ALTANA

Business Development

General Business Setting

Overall Economic Situation
In 2017, the global economy developed more dynamically than in the previous years. The International Monetary Fund (IMF) estimates that the world economy grew by 3.7 % last year (previous year: 3.2 %). Again in 2017, the emerging countries grew more strongly than the established economic nations, whose growth increased more significantly, however. The higher momentum of the advanced economic nations was primarily driven by the U.S. and the eurozone. The key economic indicators in the sales regions for ALTANA’s business developed at different levels in 2017.

At 2.3 %, the eurozone posted stronger growth than in 2016 (1.5 %). The most important European economies showed a dynamic economic development. The German Federal Office of Statistics estimates that Germany’s economic performance improved at a higher rate than in the previous year, increasing by 2.2 % (previous year: 1.9 %). But other important economic nations in the eurozone, including France and Italy, also posted more robust growth.

According to current IMF forecasts, the economic dynamics in the countries of the Americas were generally positive in 2017, after being very heterogeneous in the previous years. The economic performance of the U.S. accelerated, growing by 2.3 % in the year under review compared to 1.5 % in the previous year. The economic growth in the important Latin American economies developed at a low level, although the recessive trends were reversed in some countries. The Brazilian economy achieved slight growth of 1.1 % in 2017, following years of recession (previous year: - 3.5 %).

Growth in Asia stabilized. The growth rates of the large emerging economic nations China and India were roughly on a par with the previous year (6.8 % and 6.7 % compared to 6.7 % and 7.1 % in 2016) and were the engines of the very positive economic development in Asia. The countries of the ASEAN-5 economic region also picked up on the positive trend of the previous year, with growth of 5.3 % (previous year: + 4.9 %). The IMF expects the performance of the Japanese economy to improve in 2017, with an increase of 1.8 % in its gross domestic product compared to the previous year (+ 0.9 %).

Industry-Specific Framework Conditions
According to estimates by the American Chemistry Council (ACC), global chemical manufacture increased by 2.5 % in the past fiscal year, thus achieving higher growth than in 2016 (2.2 %).

In 2017, Germany, Europe’s largest chemical manufacturer, increased its production volume by 2.5 %, according to estimates by the German Chemical Industry Association, after stagnating in the previous year. The German chemical industry particularly benefited from a positive development of demand in China, as well as from the enhanced dynamism of the European chemical industry. Sales in the industry rose by as much as 5.5. % due to rising prices. The ACC forecasts that other European countries also had a clearly positive development in chemical production, including France (+ 4.7 %), Italy (+ 3.6 %), and Switzerland (+ 1.9 %).

According to estimates by the American Chemistry Council, the production volume in the U.S. was at the previous year’s level, however. In Latin America, chemical production decreased steadily by 1.8 %, despite the attractive overall economic data.

The chemical sector in the Asia-Pacific region was again the engine of global growth in the year under review. The ACC estimates that chemical production in the region grew by 4.6 %, a considerably higher increase than in the previous year (+ 3.6 %). All of the important economic nations in Asia showed a dynamic economic development. Chemical manufacture in China grew by 5.5 %, while Japan increased its chemical production by 4.4 %. In India, the amount of chemical goods produced increased by a substantial 7.7 %.

In the course of the first half of the year, the price of crude oil fell from around 55 U.S. dollars to below 45 U.S. dollars in June. In the following months, however, the price rose continuously, reaching its year high of around 67 U.S. dollars at the end of the year. The average price in 2017 was therefore significantly higher than in the previous year.

Important Events for Business Development
ALTANA’s earnings and financial situation as well as its assets in 2017 were influenced by non-operating effects.

In March, ALTANA further expanded its business with additives solutions for the global plastics market by acquiring U.S. and German PolyAd companies. The activities were integrated into the BYK division. Furthermore, the ELANTAS division was strengthened by the integration of the insulatingresin business of Solvay at the American site in Olean in June. In November, ELANTAS expanded even more through the acquisition of wire-enamels activities in China. These changes in the Group’s consolidation scope had an effect on control-relevant key performance indicators.

The acquisition of novel technologies, which are to be developed to the stage of market readiness in the coming years, had a decisive influence on the Group’s key performance indicators. The acquisition of metallography technology from the Israeli company Landa Labs is an example.

