, 2022

Exchangedifferences

Interest
effect fromcompounding,accrued interest
and otherchanges€ million
Bonds

3,292

–

(5)

–

–

–

10

3,297

Liabilities to banks

3

–

738

–

–

0

0

741

Lease liabilities

205

(22)

(56)

30

36

0

(1)

192

4

–

13

–

–

0

0

17

3,504

(22)

690

30

36

0

9

4,247

Dec. 31, 2022

Cash­changes

Other primary financial liabilities

Reconciliation of Borrowings 2023
Non-cash changes
Lease liabilities
new additions

Exchangedifferences

Interest
effect fromcompounding,accrued interest
and otherchanges€ million
Bonds

3,297

(500)

–

–

2

Liabilities to banks

741

(736)

–

(3)

0

2

Lease liabilities

192

(56)

71

(2)

(1)

204

Other primary financial liabilities

233

Dec. 31, 2023

2,799

17

(11)

–

0

(1)

5

4,247

(1,303)

71

(5)

0

3,010

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The adjustments in accordance with IFRS 5 in theprevious year resulted from the presentation of the High
Performance Materials business unit as a discontinued
operation.
Borrowings in the reporting year mainly related to theborrowing of various short-term money market loans
totaling €350 million. Repayments of borrowings particularly included the repayment of various short-term money
market loans of €1,050 million and the repayment of thehybrid bond of €500 million.
Interest payments and other financial disbursements
led to cash outflows of €71 million (previous year:€65 million). Dividend payments in fiscal year 2023
totaled €91 million (previous year: €91 million). There
was therefore a total cash outflow of €1,465 million(previous year: inflow of €617 million) from financing
activities in continuing operations. Discontinued operations resulted in a net cash outflow of €1 million (previous
year: €4 million).

234

Corporate GovernanceManagement Report

Financial Statements

Further Information

Cash and cash equivalents
Cash and cash equivalents, which comprise cash, checks
and bank balances, amounted to €146 million (previous
year: €360 million). In accordance with IAS 7, this item
also includes securities with maturities of up to threemonths from the date of acquisition. Cash and cash
equivalents are not subject to any material restrictions.
In addition to cash and cash equivalents, LANXESS
holds near-cash assets of €350 million (previous
year: €79 million), which comprise shares of money
market funds that can be sold at any time. As of
December 31, 2023, there were also other liquidity
reserves in the form of undrawn credit lines without
financial covenants of €1.8 billion.

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Financial Statements

Further Information

40 | Segment Reporting
The tables below contain the key data by segment andregion:
Key Data by Segment
ConsumerProtection

Specialty ­Additives

Advanced
Intermediates

All other segments

LANXESS€ million

2022

2023

2022

2023

2022

2023

2022

2023

2022

2023

External sales

2,366

2,340

2,970

2,325

2,413

1,775

339

274

8,088

6,714

Inter-segment sales
Segment/Group sales

69

75

18

18

30

42

(117)

(135)

–

–

2,435

2,415

2,988

2,343

2,443

1,817

222

139

8,088

6,714

Segment result/EBITDA pre exceptionals

363

310

479

209

291

121

(203)

(128)

930

512

Exceptional items affecting EBITDA

(25)

(14)

(5)

(20)

–

(33)

(74)

(117)

(104)

(184)

Segment assets1)

3,782

3,129

3,177

2,615

1,471

1,182

752

1,477

9,182

8,403

Segment acquisitions

1,171

–

–

–

–

–

–

–

1,171

–

Segment capital expenditures

141

112

137

133

106

94

63

61

447

400

Depreciation and amortization

168

197

182

182

117

109

69

74

536

562

0

262

8

149

2

21

0

2

10

434

Write-downs

451

429

453

380

474

404

548

665

1,926

1,878

Employees – as of Dec. 31

3,566

3,555

2,985

2,945

3,010

2,941

3,565

3,408

13,126

12,849

Employees – average for the year

3,437

3,579

3,023

2,973

3,007

3,006

3,556

3,472

13,023

13,030

Segment liabilities1)

1) Prior-year figures restated.

Key Data by Region
EMEA (excluding
Germany)

Germany

AmericasAsia-Pacific

LANXESS€ million

2022

2023

2022

2023

2022

2023

2022

2023

2022

2023

External sales by market

2,364

1,972

1,366

1,098

2,694

2,362

1,664

1,282

8,088

6,714
5,378

Non-current segment assets1)

934

892

1,445

1,395

3,459

2,834

281

257

6,119

Segment acquisitions

267

–

3

–

795

–

106

–

1,171

–

Segment capital expenditures

74

62

220

204

131

110

22

24

447

400

1,306

1,242

7,099

7,069

2,975

2,862

1,746

1,676

13,126

12,849

Employees – as of Dec. 31
1) Prior-year figures restated.

235

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Segment reporting
The segment reporting is in line with the internal management of operating business and the internal reporting
structure of the LANXESS Group. In total, segment
reporting comprises three reporting segments composedof nine operating units and “All other segments.” Theoperating units are grouped together on the basis of thetype of products and production processes, the typeof customer groups and sales methods. The “All othersegments” category primarily comprises the Urethane
Systems business unit, the business activities of thecorporate functions and the effects of consolidation.
On December 31, 2023, the LANXESS Group comprised
the following reporting segments:

236

Segments

Activities

ConsumerProtection

The Consumer Protection segment comprises
operational business units that manufacture
consumer protection products in chemical
production processes. The products are subject
to high regulatory requirements and are highlyvariable with options for configuration or are
manufactured especially for individual customers
in campaigns, batches, or specific chemical
production processes. The products essentiallycomprise disinfectant, hygiene and preservative
solutions, flavors and fragrances, technologies
for the treatment of water and other liquids, andprecursors and intermediates for the agrochemicals, pharmaceuticals and specialty chemicals
industries.

Corporate GovernanceManagement Report

Segments

Activities

Specialty
Additives

The Specialty Additives segment comprises
operational business units that manufacture
additives in chemical production processes.
The product portfolio includes additives for therubber, plastic and paint industries, constructionand electrical/electronics industry, such as lubricants, flame retardants, plasticizers and bromine
derivatives for a variety of applications.

Advanced
Intermediates

The Advanced Intermediates segment comprises
operational business areas that essentially manu­
facture standardized and high-volume products
in capital-intensive and predominantly continuous
production processes. The products manufactured essentially comprise basic and fine chemicals, organometallics, and inorganic pigments forthe coloring of construction materials as well as
paints and coatings.

The valuation principles applied in segment reporting
correspond to the uniform accounting policies andvaluation principles used for the consolidated financial
statements prepared in accordance with IFRS.
The “All other segments” category eliminates inter-­segment sales and reflects assets, liabilities and results
not allocable to the core segments including, in ­particular,
those pertaining to the Corporate Center and the
Urethane Systems business unit.
The transfer prices used for inter-segment business
transactions are calculated using the OECD rules as if
they had been agreed between independent third parties
in comparable circumstances (arm’s length principle).

Financial Statements

Further Information

The majority of employees in the “All other segments”
category provide services for more than one segment.
They include technical service staff.
The reporting regions are those into which LANXESS’s
activities are organized: EMEA (Europe [excluding
Germany], Middle East, Africa), Germany, the Americas
and Asia-Pacific. Regional sales are calculated according
to the recipient’s place of business. In fiscal year 2023, no
individual customer of the LANXESS Group accounted
for 10% or more of Group sales.
The earnings indicator used for internal management
purposes in the LANXESS Group is the operating
result before depreciation and amortization (EBITDA)
pre exceptionals (see“Value management andcontrol system” in the combined management reportfor fiscal year 2023). This is disclosed as the “segment
result.” The starting point for calculating EBITDA pre­exceptionals is the operating result (EBIT), which
comprises gross profit, selling expenses, generaladministration expenses, research and development
expenses and other operating income and expenses.
EBIT and EBITDA are alternative key financial ratios notdefined according to the ­International Financial ReportingStandards (IFRS). These are viewed as supplementary
and not a substitute to the data prepared according to
IFRS. EBITDA pre exceptionals is calculated from EBIT
before depreciation/reversals of property, plant andequipment, amortization and impairments of ­intangible
assets, disregarding exceptional items. The latter are

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effects that, by nature or extent, have a significant
impact on the earnings position, but for which inclusionin the evaluation of business performance over several
reporting periods does not seem to be appropriate.
Exceptional items may include write-downs, reversals
of write-downs or the proceeds from the disposal of
assets, certain IT expenses, restructuring expenses andincome from the reversal of provisions established inthis context and reductions in earnings resulting from
portfolio adjustments or purchase price allocations.
Segment sales include €639 million (previous year:€658 million) of sales recognized over time. Of these,€537 million (previous year: €500 million) relate to theConsumer Protection segment, €6 million (previous
year: €9 million) to the Specialty Additives segment,€70 million (previous year: €122 million) to the Advanced
Intermediates segment and €26 million (previous year:€27 million) to all other segments. All other sales arerecognized at a point in time. Please see
Note­ [22]for further information.
In view of the Group’s central financial management,interest income and expense and income tax income
and expense are not reported at segment level.

Corporate GovernanceManagement Report

The write-downs recognized in fiscal year 2023 in
the Consumer Protection and Specialty Additives
segments result primarily from the impairment test of
the cash-generating units as of December 31, 2023,
and are attributable to the Flavors & Fragrances andPolymer Additives business units. Further information
can be found in the“Estimation Uncertainties andthe Exercise of Discretion” section.
The negative exceptional items within EBITDAof €186 million (previous year: €104 million) in
fiscal year 2023 primarily related to the FORWARD! action
plan. As in the previous year, there were also exceptional
items for strategic IT projects, the strategic realignmentof the LANXESS Group, restructuring measures to adapt
the production network, M&A activities, digitalization, andother measures. They are offset by positive exceptional
items of €1 million (previous year: €0 million), which relate
to income from the reversal of provisions recognized as
exceptional items in previous years.
The segment acquisitions in the previous year included
the acquired net assets including goodwill as of theacquisition date.
Capital expenditures made by the segments comprise
additions to intangible assets, property, plant andequipment.
All depreciation, amortization and write-downs wererecognized directly in profit or loss.

