irpages.equitystory.comirpages.equitystory.com/download/companies/altana/Annual Reports... · Key figures at a glance 2009 2008 ∆ % in € million Sales 1,181.7 1,341.7 -12 Earnings

Annual Report 2009

Group Profile 2009

ALTANA and its divisions

Sales by division

in € million 2009

1 BYK Additives & Instruments 419.9

2 ECKART Effect Pigments 282.3

3 ELANTAS Electrical Insulation 272.7

4 ACTEGA Coatings & Sealants 206.8

Total 1,181.7

1

4

2

3

23.9 %

23.1 %

35.5 %

17.5 %

Sales by region

in € million 2009

1 Europe 555.1

2 Americas 267.7

3 Asia 317.9

4 Other regions 41.0

Total 1,181.7

1

4

47.0 %

3.5 %

Key figures at a glance

2009 2008 ∆ %

in € million

Sales 1,181.7 1,341.7 - 12

Earnings before interest, taxes, depreciation and amortization (EBITDA) 204.1 242.9 - 16

EBITDA margin 17.3 % 18.1 %

Operating income (EBIT) 49.2 170.3 - 71

EBIT margin 4.2 % 12.7 %

Earnings before taxes (EBT) 39.0 158.7 - 75

EBT margin 3.3 % 11.8 %

Net income (EAT) 11.0 103.4 - 89

EAT margin 0.9 % 7.7 %

Earnings per share (EPS) (in €) 0.08 0.76 - 89

Research and development expenses 71.6 72.1 - 1

Capital expenditure on property, plant and equipment and intangible assets 54.0 107.9 - 50

Cash flow from operating activities 224.6 204.5 10

Dec. 31, 2009 Dec. 31, 2008 ∆ %

in € million

Total assets 1,707.8 1,749.6 - 2

Shareholders‘ equity 1,177.6 1,178.4 0

Shares outstanding (in thousands) 136,098 136,098 0

Net debt1 55.0 99.3 - 45

Headcount 4,789 4,791 0

2009 2008

in €, Xetra

Closing price ALTANA Share 15.36 13.00

High 15.59 16.90

Low 12.39 7.53

Trading volume (Ø, in thousands per trading day) 43 904

Market capitalization (in € million, Dec. 31) 2,090 1,825

1 Comprises cash and cash equivalents, marketable securities, debt, and employee benefit obligations.

Contents

Legal DisclaimerThis presentation contains forward-looking statements, i.e. current estimates or expectations of future events or future results. The statements are based on beliefs of ALTANA as well as assumptions made by and information currently available to ALTANA. Forward-looking statements speak only as of the date they are made. ALTANA does not intend and does not assume any obligation to update forward-looking statements to reflect facts, circumstances or events that have occurred or changed after such statements have been made.

To Our Shareholders 1

Group Management Report38

Corporate Governance75

Environment, Safety and Health Protection84

Consolidated Financial Statements91

To Our Shareholders

Letter from the Management Board

Corporate Bodies

Report of the Supervisory Board

The ALTANA Share

2009: A Valuable Year

Group Management Report

Business and Economic Environment

Earnings, Financial, and Asset Situation

Research and Development

Employees

Other Information

Subsequent Events

Risk Report

Outlook

Corporate Governance

Corporate Governance Report

Compensation Report (also Part of the

Group Management Report)

Environment, Safety and Health Protection

Consolidated Financial Statements

Management Board Responsibility Statement

Independent Auditors’ Report

ALTANA Group Consolidated Income Statement

ALTANA Group Consolidated Statement

of Comprehensive Income


of Financial Position

Statement of Changes in Shareholders’ Equity

of ALTANA Group


of Cash Flows

Notes to Consolidated Financial Statements

Glossary

Contact

Financial Calendar

Locations

1

8

10

16

19

38

39

48

56

58

61

63

64

70

75

76

80

84

91

92

93

94

95

96

98

100

102

164

Management Board

Dear Shareholders,

The business year 2009 will remain in memory as a year which in many respects departed from the accustomed and from previous experiences.

Like the whole industry, ALTANA was affected by the global economic crisis with a slump in sales and earnings that in its extent was inconceivable not too long ago. In the fourth quarter of the 2008 business year, the economic environment deteriorated rapidly within a very short period. The resulting decrease in demand led, above all in the first half of 2009, to a dramatic drop in Group sales and earnings. It became apparent that, despite ALTANA’s broad positioning, such strong declines in individual market segments could no longer be offset by an improved development in other segments. In the end, all of the company’s divisions were affected, to a greater or lesser extent, by the global economic crisis.

The ECKART Effect Pigments division reported the highest sales decreases. Due to ECKART’s comparatively slow recovery in the markets and applications important to it, for example the automobile industry, ALTANA revised its earnings forecast for the division downwards. In 2009, this revision led to impairments on property, plant and equipment and goodwill of € 77 million, resulting in a substantial decrease in net income (EAT).

In these very difficult general conditions, the entire Group was called upon to take swift countermeasures yet, despite the short-term economic pressure, at the same time not lose sight of the period after the crisis. ALTANA reacted to the global downturn in demand at a very early stage and very decisively. Already in 2008, we launched an ambitious cost-cutting program which resulted in savings of around € 55 million in the 2009 business year. At the same time, we intensified the efficiency-enhancement program we had initiated before the crisis began, concerning, for example, net working capital and cash

2 Letter from the Management Board

Dr. Matthias L. Wolfgruber (on the right), Chief Executive Officer, Martin Babilas (on the left), Chief Financial Officer

3Letter from the Management Board

flow management. Capital expenditure was cut or postponed. In addition, fixed term and temporary work was reduced, and the natural fluctuation was used to adjust work-force structures. But in spite of all of the required measures, our top priority was to not lose a sense of proportion and not lose sight of our market goals. And, in fact, we did not make any compromises, particularly with regards to research and development, further training, and customer service.

During this difficult time, the shareholders, ALTANA’s management, and our employees showed that our commitment to the long-term success of the company remains resilient even in times of crisis. With great dedication and effort, everyone involved helped ALTANA master this crisis well and even emerge from it stronger.

Although we overcame the crisis comparatively faster than other industry representatives and competitors, the fact remains that the global economic crisis threw ALTANA back in its profitable growth course. In our appraisal, it will take until at least 2011 before ALTANA can reach its level of business of 2007.

So there is no reason to be euphoric. Indeed, there is still great uncertainty about how the global economy will develop. The palpable economic recovery that could be observed worldwide when this annual report went to press remains fragile. As a result, ALTANA will continue to act with sound judgment and to focus on cost discipline and efficiency enhancement. The experiences we had during the crisis will surely help us work even more successfully under improved general conditions.

On account of the crisis, we consciously decided to do the “magazine part” of this annual report differently than in previous years, namely, to make it more sober and journalistic. In this section, we focus on six areas which – along with many others – were particularly important in 2009 and will continue to play a key role for the success of our company in the future.

4

We also very consciously chose the title, as peculiar as it may seem at first glance. 2009: A Valuable Year. A year in which we mastered a great challenge, in which we learned a lot, and in which we saw confirmation that the strengths of ALTANA – a broad regional and industry-related positioning, great innovative ability and service orientation, close customer ties and a strong market position, long-term thinking, the employees’ high loyalty to the company – also and precisely function in a crisis, though they cannot completely offset the effects of the economic crisis.

In the past business year, we formulated our goal of strengthening and expanding our position in the worldwide specialty chemicals markets. In spite of the sales and earnings decline, this goal remains. In 2009, ALTANA did not lose market shares. We continued to position and differentiate ourselves as a complete provider of solutions in our markets, because in times of crisis our customers increasingly make use of pre cisely this kind of offer. Finally, ALTANA expanded its market position, and particularly its customer and technology position in the international competition, with a series of strategically sen-sible acquisitions.