In 2017, the development of the exchange rates between the euro, our Group currency, and other currencies important for ALTANA had an impact on sales and earnings development. The average exchange rate was 1.13 U.S. dollars for one euro, slightly higher than in the previous year (1.11 U.S. dollars for a euro). Effects from changed exchange-rate relations resulted from an increase in the average exchange rate between the euro and the Chinese renminbi from 7.35 renminbi to 7.63 renminbi.

While the changed average exchange rates for the year had a limited effect on the items on the income statement in 2017, differences in the exchange rates on December 31, 2017, had noticeable effects on the balance-sheet items compared to the previous year. The year-end exchange rate of the U.S. dollar was 1.20 U.S. dollars for one euro, considerably higher than the exchange rate at the end of 2016 (1.05 U.S. dollars for one euro).

Business Performance

Group Sales Performance
Group sales amounted to € 2,247.0 million in 2017, an 8 % or 171.6 million increase over the previous year (€ 2,075.3 million). Non-operating effects generally had a positive influence on the sales growth. The acquisitions of the PolyAd companies (BYK division) and the integration of the new activities acquired in the U.S. and China into the ELANTAS division resulted in a sales increase of 2 % compared to the previous year. The integration of the Addcomp companies into the BYK division in the middle of 2016 also made a contribution, as they were incorporated in the Consolidated Financial Statements for a full year for the first time in the 2017 fiscal year. In contrast, Group sales decreased slightly due to the sale of the ACTEGA Colorchemie group completed in 2016. The positive acquisition effects were partially offset by burdens due to exchange-rate changes. Slight sales drops resulted particularly from the changed relations of the euro to the Chinese renminbi and to the U.S. dollar, amounting to 1 %. Adjusted for these non-operating effects, operating sales growth was 7 % up on the previous year. As a result, we achieved operating sales growth above the range of 2 % to 5 % that we had anticipated for 2017 at the beginning of the year.

The main driver of the operating growth was an increase in sales volumes. The effects of price changes and productmix shifts did not have a significant impact on the sales level compared to the previous year. But these influences developed unevenly within the Group.

The regional volume and sales structure shifted only slightly vis-à-vis 2016. Accounting for 38 % of total Group sales (previous year: 38 %), Europe continued to be ALTANA’s most important sales market. Both nominal and operating sales in Europe were significantly higher than in the previous year. Sales developed dynamically in all ALTANA’s important sales markets in Europe. Only in Great Britain and a few Eastern European countries were sales lower than in 2016.

Sales in the Americas climbed by 6 % after business had shrunk in the previous year. Adjusted for positive acquisition and slightly negative exchange-rate effects, operating sales grew by 2 %. Operating sales in the U.S. – still ALTANA’s largest sales market, accounting for 19 % of total sales – rose by 3 %. A main reason for this increase was the strong recovery of oil and gas exploration activities. On account of higher crude-oil prices, new wells were developed in the U.S. As a consequence, the demand for specialty products from the BYK division was higher than in the previous year. However, sales in Brazil and other important Latin American markets did not reach the previous year’s levels. Overall, the Americas accounted for 28 % of global Group sales, the same percentage as in the previous year.

Asia was responsible for 33 % of Group sales in 2017 (previous year: 31 %). Recording operating growth of 13 %, Asia was the biggest growth driver of all the regions, as was the case in the previous year. Sales in China, in particular, developed extraordinarily well, achieving operating growth of 20 %. With an 18 % share of total sales, China is the Group’s second-largest sales market. Other Asian countries also made positive contributions to the sales growth, most notably South Korea, Japan, and Thailand. Sales with customers in India, ALTANA’s second-biggest sales market in Asia after China, were roughly on a par with the previous year’s level. This very dynamic development of demand, especially in China, was the primary reason that the growth goals forecast at the beginning of 2017 were surpassed.

Sales Performance of BYK
In 2017, the BYK division boosted its sales by 13 %, or € 121.2 million, to € 1,030.4 million (previous year: € 909.1 million). As a result, it showed the highest momentum within the ALTANA Group. This sales increase was driven, among other things, by the integration of the PolyAd companies acquired in 2017, as well as the prorated effects from the acquisition of the Addcomp activities in 2016. Adjusted for these effects and slightly negative burdens from exchangerate changes, operating sales growth totaled 9 %.

In all markets and regions, BYK benefitted from increased demand. The sales volume was noticeably higher than in the previous year. An essential factor in the sales growth was the revival of demand in oil and gas exploration activities. The development of business with additives for the coatings and plastics industries, as well as sales of measuring and testing instruments, was stronger than the relevant markets.