237

Financial Statements

Further Information

The reconciliation of segment sales is as follows:
Reconciliation of Segment Sales€ million

2022

2023

Total segment sales

7,866

6,575

Other

339

274

Consolidation

(117)

(135)

Group sales

8,088

6,714

The reconciliation of segment results is as follows:
Reconciliation of Segment Results€ million

2022

Total segment results

1,133

640

Depreciation and amortization

(546)

(996)

Exceptional items affecting EBITDA

(104)

(184)

Other financial income and expense

42

(47)

Net interest expense

(68)

(60)

3

(172)

Income from investments accounted forusing the equity method

2023

Other

(203)

(128)

Income before income taxes

257

(947)

The reconciliation of segment results to income before
income taxes contains total exceptional items comprising
net charges of €615 million (previous year: €109 million)(
see Notes [27] and [28]). These include exceptional
items within EBITDA of minus €185 million (previous
year: minus €104 million) and write-downs of minus€430 million (previous year: minus €5 million).

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Management Report

Financial Statements

Further Information

The reconciliation of segment assets is as follows:

The reconciliation of segment liabilities is as follows:

41 | Audit Fees

Reconciliation of Segment Assets

Reconciliation of Segment Liabilities

In fiscal year 2023, total audit fees of €2,645 thousand(previous year: €2,853 thousand) for the auditor of theconsolidated financial statements of the LANXESS Group
were recognized as expenses. The total amount includes€2,309 thousand (previous year: €2,544 thousand)relating to audits of financial statements. The fees were
essentially paid for the audit of LANXESS AG’s annual
financial statements and the consolidated financial
statements, including the early warning system, andfor the review of the condensed consolidated interim
financial statements. €313 thousand (previous year:€309 thousand) relates to other assurance services.
These essentially include services in connection withsustainability reporting and audit certification services.
Other services comprise €23 thousand (previous year:€0 thousand) for regulatory consulting services. As in theprevious year, no tax advisory services were performedby the auditor of the consolidated financial statements in
the reporting year. The fees for financial statements audit
services comprise all fees, including incidental expenses,
paid or to be paid for the audits of the consolidated financial statements of the LANXESS Group and the financial
statements of LANXESS AG and its German subsidiaries.

€ million
Total segment assets1)

Dec. 31,2022

Dec. 31,
2023

8,430

6,926

Total segment liabilities1)
Adjustments to discontinued
operations€ million

Adjustments to discontinued
operations

1,275

–

Cash and cash equivalents

324

146

Other financial liabilities

Dec. 31,2022

Dec. 31,
2023

1,378

1,213

318

–

4,247

3,010
17

Deferred taxes

54

165

Derivative liabilities

19

Near-cash assets

79

350

Income tax liabilities

66

59

Income tax receivables

92

101

Deferred taxes

284

194

Derivative assets

32

23

Other

Other financial assets

249

477

Group liabilities1)

Other
Group assets1)

752

1,477

11,2879,6651) Prior-year figures restated.

Segment assets essentially comprise intangible assets,
property, plant and equipment including right-of-use­assets from leases, inventories and trade receivables.
They do not include items such as cash and cash­equivalents and deferred taxes.

238

Corporate Governance

548

665

6,860

5,158

1) Prior-year figures restated.

Segment liabilities essentially comprise provisions, trade
payables and other liabilities. The “Other” line essentiallycontains pension and other provisions that are attributable to the Corporate Center. They do not include income
tax liabilities in particular, as well as derivative and otherfinancial liabilities.

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42 | Declaration of CompliancePursuant to Section 161 of the Stock
Corporation Act
The Declaration of Compliance with the German­Corporate Governance Code has been issued by the
Board of Management and Supervisory Board pursuant to
Section 161 of the German Stock Corporation Act (AktG)
and made available to stockholders on the LANXESS
website.

Corporate GovernanceManagement Report

Further Information

44 | Events after the Reporting Period
No events of particular significance took place after
December 31, 2023, that could be expected to have amaterial effect on the earnings, asset and financial positionof the LANXESS Group or LANXESS AG.
Cologne, March 8, 2024
LANXESS Aktiengesellschaft

43 | Utilization of Disclosure Exemptions

The Board of Management

In fiscal year 2023, the following German ­subsidiaries madeuse of disclosure exemptions pursuant to Section 264,
Paragraph 3 of the German Commercial Code (HGB):

Matthias Zachert

Frederique van BaarleDr. Hubert Fink

Oliver Stratmann› CheMondis GmbH, Cologne› IAB Ionenaustauscher GmbH Bitterfeld, Greppin› IMD Natural Solutions GmbH, Dortmund› LANXESS Deutschland GmbH, Cologne› LANXESS Global Business Services GmbH, Cologne› LANXESS Organometallics GmbH, Bergkamen› Neunte LXS GmbH, Cologne› Saltigo GmbH, Leverkusen› THESEO Deutschland GmbH, Wietmarschen

Financial Statements

In addition, the following German subsidiary made useof the disclosure exemption pursuant to Section 264b
in conjunction with Section 264, Paragraph 3 of theGerman Commercial Code (HGB) in fiscal year 2023:› LANXESS Trademark GmbH & Co. KG, Leverkusen

239

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Financial Statements

Further Information

Responsibility
Statement
To the best of our knowledge, and in  accordance withthe applicable financial reporting principles, the consolidated financial statements give a true and fair view of theearnings, asset and financial position of the Group, andthe combined management report includes a fair reviewof the development and performance of the business andthe position of the LANXESS Group and LANXESS AG,
together with a description of the principal opportunities
and risks associated with the expected development of
the LANXESS Group and LANXESS AG.
Cologne, March 8, 2024
LANXESS Aktiengesellschaft

The Board of Management

240

Matthias Zachert

Frederique van BaarleDr. Hubert Fink

Oliver Stratmann

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Financial Statements

Further Information

Independent Auditor’s Report“To LANXESS Aktiengesellschaft, Cologne

REPORT ON THE AUDIT OF THE­CONSOLIDATED FINANCIAL
STATEMENTS AND OF THE GROUP­MANAGEMENT REPORT
Audit Opinions
We have audited the consolidated financial statements of
LANXESS Aktiengesellschaft, Köln, and its ­subsidiaries(the Group), which comprise the Statement of ­Financial
Position as at 31 December 2023, the Income ­Statement,
and the Statement of Comprehensive Income, the­Statement of Changes in equity and the Statement of
Cash Flows for the financial year from 1 January to
31 December 2023, and the Notes to the Statement of
Financial Position, including material accounting policy
information. In addition, we have audited the groupmanagement report of LANXESS Aktiengesellschaft,which is combined with the ­Company’s ­management
report, for the financial year from 1 January to
31 December 2023. In accordance with the German
legal requirements, we have not audited the content of thedisclosure marked as unaudited in section “Monitoring theopportunity and risk management system” of the groupmanagement report.
In our opinion, on the basis of the knowledge obtainedin the audit,241› the accompanying consolidated financial state-

Basis for the Audit Opinions

ments comply, in all material respects, with the
IFRSs as adopted by the EU and the additional
requirements of German commercial law pursuant
to § [Article] 315e Abs. [paragraph] 1 HGB[Handelsgesetzbuch: German Commercial Code]and, in compliance with these requirements, give atrue and fair view of the assets, liabilities, and financial position of the Group as at 31 December 2023,
and of its financial performance for the financial year
from 1 January to 31 December 2023, and› the accompanying group management reportas a whole provides an appropriate view of theGroup’s position. In all material respects, this groupmanagement report is consistent with the consolidated financial statements, complies with German
legal requirements and appropriately presents
the opportunities and risks of future development.
Our audit opinion on the group management
report does not cover the content of the disclosurein section “Monitoring the opportunity and risk
management system” of the group management
report referred to above.

We conducted our audit of the consolidated financial
statements and of the group management reportin accordance with § 317 HGB and the EU Audit­Regulation (No. 537/2014, referred to subsequently
as “EU Audit Regulation”) in compliance with German
Generally Accepted Standards for Financial Statement
Audits promulgated by the Institut der Wirtschaftsprüfer­[Institute of Public Auditors in Germany] (IDW). We
performed the audit of the consolidated financial statements in supplementary compliance with the International Standards on Auditing (ISAs). Our responsibilities
under those requirements, principles and standards arefurther described in the “Auditor’s Responsibilities for
the Audit of the Consolidated Financial Statements
and of the Group Management Report“ section of ourauditor’s report. We are independent of the group entities
in accordance with the requirements of European law
and German commercial and professional law, and wehave fulfilled our other German professional responsibilities in accordance with these requirements. In addition,in accordance with Article 10 (2) point (f) of the EU
Audit Regulation, we declare that we have not provided
non-audit services prohibited under Article 5 (1) of the
EU Audit Regulation. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide
a basis for our audit opinions on the consolidated financial statements and on the group management report.

Pursuant to § 322 Abs. 3 Satz [sentence] 1 HGB, wedeclare that our audit has not led to any reservations
relating to the legal compliance of the consolidated financial statements and of the group management report.

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Key Audit Matters in the Audit of the­Consolidated Financial Statements
Key audit matters are those matters that, in our professional judgment, were of most significance in our auditof the consolidated financial statements for the financial
year from 1 January to 31 December 2023. These
matters were addressed in the context of our audit of
the consolidated financial statements as a whole, andin forming our audit opinion thereon; we do not provide
a separate audit opinion on these matters.
In our view, the matters of most significance in our audit
were as follows:
1
2

Goodwill Impairment
Pension provisions

Our presentation of these key audit matters has been
structured in each case as follows:1

Matter and issue
Audit approach and findings
3 Reference to further information

Corporate GovernanceManagement Report

The Company allocates goodwill to the respective
cash-generating units. Goodwill is tested for impairment
once a year, unless events or a change in circumstancesindicates any sooner that goodwill may be impaired. The
carrying amount of the relevant cash-generating units,
including goodwill, is compared with the corresponding
recoverable amount in the context of the impairment test.
The recoverable amount is always calculated on the basisof fair value less costs to sell. The present value of the
future cash flows from the respective cash-generating
units normally serves as the basis of measurement.
Present values are calculated using discounted cash
flow models. The discounted cash flow models are basedon cash flow projections, which in turn are based on themulti-year plan approved by management and applicableat the time the impairment test is carried out. The future
net cash flows are discounted using a weighted cost ofcapital. As a result of the impairment test, impairments
totalling € 406 million were recognised for the groupsof cash-generating units, even after taking the value in
use into account.