Our fundamental growth and success factors are intact. Due to our solid financial struc-ture, our innovativeness, and our effective global organization, we have every opportunity to benefit from the changed economic environment. We are convinced that ALTANA will retain its technology and market leadership and extend it further in the future.

Ladies and gentlemen, over the past months the process of ALTANA AG's going private was also driven forward decisively.

On November 9, 2009, SKion GmbH had made a new, improved offer to the sharehold-ers of ALTANA AG, offering to acquire their shares at a purchase price of € 14 per share, valid until expiration of the acceptance period on December 14, 2009. On the basis of this


5

offer and by means of further acquisitions of shares, SKion GmbH was able to continu-ously increase its shareholding in ALTANA AG to its current amount. Mrs. Susanne Klatten is the sole shareholder of SKion GmbH. She is also the Deputy Chairwoman of the Supervisory Board of ALTANA AG.

After a thorough examination, the Management and Supervisory Boards of ALTANA AG recommended that shareholders accept the offer of SKion GmbH. Both corporate bodies considered the offered purchase price, taking into account the overall circumstances, including the historical stock market prices, public appraisals by analysts, and a val uation of the company by an auditor, to be adequate.

On February 2, 2010, SKion GmbH informed ALTANA that as of this date it was holding 95.04 percent of the ALTANA shares. At the same time, SKion requested ALTANA AG to convene a shareholders’ meeting. At this shareholders’ meeting, a resolution on the transfer of the shares held by the remaining shareholders to SKion GmbH in return for appropriate cash compensation (squeeze out) is to be passed.

On account of this development, we expect ALTANA AG’s listing on the stock exchange to be terminated in the not-too-distant future.

Also as a private company we will successfully further develop our business model. In the future, too, ALTANA will stand for continuity, long-term thinking, and success, albeit under new conditions. And, true to our Business Principles and self-understanding, we will continue to stand for openness and credibility to the public.


6 Letter from the Management Board

We would like to thank all ALTANA’s employees for their solidarity and commitment in the business year 2009. We also express our gratitude to all ALTANA shareholders and the members of the Supervisory Board for their trust and support during this difficult pe-riod. It is thanks to all of you that ALTANA is in good shape at the end of 2009. Based on these strong foundations, in the future we will continue to do everything in our power to further expand our position as a leading specialty chemicals company.

Dr. Matthias L. Wolfgruber Martin BabilasChief Executive Officer Chief Financial Officer

Corporate Bodies 8

Report of the Supervisory Board 10

The ALTANA Share 16

8 Corporate Bodies

The Executive Management Team

The Executive Management Team is an advisory body in

which strategic and operative issues that are important for

ALTANA and its divisions are discussed and deliberated on.

In addition to the members of the Management Board, the

Executive Management Team includes the four Presidents

of the Divisions as well as other selected Executives of the

company.

(in alphabetical order)

Jörg Bauer

Vice President Human Resources

Dr. Guido Forstbach

President Division Coatings & Sealants

The Management Board

Dr. Matthias L. Wolfgruber

Chief Executive Officer

Responsibility:

– Divisions

– Corporate Development / M&A

– Human Resources

– Innovation Management

– Corporate Communications

– Purchasing

– Internal Audit

– Environment & Safety

Martin Babilas

Chief Financial Officer

Responsibility:

– Controlling

– Accounting

– Corporate Finance / Treasury

– Tax

– Legal

– Compliance

– Investor Relations

– Information Technology

Dr. Andreas Jerschensky

Head of Corporate Development / M&A

Dr. Roland Peter

President Division Additives & Instruments

Dr. Christoph Schlünken

President Division Effect Pigments

Dr. Wolfgang Schütt

President Division Electrical Insulation

Dr. Georg F. L. Wießmeier

Chief Technology Officer

To Our Shareholders Group Management Report Corporate Governance Environment, Safety and Health Protection Consolidated Financial Statements 9

The Supervisory Board

Dr. Fritz Fröhlich

Chairman

Ulrich Gajewiak1

Deputy Chairman

Susanne Klatten

Deputy Chairwoman

Dr. Helmut Eschwey

Ralf Giesen1

Armin Glashauser1

Olaf Jung1

Dr. Götz Krüger1

Dr. Klaus-Jürgen Schmieder

Werner Spinner

Dr. Carl Voigt

Walter Ziegler1

1 Employee representative

10 Report of the Supervisory Board

Report of the Supervisory Board

The Supervisory Board closely followed the work of the Management Board in the past busi-

ness year and dealt extensively with the situation and development of the company as

well as with other special issues. The Management Board regularly informed the Supervisory

Board through oral reports in their meetings, through conference calls, as well as through

documents on the treated agenda items and through regular written reports about the current

state of affairs of the company. In addition, the Chairman of the Management Board in-

formed the Chairman of the Supervisory Board on a regular basis about significant develop-

ments and events and discussed with him pending or planned decisions. The Supervisory

Board was involved in all major company decisions.

Meetings of the Supervisory Board

In the 2009 business year the Supervisory Board held four regular meetings. At its meetings,

the Supervisory Board examined in detail the economic situation and the development

perspectives of the Group and gathered information about important business events. In ad-

dition to the regular reports on sales, earnings, and financial data, the Supervisory Board

repeatedly and extensively discussed the effects of the economic crisis on ALTANA and the

countermeasures taken by the management.

Further issues addressed in the Supervisory Board’s work included the strategy of

ALTANA and its divisions, innovation and research, purchasing strategies and the company’s

retirement benefit models. At its meeting on May 12, 2009, the Supervisory Board extend -

ed Martin Babilas’ appointment as a member of the Management Board. Mr. Babilas was

reappointed as a member of the Management Board as of May 3, 2010 for a period of

five years. At the beginning of July 2009, the Supervisory Board extended the appointment

of Dr. Matthias L. Wolfgruber as Chief Executive Officer. Dr. Wolfgruber was reappointed

as Chief Executive Officer as of July 1, 2010 for a period of five years.

In a conference call on November 13, 2009, the Supervisory Board dealt intensively

with the voluntary public offer made by SKion GmbH to the other shareholders of ALTANA

AG. The Supervisory Board occupied itself in particular with the amount offered and the

cornerstones of the Management and Supervisory Boards’ joint statement on SKion GmbH’s

offer. Due to her position as Managing Director and sole shareholder of SKion GmbH,

Mrs. Susanne Klatten, who is also a member and Deputy Chairwoman of the Supervisory

Board, did not participate in the deliberation or the decision of the Supervisory Board

regarding the joint statement, and did not exert influence in any other way. The Supervisory

Board transferred the concluding discussion and resolution on the joint statement regard-


ing the offer to a special committee founded specifically for this purpose and authorized it

to make all further decisions in connection with the statement in lieu of the Supervisory

Board.

At its meeting on November 26, 2009, the Supervisory Board discussed the effects of the

German Act to Modernize Accounting Law (BilMoG) on the Supervisory Board’s work as

well as the new long-term incentive program for the Management Board and the executive

management. At the same meeting, the Supervisory Board dealt in depth with the corpo-

rate planning for the next years and the budget for 2010, and approved the budget.

Meetings of the Committees

The Supervisory Board installed four committees:

– The Audit Committee met three times in 2009 and additionally held two conference calls.