In terms of regions, the division’s growth was driven very strongly by Asia, and especially by growing demand among customers in BYK’s second-largest sales market, China. The demand for special products used to manufacture especially environmentally friendly coatings and paints drove the sales growth in China. Substantial sales growth was also generated in other important Asian countries, above all in South Korea, Japan, Thailand, and India. While sales in Europe did not grow at the same pace as the Asian sales region, the sales growth in this important core region for BYK also reached a very high level. Only in a few smaller sales markets in Eastern Europe did sales fail to reach the previous year’s level. The sales development in the Americas was positive. The sales increase was especially noticeable in the U.S., the division’s largest single sales market. The expansion of oil and gas exploration activities had a particularly positive effect on business performance. The trend reversal in this market segment that started in the previous year continued due to rising crude-oil prices. An increasing scarcity of raw materials in the course of the year limited growth in some product groups.

Sales Performance of ECKART
Sales in the ECKART division grew by 6 % to € 385.3 million (previous year: € 361.9 million). Adjusted for slightly negative exchange-rate effects, operating sales increased by 7 %. The sales volume of effect pigments was the main driver in the past fiscal year. The division also benefitted slightly from a shift in the product portfolio.

In 2017, the largest proportion of the products was sold to customers in the coatings, paint, and plastics industry, with sales in this segment exceeding the previous year’s level significantly. ECKART also expanded its activities in the cosmetics sector last year, picking up on the momentum of the previous year. In the graphic-arts and functional-applications segments, too, sales rose in year-to-year terms. Only sales with customers in the graphics industry did not quite reach the previous year’s level.

In 2017, the demand for the division’s products was positive in all regions. Asia was the biggest regional growth engine, followed by the Americas. Europe also achieved sales growth.

Sales Performance of ELANTAS
In 2017, sales in the ELANTAS division increased by 8 %, or € 36.6 million, to € 488.7 million (previous year: € 452.1 million). Adjusted for the sales increase due to the acquisitions in the U.S. and China completed in the course of the year, as well as for negative exchange-rate effects, operating sales growth was 7 % higher than in the previous year. Demand for the division’s insulating materials showed a favorable development in 2017. The resulting increase in the sales volume was partially offset by lower price levels, however.

The positive sales performance was reflected in all of the important fields of business. The division’s biggest product segment, wire enamels, accounted for the largest share of the sales growth. But the electric segment also showed a dynamic development of demand.

In regional terms, the division’s core region Asia underwent the strongest operating sales development. In 2017, Asia accounted for more than half of the division’s total sales. The sales achieved in China, ELANTAS’ most important market, showed an extraordinarily positive development. In other Asian economies, too, sales were up on the previous year. In India, however, there was slightly lower demand for ELANTAS’ products. The business development in Europe was very positive. Sales rose in many markets. In the division’s important sales markets in the Americas, however, sales decreased in 2017, especially in the U.S. and Brazil. But ELANTAS expanded its sales volume in Mexico.

Sales Performance of ACTEGA
With sales of € 342.6 million, the ACTEGA division did not reach the previous year’s level (€ 352.2 million). But the decrease in nominal sales of 3 %, or € 9.6 million, is due exclusively to the sale of the ACTEGA Colorchemie group completed in April 2016 and negative effects from exchangerate changes. Adjusted for these non-operating effects, sales in 2017 were slightly lower than the previous year’s level. An increased sales volume was set against negative effects from a changed product mix and lower price levels.

The stagnation of operating sales was due to a restrained development of demand in nearly all of the important sales segments.

In 2017, the regional sales structure of the ACTEGA division did not change significantly, but the development in the core regions was non-uniform. Operating sales increased in the division’s largest region, Europe. In Europe, positive sales impetus came, among others, from Germany, Italy, Spain, and many Eastern European countries. In the Americas, the operating sales volume lagged behind the previous year. In ACTEGA’s two largest single markets in the region, the U.S. and Brazil, lower demand led to sales decreases. In Asia, however, the division slightly increased its sales in 2017. But sales declines in the division’s largest sales market in the region, China, offset the sales increase in other countries.

Earnings Situation

The operating sales development was accompanied by a positive earnings development. Earnings before interest, taxes, depreciation and amortization (EBITDA) rose by 4 %, or € 17.0 million, to € 470.0 million (previous year: € 453.0 million). Adjusted for acquisition and exchange-rate effects, operating earnings increased by 1 %. ALTANA achieved an EBITDA margin of 20.9 % in the 2017 fiscal year (previous year: 21.8 %).