2

Hereinafter we present the key audit matters: oodwill Impairment
G
Goodwill of € 1,385 million (14% of consolidated
total assets or 31% of Group equity) is reported underthe “Goodwill” balance sheet item in the Company’s
consolidated financial statements.
1
1

242

This matter was of particular significance to our audit,
because the result of this measurement depends to alarge extent on the Company’s management’s assessment of future cash inflows, the discount rate used, thegrowth rates assumed, and other assumptions madeand is therefore subject to considerable uncertainty.

Financial Statements

Further Information2

As part of our audit, we reviewed the methodology
employed for the purposes of performing the impairment
test, among other things. We assessed the appropriateness of the future cash inflows used in the measurement, among other things by comparing this data withthe current budgets in the multi-year plan approved bymanagement, and reconciling it against general andsector-specific market expectations. We also assessed
whether the basis for including the costs of Groupfunctions was accurate. With the knowledge that evenrelatively small changes in the discount rate applied canhave material effects on the value of the entity calculated
in this way, we also included in our review the parameters
used to determine the discount rate applied, including
the weighted average cost of capital, and evaluated themeasurement model. Furthermore, we reviewed thesensitivity analysis carried out by the Company andadditionally performed our own sensitivity analysis for the
cash-generating units and, taking into account the information available, determined that the carrying amountsof the cash-generating units, including the allocatedgoodwill, were adequately covered by the discounted
future cash flows. Overall, the measurement inputs andassumptions used by management are in line with our
expectations and are also within the ranges consideredby us to be reasonable.

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3 The Company’s disclosures on goodwill are containedin the sections entitled “Intangible assets,” “Method andimpact of the global impairment tests,” and “Judgments
and estimates” in the notes to the consolidated financial
statements.
Pension provisions
Pension provisions amounting to € 498 million arereported in the consolidated financial statements of theCompany under the balance sheet item “Provisions forpensions and similar obligations.” The pension provisions
comprise mainly obligations from defined benefit pension
plans plan assets.

Corporate GovernanceManagement Report

determined by reference to market yields on high-quality
corporate bonds with matching currencies and terms
which are consistent with the expected maturities ofthe obligations. This usually requires the data to be
extrapolated, since no sufficiently long-term corporate
bonds exist. The plan assets are measured at fair value.

2
1

Obligations under defined benefit plans are measured
using the projected unit credit method. This requires
assumptions to be made in particular about long-term
rates of growth in salaries and pensions, average life
expectancy, and staff turnover. Furthermore, the discountrate applied as of the balance sheet date must be

243

From our point of view, these matters were of particularimportance in the context of our audit because the recognition and measurement of this item – which is significant
in terms of its amount – are based to a large extent on
estimates and assumptions made by the company’s
management.
2

Our audit included evaluating the actuarial expert
reports obtained and the professional qualifications of
the external experts. We also examined the specificfeatures of the actuarial calculations and reviewed
the numerical data, the actuarial parameters and thevaluation methods on which the valuations were based

Financial Statements

Further Information

for compliance with standards and appropriateness, inaddition to other procedures. In addition, we analyzed
the changes in the obligation and the cost components
in accordance with actuarial expert reports in the lightof changes occurring in the valuation parameters andthe numerical data, and verified their plausibility. For the
purposes of our audit of the fair value of plan assets, we
obtained bank confirmations.
Based on our audit procedures, we satisfied ourselvesthat the estimates and assumption made by management
were justified and adequately documented.
3 The disclosures on the provisions for pensions canbe found in the section entitled “Pension provisions
and similar obligations” in the notes to the consolidated
financial statements.

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Other Information
The executive directors are responsible for the otherinformation. The other information comprises the disclosure marked as unaudited in section “Monitoring theopportunity and risk management system” of the groupmanagement report as an unaudited part of the groupmanagement report.
The other information comprises further› the statement on corporate governance pursuant to§ 289f HGB and § 315d HGB› the separate non-financial report to comply with§§ 289b to 289e HGB and with §§ 315b to
315c HGB› all remaining parts of the annual report – excluding
cross-references to external information – withthe exception of the audited consolidated financial
statements, the audited group management reportand our auditor’s report
Our audit opinions on the consolidated financial statements and on the group management report do notcover the other information, and consequently we do not
express an audit opinion or any other form of assurance
conclusion thereon.
In connection with our audit, our responsibility is to readthe other information mentioned above and, in so doing,
to consider whether the other information

244

Corporate GovernanceManagement Report› is materially inconsistent with the consolidated
financial statements, with the group management
report disclosures audited in terms of content orwith our knowledge obtained in the audit, or› otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we are required to report that fact. We havenothing to report in this regard.

Responsibilities of the Executive ­Directors
and the Supervisory Board for the­Consolidated Financial Statements and theGroup Management Report
The executive directors are responsible for the preparation of the consolidated financial statements thatcomply, in all material respects, with IFRSs as adopted
by the EU and the additional requirements of Germancommercial law pursuant to § 315e Abs. 1 HGB andthat the consolidated financial statements, in compliancewith these requirements, give a true and fair view of
the assets, liabilities, financial position, and financial
performance of the Group. In addition, the executive
directors are responsible for such internal control as
they have determined necessary to enable the preparation of consolidated financial statements that are freefrom material misstatement, whether due to fraud (i.e.,
fraudulent financial reporting and misappropriation ofassets) or error.

Financial Statements

Further Information

In preparing the consolidated financial statements, theexecutive directors are responsible for assessing theGroup’s ability to continue as a going concern. They
also have the responsibility for disclosing, as applicable,
matters related to going concern. In addition, they are
responsible for financial reporting based on the going
concern basis of accounting unless there is an intention
to liquidate the Group or to cease operations, or there is
no realistic alternative but to do so.
Furthermore, the executive directors are responsible forthe preparation of the group management report that,as a whole, provides an appropriate view of the Group’s
position and is, in all material respects, consistent withthe consolidated financial statements, complies withGerman legal requirements, and appropriately presents
the opportunities and risks of future development. In
addition, the executive directors are responsible for sucharrangements and measures (systems) as they haveconsidered necessary to enable the preparation of agroup management report that is in accordance withthe applicable German legal requirements, and to beable to provide sufficient appropriate evidence for theassertions in the group management report.
The supervisory board is responsible for overseeing theGroup’s financial reporting process for the preparation of
the consolidated financial statements and of the groupmanagement report.

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Auditor’s Responsibilities for the Audit of
the Consolidated Financial Statements andof the Group Management Report
Our objectives are to obtain reasonable assurance about
whether the consolidated financial statements as a whole
are free from material misstatement, whether due to fraud
or error, and whether the group management report asa whole provides an appropriate view of the Group’s
position and, in all material respects, is consistent withthe consolidated financial statements and the knowledge
obtained in the audit, complies with the German legal
requirements and appropriately presents the opportunities and risks of future development, as well as to issue
an auditor’s report that includes our audit opinions on
the consolidated financial statements and on the groupmanagement report.
Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordancewith § 317 HGB and the EU Audit Regulation and incompliance with German Generally Accepted Standards
for Financial Statement Audits promulgated by theInstitut der Wirtschaftsprüfer (IDW) and supplementarycompliance with the ISAs will always detect a material
misstatement. Misstatements can arise from fraud or
error and are considered material if, individually or in
the aggregate, they could reasonably be expected toinfluence the economic decisions of users taken on thebasis of these consolidated financial statements and thisgroup management report.

245

Corporate GovernanceManagement Report

We exercise professional judgment and maintain professional skepticism throughout the audit. We also:› Identify and assess the risks of material misstatement of the consolidated financial statements andof the group management report, whether due tofraud or error, design and perform audit procedures
responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis
for our audit opinions. The risk of not detecting amaterial misstatement resulting from fraud is higher
than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions,misrepresentations, or the override of internal
controls.
› Obtain an understanding of internal control relevantto the audit of the consolidated financial statements
and of arrangements and measures (systems)
relevant to the audit of the group management
report in order to design audit procedures thatare appropriate in the circumstances, but not forthe purpose of expressing an audit opinion on theeffectiveness of these systems.
› Evaluate the appropriateness of accounting policies
used by the executive directors and the reasonableness of estimates made by the executive directors
and related disclosures.

Financial Statements

Further Information› Conclude on the appropriateness of the executive
directors’ use of the going concern basis ofaccounting and, based on the audit evidence
obtained, whether a material uncertainty exists
related to events or conditions that may castsignificant doubt on the Group’s ability to continue
as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention
in the auditor’s report to the related disclosures in
the consolidated financial statements and in thegroup management report or, if such disclosures
are inadequate, to modify our respective audit
opinions. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’sreport. However, future events or conditions may
cause the Group to cease to be able to continue asa going concern.
› Evaluate the overall presentation, structure andcontent of the consolidated financial statements,
including the disclosures, and whether the
consolidated financial statements present theunderlying transactions and events in a mannerthat the consolidated financial statements give atrue and fair view of the assets, liabilities, financial
position and financial performance of the Group incompliance with IFRSs as adopted by the EU andthe additional requirements of German commercial
law pursuant to § 315e Abs. 1 HGB.

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regarding the financial information of the entities orbusiness activities within the Group to express audit
opinions on the consolidated financial statements
and on the group management report. We areresponsible for the direction, supervision andperformance of the group audit. We remain solely
responsible for our audit opinions.
› Evaluate the consistency of the group management
report with the consolidated financial statements,
its conformity with German law, and the view of theGroup’s position it provides.
› Perform audit procedures on the prospective
information presented by the executive directors
in the group management report. On the basis ofsufficient appropriate audit evidence we evaluate,
in particular, the significant assumptions usedby the executive directors as a basis for theprospective information, and evaluate the proper
derivation of the prospective information from theseassumptions. We do not express a separate audit
opinion on the prospective information and on theassumptions used as a basis. There is a substantial
unavoidable risk that future events will differ
materially from the prospective information.

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We communicate with those charged with governanceregarding, among other matters, the planned scope andtiming of the audit and significant audit findings, including
any significant deficiencies in internal control that we
identify during our audit.
We also provide those charged with governance witha statement that we have complied with the relevant
independence requirements, and communicate withthem all relationships and other matters that may
reasonably be thought to bear on our independence,
and where applicable, actions taken to eliminate threatsor safeguards applied.
From the matters communicated with those charged withgovernance, we determine those matters that were ofmost significance in the audit of the consolidated financial
statements of the current period and are therefore the
key audit matters. We describe these matters in our
auditor’s report unless law or regulation precludes public
disclosure about the matter.