In the presence of the auditor as well as the Chief Executive Officer and the Chief Finan-

cial Officer, it dealt with the annual financial statements of ALTANA AG and the ALTANA

Group and with the proposal to the Annual General Meeting for the distribution of the

profit. It also dealt with interim financial reports on the first quarter, the first half-year, and

first three quarters with the auditor and the Management Board before they were pub-

lished. In addition, it concentrated on the statutory audit process mandating the auditor

and monitoring his independence, the setting of fees, and the approval of non-auditing

services of the auditor. Furthermore, the Audit Committee dealt in depth with the identifi-

cation and monitoring of risks in the Group, with the work and the findings of its inter-

nal auditing as well as with compliance. The Audit Committee dealt extensively with the

effects of the German Act to Modernize Accounting Law (BilMoG) and developed sug-

gestions for implementing the legal regulations that were presented to the Supervisory

Board plenum. The Audit Committee also regularly dealt with the results of asset im-

pairment tests in the Group. The chairman of the Audit Committee is Dr. Klaus-Jürgen

Schmieder. He has the necessary knowledge and expertise in the fields of accounting

and auditing.


Dr. Fritz FröhlichChairman of the Supervisory Board of ALTANA AG

– The Human Resources Committee met twice. It dealt with the preparation of the resolution

to extend the Management Board appointments of Matthias L. Wolfgruber and Martin

Babilas, as well as with the preparation of the resolution on the long-term incentive plan for

Management Board members to be given by the Supervisory Board plenum.

– A special Supervisory Board committee was formed in connection with SKion GmbH’s volun-

tary public offer to the shareholders of ALTANA AG. The task of the special committee

was to work out the details of the Supervisory and Management Boards’ joint statement on

the offer, and to accompany further proceedings related to the offer and possible legal

measures resulting from it. The special committee consists of four members, two shareholder

representatives and two employee representatives. The chairman of the special commit-

tee is the Chairman of the Supervisory Board, Dr. Fritz Fröhlich. On November 17, 2009, the

special committee discussed the Supervisory and Management Boards’ joint statement

on SKion GmbH’s offer with the Management Board and resolved a final version.

– The Mediation Committee, established in accordance with section 27 (3) of the German

Codetermination Act, did not convene in the business year 2009.

The Supervisory Board was kept regularly informed about the activities of the committees.


Corporate Governance

At its meetings, the Supervisory Board dealt several times with the further development of

the corporate governance principles and their application in the company. Among other

things, the Supervisory Board occupied itself with the effects of the Act on the Appropriate-

ness of Management Board Compensation (VorstAG). At the meeting held in March 2009,

the Supervisory Board focused on the efficiency of its activities. At the meeting of November

26, 2009, the Supervisory and Management Boards issued the annual declaration of com-

pliance in accordance with section 161 of the German Stock Corporation Act and published

it on the company’s website where it is accessible to all shareholders. ALTANA complies

with all of the recommendations of the version of the German Corporate Governance Code

of June 18, 2009, except for the following recommendations: ALTANTA AG did not form a

nomination committee composed exclusively of shareholder representatives which proposes

suitable candidates to the Supervisory Board for recommendation to the Annual General

Meeting. Newly concluded Management Board contracts do not contain provisions accord-

ing to which payments including fringe benefits to the members of the Management Board

on premature termination of their contracts without serious cause must not exceed the val-

ue of two years’ compensation (severance payment cap). Nor do Management Board con-

tracts contain a promise of payments in the case of premature termination of their contracts

due to a change of control. The Management and Supervisory Boards provide further infor-

mation on corporate governance on pages 75ff. of this annual report.

Annual Financial Statements

The annual financial statements of ALTANA AG, the consolidated financial statements for the

year ended December 31, 2009, and the combined management report were audited by

PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft which was ap-

pointed by the Annual General Meeting and engaged by the Audit Committee of the

Supervisory Board, and they issued an unqualified audit opinion in each case. The system for

early risk recognition set up for the ALTANA Group pursuant to section 91 of the German

Stock Corporation Act was audited. The examination revealed that the system properly fulfills

its function.

The financial statement documentation, the annual report, and the reports of Pricewater-

houseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft on the audit of the an-

nual financial statements and of the consolidated financial statements, as well as the Man-


agement Board’s proposal for the distribution of the profit, were made available to all

Supervisory Board members. The Audit Committee of the Supervisory Board dealt extensive-

ly with this documentation. The Supervisory Board plenum inspected the documentation

and dealt with it in depth at its meeting in the presence of the auditor, who reported on the

main results of the examination. The Supervisory Board is in agreement with the findings

of the audit and has no grounds for objection following its final examination. At its meeting

on March 16, 2010, the Supervisory Board approved the annual financial statements and

consolidated financial statements prepared by the Management Board. The annual financial

statements are thereby adopted. The Supervisory Board evaluated the Management Board’s

proposal for the distribution of the profit and is in agreement with its recommendation.

Report in Accordance with Section 312 of the German Stock Corporation Act

The Management Board prepared a report in accordance with section 312 of the German

Stock Corporation Act on relations with affiliated companies for the financial year 2009. The

Supervisory Board inspected this report and found it to be accurate. The auditor issued

the following audit opinion:

“On completion of our audit and assessment in accordance with professional standards,

we confirm that the factual information in the report is correct and that the consideration

made by the company for the transactions listed in the report was not unreasonably high.”

The auditor’s findings were approved by the Supervisory Board. Following comple-

tion of its own review, the Supervisory Board has no objections to the Management Board’s

statement at the end of the report.


Personnel Changes

In the 2009 business year, there were no personnel changes in the Management and Super-

visory Boards.

The Supervisory Board would like to extend its gratitude to the members of the Manage-

ment Board, the company’s management as well as to all employees of the ALTANA Group for

their efforts and commitment in the particularly difficult business year 2009.

Wesel, March 16, 2010

For the Supervisory Board

Dr. Fritz Fröhlich

Chairman

16 The ALTANA Share

The purchase offer was accepted for a total of 2,518,652

shares, corresponding to 1.9 % of all ALTANA shares.

As a result, SKion GmbH increased its stake to 93.55 % of

ALTANA AG’s share capital at the end of the year.

In accordance with the Securities Acquisition and Take-

over Act (German Wertpapiererwerbs- und Übernahme-

gesetz, WpÜG), the Management and Supervisory Boards

issued a joint statement on the acquisition and published

it on November 18, 2009. In the joint statement, the Man-

agement and Supervisory Boards supported the offer and

recommended that shareholders accept the offer. The Man-

agement and Supervisory Boards deemed the price of

€ 14.00 offered by SKion to be appropriate taking into

account the overall circumstances, and in their joint

statement both bodies expressed the opinion that the offer

was in the interest of ALTANA, including ALTANA’s em-

ployees, and in the shareholders’ interest.

On February 2, 2010, SKion GmbH informed ALTANA

that it now held 129,342,421 shares, i. e. 95.04 % of the

ALTANA shares. At the same time, SKion requested ALTANA

AG to convene a shareholders’ meeting pursuant to sec-

tion 327a (1) of the German Stock Corporation Act (AktG).

SKion GmbH Makes an Improved Offer for ALTANA Shares

After SKion GmbH had increased its existing majority stake

in ALTANA AG to nearly 92 % following a voluntary public

purchase offer in 2008, in the fall of 2009 the company

made a new, improved offer to acquire the shares it did not

own and further increased its holdings with this step.

On October 22, 2009, SKion GmbH, an investment

com pany whose sole shareholder is Mrs. Susanne Klatten,

informed ALTANA about the decision to make another

voluntary public offer for the acquisition of shares in ALTANA

AG for a purchase price of € 14.00 per share. The accept-

ance period for the offer was from November 9 to Decem-

ber 14, 2009. In addition to appropriate cash compensa-

tion, SKion offered to pay an improvement amount if certain

steps were taken by the end of 2011 to transfer the re-

maining shares held by minority shareholders to SKion GmbH

(so-called squeeze out) and if, in the framework of the

relating shareholders’ meeting the resolution on the transfer

of the shares was passed with a higher price than the cash

compensation.

