Expected Developments

Future Orientation of the Group

We do not plan on making any fundamental changes to the Group’s strategy or organizational structure in the next two years. The focus on specialty markets and the offer of innovative chemical solutions based on our customers’ requirements will continue to drive our business development.

We do not expect our entry into new market segments or application areas to lead to any significant changes in our sales structure in the medium term. We also expect the balanced regional sales distribution to basically remain stable.

Acquisitions, however, could lead to changes in our sales and market structures. Bolt-on acquisitions and particularly the integration of a new business division could result in a shift.

In the future, the area of occupational safety and the focus on environmentally compatible management will continue to result in ambitious targets that will impact the ALTANA Group’s strategic orientation.

Economic and Industry Outlook

For 2022, ALTANA expects global economic growth to continue, albeit at a slower pace than in the previous year. The global recovery of the national economies since the end of 2020 and the related strong increase in demand were followed by a significant rise in raw material and energy costs, bottlenecks in the provision of logistics services, and, as a result, disruptions in global supply chains. Based on these influencing factors, the International Monetary Fund (IMF) forecasts a 4.4% increase in global economic output, following a 5.9% rise in 2021. Expectations for overall economic development are fundamentally dampened by the risk of further coronavirus variants, which could lead to renewed pandemic-related restrictions on public life. Economic growth will be somewhat weaker in the industrialized countries than in the emerging and developing ones. The IMF expects the industrialized nations as a whole to grow by 3.9% in 2022 (previous year: 5.0%), with different economies benefiting to varying degrees. In the U.S., growth of 4.0% is forecast for 2022. Here, the expansion of 5.6% in 2021 already more than offset the percentage decline in 2020. In the Eurozone, the IMF expects a growth rate of 3.9%, after the sharp pandemic-related decline was not fully compensated for in 2021 despite 5.2% growth. For Germany, however, the IMF assumes that the GDP slump in 2020 can be fully offset by growth of 2.7% in 2021 and forecast growth of 3.8% in 2022. In all countries, the anticipated economic recovery depends on whether the pandemic will become increasingly manageable and on there being no further disruptions to supply chains and subsequent price increases and production bottlenecks.

According to the IMF forecast, growth in the emerging markets will total 4.8% in 2022 (previous year: 6.5%) and thus exceed the global average. The picture continues to vary in relation to individual economies. Based on this forecast, China will no longer have the highest growth rate. After stellar growth of 8.1% in 2021, the growth rate is expected to fall to 4.8%, slightly above the global level. According to the IMF, this is mainly due to disruptions in residential construction. In view of the strict zero-covid strategy in China, which is giving rise to recurring restrictions on public life and poorer employment prospects in the construction sector, private consumption is likely to be lower. India, on the other hand, is expected to continue to grow at an above-average rate. The forecast growth rate of 9.0% for 2022 is on a par with growth in 2021, meaning that India has far more than compensated for the pandemic-induced decline. Overall, the Latin American economies are expected to show below-average growth of 2.4%. Brazil, which was able to compensate for the pandemic-related losses with 4.7% growth in the previous year, is forecast to post lower growth than other countries in this region at just 0.3%. It is assumed that measures to combat inflation will have a strong influence on demand in Brazil.

In addition to the pandemic and the risks that have arisen in its wake, the IMF sees numerous other macroeconomic risks for 2022 that could lead to a slowdown in global growth. These are basically rising uncertainty regarding geopolitical risks, which could lead to a curtailment of international trade relations, and an increase in risks as a result of climate change. Major natural disasters are becoming more likely and – as the range of extreme weather events on all continents in 2021 showed – could threaten all economies.

Against the background of the global economic outlook, further, albeit weaker, growth is expected in all regions for the general chemical industry in 2022. The American Chemistry Council (ACC) forecasts a 3.8% increase in global chemical production in 2022, following growth of 5.8% in the previous fiscal year. A further increase in the growth rate vis-à-vis the prior year is only expected for North America, at 4.5%. Here, growth in 2021 was below average at 1.8% due to weather-related production losses. For all other regions, the curve is expected to flatten to moderate low to mid single-digit growth rates. The forecast growth rates are based on the assumption that the bottlenecks in procurement and transportation that occurred in 2021 owing to the pandemic will ease again or not worsen further, leading to a stabilization of price levels.