Financial Statements

Further Information

OTHER LEGAL AND REGULATORYREQUIREMENTS
Report on the Assurance on the­Electronic Rendering of the Consoli­
dated Financial Statements and theGroup Management Report Preparedfor ­Publication Purposes in Accordancewith § 317 Abs. 3a HGB
Assurance Opinion
We have performed assurance work in accordance with
§ 317 Abs. 3a HGB to obtain reasonable assurance as towhether the rendering of the consolidated financial statements and the group management report (hereinafter
the “ESEF documents”) contained in the electronic file
LXS_AG_KA+LB_ESEF-2023-12-31.zip and preparedfor publication purposes complies in all material respects
with the requirements of § 328 Abs. 1 HGB for theelectronic reporting format (“ESEF format”). In accordance with German legal requirements, this assurance
work extends only to the conversion of the information
contained in the consolidated financial statements andthe group management report into the ESEF format andtherefore relates neither to the information contained
within these renderings nor to any other information
contained in the electronic file identified above.

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Management Report

In our opinion, the rendering of the consolidated financial
statements and the group management report containedin the electronic file identified above and prepared for
publication purposes complies in all material respects
with the requirements of § 328 Abs. 1 HGB for theelectronic reporting format. Beyond this assurance
opinion and our audit opinion on the accompanying
consolidated financial statements and the accompanying group management report for the financial year
from 1 January to 31 December 2023 contained in
the “Report on the Audit of the Consolidated Financial
Statements and on the Group Management Report”
above, we do not express any assurance opinion on theinformation contained within these renderings or on
the other information contained in the electronic file
identified above.

Auditor’s Responsibilities for the Assurance Work on the
ESEF Documents” section. Our audit firm applies the
IDW Standard on Quality Management: Requirements
for Quality Management in the Audit Firm (IDW QMS 1(09.2022)).

Basis for the Assurance Opinion

In addition, the executive directors of the Company
are responsible for such internal control as they haveconsidered necessary to enable the preparation of ESEF
documents that are free from material non-compliancewith the requirements of § 328 Abs. 1 HGB for theelectronic reporting format, whether due to fraud or error.

We conducted our assurance work on the renderingof the consolidated financial statements and the groupmanagement report contained in the electronic file
identified above in accordance with § 317 Abs. 3a HGB
and the IDW Assurance Standard: Assurance Work on
the Electronic Rendering, of Financial Statements andManagement Reports, Prepared for Publication Purposesin Accordance with § 317 Abs. 3a HGB (IDW AsS 410(06.2022)) and the International Standard on Assurance
Engagements 3000 (Revised). Our responsibility inaccordance therewith is further described in the “Group247

Corporate Governance

Responsibilities of the Executive
Directors and the Supervisory Board for the ESEF ­Documents
The executive directors of the Company are responsible
for the preparation of the ESEF documents including theelectronic rendering of the consolidated financial statements and the group management report in accordancewith § 328 Abs. 1 Satz 4 Nr. [number] 1 HGB and forthe tagging of the consolidated financial statements inaccordance with § 328 Abs. 1 Satz 4 Nr. 2 HGB.

The supervisory board is responsible for overseeing theprocess for preparing the ESEF documents as part of
the financial reporting process.

Financial Statements

Further Information

Group Auditor’s Responsibilities for the­Assurance Work on the ESEF Documents
Our objective is to obtain reasonable assurance
about whether the ESEF documents are free frommaterial non-compliance with the requirements of§ 328 Abs. 1 HGB, whether due to fraud or error. We
exercise professional judgment and maintain professional
skepticism throughout the assurance work. We also:› Identify and assess the risks of material non-compliancewith the requirements of § 328 Abs. 1 HGB,
whether due to fraud or error, design and performassurance procedures responsive to those risks,and obtain assurance evidence that is sufficient andappropriate to provide a basis for our assurance
opinion.
› Obtain an understanding of internal control relevantto the assurance work on the ESEF documents
in order to design assurance procedures that areappropriate in the circumstances, but not for the
purpose of expressing an assurance opinion on theeffectiveness of these controls.
› Evaluate the technical validity of the ESEF
documents, i.e., whether the electronic filecontaining the ESEF documents meets therequirements of the Delegated Regulation (EU)2019/815 in the version in force at the date of theconsolidated financial statements on the technicalspecification for this electronic file.

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To Our Stockholders

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Sustainability

LANXESS on the Capital Market› Evaluate whether the ESEF documents provide an
XHTML rendering with content equivalent to theaudited consolidated financial statements and to theaudited group management report.
› Evaluate whether the tagging of the ESEF
documents with Inline XBRL technology (iXBRL) in
accordance with the requirements of Articles 4 and
6 of the Delegated Regulation (EU) 2019/815, inthe version in force at the date of the consolidated
financial statements, enables an appropriate andcomplete machine-readable XBRL copy of the
XHTML rendering.

Further Information pursuant to
Article 10 of the EU Audit Regulation
We were elected as group auditor by the annual general
meeting on 24 May 2023. We were engaged by thesupervisory board on 19 October 2023. We have been
the group auditor of the LANXESS Aktiengesellschaft,
Köln, without interruption since the financial year 2005.

Corporate GovernanceManagement Report

Financial Statements

Further Information

Reference to an Other Matter–
Use of the Auditor’s Report

German Public Auditor Responsible
for the Engagement

Our auditor’s report must always be read together withthe audited consolidated financial statements and theaudited group management report as well as the assured
ESEF documents. The consolidated financial statements
and the group management report converted to the ESEF
format – including the versions to be filed in the company
register – are merely electronic renderings of the audited
consolidated financial statements and the audited groupmanagement report and do not take their place. In particular, the “Report on the Assurance on the Electronic
Rendering of the Consolidated Financial Statements andthe Group Management Report Prepared for Publication
Purposes in Accordance with § 317 Abs. 3a HGB” andour assurance opinion contained therein are to be usedsolely together with the assured ESEF documents madeavailable in electronic form.

The German Public Auditor responsible for the engagement is Folker Trepte.
Cologne, March 11, 2024
PricewaterhouseCoopers GmbH
Wirtschaftsprüfungsgesellschaft
Folker Trepte
Wirtschaftsprüfer

ppa. Daniel Deing
Wirtschaftsprüfer”

We declare that the audit opinions expressed in thisauditor’s report are consistent with the additional report tothe audit committee pursuant to Article 11 of the EU Audit
Regulation (long-form audit report).

248

Annual Report 2023 | LANXESSContents

FURTHERINFORMATION
250

About This Report

252

Independent Practitioner’s Report on
Non-financial Reporting254

Environmental and Safety Performance
Data: Independent Assurance Report

256

GRI Content Index

263

SASB Index

267

Financial Calendar

268

Contacts

Contents

To Our Stockholders

Strategy

Sustainability

LANXESS on the Capital Market

Corporate GovernanceManagement Report

Financial Statements

Further Information

About This Report
REPORTING METHODOLOGYThis report comprises the financial and sustainability
reporting by the LANXESS Group. It is aligned to national
and international standards for financial and sustainability
reporting, especially the International Financial ReportingStandards (IFRS), German accounting standards (DRS)
and the principles of the U.N. Global Compact. This report
was also created in compliance with the GRI standards.
The Sustainability Accounting Standards Board (SASB)
has published 77 industry standards to enable businesses
to communicate financially material sustainability information to their investors. Starting on
page 263, we
present an SASB Index in alignment with the Chemicals
Standard and thus acknowledge the growing importanceof these guidelines.
This report contains information according to the transparency requirements of the U.K. Modern Slavery Act.
“Slavery and human trafficking statement”
Reporting is performed annually. The last report for fiscal
year 2022 was published in March 2023.

250

LANXESS also follows the recommendations for effective
climate-related reporting of the Task Force on Climate-­
related Financial Disclosures (TCFD). Accordingly, we will
publish detailed information on the handling of climate-­
related opportunities and risks in a TCFD Index. You candownload the TCFD Index at
Investors in April 2024.

PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft on behalf of the Supervisory Board. The audit
report can be found on
page 252. The reporting year
is 2023. Key non-financial performance indicators are an
integral component of the audit of the combined management report and subject to the audit of the consolidated
financial statements.

NON-FINANCIAL REPORTING

Information on the business model can be found on
page 97 onwards of the management report.

In theSustainability section of this Annual Report,
we fulfill our obligation to issue a non-financial Group
report. We report in accordance with Sections 315band 315c in conjunction with Sections 289c to 289e
HGB, with Regulation (EU) 2020/852 of the European
Parliament and of the Council of 18 June 2021 on theestablishment of a framework to facilitate sustainable
investment, and amending Regulation (EU) 2020/2088,
with the Climate Delegated Act (2022/2139), and with
the Article 8 Delegated Act (2022/2178). The required
non-financial disclosures shown separately in the layout
were prepared by the Board of Management and reviewed
by the Supervisory Board of LANXESS AG. The non-financial report and the associated data collection processes have undergone a review with limited assurance
in line with the auditing standard ISAE 3000 (revised) by

References to disclosures not included in the combined management report of the LANXESS Group and
LANXESS AG or in the consolidated financial statements
represent further information and do not form part of thenon-financial Group report.
Within the non-financial report, we generally use the international standards of the Global Reporting Initiative (GRI)
2022 as the framework for the materiality analysis andreporting on management approaches and on generaland topic-specific disclosures.  
Information on environmental protection provisions of€169 million for potential future costs of environmental
protection and remediation measures can be found in
Note [16] of the consolidated financial statements.