The ALTANA Share

Share price development Jan. 1, 2009 to Dec. 31, 2009

€ Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

15

10

5


In this shareholders’ meeting, a resolution on the transfer of

the shares held by the remaining shareholders to SKion

GmbH in return for appropriate cash compensation shall be

passed (squeeze out).

Price Development Influenced by Purchase Offers

In the 2009 business year, the price of the ALTANA share was

influenced almost exclusively by the share purchase offers

made in 2008 and 2009 and by speculation about SKion

GmbH’s further course of action.

The share opened trading on January 2, 2009, at a price

of € 13.10. In the months to follow the share price re-

mained very constant in the € 12.50 to € 13.50 range and

thus around the level of the purchase price of € 13.00

that SKion GmbH had offered to shareholders in 2008. With

the announcement of the second, improved offer, on

October 22, 2009 the share price increased to over € 14.00.

In the weeks to follow, the price rose continuously and

closed the year at € 15.36.

On the whole, the value of the ALTANA share increased

by 17 % in the course of the year, while the overall mar-

kets reported stronger increases following the economic

slump in 2008. The DAX, the German benchmark index,

rose by 24 % in the course of the year, while the German

MDAX, in which the ALTANA share was listed until Janu-

ary 5, 2009, climbed by 34 %.

In the past business year, the trading volume was signifi-

cantly lower than in the prior year. In 2009, a total of only

10.9 million ALTANA shares were traded on the XETRA trad-

ing platform and on the Frankfurt Stock Exchange, after

231.5 million in the prior year.

Profit Appropriation Proposal to the Annual General Meeting 2010

The economic crisis had a significantly negative effect on

the ALTANA Group’s business performance and its an-

nual financial statements in 2009. The Group’s net income

amounted to only € 11 million. Against this background,

the Supervisory and Management Boards propose to the

Annual General Meeting 2010 to distribute a dividend

of € 0.04 per share and to allocate the remaining Group’s in-

come to retained earnings. This accounts for the ongoing

uncertainty about the economic development.

18 The ALTANA Share

Further information on Investor Relations, company key figures

and the current share price can be found at

www.altana.com/ir

Key figures of the ALTANA share in 2008 and 2009

2009 2008

in €

Number of shares (in thousands)

annual average 136,982 136,000

at year-end 136,098 136,098

Earnings per share 0.08 0.76

Cash flow from operating activities per share 1.64 1.50

Dividend 0.041 0.10

1 Profit appropriation proposal

Key figures of the share price performance in 2008 and 2009

2009 2008

in €, XETRA

Closing price 15.36 13.00

High 15.59 16.90

Low 12.39 7.53

Market capitalization (in € million as of December 31) 2,090 1,825

Average daily trading volume (in thousand shares) 43 904

Basic information on the ALTANA share (Frankfurt Stock Exchange)

ISIN / Security code number DE0007600801 / 760080

Ticker symbol ALT

Type No-par value shares

Affiliation to indexes of the Deutsche Börse AG (a selection) MDAX (until January 5, 2009), Prime Standard All Share, Classic All Share, Prime Chemicals, Prime IG Chemicals Specialties

Efficiency and Cost Optimization 20

Cash Flow and Net Working Capital 24

Corporate Development and Acquisitions 27

Synergies and Key Account Management 30

Innovations 33

Corporate Culture 36

2009: A Valuable Year

Lorem ipsum dolore20

Efficiency and Cost Optimization

Efficiency and Cost OptimizationIn the late summer of 2008, a global economic crisis, beginning in the U.S., was already looming, and it would have a lasting effect on ALTANA’s business in 2009. It quickly became apparent that ALTANA would have to cut costs rapidly and sustainably to remain profitable and keep its competitive edge. How did the company cope with this situation? What concrete measures were taken? And what lessons can be learned today from the experiences gained during the economic crisis? In the following pages, we discuss the key measures ALTANA took to cut costs without jeopardizing its future potential.

As an important supplier to numerous in-

dustries, the chemical sector was espe-

cially affected by the economic crisis. In-

dustrial customers’ demand for products

declined massively starting in the fourth

quarter of 2008 at the latest.

Global decrease in demand

While a difficult economic development

was on the horizon back in 2007 due to the

real estate and financial crisis in the U.S.,

neither economic experts nor companies

expected the crisis to lead to such a severe

collapse or to have such far-reaching glob-

al ramifications. Crisis-related destocking

heightened the dramatic sales decline even

more.

An early reaction

When sales fall strongly, cost-cutting and

efficiency-enhancing measures are key

means of compensating for or, at least, sof-

tening the effects on earnings. Very early

on, ALTANA prepared itself for the in part

catastrophic business environment by in-

troducing a catalog of measures.

The essential key points were:

– Cost savings measures, postpone-

ment of capital expenditure, safeguard-

ing liquidity

– Development of different scenarios

and appropriate maxims for action de-

pendent on business development

– Continuous updating of the scenarios

together with the divisions

– Joint identification and activation of

the measures within the divisions and

the holding company

– Jointly deciding on targets so that every-

one bore responsibility for reaching

them

ENVIRONMENT AND TEMPORAL PROGRESSION

21

In principle, ALTANA has always worked

cost-consciously and with lean struc-

tures; otherwise, the company would not

have become so highly competitive and

profitable and remained so for such a long

time. Thus, due to the company’s stable,

positive business performance, it had not

had any experience with comprehen-

sive, crisis-related cost-cutting measures.

Cost savings had been predominantly

driven by structural changes in the divi-

sions, and were not a reaction to dra-

matic changes in the economic environ-

ment. Against this background, not

only consistent implementation of jointly

resolved measures was needed, but also

the awareness within the Group that

painful cuts were inevitable, and that to

avoid having to take even more dras-

tic measures, sustained joint efforts were

required. At the same time, ALTANA

did not want to lose sight of the compa-

ny’s future beyond the crisis. Through

clear and open communication, without

any embellishment on the one hand,

or dramatization on the other, this joint

understanding was reached quickly and

resiliently.

THE STARTING SITUATION

Cost-cutting measures can only be effec-

tive if they meet with wide approval

in the company, if their necessity is rec-

ognized, and if the distribution of bur-

dens is regulated fairly and comprehen-

sively. Thus, at ALTANA, cutting costs

does not mean letting the axe fall every-

where and radically. Rather, very clear

and analytical possibilities of reducing

costs were identified, evaluated, and

implemented.

Participation of all employees

Every single employee was explicitly asked

to assess his or her own work environ-

ment and area of responsibility with a view

to possible cost savings and efficiency

enhancements. As a result, all of the cost-

cutting measures were not only a top-

down process, but were brought about

through the active participation of all

ALTANA staff. In the implementation of

all necessary measures, the top priority

was not to jeopardize ALTANA’s long-term

business model with its strong focus

on innovation and customer orientation.

Therefore, all of the measures not

only pursued the primary aim of cutting

costs measurably in the short term.

It was just as important to raise the effi-

ciency and synergy potential that can

strengthen ALTANA not only in the crisis

but also beyond it in the long term.