On the basis of the economic and industry-specific framework conditions, we assume that general demand in the markets relevant for ALTANA will basically be positive, although there will be regional and market-specific differences. The extent to which changes in storage levels along the value chain will influence the demand for our divisions’ products largely depends on the expected short- to medium-term development. Stock-level changes can lead to significant effects.

The development of crude-oil prices cannot be predicted reliably. Following the enormous demand-driven price increase in 2021, we expect the price to stabilize at a high level in 2022 and thus not to see any significant price reductions. The availability, pricing, and consumption volume of chemical products are subject to the influence of the crude-oil market, albeit to different extents. In addition, the expectations of market participants with regard to the future development of oil prices can give rise to significant changes in inventory levels along the chemical industry’s entire value chain.

As in the previous years, the exchange-rate relations important for ALTANA may continue to show pronounced volatilities in 2022. The development of regional interest rates and economic output, as well as political influences, can be of decisive importance for exchange-rate fluctuations. Since the intensity and direction of the exchange rates cannot be predicted, it is not possible to make concrete statements about the influence. Concrete risks, as well as opportunities, can result from a deviation of the actual exchange-rate development from our planning assumptions.

Expected Earnings, Asset, and Financial Situation

Expected Sales and Earnings Performance
On the basis of the expected growth of the global economy, we anticipate a further positive development in demand for our products and services in the 2022 fiscal year. Operating sales growth, i.e. sales growth adjusted for exchange-rate and acquisition effects, is expected to be in the mid-single-digit percentage range. Growth should be driven by a further increase in volumes and positive price/mix effects to safeguard margins.

As we do not expect any significant year-on-year exchange-rate effects in 2022, the nominal increase in sales is expected to be at the level of the operating increase. The acquisitions already made in 2021 and potential further acquisitions may also have a significant influence on the growth rate. In February 2021, the activities of TLS Technik GmbH & Co. Spezialpulver KG were integrated into the Group within the ECKART division. In addition, the ACTEGA division has included the closure materials business acquired from Henkel since May 2021. In operational terms, the divisions’ sales should develop within the same growth range as Group sales.

We assume that there will be no significant shifts in cost ratios in relation to sales for the main functional cost variables. We forecast only a slight decrease in the cost of materials ratio compared to the past fiscal year, which will remain at a high level.

In the case of human resources costs and certain other cost items, we are planning a relative increase for 2022 that will be higher overall than the level of sales growth. The main reasons for this are the planned increase in personnel and the expectation that trade show and travel activities will pick up again in 2022.

The EBITDA margin in 2022 is expected to be roughly at the level of the previous year. It should be at the lower end of our strategic target range of 18% to 20%. A slight increase is anticipated for absolute EBITDA.

After 2022, we expect continued high growth momentum with fundamentally increasing profitability.

Expected Asset and Financial Situation
Overall, there should be no significant shifts in the balance sheet structure in 2022. The level of our investments in property, plant and equipment and intangible assets should remain within our long-term target range of 5% to 6% of sales over the next two years. The absolute values of net working capital are expected to develop in line with the general business performance, with the relative level lower compared to the end of 2021. Based on the expected business development, we will continue to generate a clearly positive cash flow from operating activities in the coming years, which should be higher than in the previous year. We will use the cash inflow primarily to finance investments and further acquisitions beneficial to the development of the ALTANA Group.

For the key figures of value management, we expect only a slight decline compared to the past business year. This will mainly result from an increase in operating capital due to the expected investments and the acquisitions already completed in 2021. For the relative and absolute ALTANA value added, we expect an amount significantly above the threshold for value creation, as the return on capital employed for 2022 should exceed the cost of capital at 7.5%.