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LANXESS on the Capital Market

Corporate GovernanceManagement Report

Index to the Non-Financial Report
NFR issues

Topic (section)

Pages

Circular and Sustainable Sourcing

Identified content
on pages 19-21

Safe and Sustainable Sites

Identified content
on pages 22-29

Climate Action and Energy Efficiency

Identified content
on pages 32-36

Good Governance and Energized Employees

Identified content
on pages 37-55

Safe and Sustainable Sites

Identified content
on pages 27-28

Good Governance and Energized Employees

Identified content
on pages 37-39

Circular and Sustainable Sourcing

Identified content
on pages 19-21

Good Governance and Energized Employees

Identified content
on pages 37-40

Environmental issues

Employee issues
Social issues
Respect for human rights

Combating corruption and bribery

DATA COLLECTION
In compiling the data, we applied the principles of balance,comparability, accuracy, timeliness, clarity and reliability.
For disclosure of HR key figures, LANXESS uses a global
reporting system that contains the key data for the entire
Group.
We use electronic data capture systems for the systematic
global recording of key performance indicators (KPIs) in
the areas of safety and environmental protection. The two
performance indicators we use to measure occupational

251

safety – the lost time injury frequency rate (LTIFR, known
as MAQ in Germany) and the recordable incident rate(RIR) – apply to all sites. Environmental protection data
are gathered only at those production sites in which thecompany has a holding of more than 50%. With regard
to the collection of emissions data, we have taken into
account the recommendations of the Greenhouse Gas
Protocol (GHG Protocol) and the International Energy
Agency (IEA). To ensure the quality of data, PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft
has audited selected key figures with limited assurance.
These are identified accordingly in the report.

Financial Statements

Further Information

In 2022, LANXESS and the private equity investor
Advent International announced the agreement of astrategic alliance. In addition to signing an agreement toacquire the engineering materials business of the Dutchgroup Royal DSM, LANXESS agreed to contribute its
High ­Performance Materials business unit to the newly
established company for high-performance engineering
polymers. From June 1, 2022, the High Performance
Materials business unit was reported as a discontinued
operation. The establishment of Envalior was completed
as of April 1, 2023. As of December 31, 2023, LANXESS
held a minority interest of 40.94% in Envalior GmbH,
Cologne, Germany. The investment is included in the
LANXESS consolidated financial statements using theequity method. At the end of 2023, we also announced
the process to sell our Urethane Systems business unit,
the final polymer business remaining at LANXESS.

KEY REPORT CONTENT
The content of the report is based on a materiality analysis
performed in fiscal year 2023. The material topics that aredescribed in detail in this report are as follows:› Circular and Sustainable Sourcing› Safe and Sustainable Sites› Climate Action and Energy Efficiency› Good Governance and Energized Employees› Sustainable Products

Annual Report 2023 | LANXESSContents

To Our Stockholders

Strategy

Sustainability

LANXESS on the Capital Market

Corporate GovernanceManagement Report

Financial Statements

Further Information

Independent Practitioner’s Report on
Non-financial Reporting
INDEPENDENT PRACTITIONER’SREPORT ON A LIMITED ASSURANCEENGAGEMENT ON NON-FINANCIALREPORTING1“To LANXESS AG, Cologne
We have performed a limited assurance engagement on
the Separate Non-financial Group Report of LANXESS AG,
Cologne, (hereinafter the “Company”) for the period from
01 January 2023 to 31 December 2023 which includes
the information marked with a gray side stripe in the­“Corporate Responsibility” section of the Annual Report(hereinafter the “Separate Non-financial Group Report”).
Not subject to our assurance engagement are the externalsources of documentation or expert opinions mentioned
in the Separate Non-financial Group Report.

Responsibility of the Executive Directors
The executive directors of the Company are responsible for the preparation of the Separate Non-financial
Group Report in accordance with §§ (Articles) 315c inconjunction with 289c to 289e HGB (“Handelsgesetzbuch”: “German Commercial Code”) and Article 8 of
REGULATION (EU) 2020/852 OF THE EUROPEAN

1 PricewaterhouseCoopers GmbH has performed a limited assurance­engagement on the German version of the separate non-financial groupreport and issued an independent practitioner`s report in German
language, which is authoritative. The following text is a translation of the
independent practitioner`s report.

252

PARLIAMENT AND OF THE COUNCIL of 18. June 2020
on establishing a framework to facilitate sustainable investment and amending Regulation (EU) 2019/2088 (hereinafter the “EU Taxonomy Regulation”) and the DelegatedActs adopted thereunder, as well as for making their own
interpretation of the wording and terms contained in the
EU Taxonomy Regulation and the Delegated Acts adopted
thereunder, as set out in section “Reporting on the EU
taxonomy” of the Separate Non-financial Group Report.
This responsibility includes the selection and application of appropriate non-financial reporting methods andmaking assumptions and estimates about individual non-­financial disclosures of the Group that are reasonable inthe circumstances. Furthermore, the executive directors
are responsible for such internal control as the executive
directors consider necessary to enable the preparation ofa Separate Non-financial Group Report that is free frommaterial misstatement whether due to fraud or error.
The EU Taxonomy Regulation and the Delegated Acts
issued thereunder contain wording and terms that are still
subject to considerable interpretation uncertainties and forwhich clarifications have not yet been published in everycase. Therefore, the executive directors have disclosed
their interpretation of the EU Taxonomy Regulation and theDelegated Acts adopted thereunder in section “Reportingon the EU taxonomy” of the Separate Non-financial Group
Report. They are responsible for the defensibility of thisinterpretation. Due to the immanent risk that indeterminate legal terms may be interpreted differently, the legal
conformity of the interpretation is subject to uncertainties.

Audit Firm’s Independence and Quality
Management
We have complied with the German professional provisions regarding independence as well as other ethicalrequirements.
Our audit firm applies the national legal requirements
and professional standards – in particular the Professional
Code for German Public Auditors and German Chartered
Auditors (“Berufssatzung für Wirtschaftsprüfer und vereidigte Buchprüfer“: “BS WP/vBP”) as well as the Standard
on Quality Management 1 published by the Institut der
Wirtschaftsprüfer (Institute of Public Auditors in Germany;
IDW): Requirements to quality management for audit firms(IDW Qualitätsmanagementstandard 1: Anforderungen
an das Qualitätsmanagement in der Wirtschaftsprüferpraxis - IDW QMS 1 (09.2022)), which requires theaudit firm to design, implement and operate a system of
quality management that complies with the applicablelegal requirements and professional standards.

Responsibility of the Assurance­Practitioner
Our responsibility is to express a conclusion with limited
assurance on the Separate Non-financial Group Reportbased on our assurance engagement.
We conducted our assurance engagement in accordancewith International Standard on Assurance Engagements(ISAE) 3000 (Revised): Assurance Engagements otherthan Audits or Reviews of Historical Financial Information,issued by the IAASB. This Standard requires that we plan
Annual Report 2023 | LANXESSContents

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LANXESS on the Capital Market

and perform the assurance engagement to obtain limited
assurance about whether any matters have come to ourattention that cause us to believe that the Company’s
Separate Non-financial Group Report, other than theexternal sources of documentation or expert opinions
mentioned in the Separate Non-financial Group Report, is
not prepared, in all material respects, in accordance with§§ 315c in conjunction with 289c to 289e HGB and the
EU Taxonomy Regulation and the Delegated Acts issued
thereunder as well as the interpretation by the executive directors disclosed in section “Reporting on the EU
taxonomy” of the Separate Non-financial Group Report.
In a limited assurance engagement the procedures performed are less extensive than in a reasonable assurance
engagement, and accordingly a substantially lower levelof assurance is obtained. The selection of the assurance
procedures is subject to the professional judgement of
the assurance practitioner.

253

Corporate GovernanceManagement Report› Analytical procedures on selected disclosures in the
Separate Non-financial Group Report› Inspection of the processes for the collection,­controls, analysis and aggregation of selected dataat specific sites of the company› Reconciliation of selected disclosures with thecorresponding data in the consolidated financial
statements and group management report› Evaluation of the process to identify taxonomy-­eligible and taxonomy-aligned economic activities
and the corresponding disclosures in the Separate
Non-financial Group Report› Inquiries on the relevance of climate-risks› Evaluation of the presentation of the Separate
Non-financial Group Report  

In the course of our assurance engagement, we have,amongst other things, performed the following assurance
procedures and other activities:

In determining the disclosures in accordance with Article
8 of the EU Taxonomy Regulation, the executive directors
are required to interpret undefined legal terms. Due to theimmanent risk that undefined legal terms may be interpreted differently, the legal conformity of their interpretation
and, accordingly, our assurance engagement thereon are
subject to uncertainties.

› Gain an understanding of the structure of the

Assurance Opinion

Group’s sustainability organisation and stakeholder
engagement› Inquiries of the executive directors and relevant
employees involved in the preparation of the­Separate Non-financial Group Report about the
preparation process, about the internal control
system relating to this process and about disclosuresin the Separate Non-financial Group Report› Identification of likely risks of material misstatementin the Separate Non-financial Group Report

Based on the assurance procedures performed and evidence obtained, nothing has come to our attention thatcauses us to believe that the Separate Non-financial Group
Report of the Company for the period from 01 January2023 to 31 December 2023 is not prepared, in all material respects, in accordance with §§ 315c in conjunction
with 289c to 289e HGB and the EU Taxonomy Regulation and the Delegated Acts issued thereunder as well as
the interpretation by the executive directors disclosed in
section “Reporting on the EU taxonomy”  of the Separate
Non-financial Group Report.

Financial Statements

Further Information

We do not express an assurance opinion on the externalsources of documentation or expert opinions mentioned
in the Separate Non-financial Group Report.

Restriction of Use
We draw attention to the fact that the assurance engagement was conducted for the Company’s purposes and thatthe report is intended solely to inform the Company about
the result of the assurance engagement. Consequently,
it may not be suitable for any other purpose than the
aforementioned. Accordingly, the report is not intended
to be used by third parties for making (financial) decisions
based on it. Our responsibility is to the Company. We do
not accept any responsibility to third parties. Our assurance opinion is not modified in this respect.
Cologne, 11 March 2024
PricewaterhouseCoopers GmbH
Wirtschaftsprüfungsgesellschaft
Folker Trepte		
Wirtschaftsprüfer[German public auditor]

Theres Schäfer
Wirtschaftsprüferin[German public auditor]”

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To Our Stockholders

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Sustainability

LANXESS on the Capital Market

Corporate GovernanceManagement Report

Financial Statements

Further Information

Environmental and Safety Performance
Data: Independent Assurance Report
INDEPENDENT PRACTITIONER’SREPORT ON A LIMITED ASSURANCEENGAGEMENT ON SUSTAINABILITY
INFORMATION1“To LANXESS AG, Cologne
We have performed a limited assurance engagement
on data in the “Environmental and Safety Performance
Data table” included in the “Safe and sustainable sites”
section of the “Corporate Responsibility” chapter in the
Annual Report 2023 of LANXESS AG, Cologne (hereinafter: “the Company”), for the period from 1 January to
31 December 2023 (hereinafter: the “Environmental and
Safety Performance Data table”).