PHILOSOPHY AND OBJECTIVES

– No one-sided specifications on the part of management, but active participation of employees

– A balanced contribution by all divisions

– A fair distribution of the burdens in line with the economic achievement po-tential of the employees

– Retaining employees, with termination of employment for operational reasons only as a last resort

– Participation of shareholders through a lower dividend

– The full support of the Supervisory Board

– Continuously informing employees, transparency regarding the measures resolved

CLEAR PHILOSOPHY

22

Efficiency and Cost Optimization

Both in the Group holding company

and in the different divisions, a series of

concrete measures was implemented in

the 2009 business year to react to reduced

demand and to achieve our demanding

cost targets. The focus of the program was

on measures related to operating costs /

capital expenditure as well as personnel:

Essential measures relating to operating

costs/capital expenditure

– Temporary shutting down of operations

– Scaling down of manufacturing lines

– Reduction of maintenance work that was

not absolutely necessary

– Reduction of travel costs

– Decrease in expenditure for marketing

and market communications

– Optimization of current assets

– Stretching and postponement of planned

capital expenditure

Essential personnel-related measures

– Reduction of overtime and leave accounts

– Short-time work at most German sites

– Reduced working hours and simultane-

ous reduction of remuneration

– Reduced variable salary components for

the management

– Postponement of remuneration increases

for exempt employees

– Usage of natural fluctuation to reduce

the number of employees

– Reduction of temporary employment

and leased labor

– Postponement of employee benefit pro-

grams in Germany and abroad

DIFFERENT STRUCTURES AND CONTRIBUTIONS

THE MOST IMPORTANT MEASURES IN DETAIL

other hand, they are mostly performed at

the individual sites or via a lean holding

company in Wesel. Due to these structural

differences, but also due to the differing

effects on the divisions’ businesses, there

The four divisions within the ALTANA

Group have very different structures.

While the BYK Additives & Instruments

division and ECKART Effect Pigments

have, for historical reasons, a classical par-

ent company with a significant share in

the total production with relatively large

numbers of employees, the ELANTAS

Electrical Insulation and ACTEGA Coatings

& Sealants divisions are organized as

holding structures with a number of medi-

um-sized and small sites. Therefore, the

holding functions are weighted differently:

At BYK and ECKART, the main tasks

and administrative activities are carried

out primarily at the companies’ head

offices; at ELANTAS and ACTEGA, on the

were significant differences regarding

the cost savings that could realistically be

expected in each division. In 2009 as a

whole, cost savings of around 55 million

Euros were achieved.

SAVINGS COMPARED TO THE PRIOR YEAR

HOLDING

-13 %

-22 % -13 %

-5 %

-11 %

-20 %

23

Right when the cost-cutting and effi-

ciency-enhancing measures began, the

organizational and structural bases

were created to counter the challenges

posed by the global economic crisis.

Ongoing monitoring of success

On the one hand, a team consisting of

representatives from Controlling (holding

company and representatives of the

divisions) as well as Human Resources was

established. This team’s primary task

was to continually accompany the cost-

cutting and efficiency-enhancing pro-

cess, to support implementation of the

resolved measures, and to check the

progress of the entire program. This includ-

ed regular discussions with representa-

tives of the divisions and development of

joint solutions. At the same time, the

project team reported to ALTANA’s Manage-

ment Board and its Executive Manage-

ment Team, which in turn discussed and

decided on how to proceed. In addition,

the team informed the company’s employ-

ees at regular intervals and helped the

communications department inform the

press, public, and shareholders.

In addition to assignment of clear responsi-

bility for the success of the cost-cutting

measures, monitoring instruments were

used, on the basis of which the success

of the cost-saving process could be meas-

ured and analyzed quickly. These instru-

ments primarily were comprised

of ALTANA’s existing controlling instru-

ments – however, instead of using

these instruments to assess sales and

earnings development, they were

employed to shed light on the develop-

ment of costs, as well as cost struc-

tures and types of costs.

In times when the economy is weak,

maintaining competitiveness, cost sensi-

tivity, and efficiency enhancement are

of decisive importance. ALTANA reacted

to the crisis resolutely yet at the same

time continued with projects and its efforts

to safeguard the company’s innova-

tiveness and thus its sustainability, par-

ticularly in terms of research and cus-

tomer service. Using this two-pronged

strategy, ALTANA succeeded in sig-

nificantly mitigating the economic crisis’

effects on the company.

ALTANA did not only benefit from the

experiences it had gained – improvement

of internal processes, heightening of effi-

ciency, continuing to invest large amounts

in research and development, and not

least the high solidarity of the employees

– during the crisis. They are doubtless

essential building blocks for a positive cor-

porate development in the future as well.

Thus, the fast and consistent reaction not

only averted damage but paved the way

for the period after the crisis.

ORGANIZATION AND IMPLEMENTATION

EXPERIENCES AND KNOWLEDGE GAINED

Cash Flow and Net Working Capital

In terms of liquidity, the 2009 business

year was extraordinarily successful

for ALTANA. On account of the company’s

good financial starting position as well

as the measures implemented in 2009, a

very positive cash flow could be achieved

despite the difficult business environ-

ment. In terms of operating cash flow,

all of ALTANA’s divisions made great

efforts to optimize cash outflows and in-

flows.

Improvement in net working capital

One of the focuses of ALTANA’s activities

in the past business year was to opti-

mize balance sheet items that tie up capi-

tal for operating business and free up

bound liquidity. Particularly important

among these items are trade accounts

payable and receivable as well as inven-

tories. In 2009, this led to an operating

cash flow of € 225 million, to which im-

provements in working capital contrib-

uted € 22 million.

Greater Effectiveness through Cash Flow ManagementLiquidity is an important issue for every company, including ALTANA, but it is particularly significant in times of crisis.

At different subsidiaries, intensive analy-

ses were performed, starting points

for improvements were determined, and

a comprehensive package of measures

was prepared in advance. Thus, for exam-

ple, buffer stock was minimized by

reducing so-called “long-lying products”

and production planning processes

were adjusted. Delivery conditions and

administrative processes (e.g. dunning

runs) in accounts receivable management

were optimized such that the period

until receipt of money was reduced con-

siderably. On the other hand, from

now on discount possibilities regarding

accounts payable to our suppliers can

be exploited better and early payments

can be avoided. In a long-term, still

ongoing process, payment conditions will

be further optimized.

All of the experiences and the knowledge

we gained in the projects were passed

on quickly to the subsidiaries that were

not involved in the main projects. As a

result, all ALTANA companies are benefit-

ing from the optimizations, and can

define and implement measures tailored

to their individual company.

Reduction of capital expenditure

In addition to the activities aimed at

optimizing the operating cash flow, the

ALTANA management’s fast and con-

sistent reaction to the economic and finan-

cial crisis in the area of capital expend-

iture particularly contributed to a signif-

icant decrease in cash outflows. As early

as the end of 2008, ALTANA’s management

significantly scaled down the invest-

ment budget for the 2009 business year.

In close consultation with the divisions,

the management examined all investment

projects.

The essential basis for deciding whether to

carry out investment measures or not

was a classification of projects into urgent

and less urgent. Among the urgent proj-

ects were all necessary replacement invest-

25

ments, investments to significantly

strengthen ALTANA’s core competencies,

and investments which amortize in

the short term, e.g. through subsequent

cost reductions. Pure expansion invest-

ments were not included, however. In the

end, “sound judgment” was used to

decide which investments would be car-

ried out. Capital expenditure fell by

€ 54 million compared to the prior year.

Implementation of a centrally controlled

Euro cash pool

For ALTANA, the introduction of a central-

ly managed cash pool means more than

optimization of cash flow. It is above all a

reorganization. For until 2008, ALTANA

did not have a centralized approach regard-

ing cash management, in keeping with

the company’s decentralized business mod-

el. That meant that the subsidiaries in

the different countries managed their ac-

counts themselves and carried out mon-

etary transactions and disposition autono-

mously.