Expected Development in the Area of Occupational Safety and the Environment
Based on the long-term positive development of the past fiscal years in the area of occupational safety, we set ourselves the following targets for 2022 for the three accident indicators: WAI 1: 2.3; WAI 2: 1.5; and WAI 3: 28.0.

The target for the specific energy parameter in 2022 is 1.21 MWh/t, following an actual value at the same level in the previous fiscal year. In subsequent years, further reductions in specific energy consumption in the order of 2% per year are sought.

Risks

Management and control of the ALTANA Group are geared to the strategy that has been defined and the target levels derived from it. Due to changes in the economic environment or internal and external factors of influence, it might not be possible to implement the strategy successfully or to achieve targets in the planned time frame or to the planned extent. To be optimally prepared for such situations, ALTANA systematically identifies, evaluates, and considers risks within the framework of decision-making processes.

To anchor our risk policy at all decision-making levels, we established a Group-wide risk management system that brings together various information, communications, and monitoring systems. Core elements of our risk management include strategic corporate planning, internal reporting, our internal control system, compliance organization, and risk management in the strict sense.

Our strategic corporate planning is closely tied to our medium- to long-term financial planning. The extent of the fulfillment of our targets is examined in monthly reports on the company’s business performance and in our short-term financial planning. Apart from an analysis of the current business situation, in these reports and our planning our expectations for the current fiscal year are discussed extensively at the divisional level on a regular basis. As a result, deviations from planned developments can be recognized and countermeasures introduced if necessary.

Our internal control system defines organizational and procedural requirements that serve to prevent damage to the company. In connection with our established compliance organization, it aims to prevent possible violations of guidelines and laws on the part of employees.

At ALTANA, risk management in the strict sense is viewed as the systematic compilation, evaluation, documentation, communication, and, if not already in place, derivation of measures regarding the relevant risks as well as the determination and assessment of risk-bearing capacity. Thus it is an essential component of the company’s system for early risk recognition in accordance with section 91 (2) of the German Stock Corporation Act. This system was voluntarily examined by the auditor. The audit deemed the system capable of recognizing risks that can endanger the existence of the company at an early stage.

Risks that are identified are evaluated in a uniform way. So-called evaluated risks are assessed based on the probability of their occurring and the potential damages. Individual risks are assigned to certain risk groups. Risks or risk groups rated as very high are risks which could cost the company more than € 25 million in the next twelve months. Individual risks that could cost the company between € 12 million and € 25 million are rated as high risks; risks that would cost between € 5 million and € 12 million are categorized as medium risks, and risks that would cost less than € 5 million are deemed low risks. The prioritization resulting from the assessment determines focal points for the development and initiation of countermeasures to prevent or reduce the potential effects of risks.

The individual risks and risk fields described below could have a material adverse effect on the Group’s earnings, financial, and asset situation in the years to come and thus give rise to a negative deviation from the forecast development. For risks categorized as “medium,” “high,” and “very high” we address changes in our appraisal compared to the previous year.

Economic and Industry Risks
The development of the general economic conditions worldwide has a decisive impact on our business performance. The performances of the economies of China, the U.S., and Germany – industrial nations important for ALTANA – have a particularly strong influence on the direction and intensity of demand for our products.

A global economic crisis leading to an economic collapse would bring about significant sales decreases with corresponding influences on our earnings. Recessions limited to certain regions in sales markets important for us could also significantly impair our business performance. With the global orientation of our sales activities, we try to shape our dependence on regional or national markets in such a way that the effects of geographically confined economic crises on the Group are limited.

Thus, China and the U.S., the most important countries for us, each currently accounts for less than 20% of total Group sales. The distribution of our business activities in the core regions of Europe, Asia, and the Americas also has a balanced structure.

Furthermore, we continually update our appraisal of the regional economic development in our internal reporting system to be able to react to foreseeable effects by controlling our procurement, production, and sales activities. We react to long-term shifts in the regional significance of sales markets by adjusting our sales, production, and organizational structures.