Responsibilities of the Executive Directors
The executive directors of the Company are responsible
for the preparation of the Environmental and Safety­Performance Data table in accordance with the principles
stated in the Sustainability Reporting Standards of the
Global Reporting Initiative (hereinafter the “GRI-Criteria”).

1 PricewaterhouseCoopers GmbH has performed a limited assurance
engagement on the German version of the “Environmental and Safety­Performance Data table” included in the “Safe and sustainable sites”­s ection of the “Corporate Responsibility” chapter in the Annual Report
2023 of LANXESS AG and issued an independent assurance report inGerman language, which is authoritative. The following text is a translationof the independent assurance report.

254

This responsibility of Company’s executive directors
includes the selection and application of appropriate
methods to prepare the Environmental and Safety­Performance Data table as well as making assumptions and estimates related to individual sustainability
disclosures, which are reasonable in the circumstances.
­Furthermore, the executive directors are responsible forsuch internal controls as they have considered necessary to enable the preparation of Environmental and
Safety Performance Data table that is free from material­misstatement whether due to fraud or error.

Independence and Quality Controlof the Audit Firm
We have complied with the German professional provisions regarding independence as well as other ethicalrequirements.
Our audit firm applies the national legal requirements
and professional standards – in particular the P­ rofessional
Code for German Public Auditors and German C­ hartered
Auditors (“Berufssatzung für Wirtschaftsprüfer und­vereidigte Buchprüfer“: “BS WP/vBP”) as well as theStandard on Quality Management 1 published by theInstitut der Wirtschaftsprüfer (Institute of Public Auditorsin Germany; IDW): Requirements to quality management
for audit firms (IDW Qualitätsmanagementstandard 1:
Anforderungen an das Qualitätsmanagement in der
Wirtschaftsprüferpraxis – IDW QMS 1 (09.2022)), which

requires the audit firm to design, implement and operatea system of quality management that complies with theapplicable legal requirements and professional standards.

Practitioner’s Responsibility
Our responsibility is to express a limited assurance­conclusion on the sustainability information in the­Environmental and Safety Performance Data table basedon the assurance engagement we have performed.
We conducted our assurance engagement in accordance with the International Standard on Assurance­E ngagements (ISAE) 3000 (Revised): Assurance­Engagements other than Audits or Reviews of ­Historical
Financial Information, issued by the IAASB. This ­Standard
requires that we plan and perform the a­ ssurance engagement to allow us to conclude with limited assurance
that nothing has come to our attention that causes us
to believe that the disclosures in the Environmental
and Safety Performance Data table for the period
from 1 ­January to 31 December 2023 have not been
­prepared, in all ­material aspects, in accordance with therelevant GRI-Criteria.
In a limited assurance engagement the assurance procedures are less in extent than for a reasonable assurance
engagement and therefore a substantially lower level ofassurance is obtained. The assurance procedures selected
depend on the practitioner’s judgment.

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LANXESS on the Capital Market

Within the scope of our assurance engagement, we­performed amongst others the following assurance­procedures and further activities:› Inquiries of the executive directors and relevant
employees involved in the preparation of the Environmental and Safety Performance Data table regarding
the preparation process, the underlying internal
control system and selected disclosures in the­Environmental and Safety Performance Data table› Identification of potential risks of material misstatements in the Environmental and Safety Performance
Data table based on the GRI criteria› Inspection of the processes for the collection,­controls, analysis and aggregation of selected data at
specific sites of the company› Analytical procedures on the disclosures in the­Environmental and Safety Performance Data table› Assessment of the presentation of the disclosuresin the Environmental and Safety Performance
Data table  

Corporate GovernanceManagement Report

Financial Statements

Further Information

Assurance Conclusion
Based on the assurance procedures performed andassurance evidence obtained, nothing has come to ourattention that causes us to believe that the disclosures inthe Environmental and Safety Performance Data table forthe period from 1 January to 31 December 2023 havenot been prepared, in all material aspects, in accordancewith the relevant GRI-Criteria.

Intended Use of the Assurance Report
We issue this report on the basis of the engagementagreed with the Company. The assurance engagement
has been performed for purposes of the Company andthe report is solely intended to inform the Company as
to the results of the assurance engagement. The report
is not intended to provide third parties with support inmaking (financial) decisions. Our responsibility lies solely
toward the Company. We do not assume any responsibility
towards third parties.
Cologne, 11 March 2024
PricewaterhouseCoopers GmbH
Wirtschaftsprüfungsgesellschaft
Folker Trepte		
Wirtschaftsprüfer[German public auditor]

255

Theres Schäfer
Wirtschaftsprüferin[German public auditor]”

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Financial Statements

Further Information

GRI Content Index

Statementof useLANXESS AG has reported in compliance with the GRI standards forthe period from January 1, 2023,
to December 31, 2023.
Location

Comments andonline annexes

UNGC

Statementof useLANXESS AG has reported in compliance with the GRI standards forthe period from January 1, 2023,
to December 31, 2023.
Location

Comments andonline annexes

GRI 1: Foundation 2021

GOVERNANCE

Applicable
GRI industry
standards

2-9

Governance structure
and composition

pp. 89–90

2-10

Nomination and selection of thehighest governance body

pp. 80–86

2-11

Chair of the highest governancebody

pp. 79–80

2-12

Role of the highest governancebody in overseeing the managementof impacts

p. 13

2-13

Delegation of responsibility
for managing impacts

p. 13

2-14

Role of the highest governancebody in sustainability reportingp. 2502-15

Conflicts of interest

pp. 84–85,
94

2-16

Communication of critical concerns

pp. 79–80

2-17

Collective knowledge of the highest
governance body

pp. 82–86

2-18

Evaluation of the performanceof the highest governance body

pp. 79–80

Voting results

2-19

Remuneration policies

pp. 87, 101Compensation Report

2-20

Process to determine remunerationp. 87Compensation Report

2-21

Annual total compensation ratio

No GRI sector standard available.

GRI 2: General Disclosures 2021
THE ORGANIZATION AND ITS REPORTING PRACTICES
pp. 1–3,
73–75

2-1

Organizational details

2-2

Entities included in the organization’s pp. 179–183
sustainability reporting

2-3

Reporting period, frequency andcontact point

2-4

Restatements of information

2-5

External assurance

Legal name of the organization:
LANXESS AG

pp. 250, 268
No sustainability-related information
was corrected or restated in thereporting period.
pp. 252–255

ACTIVITIES AND WORKERS
2-6

Activities, value chain and otherbusiness relationships

pp. 1, 6–9,
19–21,
97–99,
104–108,
116–119, 147,
217–218

2-7

Employees

pp. 40–51,
106–107,217

2-8Workers who are not employees

p. 48

256

Products and Solutions

6

UNGC

10

Stakeholder dialog

Compensation Report

STRATEGY, POLICIES AND PRACTICES
2-22

Statement on sustainable­development strategy

p. 4

2-23

Policy commitments

pp. 77–86

2-24

Embedding policy commitments

pp. 37–40

Annual Report 2023 | LANXESSContents

Statementof useTo Our Stockholders

Strategy

Sustainability

LANXESS AG has reported in compliance with the GRI standards forthe period from January 1, 2023,
to December 31, 2023.
Location

LANXESS on the Capital Market

Comments andonline annexes

UNGC

Corporate GovernanceStatementof useManagement Report

LANXESS AG has reported in compliance with the GRI standards forthe period from January 1, 2023,
to December 31, 2023.
Location

2-25

Processes to remediate
negative impacts

pp. 37–40

2-26

Mechanisms for seeking advice
and raising concerns

pp. 22,
38–40, 63,
78

204-1

2-27

Compliance with laws andregulations

pp. 37–40,
77–78,
138–140,
150–151

GRI 308: Supplier Environmental Assessment 2016

Membership associations

pp. 11, 14, 20,
266

2-28

Approach to stakeholder­engagement

pp. 14–15,
52–56, 80

2-30Collective bargaining agreements

pp. 46, 56

Stakeholder dialog
3

MATERIAL TOPICS
Process to determinematerial topics

pp. 14–15

3-2

List of material topics

pp. 15, 251

Proportion of spendingon local suppliers

New suppliers that were screenedusing environmental criteria

pp. 20–21

308-2

Negative environmental impacts inthe supply chain and actions taken

pp. 20–21

414-1

New suppliers that were screenedusing social criteria

pp. 20–21,
38–39

414-2

Negative social impacts in the
supply chain and actions taken

pp. 20–21,
38–39

Material Topics
GRI 3: Material Topics 2021
GRI 3-3Management of material topics

pp. 14–15,
23–28

GRI 203: Indirect Economic Impacts 2016

GRI 3: Material Topics 2021

203-1
pp. 14–15,
19–21

Infrastructure investments
and services supported

pp. 30–31

Societal Added Value

Safe and Sustainable Sites
Business-Driven Innovation

GRI 303: Water and Effluents 2018

GRI 2: General Disclosures 2021

257

p. 104308-1

CIRCULAR AND SUSTAINABLE SOURCING

Activities, value chain andother business relationships

UNGC

SAFE AND SUSTAINABLE SITES

3-1

2-6

Comments andonline annexes

GRI 414: Supplier Social Assessment 2016

2-29

Management of material topics

Further Information

GRI 204: Procurement Practices 2016

STAKEHOLDER ENGAGEMENTGRI 3-3

Financial Statements

pp. 6–9,
19–21,
97–99,
104–108,
116–119,
147–148,
217–218

303-1

Interactions with water asa shared resource

pp. 25–26

303-2

Management of water
discharge-related impacts

pp. 25–26

7, 8

303-3

Water withdrawal

pp. 25–26, 29

7, 8

303-4

Water discharge

pp. 25–26, 29

7, 8

303-5

Water consumption

pp. 25–26, 29

7, 8

Products and Solutions

7, 8

Annual Report 2023 | LANXESSContents

Statementof useTo Our Stockholders

Strategy

Sustainability

LANXESS AG has reported in compliance with the GRI standards forthe period from January 1, 2023,
to December 31, 2023.
Location

LANXESS on the Capital Market

Comments andonline annexes

UNGC

GRI 306: Waste 2020

Corporate GovernanceStatementof useManagement Report

Financial Statements

LANXESS AG has reported in compliance with the GRI standards forthe period from January 1, 2023,
to December 31, 2023.
Location

