05/09/2005 - Speech by Dr. Günter von Au, Chairman of the Managing Board

Annual Press Conference of Süd-Chemie AG

Good morning, ladies and gentlemen,

I should like to welcome you most warmly to this year´s annual press conference at Süd-Chemie. It gives me great pleasure to speak to you today for the first time as Chairman of the company and be able to report on a successful business year in 2004. Before I begin, I would like to introduce my two colleagues, Mr. Edgar Binnemann, our Managing Board member responsible for controlling and finance, and Mr. Patrick Salchow, head of public relations and Managing Board secretarial services.

First of all, I shall briefly review the last financial year and then Mr. Binnemann will outline the key financial data. After which, I will explain our strategic policy for the future development of the Süd-Chemie Group, followed by a report on our business performance to date during 2005. We shall then both be available to answer your questions. We would be delighted if, after the press conference, you had time to join us in some light refreshment that has been prepared for you .

Successful year for Süd-Chemie in 2004

Let us turn first of all to the 2004 financial year. The positive business performance I was able to report at last year´s Annual General Meeting and in the Interim Report continued for the remainder of 2004. A glance at the key business figures for 2004 highlights the positive performance achieved by the Süd-Chemie Group.

Compared with 2003, we were able to raise consolidated sales by €99.2 million to €862.2, an increase of 13%.

After reaching €44.6 million in 2003, the Group´s operating result (EBIT) rose by 14% to €51.0 million, growing at an even higher rate than sales. In the case of net income, it was possible to achieve a 32% increase compared with the previous year, to €19.8 million, after €15.0 million in 2003. Earnings per share rose by as much as 35%.

We not only reached our sales and earnings targets, but thanks to the excellent positioning of our business units in their core markets, even exceeded them. Whereby 2004 was not an easy year for Süd-Chemie. Although powered by a dynamic global economy, there was a marked rise in production volumes in the chemical industry, the market was nevertheless dominated by strong competition and high pressure on margins, due especially to the drastic rises in the price of raw materials. The increasingly strong euro also had a negative effect.

Divided stable at €0.62 per share

The Managing Board and the Supervisory Board of Süd-Chemie AG will be proposing an unchanged dividend of €0.62 per share at the Annual General Meeting to be held on 1 July 2005, representing a total distribution of €7.3 million. This dividend would represent a continuation of the company´s stable dividend policy of recent years.

Paving the way for future growth in sales and profits

As already mentioned, the top international positions attained in our most important markets played a decisive role in promoting the Group´s positive performance. We were not only able to maintain these positions during last year, but even expand them further.

In the Adsorbents Division, we acquired the global trading activities in metallurgical additives from SKW Metallurgie AG. For organisational purposes, the two companies taken over as part of this acquisition, SKW Giesserei-Technik GmbH & Co. KG in Hart, Germany and Tecpro Corp. in Atlanta, USA, have been integrated into the Foundry Products and Specialty Resins Business Unit, which offers a wide range of products for the foundry industry, such as casting filters, core binders, fireproof core-coatings, mineral and organic additives, release agents, and feeders. By acquiring these operations, the Business Unit rounded off its competence as a provider of solutions for the foundry and automobile industries, particularly in the sector of thin-walled iron casting, a technique used for instance in the manufacture of diesel engines. As a result of this acquisition, Süd-Chemie has become the only full-service provider of foundry chemicals for iron castings in Europe.

Another of last year´s highlights was an agreement signed by the Catalysts Division to form the joint-venture company, Süd-Chemie Qatar W.L.L. From 2007 onwards, the joint venture will be producing catalysts to convert natural gas into high-grade petroleum products, such as diesel fuel, but also into primary and intermediate petrochemical products based on gas-to-liquid (GTL) processes. In the years to come, natural gas will gradually be replacing oil as a primary product and Qatar owns the world´s third-largest reserves of natural gas after Russia and Iran. Investment focus is meanwhile shifting increasingly towards the Middle East, especially in the petrochemical industry. The joint venture, in which Süd-Chemie will hold a 65-percent majority share, will benefit from the growing demand for fuel and gas-based chemical products and the related rise in the volume of catalysts and technological know-how required in this region.