In addition to general economic risks, there are marketrelated sales risks concerning individual product groups or application areas. Particularly medium- to long-term trends that structurally lead to a decrease in demand in our target markets can mean that we will not achieve our growth and profitability targets. We try to counteract industry-related sales risks by broadly diversifying our offer. We supply many different industries, which in turn sell their end products in various markets. Therefore, our dependence on the underlying markets is limited. We estimate that no more than 20% of our sales is attributable to a single consumer segment, such as the automotive sales market, the graphic arts industry, or the construction sector.

The analysis of our industry-specific and application-related sales is a component of our annual strategy process. In addition, we examine changes in future growth potential arising from demand trends and technological developments, and adjust our strategic orientation in the divisions if necessary.

The occurrence of a global economic crisis and the emergence of regional economic crises continue to pose significant risks. The probability of a global economic crisis occurring is estimated to be lower than in the previous year, which is attributable to the trend toward regionalization. This is offset by an increase in forecast loss values, resulting in a slight reduction in the assessed risk. The risk is classified as high. The probability of regional economic crises occurring is assessed as unchanged from the previous year. However, taking into account positive market dynamics in medium-term planning, an increasing damage amount was assumed. The assessed risk of regional economic crises is increasing compared with the previous year and is still classified as a medium risk.

Sales Risks
Sales risks result primarily from changes in the market and customer structure and an associated increase in the intensity of competition, as well as from marketing risks for products or product groups due to specific demand trends or technological changes.

This can lead to decreasing sales revenues, which can be caused by declining sales volumes or falling prices. Since in many cases we cannot adjust the cost structure in the short term, this can lead to a drop in profitability.

We counter sales risks by continually optimizing our product and service portfolio, above all on the basis of our innovative ability. In the process, it is decisive that we cooperate closely with our customers at an early stage of development work to adapt to market needs. With our innovation strategy, we can counter increased competition in our markets.

A loss of, mergers of, or backward integration of customers can lead to major changes in the customer structure. Due to our very diversified customer structure, however, these risks are limited. In addition, we cooperate closely with our core customers within the framework of our key account management.

In the group of sales risks in the market and technology area, the assessment of the level of losses – primarily as a base effect due to the increase in sales – increased slightly compared to the previous year, but the assessment of the probability of occurrence decreased in comparison. Overall, the magnitude of the risk assessed continues to be classified as high.

Risks from Business Combinations, Participations, and Other Investments
Apart from operating growth, acquisitions of companies, business activities, and individual technologies play a key role in the implementation of the strategy for sustainable profitable growth at ALTANA. Depending on the size of the activities acquired, inadequate integration can place a burden on the Group’s earnings situation and limit its financial headroom. In addition, a business performance that is worse than what was expected when the acquisition was made can lead to impairments of assets with a negative impact on earnings.

To minimize the effects of the risks from business combinations, we examine our acquisition targets systematically and comprehensively and analyze them in detail in a multistage approval process.

Impairment losses recognized in the past fiscal year further reduced the impairment risk reported as an individual risk, both in terms of amount and probability of occurrence. Therefore, compared to the previous year, the assessed risk for impairment of assets from acquisitions is now only classified as a low risk (previous year: medium).

To implement its strategic goals, ALTANA is constantly expanding and renewing its development, production, and other facilities. The projects, some of which are very complex, are always subject to certain risks regarding adherence to the budgeted schedules, costs, and the realization of the expected goals. The projects regularly undergo extensive approval and monitoring routines. Due to the high volume of these projects, the potential losses have also increased compared with the previous year, although the probability of occurrence has decreased slightly, so we now classify risks from capital expenditures as medium risks.

Procurement Risks
Among the main procurement risks are a restriction in the availability of individual raw materials and transport services as well as significant price increases for raw materials and logistics, which we cannot or can only partially pass on to the markets in the short term and which may thus have a negative influence on the Group’s earnings situation.