The slight decline of the EBITDA margin compared to the previous year was in line with our expectations. At the beginning of 2017, we had forecast an EBITDA margin that after the good year 2016 would be oriented more closely to our strategic target range of 18 % to 20 %.

The most important cost factor for ALTANA, raw-materials and packaging costs, developed negatively relative to sales. The materials usage ratio, the ratio of raw-materials and packaging costs to sales, increased in the course of 2017 to 41.5 % (previous year: 39.7 %). This trend burdened all four divisions.

Other cost factors important for ALTANA’s earnings largely developed in proportion to sales. Personnel expenses rose by 6 %. The ratio of total personnel expenses to sales fell to 21.3 % (previous year: 21.8 %).

In 2017, the structure of functional costs did not change significantly vis-à-vis 2016. The ratio of production costs to sales dipped slightly below the previous year’s level. Although maintenance costs increased disproportionately due to high capacity utilization, other kinds of costs important for the development of the total product costs increased only moderately, most notably depreciation and amortization and personnel expenses.

In 2017, selling and distribution expenses increased compared to the previous year, but the relative ratio to sales declined. Due to an orientation of sales activities to direct business with customers in certain activities, the sales commissions increased only slightly in a year-to-year comparison despite the dynamic sales development, and personnel expenses rose disproportionately to the sales development. On the other hand, freight charges directly dependent on sales increased due to the higher sales volume, and advertising costs were also up on 2016.

Of all functional cost areas, research and development expenses showed the strongest growth in 2017. On account of the continuous expansion of development activities in nearly all of our divisions, as well as the buildup of activities to further develop the metallography technology we acquired, the ratio of research and development costs to sales rose slightly from 6.2 % to 6.3 %. This trend was additionally driven by initiatives in application-oriented research and intensified activities in the development of new technologies that can be used to market innovative products.

In 2017, administrative expenses recorded the lowest increase of all functional cost areas, and the ratio of administrative expenses to sales sank further. This positive development was primarily due to stable personnel expenses, by far the most important cost position within administrative expenses.

The balance of other operating income and expenses improved considerably. This development is mainly due to one-off earnings from the reimbursement of a share of the costs from the Renewable Energies Law (EEG), as well as higher insurance refunds.

Earnings before interest and taxes (EBIT) reached € 335.9 million, surpassing the previous year’s level
(€ 328.7 million).

The financial result was € - 8.6 million, unchanged from the previous year. On the other hand, the result from companies accounted for using the equity method worsened, from € - 20.3 million in 2016 to € - 21.3 million in the 2017 fiscal year. This decrease is due to the fact that the Israeli Landa Corp. posted a higher loss for the year. The company’s 2017 fiscal year was burdened by higher expenses for the preparation of a broad market introduction of new products.

Earnings before taxes (EBT) rose to € 306.0 million (previous year: € 299.8 million), and net income (EAT) to € 234.6 million (previous year: € 210.1 million). Despite the increase in earnings, income tax did not reach the previous year’s level. Here, positive effects from the U.S. tax reform are reflected, above all from the recalculation deferred tax liabilities.

Multi-period overview of the earnings situation

Asset and Financial Position

Capital Expenditure

In the past fiscal year, ALTANA invested a total of € 188.0 million, € 65.9 million or 54 % more than in the previous year (€ 122.1 million). The investment ratio, or the ratio of investments to sales, was 8.4 % and thus above the target range of 5 % to 6 % we had forecast for 2017. The increase over the previous year and the surpassing of the target range were mainly due to the purchase of metallography technology from the Israeli company Landa Labs and the acquisition of a technology portfolio for labels and packaging in the U.S.

Overall, € 91.6 million were invested in intangible assets (previous year: € 15.7 million). In addition to the two technology acquisitions, the investments in intangible assets resulted in particular from the expansion of ERP systems at different Group sites. Investments in property, plant and equipment amounted to € 96.4 million in the past business year (previous year: € 106.4 million).

In the last fiscal year, the regional distribution of investments concentrated on Europe again, especially on the two biggest German Group sites in Wesel (BYK) and Güntersthal (ECKART). Furthermore, the metallography technology was acquired by a German Group company. Overall, 80 % of the total investments in property, plant and equipment and intangible assets were made in Europe (previous year: 57 %). The Americas accounted for 14 % of our worldwide investments (previous year: 18 %). The share of investments in Asia fell in the past fiscal year from 25 % to 6 %.