In North America, our adsorbents business was restructured. Bleaching-earth production was discontinued at the Meigs site in the US and relocated to Puebla in Mexico. Puebla was already providing a major part of the preliminary and intermediate products required for local bleaching-earth production in Meigs, and is now supplying American customers directly from Mexico. This restructuring was necessary to ensure that the quality of bleaching earth supplied to the North American market complied with the most stringent environmental regulations. The losses from ongoing operations and the extraordinary costs created by restructuring this business had a negative impact on consolidated pre-tax earnings in 2004 amounting to a high, single-digit million figure.

We also launched a Group-wide "Free for Customers" project to strengthen customer orientation and increase efficiency. Not that I was worried about our customer orientation, the Group having just been presented once again with the Supplier Recognition Award by Saudi Basic Industries Corporation (SABIC), one of the world´s leading petrochemical groups, in recognition of its exceptional performance in the fields of product quality, on-time delivery and technical application services. But our customers move ahead very quickly, and we always claim to provide them with a vital leading edge. As a result, we are now scrutinising all Group processes and structures to pinpoint areas that can be simplified and standardised. Only activities that enhance either customer benefit or our own value added are to be continued. Since last September, project teams in Germany and abroad have been implementing numerous measures, the main focus initially being on projects aimed at reducing administrative activities and costs. In the course of 2005, the project is being expanded to include measures concentrated on strengthening customer orientation. The success of this drive is already reflected in the lower level of administrative expenses.

For financial details of the year 2004, I should now like to pass you over to my colleague Mr. Binnemann.

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Thank you very much Mr. Binnemann for that information.

Süd-Chemie´s strategy

In order to make our deeds and actions more comprehensible, I should like to outline our strategy for the Süd-Chemie Group, based on which we intend to grow in a controlled and profit-oriented manner in both our Adsorbents and Catalysts Divisions.

Süd-Chemie´s strategy is based on the four pillars of customer orientation and market penetration, ongoing process optimisation, sustained enhancement of innovative ability and finally, targeted portfolio management and co-operation agreements. The strategic focus is clearly on organic growth.

Strengthening customer orientation, improving market penetration

To achieve profitable growth, we intend to gear our activities even more strongly towards the needs of our customers. Süd-Chemie operates on a systematic basis of strategic customer marketing, relying particularly on long-term partnerships with key accounts. As a result of global concentration, an increasingly larger share of sales is attributable to major customers with strong market positions. In line with this development, we are intensifying our marketing efforts based, among other things, on bespoke key-account management.

Today, Süd-Chemie is represented in all important regions of the world. To ensure that the Group becomes a leading player in each of its areas of activity in the long term, its market positions need to be expanded, especially in countries offering high growth potential. Lasting success depends essentially on proximity to the market. Particularly in the growth markets of Asia and the Middle East, our aim is to expand Süd-Chemie´s presence even further and optimise our positioning. Japan, China and India already rank among the world´s leading chemical markets and China might well be the largest chemical market in the world by no later than 2010. I have already highlighted the significance of the Middle East, especially in the petrochemical and refinery sector. Proximity to the customer is the key to successful partnerships - and this applies not only to sales activities. Real closeness cannot materialise until all links in the value chain are for the most part interconnected. These include research and development, purchasing, manufacturing, service and sales. Without this proximity and an exact knowledge of the needs and wishes of our customers, we will be unable to develop products and services tailor-made to suit these regions. Our presence in each market is therefore absolutely essential.

Optimising all business processes

Directly linked with customer orientation is the task of optimising our business processes, since increased efficiency ultimately benefits the customer. We need to be open for innovation, while critically analysing existing structures and processes. Key targets include optimisation of the production structure, reorientation of central purchasing activities, reduced administration, optimisation of our IT infrastructure and resolute action in the case of loss-making subdivisions.

In addition to strengthening customer orientation, the Group-wide Free for Customers project launched in 2004 is also aimed at optimising business processes, reducing administrative activities and costs and thereby strengthening ongoing operations. Only if the operating units are relived of all unnecessary administrative tasks will they be able to exploit the full sales potential of our know-how, our products and our services. All our employees and all Group companies are progressively becoming involved in this project. I am very confident that it will become an integral part of our corporate culture, both at a national and international level. The improvements it brings will secure our ambitious financial goals in the long term.