We continually analyze the situation on the raw-materials markets that are relevant for ALTANA. By doing so, we can identify price trends and structural shifts on the part of suppliers at an early stage and devise suitable measures. We take this knowledge into account when we arrange supply contracts. In addition, we bear in mind the volatility of raw-materials prices in our customer relations. To be able to pass on price increases to the markets in the short term, we use the flexibility of price mechanisms and price lockup periods.

An increased probability of occurrence of procurement risks and a further rise in the level of losses in the area of raw material procurement due to pandemic-related disruptions to supply chains led to an increase in the risk rating in this risk group from medium to high.

Financial Market Risks
Financial market risks primarily concern short-term and significant changes in exchange-rate relations and interest rates, as well as default risks and the covering of financial resource needs.

Due to exchange-rate fluctuations, the translation of foreign currency positions into the Group currency, the euro, can have a negative effect on the Group’s sales and earnings performance (translation risks). Such negative effects can also result from business conducted in a foreign currency (transaction risks). Interest-rate changes influence financing costs. Defaults on trade accounts receivable or financial receivables can also have a negative effect on the Group’s earnings situation and its financial resources. If there is a lack of availability of financial resources for the implementation of acquisitions or major investment projects, we might not reach our strategic targets.

We safeguard against material transaction risks by concluding forward foreign-exchange contracts in cases where we assume that the underlying business can be realized with a sufficient degree of certainty. In the case of risks from operating activities, the total amount expected is safeguarded in different tranches to offset short-term exchangerate fluctuations. More information on our evaluation and accounting procedures for hedges can be found in the complete Consolidated Financial Statements.

To minimize credit default risks, we systematically examine the credit rating and payment behavior of our counterparties. The latter include customers, the banks we do business with, and other business partners where payment default can have an influence on our financial situation.

We safeguard availability of financial resources through central control and monitoring of our Group-wide financial resources. In addition, by utilizing various financing instruments, we centrally provide a financial resources framework. It can be used to cover unplanned financial requirements in the short to medium term arising, for example, from acquisitions or a crisis-related decline in operating activities.

As in the previous year, the group of financial market risks is assessed as a medium risk. We evaluate the main individual risk in this risk group – negative earnings effects from exchange-rate changes – as having a slightly lower probability of occurrence as in the previous year and a slightly higher potential to lead to damages. Continued high cash inflows from operating business activity and the existing general financial resources framework continue to suffice to cover the expected cash outflows for investments, repayments, and dividends.

Innovation Risks
ALTANA’s position as an innovation and technology leader is a major success factor for the company. It is important for a supplier of highly specialized chemical products to continually introduce new products on the market and to be perceived by our customers as a competent and innovative partner. If this was no longer the case in the future, risks could result for our sustainable growth, the attainment of our profitability targets, and ALTANA’s positioning in the relevant markets.

With our innovation culture, which is put into practice at all levels of our organization, we highlight the importance of innovation and safeguard its status. Both at a decentralized and at Group level, we can continually evaluate and control our research and development activities based on financial and non-financial criteria. By investing aboveaverage amounts in research and development, we can continually introduce products on the market that are tailored to customers’ individual and current needs and thus positively influence our competitive position.

It is important to protect knowhow we develop with patents to convert our knowledge edge into economic success. This includes safeguarding technologies as well as methods and product properties we currently use so that other companies cannot patent them.

Both the potential losses and the probability of occurrence of this risk group are slightly below the previous year’s level. Overall, we classify the group of innovation risks as belonging to the medium risk group.

Other Risks
Production risks concern technical disruptions or human failure in production that can be harmful to people or the environment. Our goal is to minimize the effects of machine failure on the value chain by operating production lines independently from one another. It is compulsory for our staff to receive training in the clearly defined process and quality standards in the areas in question. In addition, we conclude property damage as well as plant and equipment breakdown insurances. Due to capacity utilization stretched to the limits, both the probability of occurrence and the amount of loss in the production risk group have increased compared to the previous year, resulting in an upgrade from low to medium in this risk class as well.