Comments andonline annexes

Further Information

UNGC

GRI 305: Emissions 2016306-1

Waste generation and significant
waste-related impacts

pp. 23, 27–29

7, 8

305-1

Direct (Scope 1)
GHG emissions

pp. 29, 32–35

7, 8

306-2

Management of significant
waste-related impacts

p. 23

7, 8

305-2

Energy indirect (Scope 2)
GHG emissions

pp. 29, 32–35

7, 8

306-3

Waste generated

pp. 23, 27–29

7, 8

305-3

Other indirect (Scope 3)
GHG emissions

pp. 29, 32–35

7, 8

305-4

GHG emissions intensity

pp. 29, 32–35

8

305-5

Reduction of GHG emissions

pp. 32–35

8, 9

305-6

Emissions of ozone-depleting­substances (ODS)

p. 29

7

305-7

Nitrogen oxides (NOx), sulfur
oxides (SOx), and other significant
air emissions

p. 29

7, 8

GRI 413: Local Communities 2016
413-1

413-2

Operations with local community
engagement, impact assessments,
and development programs

pp. 22,
24–28,
30–31,
39–40, 50Societal Added Value

Operations with significant actualand potential negative impacts on
local communities

pp. 23, 24–28

Impact Assessment

GOOD GOVERNANCE AND ENERGIZED EMPLOYEESCLIMATE ACTION AND ENERGY EFFICIENCYGRI 3: Material Topics 2021

GRI 3: Material Topics 2021
GRI 3-3Management of material topics

GRI 3-3

pp. 14–15,
32–36

Management of material topics

pp. 14–15,
37–56

GRI 2: General Disclosures 2021

GRI 302: Energy 2016
302-1

Energy consumption within
the organization

p. 29

7, 8

302-2

Energy consumption outside of
the organization

p. 29

7, 8

302-3

Energy intensity

pp. 35–36

8

302-4

Reduction of energy consumption

pp. 35–36

7, 8, 9302-5

Reductions in energy requirements
of products and services

pp. 35–36,
57–62

2-7

Employees

pp. 40–51,
106–107,
183, 185,217

2-8Workers who are not employees

p. 48

2-27

Compliance with laws
and regulations

pp. 37–40,
77–78,
138–140,
150–151

New mobility solutions

6

GRI 201: Economic Performance 2016
201-3

258

Defined benefit plan obligations andother retirement plans

pp. 197–205

Annual Report 2023 | LANXESSContents

Statementof useTo Our Stockholders

Strategy

LANXESS AG has reported in compliance with the GRI standards forthe period from January 1, 2023,
to December 31, 2023.
Location

Sustainability

LANXESS on the Capital Market

Comments andonline annexes

UNGC

GRI 202: Market Presence 2016
202-1

202-2

Comments andonline annexes

207-1

Approach to tax

Tax guideline

207-2

Tax governance, control,
and risk management

Tax guideline

207-3

Stakeholder engagementand m­ anagement of concerns
related to tax

Tax guideline

207-4

Country-by-country reporting

Tax guideline

UNGC

401-1

New employee hires andemployee turnover

pp. 44, 50

6

401-2

Benefits provided to full-time
employees that are not provided totemporary or part-time employees

pp. 47–49

6

401-3

Parental leave

p. 49

402-1

Operations assessed for risks
related to corruption

pp. 39–40

10

205-2

Communication and training
about anti-corruption policies
and procedures

pp. 39–40

10

205-3

Confirmed incidents ofcorruption and actions taken

pp. 39–40

10

GRI 206: Anti-competitive Behavior 2016

259

LANXESS AG has reported in compliance with the GRI standards forthe period from January 1, 2023,
to December 31, 2023.
Location

Further Information

GRI 402: Labor/Management Relations 2016

pp. 51–52

205-1

Legal actions for anti-competitive
behavior, anti-trust, and monopoly
practices

Financial Statements

GRI 401: Employment 2016

GRI 205: Anti-corruption 2016

206-1

Statementof useManagement Report

GRI 207: Tax 2019
An employee’s individual income
is based on his or her responsibilities and performance. As wellas collective agreements thatare the basis for the compensation of non-managerial staff
in Germany and many othercountries, legal requirements
such as minimum wage levels arealso important in ensuring faircompensation. In Germany, forexample, we obtain temporary
employees only from agencies
that are covered by the collective
agreement for t­ emporary employment. In ­addition, the chemicalindustry pays industry-specific­supplements.

Ratios of standard entry level
wage by gender compared to local
minimum wage

Proportion of senior management
hired from the local community

Corporate GovernanceThe company was not involvedin any legal actions regardinganti-competitive behavior or­v iolations of antitrust law in 2023.

Minimum notice periods regarding
operational changes

In accordance with the German
Works Constitution Act,
­L ANXESS is obliged to inform theWorks Council fully and in goodtime of any planned operationalchanges that could result inmaterial disadvantage to all or
substantial parts of the workforce.
The Economics Committee isalso informed on a regular basis
about the company’s economic
affairs. We fully comply with ourlegal obligations with respect
to the responsible bodies.
Similar requirements applicablein other countries are always
complied with.

3

Annual Report 2023 | LANXESSContents

Statementof useTo Our Stockholders

Strategy

LANXESS AG has reported in compliance with the GRI standards forthe period from January 1, 2023,
to December 31, 2023.
Location

Sustainability

LANXESS on the Capital Market

Comments andonline annexes

UNGC

Statementof useOccupational health and safety­management system

pp. 52–55

403-2

Hazard identification, risk
­assessment, and incident­investigation

pp. 52–55

403-3

Occupational health services

pp. 52–55

403-4

Worker participation, consultation,and communication on occupational
health and safety

pp. 52–55

403-5

Worker training on occupational
health and safety

pp. 52–55

403-6

Promotion of worker health

p. 52

403-7

Prevention and mitigation ofoccupational health and safety
impacts directly linked by business
relationships

pp. 52–55

260

Protecting the health and safety of
our employees is a regular aspectof the dialog between employee
and employer representatives
in all countries where collective
agreements apply. In Germany,and going above and beyond legal
requirements, agreements exist
with employee representatives
as well as for occupational healthmanagement and company
inte­gration management. The
operational teams are managed
by steering committees made up
equally of employer and employee
representatives.

Management Report

Financial Statements

LANXESS AG has reported in compliance with the GRI standards forthe period from January 1, 2023,
to December 31, 2023.
Location

Further Information

Comments andonline annexes

403-8

Workers covered by an occupational
health and safety management system

pp. 52–55

Most of the company’s offerings
to promote health and well-being­apply to workers who are­em­ployees or whose workplaceis controlled by the organization.
­Local offerings are supple­
mented by global programs, suchas Xwork. There are suitable­occupational safety measures
for all persons working on­company premises.

403-9

Work-related injuries

p. 55

LANXESS collects and reviews
injury and accident data of
the contractors working at
LANXESS sites. These data
are treated ­confidentiallyand are not p­ ublished.

GRI 403: Occupational Health and Safety 2018403-1

Corporate Governance

UNGC

GRI 404: Training and Education 2016
404-1

Average hours of training per year
per employee

pp. 51–52

404-2

Programs for upgrading employee
skills and transition assistanceprograms

pp. 51–52

404-3

Percentage of employees receiving
regular performance and careerdevelopment reviews

6

At present, all managers
worldwide receive an annual,system-based performanceassessment and development
planning. As part of our corporate culture, all managers and­employees are called upon to
give each other regular feedback,e.g. in regular review meetings.
The system-based solution isavailable to all managers as wellas ­selected non-management­employees. Individual targets
were also agreed upon with amajority of employees.

6

Annual Report 2023 | LANXESSContents

Statementof useTo Our Stockholders

Strategy

Sustainability

LANXESS AG has reported in compliance with the GRI standards forthe period from January 1, 2023,
to December 31, 2023.
Location

LANXESS on the Capital Market

Comments andonline annexes

UNGC

GRI 405: Diversity and Equal Opportunity 2016

Corporate GovernanceStatementof useManagement Report

Financial Statements

LANXESS AG has reported in compliance with the GRI standards forthe period from January 1, 2023,
to December 31, 2023.
Location

Diversity of governance bodies
and employees

pp. 17,42–43,
46, 82–86

6

405-2

Ratio of basic salary and­remuneration of women to men

p. 47

6

p. 38

6

411-1

Incidents of violations involving rights
of indigenous peoples

GRI 406: Non-discrimination 2016
Incidents of discrimination and­corrective actions taken

Operations and suppliers in which theright to freedom of association andcollective bargaining may be at risk

p. 56

3

Operations and suppliers at significant
risk for incidents of child labor

pp. 19–21,
38–39

1, 2, 5

GRI 409: Forced or Compulsory Labor 2016409-1

Operations and suppliers at ­significant risk for incidents offorced or c­ ompulsory labor

415-1

Political contributions

pp. 19–21,
38–39

416-1

Assessment of the health andsafety impacts of product andservice categories

416-2

Incidents of non-complianceconcerning the health and safety
impacts of products and services

1, 2, 4

pp. 18, 59

261

Security personnel trained in humanrights policies or procedures

1, 2Stakeholder Dialog
No political donations were madein the reporting year.

10

LANXESS does not employ
its own security personnel at
its sites but procures s­ ecurity
services from specialized
external ­providers. They, likeall our ­suppliers, are subject
to our ­Business Partner Codeof ­C onduct, which also covers
human rights. In addition,
professional security providers­contracted by LANXESS are
subject to the relevant security
legislation in each country.

Product Portfolio Evaluation

Our employees and external third
parties can use the SpeakUp
system to report grievances
concerning non-compliance withregulations concerning health andsafety. We received no indicationsof corresponding non-compliancefor fiscal year 2023.

GRI 410: Security Practices 2016
410-1

Our employees and external
third parties can use the
SpeakUp system to reportgrievances concerning theviolation of ­indigenous rights.
In fiscal year 2023, we received
no reports or other indicationsof c­ ases ­involving the violationof i­ndigenous rights.

