Coping with a global recession

A "recession" has many definitions. One definition is that it is a significant decline in the economic activity spread across the country, lasting more than a few months. The signs of recession are normally reflected in the decline in the real Gross Domestic Product (GDP) growth, real personal income, employment, industrial production, and wholesale-retail sales. Analysts say that a global growth rate under 2% is tantamount to a recession ?and most predict that the global economy would grow by only 0.9% to 3% in 2009, the lowest in years. Countries around the world saw their economies contracting and their responses to the crisis vary. Most countries attempt to move their economies out of recession by increasing government spending to stimulate economic activities. Other countries responded by encouraging investments through incentives and tax cuts, as well as by implementing expansionary monetary policies. Just how these macroeconomic actions would impact on doing business are now under scrutiny. Companies around the world have their own ways to survive the economic recession affecting their markets and some of them gave their insights and useful advice.

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Flexibility and process improvement Mr. Milan Vignjevic Head of Semi-Crystalline Products Business Unit LANXESS AG Tel: +852-3526 8868 E-mail: milan.vignjevic@lanxess.com Website: www.lanxess.com "To manage the current crisis while positioning the business to capture opportunities when the economy rebounds, companies have to work in parallel on two fronts: short-term operations optimization and mid-term execution of earlier defined strategy. The Innovation Group Function of LANXESS was created to focus on efficiency programs, process enhancements and development of innovative technologies and products." LANXESS, a specialty chemicals company based in Leverkusen, Germany, has felt the full force of the economic slowdown since November 2008 with all its business units impacted. Milan Vignjevic, Head of Semi-Crystalline Products Business Unit of LANXESS identifies two groups of factors that affected the company in these times of global economic slump. "On the sales and revenue side, there has been a sudden collapse of demand from our main markets, such as automotive and electro/electronics. Customers have simply stopped buying, leaving producers to face sluggish sales. Another impact comes from the build-up of raw materials in the supply chain. As a result, producers suffer the painful devaluation of their expensive inventories, which adds to the burden of already low revenues." D e s p i t e t h e g l o b a l r e c e s s i o n , LANXESS achieved a solid earnings performance in 2008. Group net income rose by 52.7% to EUR 171 million. It also achieved its 2009 targets one year ahead of schedule. Importantly, LANXESS continues to be in a sound financial position. In the first quarter of 2009, cash flow climbed by EUR 77 million to EUR 122 million. "We expect 2009 to be a challenging year for LANXESS. In the second quarter of 2009, demand from several main markets has picked up. We will capitalise on these favourable developments to further strengthen our market position. But it is difficult to predict when the industry will make a sustainable recovery," according to Mr. Vignjevic. LANXESS responded to the global economic challenges with flexibility and speed. A "Crisis Management Team" headed by Chairman of the Board of Management Dr. Axel Heitman was formed to continuously analyse the market situation and formulate appropriate actions. In January, the Innovation Group Function was created to focus on efficiency programs, process enhancements and development of innovative technologies and products. A global package of measures named "Challenge 09"Mujer