In 2017, the BYK division invested a total of € 58.3 million (previous year: € 52.0 million), mainly to expand production and laboratory capacities at the division’s biggest sites in Germany and the U.S. Investments were also made to expand its new site in Shanghai in order to bundle the region’s sales and research activities at one site in China in the future. Another large investment involved a facility for carrying out automated product tests for additives at the Wesel site.

The investment volume in the ECKART division was € 17.1 million (previous year: € 17.2 million) and thus on a par with the previous year’s figure (previous year: € 17.2 million). The largest share by far was invested in the division’s biggest site in Güntersthal, followed by sites in the U.S. and Switzerland.

In 2017, the ELANTAS division invested less in property, plant and equipment and intangible assets than in the previous year (€ 13.8 million compared to € 30.9 million in 2016). But in 2016, the investment activities were strongly influenced by the acquisition of a manufacturing site in Tongling, China. In the past fiscal year, the investment activities focused on the division’s two sites in Europe as well as India and the U.S.

The ACTEGA division invested the highest share of all of the Group’s divisions, € 96.8 million, and much more than in 2016 (€ 18.4 million). The division’s acquisitions of the metallography activities and the technology portfolio for labels and packaging in the U.S. were integrated in the ACTEGA division, strongly influencing the development of the total investments. The other capital expenditure was distributed relatively evenly across the division’s sites and mainly comprised investments in research and production sites.

Balance Sheet Structure

In the course of the 2017 fiscal year, the ALTANA Group’s total assets climbed from € 3,053.9 million to € 3,147.7 million. The increase of € 93.9 million, or 3 %, is mainly the result of increased investment activity as well as the acquisitions made in the course of the year. This rise was partially offset by the changed exchange-rate relations compared to December 31, 2016, particularly the strong euro in relation to the U.S. dollar.

Intangible assets rose to € 1,056.9 million (previous year: € 922.8 million). The increase was primarily due to the acquisition of the PolyAd business activity, the acquisitions in the ELANTAS division, and ACTEGA’s technology purchases. This was offset by the change of exchange-rate relations on the balance-sheet date. Property, plant and equipment decreased slightly to € 774.4 million (previous year: € 781.1 million), primarily on account of exchange-rate effects.

On December 31, 2017, non-current assets totaled € 2,021.6 million (previous year: € 1,831.0 million),
€ 190.5 million higher than in the previous year. Their share in total assets was 64 % on the balance-sheet date (previous year: 60 %).

The change in current assets was influenced particularly by the change in the amount of cash and cash equivalents and short-term financial assets, as well as a change in net working capital. In the course of the year, cash and cash equivalents decreased to € 275.7 million due to company and technology acquisitions (previous year: € 375.6 million). The short-term financial assets that at the end of 2016 were still used as a time-deposit investment with a term of more than three months were also used as financing in 2017.

Both inventories and trade accounts receivable increased in the course of the growth of business activity. The ratio of the total net working capital, in relation to the business development of the previous three months, and taking into account trade accounts payable, was 101 days and thus at the level of the end of 2016 (previous year: 102 days). The increase in the ratio of liabilities had a positive effect. Total current assets decreased by € 96.7 million to € 1,126.1 million (previous year: € 1,222.8 million).

On the liabilities side, changes arose primarily due to the earnings-related increase in equity. Group equity climbed by € 132.0 million, or 6 %, to € 2,214.2 million (previous year: € 2,082.2 million). The increase is attributable to the surplus in the 2017 fiscal year, which was partially offset, however, by negative effects from exchange-rate changes. The equity ratio climbed to 70 % on December 31, 2017 (previous year: 68 %). At the end of 2017, liabilities from promissory loans remained an essential component of the debt. These liabilities were reduced further in the past fiscal year by the scheduled repayment of a tranche (€ 32.0 million). Total non-current liabilities decreased to € 486.6 million (previous year: € 564.2 million). In addition to the reduced debt, this can also be attributed to a decrease in deferred tax liabilities, which sank in the course of the corporate tax reform in the U.S. The share of total non-current debt dropped from 18 % to 15 %. The amount of current debt on the balance sheet increased from € 407.5 million to € 446.9 million on December 31, 2017. This development was due to the expansion of liabilities from trade accounts payable on account of the expansion of business activity and the increase in current debt in the course of the reclassification of the promissory note tranches due in 2018 (€ 64 million).