To optimize liquidity allocation, reduce

monetary transaction costs, and

increase efficiency, ALTANA decided to

control cash flows to a greater degree

via the holding company. To this end, a

centrally managed cash pool was

introduced that primarily pursued the

following aims:

– Optimum interest yields

– Centralized availability and controlling

of liquidity

– Reduction of necessary credit lines

– Reduction of the number of bank

accounts and bank partners

– Uniform payment transactions

– Simplification of disposition (planning)

Apart from introducing a Euro cash pool

in 2009, we started the implementation

of a cash pool in the U.S. Dollar zone at the

end of the year.

Receipt of goods Sale of goods

CASH CONVERSION CYCLE

Inventories Unfinished products End product

FURthER pRocESSIng pERIod AVERAgE collEctIon pERIod

outgoing paymentBeginning of payment deadline

LENGTH OF CASH CONVERSION CYCLE

SHORTENED CASH CONVERSION CYCLE

Incoming payment

Beginning of payment deadline

26

What were the reasons to set up a cash

pool right now?

With the realignment of the Group and

the concentration on specialty chemicals,

ALTANA was newly refinanced. This

was coupled with significantly stronger

recourse to debt than had been the case

in the past. As a result, the issue of optimiz-

ing the Group’s cash flows became con-

siderably more important. Ultimately, the

cash flow was meant to be a prerequisite

for a resource allocation within the Group

that is as optimal as possible.

You introduced the Euro cash pool

within a period of six months. In hind-

sight, was this time frame sufficient?

With a stringent project management, this

period is in principle sufficient for imple-

menting a cash pool. However, it will take

a while before all of the advantages can

be fully exploited. On the one hand, more

time is needed to transfer all of the pay-

ment flows to the cash pool accounts. On

the other, the cash flow planning needs a

certain “fine-tuning.”

What were the most important obstacles

that had to be overcome, externally and

internally?

Due to ALTANA’s decentralized structure, a

process of rethinking had to be initiated,

because ultimately, a cash flow pool means

centralization. In this connection, particu-

larly cultural, administrative, and legal

differences in the different companies had

to be considered. In terms of the com-

plexity and the time needed, we under-

estimated the adjustments that had to

be made to our system environment and

harmonizing it with other running data

processing projects. Thanks to the dedica-

tion of the employees in all departments

concerned, however, we were able to quick-

ly find and implement solutions.

How much of an internal effort was

needed for the project?

It is difficult to gauge the effort exactly, as

little direct costs were incurred. But a

great deal of administrative effort had to

be expended.

How did the internal cooperation

with the participating subsidiaries go?

What experiences did you have?

All of our subsidiaries worked well in the

project team. However, in a decentral-

ized group a certain attitude shift and a

turn away from old habits are required.

We supported our subsidiaries and showed

INTERVIEW WITH FRANK RICHTER, HEAD OF CORPO-RATE TREASURY

Cash pool: optimum resource allocation in the ALTANA Group

Cash Flow and Net Working Capital

them the advantages that a cash pool

provides for the respective company and

for ALTANA.

What advantages from the cash pool

can you recognize and utilize already?

Free liquidity of the subsidiaries is auto-

matically and immediately available

to decrease debts, as liquidity reserve, or

for allocation to other companies in

the ALTANA Group. Local credit lines from

banks were scaled down. These are sub-

stantial improvements over the previous

situation.

ALTANA has set itself the goal of achieving

an annual average growth of ten percent

in the long term. This profitable growth is

primarily based on three pillars:

1. Organic growth, particularly in the

growth regions Asia and South America,

but also in the U.S. and Europe.

2. Expanding business by means of new

technologies, new products and thus

new activities in new markets.

3. Acquisition of companies or segments of

companies.

ALTANA continuously analyzes the

worldwide specialty chemicals markets to

identify appropriate acquisition tar-

gets, based on its self-understanding as

a specialty chemicals company. We

view specialty chemicals as being synony-

mous with offering complex solutions,

where customers mainly buy an overall

performance and not an individual prod-

uct. Improving the performance of the

customer’s product is of decisive impor-

tance. ALTANA significantly contributes

to making the customer’s product success-

ful in the customer’s market. Key factors

here include innovation and a comprehen-

sive service. For its part, ALTANA bene-

fits due to the high market entry barriers

for competitors, long product lifecycles,

and lower cyclical dependence than with

mass chemical products.

Our acquisition strategy is geared to this

philosophy. ALTANA looks for companies

that are innovation and technology

leaders, that offer unique solutions and that

play a leading role in their markets. In

addition, it should be possible to integrate

acquisitions effectively in the Group’s or-

ganization. The key issue regarding poten-

tial acquisitions, as well as divestments,

is therefore: Is ALTANA the best “owner”?

Does ALTANA offer the framework in

which the business can develop best? Only

when, after the candidate is carefully

examined, the answer is a resounding “yes”

is an acquisition considered.

Acquisitions Create Value The combination of organic growth and acquisitions gives rise to profitable and sustainable growth.

Corporate Development and Acquisitions

ALTANA ACQUISITION CRITERIA

Each acquisition has to contribute measurable, sustained value added

– A leading market position is achievable– A € 200 – € 2,000 million total target market

for new business areas– Market growth is bigger than general eco-

nomic growth

– Debt financing preferred– Cash flow financing for smaller acquisitions

– No margin dilution– Consistent fulfillment of return and amorti-

zation criteria– Short-term earnings growth (within two

years, after all costs)– Positive value contribution of the acquired

company

– Optimization of the strategic position (markets, products / technologies)

– Realization of synergies– Entry in new business segments

– Pure majority participations (normally 100 %)

– Definition of the most important know- how owners

Market

Business compatibility Fast integration

Financing Earnings contribution

28

Acquisitions as an Important Contribution to Our Corporate StrategyDr. Andreas Jerschensky, Head of Corporate

Development / Mergers and Acquisitions (M & A)

… on the role of strategic corporate

development at ALTANA

We do not view corporate development

as consisting solely of “classical” mergers

and acquisitions, i.e. the acquisition and

sale of companies or activities. Our aspira-

tions are higher, namely towards active

management of our portfolio derived from

the overall corporate strategy. This ac-

tive management pertains to both bolt-on

acquisitions within the divisions and the

acquisition of a new division sought in the

medium term. At the same time, we con-

tinually examine our existing activities and

react, if required, with divestments or

restructuring measures, if the margins of

business areas are too weak on a contin-

ual basis, if they develop out of their core

business, or if the respective target mar-

kets become commodity markets.

… on the importance of acquisitions for

new fields of technology

Ideally, acquisitions not only add to the size

of an existing business. The importance

for profitable growth is stronger and more

sustainable if at the same time capabili-

ties are acquired which give us access to

new market segments and thus new cus-

tomers. With all acquisitions, it is important

that there is a relationship to existing

business, so that we can generate synergies

and thus create added value. Against this

background, all of the acquisitions made in

2009 have high benefits: They not only

strengthen the market position of the divi-

sions involved, but also create new know-

how in related business areas. In addition,

we specifically seek, based on our tech-

nology road map, young, innovative com-

panies which have technologies that we

ourselves can only develop with difficulty

or slowly.

Corporate Development and Acquisitions

… on the question of whether it was

easier to make acquisitions in 2009

Under any economic conditions, ALTANA

was and is financially strong enough to

make acquisitions that create lasting value.

Initially, therefore, one might think that

due to the economic crisis there were major

acquisition opportunities in 2009. But

this was clearly not the case, as many own-

ers of attractive companies who were

generally willing to sell their companies

were not prepared to do so in 2009, but

were waiting for the economy to recover to

obtain a higher sales price. Or the sales

price was too high, in no way reflecting the

current economic development. In addi-

tion, due to uncertain general conditions it

was not clear whether potential acquisi-

tion candidates could guarantee a sustain-

ably high margin and short-term earn-

ings growth, because it was very difficult to

evaluate future outlooks.