Increasing innovative ability

A company is only as good as its innovations. True to this principle, the development of new products and of new processes to improve existing products and solutions will continue to represent one of Süd-Chemie´s key value drivers. Our technological lead in dynamic future markets can only be secured with high innovative strength. Especially since markets and customer requirements are changing at breakneck speed. We must develop better, and above all marketable solutions for our customers - also together with these customers. Customer orientation begins at the research and development stage by creating joint solutions for attractive markets based on close co-operation. Even more emphasis will be laid on our dialogue with universities and research institutes, the formation of lasting partnerships within the scope of a global research and development network having high priority. We shall intensify our efforts to attract top international scientists to Süd-Chemie. We plan to steadily increase our research and development ratio to a volume in the order 4%, with investment flowing largely into our fast-growing activities. Having set up a new centralised Strategic Research Department, better overall use will be made of our innovation and technological potential. Whereas research departments in the various business units will concentrate on improving their product solutions and on contract research, the new central department will be promoting cross-unit research projects and leading research activities in new directions related to our core competencies. The efficiency of our innovation management is also to be improved. Süd-Chemie operates a systematically-controlled innovation process, its innovation management ensuring that the customer-benefit aspect of new products and technologies is screened from the outset and that only qualified projects are selectively supported and developed to market maturity.

Targeted portfolio management

As well as aiming for growth and added value on the basis of our own ability and know-how, we shall continue to be on the lookout for profit-boosting co-operation opportunities with strong partners, as well as strategic acquisitions. We shall however only enter into partnerships or undertake targeted acquisitions in our fast-growing core areas of activity, without ever losing sight of Süd-Chemie´s financial stability. In addition to selective expansion of our leading market positions, portfolio management also means opting out of activities that fail to meet the high demands made on our core areas of operation.

Allow me to close this account of our strategy by stressing one more point, namely that responsible financial management has priority over all these strategic measures, for financial stability forms the basis for ongoing success.

Expansion of strong positions in 2005 based on acquisitions in the sector of sparing use of resources and environmental protection

Ladies and gentlemen,

Before I end my speech, I should like to report on the first highlights of the current financial year and the outlook for the full year of 2005.

We are aiming to achieve a great deal in 2005 - but have also already reached some important milestones. In line with the strategic principles just outlined, we have been continuing to concentrate on our core areas of activity which offer prospects for strong growth.

In February 2005, we succeeded in taking over a coating technology for the catalytic purification of diesel exhausts from Wacker-Chemie GmbH. This supplements the previous activities and developments of our Energy and Environment Business Unit in the sector of exhaust-gas purification for diesel engines. This business unit produces catalysts for purifying industrial exhausts, extracting pollutants given off by internal combustion engines (particle filters for buses, upgrading business) and for producing hydrogen. In view of the increasingly stringent emission control standards for diesel-powered cars and lorries, strong growth is expected in the market for diesel-exhaust catalysts. The German government´s announcement regarding subsidies for vehicles emitting low levels of exhaust gases and particulate matter will considerably speed up the market launch of this technology. By co-operating with vehicle manufacturers, we intend to quickly advance the relevant technology to the production stage and subsequently play a significant role on this growth market.

Added to this, we expanded our involvement in the field of lithium-ion batteries in April 2005 by buying into the Canadian company Phostech Lithium Inc., which specialises in the development and production of lithium iron phosphate. This is used as a cathode material for lithium-ion batteries. As well as the rising demand in existing markets for mobile electronic devices, such as mobile phones, notebooks and digital cameras, it is mainly new markets, including hybrid-drive cars, that are boosting the demand for lithium-ion batteries. The know-how offered by Phostech Lithium in the field of lithium iron phosphate provides an optimal addition to our current activities in the lithium-ion-battery sector, so that we are now excellently equipped for this growth market.

Continued increase in profitability in 2005

We shall continue to use our strong positions to maintain Süd-Chemie´s successful course and consistently pursue our strategic policy. In our traditional markets of Europe and America, we shall expand our leading positions even further, but at the same time use the opportunities for strong expansion offered particularly in the fast-growing Asian and Middle-Eastern markets. Süd-Chemie is a globally-recognised speciality-chemistry enterprise, with excellent market positions and excellent potential.

For the current financial year, we anticipate a further rise in consolidated sales, but even faster growth in the operating result (EBIT). Based on Free for Customers projects, we shall be promoting with undiminished enthusiasm our internal measures to increase performance and efficiency, as well as strengthen customer orientation. As a result of self-generated growth, Süd-Chemie´s sales will exceed one billion euros in the mid term - coupled with a significant increase in profitability. I view Süd-Chemie´s future with great confidence.

Thank you very much for your attention.