Financial condition and capital expenditures
Changes in the statement of cash flows In the first six months of 2014 there was a net cash inflow of €187 million from operating activities, against a net outflow of €67 million in the prior-year period. With income before income taxes amounting to €132 million, the increase in net working capital compared to December 31, 2013 resulted in a cash outflow of €250 million. In the prior-year period, income before income taxes was €42 million and the cash outflow from the increase in net working capital was €230 million. The increase in net working capital in the reporting period was mainly due to higher inventories and trade receivables.
There was a €415 million net cash outflow from investing activities in the first half of 2014, compared with a net inflow of €51 million in the same period a year ago. The net cash outflow in the reporting period was mainly attributable to purchases of intangible assets and property, plant and equipment totaling €262 million, and of near-cash assets totaling €163 million. The net cash inflow in the prior-year period was largely the aggregate of inflows from the sale of near-cash assets of €315 million and outflows of €252 million for purchases of intangible assets and property, plant and equipment. Depreciation and amortization amounted to €202 million in the reporting period, against €218 million a year before.
Net cash provided by financing activities came to €100 million, compared with net cash of €99 million used in financing activities in the first half of 2013. The cash inflow of €433 million from the capital increase and €317 million in proceeds from new borrowings in the reporting period was partly offset particularly by outflows of €519 million for the repayment of financial liabilities and by the dividend payment to LANXESS AG stockholders for fiscal 2013. Cash outflows in the prior-year period related mainly to interest payments and the dividend payment for fiscal 2012.
Financing and liquidity The principles and objectives of financial management discussed in chapter "Earnings, asset and financial position of LANXESS AG" of the Annual Report 2013 remained valid during the first half of 2014. They are centered on a conservative financial policy built on long-term, secured financing.
Cash and cash equivalents decreased by €126 million compared with the end of 2013, to €301 million. This decrease resulted from factors including the repayment partly in cash of the €500 million Eurobond issued in 2009 that matured in the reporting period. The €269 million of instant-access investments in money market funds, up from €106 million at the end of 2013, were reported under near-cash assets. The Group’s liquidity position thus remains sound.
The capital increase resolved by the Board of Management on May 7, 2014 with the authorization of the Supervisory Board was completed on May 8, 2014 in an accelerated bookbuilding process. The additional 8,320,266 shares were placed with international institutional investors at a price of €52.00 per share, resulting in gross proceeds of €433 million. This capital measure strengthened the LANXESS Group’s equity and reduced net financial liabilities.
Net financial liabilities totaled €1,495 million as of June 30, 2014, compared with €1,731 million as of December 31, 2013.
|Net Financial Liabilities|
|€ million||Dec. 31, 2013||June 30, 2014|
|Non-current financial liabilities||1,649||1,774|
|Current financial liabilities||668||316|
|Liabilities for accrued interest||(53)||(25)|
|Cash and cash equivalents||(427)||(301)|
Financing instruments off the statement of financial position As of June 30, 2014, we had no material financing items that were not reported in the statement of financial position, such as factoring, asset-backed structures or sale-and-lease-back transactions.
Significant capital expenditure projects Capital expenditures in the Performance Polymers segment included, among other projects, the construction of the world’s largest production facility for neodymium-based performance butadiene rubber (Nd-PBR) for our Performance Butadiene Rubbers business unit in Singapore. This facility is designed for an annual capacity of 140,000 tons and is due on stream in the first half of 2015. In Changzhou, China, our Keltan Elastomers business unit is constructing the world’s largest production plant for synthetic ethylene-propylene-diene rubber (EPDM) with an annual capacity of up to 160,000 tons. Start-up of this plant, which will utilize the innovative Keltan® ACETM technology, is planned for 2015. In the second quarter of 2014, the High Performance Materials business unit finished construction of its facility for polyamide plastics at the site in Antwerp, Belgium, with an annual capacity of around 90,000 tons. The plant is due on stream in the third quarter of 2014. In addition, a new compounding facility for high-tech engineering plastics was commissioned in April 2014 in Porto Feliz, Brazil.
The Performance Chemicals segment’s Inorganic Pigments business unit is currently building a new facility for iron oxide red pigments in Ningbo, China, designed for an initial annual capacity of 25,000 tons. Start-up of this plant is planned for the first quarter of 2016.