29

AN OVERVIEW OF ACQUISITIONS MADE IN 2009

Division Business acquired from Application area

BYK DyStar group High-performance additivesACTEGA Water Ink Technologies Water-based and UV inksELANTAS Shimo Resins Private Limited Epoxy and polyurethane systemsELANTAS Quadrant Chemical Corp. Epoxy and polyurethane systems

Competition and cost pressure are giving

rise to ever-stronger consolidation on

the part of our customers, resulting in a

changed purchasing behavior. While

our customers’ requirements for products

and services are becoming higher, at

the same time they want to cut costs. Cus-

tomers are transferring tasks and risks

to suppliers, i.e. to ALTANA and its divi-

sions. Thus, the pure product supplier

has become a strategic partner in research,

services, and logistics, i.e. a supplier of

complex solutions. This market develop-

ment poses a new challenge, but also

offers innovative companies additional

opportunities to have long-lasting ties

with customers. We intend to use these

opportunities with our Key Account

Management program. Within the frame-

work of this program, ALTANA is using

its competencies to cooperate with custom-

ers within its divisions, but also increas-

ingly across divisions.

Thus, we are focusing our activities on

selected customers who, in a spirit of part-

nership, want to grow profitably and sus-

tainably together with us. Our objective is

to offer our customers clear added value,

to strengthen their role in the market,

and at the same time to bolster our position

and to reduce the interchangeability of

our products and services.

Customer expectations and require-

ments for Key Account Management

Many key customers do not equate

ALTANA with its respective divisions but

view it as an integrated specialty chem-

icals company. They expect a universal

contact partner that coordinates the

work with them. The business relation-

Growth with Important CustomersALTANA is striving to grow and be successful together with its most important customers or key accounts. To do so, we have to under-stand their needs, know their markets, and develop growth strategies together with them.

Synergies and Key Account Management

“With the help of a division’s existing contacts, the door can be opened for another division, too. This creates new opportunities.”

FRANK KOTHER, KEY ACCOUNT MANAGER

31

ship should include not only the know-

how of an individual division, but also all

competencies of the ALTANA Group –

i.e. globally coordinated behavior rather

than isolated applications. In return,

key accounts are willing to enter long-term

agreements. Thus, it is a win-win situa-

tion for both parties.

New opportunities through cross-

divisional cooperation

Many customers require a strategic part-

ner to have a minimum size or amount

of potential, which an individual division

often cannot achieve alone. ALTANA’s

largest and most important customers,

however, are often supported and sup-

plied by two or more divisions. With the

combined portfolios of its divisions,

ALTANA has a wide spectrum of products

and is in a position to offer unique prod-

ucts and services. To this end, different divi-

sions work hand in hand for customers.

The key to success is innovation. Cross-

divisional networking in research and

development creates new, wide-ranging

opportunities.

Key Account Management (KAM) involves systematic expansion of business relationships with key customers. Key customers, or key accounts, are strategically important customers with which ALTANA pursues sustainable and profitable growth in a spirit of partnership.

ALTANA KEY ACCOUNT MANAGEMENT

to generate profound knowledge about our key customers’ success drivers.

1

to define forward strategies together with our customers.

2

to recognize and systematically open up cross- divisional potential.

3

to use resources in a targeted way, bundle synergies and reduce complexities.

4

to implement replicable projects with our key customers and create value together.

5

PR

OFI

TAB

LE,

SU

STA

INA

BLE

GR

OW

TH

ALT

AN

A K

EY

AC

CO

UN

T M

AN

AG

EM

EN

T

“Through joint, cross-divisional projects with customers, added value is created for our customers and for us.”

DETLEV LINDNER, HEAD OF KEY ACCOUNT MANAGEMENT

32

Structured Key Account Management

The members of the Executive Manage-

ment Team support ALTANA’s Key Account

Management’s activities both internally

and externally.

They take over a kind of “sponsorship”

function for the most important custom-

ers. Group Account Managers maintain

contact with both their own top manage-

ment as well as the customer’s manage-

ment, coordinate all projects, and provide

for preparation of the most important

resources. All information important for

supporting key customers is compiled

in so-called “collaboration rooms” – virtual

workrooms on ALTANA’s Intranet – and

are available to the team members involved

Group-wide. In regular meetings, the

core team and “extended teams,” consist-

ing of members of different divisions and

different spheres of competence, exchange

ideas and specify the next steps. Further-

more, a Key Account Management (KAM)

forum takes place once a year. Here, cus-

tomers who work with more than one divi-

sion are presented, current projects are

described, and the goals for the years to

come are defined.

Examples of successful collaboration

Key Account Managers from all four of

ALTANA’s divisions work together to

develop solutions for key customers in

their markets. Two examples from the

BYK and ECKART divisions show how this

cross-divisional cooperation works:

Synergies for automotive coatings

Together with a North American company

that focuses on automotive coatings,

we are working on improving the optical

properties of coatings for a large interna-

tional automobile company. This became

necessary after the automobile compa-

ny switched to a more economical paint-

ing procedure for a certain make of

car. To this end, BYK and ECKART jointly

developed a targeted selection of addi-

tives and pigments that optimize the result.

For our key account, this means a clear

competitive edge coupled with cost savings.

For ALTANA, it safeguards our existing

pigments business and provides additional

opportunities for our additives and meas-

uring instruments business.

Optimum product coordination simplifies

customers’ manufacturing processes

In October 2009, ALTANA launched a

joint project together with a leading man-

ufacturer of automotive repair paints

and coil coatings (coating of steel or alu-

minum bands). Products from BYK and

ECKART are optimally coordinated with

each other and processed in an auto-

matic mixing unit. Production is carried

out completely via pastes, which sim-

plifies our customer’s manufacturing pro-

cess. With the metallic aluminum pastes

for coil coatings, thousands of color shades

can, through a corresponding combina-

tion of individual pastes, be manufactured

with a base color produced by the cus-

tomer. The color shade is measured using

color measurement instruments from

BYK-Gardner, which make use of adapted

third-party software – a novelty for our

customer.

Synergies and Key Account Management

“Growth decisively depends on the custom-ers who play a key role in their markets and industries. We gear our resources such that we can systematically grow with these customers.”

DR. RENE KUMAR, KEY ACCOUNT MANAGER

Innovations

ALTANA Presents Innovation Award Future growth can only be achieved through innovations. In 2009, for the first time, ALTANA presented the ALTANA Innovation Award for the best innovation.

Applications for the award are tied to a

number of key features and other criteria.

For the ALTANA Innovation Award, only

those innovations are considered that are

already generating considerable market

sales. The proposals have to be based on an

innovative concept, have to have an eco-

nomic benefit for ALTANA, and must have

advantages for the environment. The in-

novation can relate to a product, a process,

an application, or a service.

On November 11, 2009, the ALTANA Inno-

vation Award was presented for the first

time within the framework of the ALTANA

Innovation Conference at the awards cer-

emony in Wesel. Of the more than 20 pro-

posals submitted from all the divisions,

the ALTANA Innovation Council, a commit-

tee comprised of all Chief Technology

Officers of the ALTANA Group, nominated

five projects for the ALTANA Innovation

Award 2009.

Nominated and presented with the

ALTANA Innovation Award 2009

A new procedure for manufacturing and

stabilizing high-quality mirror-effect

pigments based on the specific develop-

ment of a new process additive.

Through cross-divisional collaboration be-

tween BYK and ECKART, a completely

new manufacturing technology for high-

quality metallic effect pigments could

be developed which has improved mechan-

ical properties in terms of adhesion and

printability. In addition, these metallic pig-

ments, which achieve the brilliance of a

mirror, offer customers new design possi-

bilities, which can be realized in diverse

industrial applications (for example, auto-

motive, packaging, cosmetics, and printing

media).