GRI 416: Customer Health and Safety 2016

GRI 408: Child Labor 2016
408-1

UNGC

GRI 415: Public Policy 2016

GRI 407: Freedom of Association and Collective Bargaining 2016
407-1

Comments andonline annexes

GRI 411: Rights of Indigenous Peoples 2016

405-1

406-1

Further Information

1, 2
GRI 417: Marketing and Labeling 2016
417-1

Requirements for product and service
information and labelingpp. 58–60

Annual Report 2023 | LANXESSContents

Statementof use417-2

To Our Stockholders

Strategy

Sustainability

LANXESS AG has reported in compliance with the GRI standards forthe period from January 1, 2023,
to December 31, 2023.
Location

LANXESS on the Capital Market

Comments andonline annexes
Our employees and external third
parties can use the SpeakUp
system to report grievances
concerning non-compliancewith regulations and voluntary
codes concerning productand service information. We
received no ­indications ofcorresponding non-compliancefor ­fiscal year 2023.

Incidents of non-complianceconcerning product and service
information and labeling

GRI 418: Customer Privacy 2016418-1

Our employees and external third
parties can use the SpeakUp
system to report complaints
regarding customer data privacy.
In fiscal year 2023, we received
no reports or other indications ofcomplaints regarding breachesof customer privacy and losses ofcustomer data.

Substantiated complaints concerning
breaches of customer privacy andlosses of customer data

UNGC

Corporate GovernanceStatementof useManagement Report

Financial Statements

LANXESS AG has reported in compliance with the GRI standards forthe period from January 1, 2023,
to December 31, 2023.
Location

Further Information

Comments andonline annexes

UNGC

GRI 201: Economic Performance 2016
201-2

Financial implications andother risks and opportunities
due to climate change

pp. 34, 61,
64–71,
145–146, 174

GRI 301: Materials 2016
301-1

Materials used by weight or volume

pp. 23–25

7, 8

GRI 416: Customer Health and Safety 2016
416-1

Assessment of the health andsafety impacts of product andservice categories

416-2

Incidents of non-complianceconcerning the health and safety
impacts of products and services

pp. 18, 59

Product Portfolio Evaluation

Our employees and external third
parties can use the SpeakUp
system to report grievances
concerning non-compliance withregulations concerning health andsafety. We received no indicationsof corresponding non-compliancefor fiscal year 2023.

SUSTAINABLE PRODUCTS
GRI 417: Marketing and Labeling 2016
GRI 3: Material Topics 2021
GRI 3-3Management of material topics

pp. 14–15, 18,
57–68

GRI 2: General Disclosures 2021
2-6

262

Activities, value chain andother business relationships

pp. 6–9,
19–21,
97–99,
104–108,
116–119,
147–148,
217–218

Products and Solutions

417-1

Requirements for product and­service information and labeling

417-2

Incidents of non-complianceconcerning product and service
information and labelingpp. 57–59
Our employees and external third
parties can use the SpeakUp
system to report grievances
concerning non-compliancewith regulations and voluntary
codes concerning productand service information. We
received no indications of­corresponding non-compliancefor ­fiscal year 2023.

Annual Report 2023 | LANXESSContents

To Our Stockholders

Strategy

Sustainability

LANXESS on the Capital Market

Corporate GovernanceManagement Report

Financial Statements

Further Information

SASB Index

Greenhouse gas emissions

Topic, accounting metric and unit of measure

Code

Chapter/section

Gross global Scope 1 emissions;percentage covered under emissions-limiting regulations

RT-CH-110a.1› Climate action and energy efficiency, see page 34›

Discussion of long-term and short-term strategy or plan to
manage Scope 1 emissions, emissions reduction targets,and an analysis of performance against those targets

RT-CH-110a.2› Strategy, see page 9 onwards› Corporate responsibility goals, see page 17› Climate action and energy efficiency,› CDP questionnaire – Climate Change
2023, see sections C2, C3, C4› Responsibility – Climate-Neutral 2040

› Environmental and safety performance data,
see page 29› Climate action and energy efficiency, see page 32›› Climate action and energy efficiency,››› Investors – ESG – Water BackgroundPaper› CDP questionnaire – Water Security

see page 32 onwards

Air quality

Air emissions of the following pollutants:(1) NO X (excluding N2O),(2) SO X ,(3) Volatile organic compounds (VOCs), and(4) Hazardous air pollutants (HAPs)

RT-CH-120a.1

Energy management(1) Total energy consumed,(2) Percentage grid electricity,(3) Percentage renewable,(4) Total self-generated energy

RT-CH-130a.1(1) Total water withdrawn,(2) Total water consumed, percentage of each in regionswith high or extremely high baseline water stress

RT-CH-140a.1

Number of incidents of non-compliance associated withwater quality permits, standards, and regulations

RT-CH-140a.2› Environmental and safety performance data,
see page 29› Sparing use of water, see page 26› GRI Content Index, see page 257 (GRI 2-27)

Description of water management risks and discussionof strategies and practices to mitigate those risks

RT-CH-140a.3› Safe and sustainable sites, see page 25 onwards

Water management

see pages 29, 36

Further publicly available information

CDP questionnaire – Climate Change
2023, see sections C6.1, C11.1b

CDP questionnaire – Climate Change
2023, see section C7.1a

CDP questionnaire – Climate Change
2023, see sections C6.1, C11.1b

CDP questionnaire – Water Security
2023, see sections W1.2b, W1.2d, W1.2h

2023, see sections W3.3, W4

Hazardous waste management

Amount of hazardous waste generated,
percentage recycled

RT-CH-150a.1› Safe and sustainable sites, see page 27 onwards› Environmental and safety performance data,
see page 29

263

Annual Report 2023 | LANXESSContents

To Our Stockholders

Community relations

Strategy

Sustainability

LANXESS on the Capital Market

Topic, accounting metric and unit of measure

Code

Discussion of engagement processes to manage risks andopportunities associated with community interests

RT-CH-210a.1

Corporate GovernanceManagement Report

Financial Statements

Further Information

Chapter/section

Further publicly available information› Commitment to sustainable transformation,
see page 11 onwards› Corporate citizenship, see page 30 onwards› Sustainable products, see page 57 onwards› Responsibility – Societal Added Value› Investors – ESG – Water BackgroundPaper› CDP questionnaire – Water Security
2023, see section W3.3c(1)	Total recordable incident rate (TRIR) and(2) Fatality rate for(a) direct employees and(b) contract employees

RT-CH-320a.1› Work-related injuries, see page 55› GRI Content Index, see page 260 (GRI 403-9)

Description of efforts to assess, monitor, and reduce exposureof employees and contract workers to long-term (chronic)
health risks

RT-CH-320a.2› Occupational health and safety, see page 52 onwards

Product design for
use-phase efficiency

Revenue from products designed for use-phase resource
efficiency

RT-CH-410a.1

Safety and environmental
stewardship of chemicals(1) Percentage of products that contain Globally Harmonized
System of Classification and Labeling of Chemicals (GHS)
Category 1 and 2 Health and Environmental Hazardous
Substances,  (2)	Percentage of such products that have undergone a
hazard assessment

RT-CH-410b.1› Sustainable products, see page 57 onwards› Reporting on the EU taxonomy, see page 64 onwards› Sustainable products, see page 57 onwards

Discussion of strategy to (1) manage chemicals of concern
and (2) develop alternatives with reduced human and/or
environmental impact

RT-CH-410b.2› Sustainable products, see page 57 onwards

Percentage of products by revenue that contain geneticallymodified organisms (GMOs)

RT-CH-410c.1› Not applicable, as no sales share in this area

Workforce health and safety

Genetically modified organisms

264

Annual Report 2023 | LANXESSContents

To Our Stockholders

Strategy

Sustainability

LANXESS on the Capital Market

Corporate GovernanceManagement Report

Topic, accounting metric and unit of measure

CodeManagement of the legal &regulatory environment

Discussion of corporate positions related to government
regulations and/or policy proposals that addressenvironmental and social factors affecting the industry

RT-CH-530a.1

Operational safety, emergency
preparedness, and response

Process Safety Incidents Count (PSIC), Process Safety Total
Incident Rate (PSTIR), and Process Safety Incident Severity
Rate (PSISR)

RT-CH-540a.1

Number of transport incidents

RT-CH-540a.2› Corporate responsibility goals, see page 16› Safe and sustainable sites, see page 22 onwards

Production by reportable segment

RT-CH-000.A› Total volume sold in thousand metric tons, see page 29

Activity metric265

Financial Statements

Further Information

Chapter/section

Further publicly available information› Commitment to sustainable transformation,
see page 11 onwards› Sustainable products, see page 57 onwards› Disclosures on global process safety, see page 16›

Responsibility – Political Positions

Annual Report 2023 | LANXESSContents

To Our Stockholders

Strategy

Sustainability

LANXESS on the Capital Market

Corporate GovernanceManagement Report

Financial Statements

Further Information

We support

unglobalcompact.org

responsible-care.dechemiehochdrei.de

cdp.nettfs-initiative.com

sdgs.un.org

wbcsd.org

LANXESS stock in the­sustainability index

sustainability-indices.com

266

Annual Report 2023 | LANXESSContents

To Our Stockholders

Strategy

Sustainability

LANXESS on the Capital Market

Corporate GovernanceManagement Report

Financial Statements

Further Information

Financial Calendar 2024

MAY

AUG.

NOV.

MAY 8

AUGUST 9

NOVEMBER 7

Quarterly Statement
Q1 2024
Conference Call

Half-Year Financial Report
H1 2024
Conference Call

Quarterly Statement
Q3 2024
Conference Call

MAY 24
Annual Stockholders’ Meeting

JAN.

267

FEB.

MARCH

APRIL

JUNE

JULY

SEP.

OCT.

DEC.

Annual Report 2023 | LANXESSContents

Contacts and Masthead

MASTHEAD

CONTACTSLANXESS AG
Kennedyplatz 150569 Cologne, Germany
Tel. +49 (0) 221 8885 0
www.lanxess.com

Corporate Communications
Christiane Minderjahn
Tel. +49 (0) 221 8885 2674
mediarelations@lanxess.com

Consultancy:
Kirchhoff Consult AG, Hamburg, Germany
Design and production:
Kirchhoff Consult AG, Hamburg, Germany

This Annual Report contains forward-looking statements basedon current assumptions and forecasts made by LANXESS AG
management. Various known and unknown risks, uncertainties andother factors could lead to material differences between the actual

Investor Relations
André Simon
Tel. +49 (0) 221 8885 3494
ir@lanxess.com
Date of publication:
March 14, 2024

future results, financial situation, development or performance ofthe company and the estimates given here. The company assumes
no liability whatsoever to update these forward-looking statements
or to conform them to future events or developments.

PUBLISHERLANXESS AG
50569 Cologne, Germany
www.lanxess.com