Information technologies form the basis of nearly all of ALTANA’s business and communications processes. Breakdowns or other disruptions of IT systems can lead to farreaching impairments in all of the Group’s value-added stages, which can have significant effects on business performance (IT risks). In addition, potential risks arise from data loss or theft of business secrets. ALTANA attaches great importance to smooth availability of IT applications and services. To guarantee this, corresponding processes and organizational structures have been established. Emergency plans are in place in case of significant disruptions or losses of data. Due to the increased risk of cyberattacks and the resulting potential damage to internal processes and delivery capability, the group of IT risks has been rated higher in terms of both probability of occurrence and amount of damage, so that these are now reported as a medium risk. In the past fiscal year, in view of the increased risk profile, we significantly increased spending to expand security and protective measures against cyberattacks. We will continue this level of security and these protective measures in the coming years and regularly adjust them to the threat profile.

Delivery of faulty products can cause damage to people, property, or the environment and thus cause liability risks. This can have significant effects on the Group’s asset situation. We minimize this risk by standardizing production processes to a large extent and by taking comprehensive quality control measures. In addition, we continually conduct analyses to assess the hazardous potential of our input materials and products, and we conclude insurances.

Changes in political and regulatory framework conditions can lead to restrictions on trade or foreign-exchange transactions. Due to political unrest, it can be more difficult or even impossible to access the Group’s assets in the country or countries in question. On account of regulatory adjustments, it might no longer be possible to process or sell certain products or ingredients, or only with strong restrictions. We continually examine the political environment in the countries important for us and take current tendencies into account when evaluating business relationships. We only make direct investments in countries in which we assume the political environment is highly stable. We actively take part in legislative procedures and discussions important for us that focus on changes in the regulatory environment. As a result, we can anticipate possible new requirements early on.

In the past fiscal year, both the probability of occurrence and the damage values in the group of political and regulatory risks decreased slightly, so this group was reclassified from medium to low.

Although the intensity of the pandemic varies from region to region and at different times, it is still ongoing. As a result, supply chains and logistics processes may be adversely affected, making it more difficult to sell products and having a negative influence on manufacturing costs. Thus, there is still the risk of economic damage resulting from the coronavirus pandemic. The further course of the pandemic may have an impact on the economic development of all of ALTANA’s sales markets. The possible financial effects have been taken into account in the planning figures and scenario analyses based on them for the year 2022.

The United Kingdom left the European Union on January 31, 2020, with an exit agreement. The necessary regulations were agreed between the negotiating parties in the course of 2021. An increased risk of a significant impact on earnings is no longer expected.

Legal violations (compliance risks) can give rise to liability risks or tarnish our reputation, which can have a significant effect on the Group’s earnings and asset situation. We counter these risks within the framework of our compliance management system, inter alia by regularly informing and training our employees about relevant legal requirements. The amount of loss within the compliance risk group was reduced slightly, and the risk group is still classified as medium risk.

An important basis for long-term success are competent and committed employees. Should we no longer be able to recruit or retain suitable specialists or managers in the future, risks could arise for the successful implementation of our strategy (personnel risks). To counter these risks, ALTANA offers a sophisticated work environment and an attractive compensation system, which is supplemented by various pension plans and wealth creation schemes. Moreover, we regularly offer further education and training programs to budding junior staff members, as well as to specialized and managerial staff.

Compliant Group Accounting
Essential accounting-related risks arise particularly when extraordinary or non-routine issues are handled. These include the first-time consolidation of acquired businesses or parts of companies as well as the recording of the sale of Group assets. Accounting of financial instruments is also subject to risks due to the complex evaluation structure. Risks also arise from fraudulent acts.

At ALTANA, a separate department of the Group’s holding company coordinates and monitors Group accounting. A core component of the control system are the guidelines, process descriptions, and deadlines that this department defines centrally for all companies, guaranteeing a standardized procedure for preparing the financial statements. For complex issues, the instruments needed for uniform accounting are retained centrally for all Group companies. For recording extraordinary processes and complex special issues, we regularly obtain external reports, advice, and statements.

