Financial Condition
Financial Condition
Balance sheet structure As of June 30, 2008, the LANXESS Group had total assets of €4,850 million, up €801 million, or 19.8%, from €4,049 million as of December 31, 2007. The acquisition of approximately 70% of the shares of Petroflex S.A., Brazil, factored heavily into asset growth. The Petroflex group was fully consolidated as of April 1, 2008. Details of changes in the individual balance sheet items resulting from the first-time consolidation are given in the condensed notes to the consolidated interim financial statements. LANXESS funded the purchase price payment out of existing credit facilities. An increase in working capital driven by higher raw material prices also added to total assets.
Non-current assets rose by €286 million to €2,092 million, solely due to the addition of the acquired assets of Petroflex S.A. The total of intangible assets, property, plant and equipment rose by €241 million to €1,733 million, including €67 million of goodwill acquired with the acquisition. The increase in goodwill from the €62 million reported as of the initial consolidation on April 1, 2008 is exclusively the result of exchange rate movements. Capital expenditures amounted to €105 million, while depreciation and amortization came to €128 million. The increase in the carrying value of investments in associates was largely attributable to the positive earnings of CURRENTA GmbH & Co. OHG in the first half of 2008.
Non-current financial assets decreased by €21 million to €64 million, mainly because of the impairment loss recognized on the financial interest in INEOS ABS (Jersey) Limited. The addition of the Petroflex group’s non-current financial assets partially offset this effect. The ratio of non-current assets to total assets, at 43.1%, was 1.5 percentage points below the ratio for December 31, 2007.
Current assets, at €2,758 million, were up €515 million from December 31, 2007. Inventories and trade receivables rose €152 million and €271 million, respectively, largely because of the first-time consolidation of the acquired Petroflex companies and the sharp increase in raw material prices. Current financial assets advanced €64 million to €264 million, partly as the result of the first-time consolidation of Petroflex and an increase in the fair value of hedging contracts as of the reporting date. The increase in other current assets, up €31 million to €176 million, was also due primarily to the first-time consolidation of Petroflex. Cash and cash equivalents, at €183 million, were nearly unchanged from the end of 2007. Current assets accounted for 56.9% of total assets, up from 55.4% as of December 31, 2007.
Equity rose by €101 million from December 31, 2007 to €1,626 million. The €160 million in net income for the first half and €55 million in additional minority interest resulting from the first-time consolidation of Petroflex S.A. were partially offset by the €83 million dividend payment by LANXESS AG in May 2008 and €27 million in negative currency effects. The ratio of equity to total assets amounted to 33.5% as of June 30, 2008, compared with 37.7% as of December 31, 2007.
Non-current liabilities were up €402 million to €1,858 million as of June 30, 2008, mainly because of drawings on credit facilities to finance the Petroflex acquisition, and the assumption of the Brazilian group’s financial debt. Part of this debt has since been repaid and the financing structure integrated into that of the LANXESS Group. Advance payments received on the sale of the Lustran Polymers business unit also drove non-current liabilities higher. The ratio of non-current liabilities to total assets was 38.3%, against 36.0% at the end of 2007.
Current liabilities rose by €298 million to €1,366 million because of the acquisition. Trade payables, like inventories, grew because of the steep increase in raw material prices. The ratio of current liabilities to total assets was 28.2% at mid-year, compared with 26.4% as of December 31, 2007.