The net financial debt, comprising the balance of cash and cash equivalents, short-term financial assets, current marketable securities, loans granted, debt, and employee benefit obligations, reached € 78.0 million at the end of 2017, after net financial assets of € 25.7 million were disclosed in the previous year.

Principles and Goals of Our Financing Strategy
We generally aim to finance our operating business activities from the cash flow from operating activities. The same applies to the need for capital expenditure, which caters to the continual expansion of business activities.

As a result, our financing strategy is oriented to keeping the cash and cash equivalents generated within the Group centralized. In addition, a financing framework is sought that enables ALTANA to flexibly and quickly carry out acquisitions and even large investment projects beyond the accustomed scope.

To successfully implement these goals, we manage nearly all of the Group’s internal financing centrally via ALTANA AG. To this end, cash pools are set up for all of the important currency areas.

At the end of 2017, ALTANA’s liabilities totaled € 192 million due to the issuance of two promissory note loans in 2012 and 2013 (€ 350 million in total). The outstanding promissory note loans are divided into tranches with fixed interest rates and different maturities. The loans will be repaid by 2020. Furthermore, there is a general syndicated credit facility of € 250 million. The term of this credit facility will last until 2022.

This financing structure offers ALTANA the flexibility it needs to appropriately take advantage of short-term or investment-intensive growth opportunities. The distribution of the maturities of the financing instruments we use enables us to optimally control repayment of liabilities with inflows from operating cash flow.

We continue to use off-balance-sheet financing instruments to a very limited extent. These include purchasing commitments, operating leasing commitments, and guarantees for pension plans. Details on the existing financing instruments are provided in the online Consolidated Financial Statements.

Liquidity Analysis

In the course of 2017, the level of cash and cash equivalents fell by € 99.9 million to € 275.7 million (previous year: € 375.6 million). Cash inflow from operating activities, amounting to € 302.3 million, did not reach the previous year’s level (€ 376.7 million). The decrease in operating cash flow vis-à-vis 2016 resulted from an increase in net working capital in the course of the strong expansion of business activity. On the other hand, the higher consolidated net income was influenced by non-cash earnings components (primarily in the area of income tax positions and provisions). The lower operating cash flow compared to the previous year did not meet our expectations, since at the beginning of the year we had anticipated the cash inflow would be roughly the same as in the previous year.

Compared to 2016, the cash outflow from investing activities increased significantly to € 325.1 million (previous year: € 234.3 million). This increase was particularly driven by acquisitions and technology purchases made in 2017.

The cash flow from financing activities amounted to € 67.4 million in 2017 (previous year: € 185.4 million). The current debt outflows concerned the scheduled repayment of a promissory note tranche (€ 32.0 million) and the reduction of the debt of the PolyAd activities acquired. In the 2017 fiscal year, ALTANA AG did not pay a dividend.

Value Management

ALTANA determines the change in the company’s value via the key figure ALTANA Value Added (AVA). In the 2017 fiscal year, we made a very positive contribution to our company’s value again.

The Group’s average capital employed rose to € 2,509.7 million (previous year: € 270.8 million). This increase in capital largely resulted from company acquisitions and technology purchases. At € 284.8 million (previous year: €270.8 million), operating earnings increased due to the improved earnings situation in the 2017 fiscal year. To guarantee the comparability of the key figures in value management, in 2017 they were adjusted for the positive effects of the tax reform in the U.S.

In 2017, the return on capital employed (ROCE) was, at 11.3 %, at an unchanged high level, though it did not quite reach the previous year’s level (11.6 %). With an unchanged cost of capital rate of 8.0 %, the relative AVA reached 3.3 % (previous year: 3.6 %).

Analogous to the expansion of the operating capital, the cost of capital rose to € 200.8 million (previous year: € 187.5 million). As a result the absolute AVA amounted to € 84.0 million in the past business year (previous year: € 83.3 million).

Thus, the decrease of value key figures forecast for 2017 on account of company acquisitions did not only concern the relative AVA. The slight increase in the absolute AVA vis-à-vis 2016 exceeded our expectations and was attributable to the positive business performance.

Overall Assessment of the Business Performance and the Business Situation

In the course of the year, the overall  economic framework conditions developed positively.

In this environment, ALTANA successfully expanded its business activities in its important target markets and achieved high operating growth. Due to continuously rising raw materials prices, profitability fell compared to the previous year.

Our balance-sheet structures remained robust at the end of 2017. As a result, sufficient financial headroom is available for further growth.