The financial statements of the individual Group companies are prepared decentrally by the local accounting departments. Hence the individual companies are responsible for preparing the financial statements, in keeping with Group guidelines and country-specific statutory accounting requirements.

The work steps needed to prepare the financial statements are defined such that important process controls are integrated. These include guidelines pertaining to the separation of functions and allocation of responsibilities, to control mechanisms, and to IT system access regulations. The respective management explicitly confirms to the Group’s management that the annual financial statements are correct and complete. In addition, important financial statements are audited by the company or Group auditors in charge.

The local financial statements are recorded and consolidated via standardized formats and processes in a central IT system. At the divisional and holding company levels numerous manual and IT-assisted control mechanisms are applied. They encompass an analysis and a plausibility examination of the registered data and the consolidated results by Group accounting as well as by the controlling department and other departments with expertise in this area. Required corrections of the information in the financial statements are generally made at the level of the individual company to ensure the data are uniform and are transferred.

The company auditor and the Group auditor examine issues, processes, and control systems relevant for the generation of financial statements. The Group auditor reports on the audit directly to the Supervisory Board and the Audit Committee. In certain cases, audits are carried out by the central Internal Audit department.

After each process related to the preparation of the financial statements, optimization potential identified at the different levels is analyzed and adjustments of the processes are made.

Opportunities

The identification and evaluation of opportunities for our future business development is integrated into the different planning, analysis, and control processes.

Within the framework of strategic planning, we analyze demand trends as well as market and technology developments with regard to options for action that could enable ALTANA to create value. In addition, the divisions continually examine possibilities of developing new sales markets. During the financial-planning process, the effects of action options are evaluated and discussed so that we can optimally exploit future opportunities. Finally, possible opportunities for short-term business development, along with the attendant risks, are dealt with in detail at all levels of management.

Below, major opportunities are described that could lead to ALTANA’s surpassing its short-, medium-, or long-term goals. The order corresponds to our assessment of the effects on our business performance.

Economic and Industry Development
Should the economic environment in the established industrial regions important for ALTANA, particularly in Asia, the Americas, and Europe, develop better than we anticipated, unexpected growth impetus could arise. As a result, demand for our products and services could develop more positively and exceed our forecast. The same applies to growth in the important emerging countries in Asia and South America. If the growth rates in these nations were higher than expected, we might be able to benefit from this to a disproportionately high extent due to our market positions.

In addition to regional factors, growth impetus can also result from individual branches of industry. Further potential could be opened up, in particular, if the automotive sector and the construction industry showed a positive development, or if there was an increase in the use of silver and gray colors in the consumer sector.

Innovation
We have to continually streamline our product and service portfolio to be able to continue to pursue our strategy for profitable and sustainable growth in the long term. Should ALTANA manage to enhance its innovativeness more quickly than expected or to increase its share of new products for which there is a high demand beyond the target level, there would be even better prospects for growth. Furthermore, customers could demand innovative products manufactured and sold by us more quickly and to a greater extent than we had expected. The same applies if we entered new markets or opened up new application fields for our products.

Business Combinations and Portfolio Measures
Acquisitions play a key role in ALTANA’s long-term value creation. In recent years, we have continually advanced the Group strategically due to acquisitions. At the same time, we cleansed our portfolio of those activities that did not develop in line with our strategic objectives and did not promise to create value for the Group in the long term.

In the future, we intend to continue to boost our growth by acquiring businesses and activities. This is an essential prerequisite for us to achieve our strategic growth targets. Should opportunities arise in the future that exceed our expectations, this can help us strengthen our market positions and open up new market segments. This can also have a positive impact on the achievement of our strategic goals.

Synergies
The ALTANA Group is decentralized to a large extent. Still, in some areas of the value-creation chain and in certain management functions, central units support the divisions and play a coordinating role or provide shared platforms. To the extent that we manage to push forward the networks within the Group more strongly than expected, this may spawn further potential to improve efficiency.