The other nominated proposals

TerraGreen – coatings based on

renewable raw materials

For the graphics industry, the ACTEGA

Terra team developed the first coating

made out of renewable raw materials. Un-

like conventional water-based coatings,

TerraGreen is based on natural resins and

waxes. As a result, its raw material basis

is not dependent on petroleum or scarce

natural resources. With TerraGreen, it is

now possible for the first time to produce a

print product with substrate, paint and

coating that is based completely on renew-

able raw materials.

Metallic printing inks for digital print-

ing: the world’s first metallic ink for

drop-on-demand printing procedures

An ECKART research team developed me-

tallic printing inks for digital printing for

so-called drop-on-demand printing

procedures. In the last three years, ECKART

has invested considerable sums to devel-

op decorative metallic inks for this printing

procedure.

This innovation was presented to experts

for the first time at the drupa tradeshow

in 2008. As these products have to be tai-

lored to different print engines and print-

ing machines, an entire product family is

being developed with the brand name Jet-

Fluid.

The winners of the ALTANA Innovation Award 2009 (from left to right): Dieter Prölß, Bärbel Gertzen, Dr. Wolfgang Pritschins, Dr. Stephan Roth

Innovations34

35

Heavy-metal-free laser marking addi-

tive for thermoplastics and laser-

markable thermoplastic compounds

(brand name Lasersafe [ECKART]

and Actelar [ACTEGA DS])

Thanks to cooperation between ECKART

and ACTEGA and the resulting synergy

effects, an important innovation could be

realized in this area: a highly efficient,

novel laser marking additive.

As opposed to the additives used so far,

the new additive is free of heavy metals

and other toxic substances. Today, laser

marking is used in many areas, for bar

codes, expiration dates, identification num-

bers, and company logos, among other

things. In addition, it helps prevent prod-

uct piracy.

Non-toxic, cost-effective polyurethane

wire enamel

ELANTAS Tongling succeeded in devel-

oping a new polyurethane wire enamel

which can be dissolved in solvent

naphta (a hydrocarbon solvent) instead

of cresilic acid. The coating can be re-

moved by means of a chemical reaction

at a temperature of 375 °C, making

the polyurethane wire coating solderable.

The coatings are primarily used for thin

and ultra-thin wires (for example in

clocks and cellular phones), where it is not

possible to physically remove the coat-

ing. The advantages of the innovation: The

new product does not have to be labeled

as toxic and, moreover, offers a price ad-

vantage vis-à-vis the current standard

product.

Corporate Culture

Creating Strength and Motivation from Values A strong and accepted corporate culture is the basis for economic success – not only in times of crisis

The global economic crisis not only put

the business models of numerous compa-

nies to an acid test. At the same time, the

difficult economic environment – connect-

ed with far-reaching, often painful corpo-

rate decisions – was an important indicator.

An indicator, namely, for whether a cor-

porate culture, a joint canon of values, ex-

ists, which in times of crisis is strong

enough to guarantee that employees iden-

tify with the company and thus remain

motivated, and at the same time serves as

basis for distributing burdens and encum-

brances in a just and fair way.

ALTANA mastered the crisis with great in-

ner cohesion, solidarity and collegiality. The

basis of our strong corporate culture is

created by values which are not only heed-

ed, but also lived by everyone in the com-

pany. Only when there is a common under-

standing of what things to stand up for, of

how staff should interact, and what joint

aims they should pursue, is a company

truly crisis-proof. A fair distribution of bur-

dens is part of this. At ALTANA, every

employee made a contribution – including

a financial one – within the scope of his

or her possibilities.

ALTANA’s corporate culture, which has

grown for many years, was also an

important element in the integration of

acquisitions. It is decisive, however,

that corporate values are not only laid

out in brochures, but are actually im-

plemented by employees and form the

basis for their actions. Only then can

these values decisively help a company

function as a unit and thus be economi-

cally successful. Particularly in a business

enterprise, values are not “soft” factors.

On the contrary, they promote a sense of

identity and provide future perspectives,

cater to fairness and clear rules regarding

employees’ interaction with one another.

They constitute a clear competitive advan-

tage.

Advantage over the competitors

The difficult 2009 business year was a

valuable year for ALTANA in this respect,

too. Our values are not only written

down on paper, but are resilient and avail-

able when we need them. But strong

values are not only important for joint

perseverance in difficult times. In good

economic periods, too, they unfold a great

strength and a positive differentiation

from the competitors.

Not least due to the experiences in the past

business year, ALTANA decided to pro-

mote corporate values and culture as one

of the company’s key success factors.

Two projects are at the center of interest.

37

The company’s strengths and future perspectives shall not be jeopardized even by painful corpo-rate decisions, for example ambitious cost sav-ings.

Secondly, it is important to distribute all burdens, especially financial losses, justly and correspond-ing to the employees’ economic achievement

potential. Jointly, both aims have been positively achieved in many areas; they are a prerequisite for the management and employees mastering the crisis with great solidarity and at the same time laying the foundations for further growth.”

“Through joint efforts, ALTANA is mastering the effects of the crisis. Two things are particularly important:

On the one hand, both the management and the employees believe that the crisis should be overcome through decisions that are moderate, that are made with a cool head and a calm hand.

ULRICH GAJEWIAK, DEPUTY CHAIRMAN OF THE SUPERVISORY BOARD

First, within the framework of an inter-

national multimedia training project,

ALTANA is familiarizing all its employees

with the basic features of “compliance,”

or proper legal conduct, in many situations

of workaday life. An interactive learning

program developed especially for this pur-

pose helps all employees find good, licit

solutions in potential conflict situations

with customers, colleagues, and supervi-

sors.

In a second project, employees in all divi-

sions and the holding company are cur-

rently involved in reworking our Business

Principles. These jointly developed prin-

ciples, valid for all ALTANA companies,

are to be communicated and imple-

mented already in the course of 2010. The

new Business Principles will formu-

late ALTANA’s values and corporate cul-

ture even more clearly and thus serve

as an even more emphatic and convincing

guideline for the company.

ALTANA’s employees regard an open

and trusting corporate culture as being in-

dispensable. It is not only an essential

component for lasting economic success

and something that makes ALTANA

more attractive as an employer. It also en-

sures that the employees at ALTANA –

beyond social, cultural, and hierarchical

differences – work with motivation, in

a spirit of partnership, and that they enjoy

working with each other.

Group Management Report

Business and Economic Environment 39

Earnings, Financial, and Asset Situation 48

Research and Development 56

Employees 58

Other Information 61

Subsequent Events 63

Risk Report 64

Outlook 70

39To Our Shareholders Group Management Report Corporate Governance Environment, Safety and Health Protection Consolidated Financial Statements

Business and Economic Environment

Group Structure and Business Activities

Range of Products and Services and Organizational

Structure

ALTANA is an internationally operating specialty chemi-

cals group with core competencies in the development and

manufacture of high-quality and innovative products.

ALTANA’s business activities focus on offering special prod-

ucts and services to coatings manufacturers, coatings

and plastics processors, to the printing, packaging, cosmet-

ics and the electrical industries. The company’s product

portfolio encompasses additives, special coatings and adhe-

sives, effect pigments, sealants and compounds, impreg-

nating resins and varnishes, printing inks, and testing and

measuring instruments.

The global orientation of ALTANA’s business activities is

an essential feature of the Group’s organization. In order

to optimally meet the needs of internationally operative cus-

tomers and cater to the special characteristics of different

regional markets, the Group has 35 production sites on four

continents. In addition, ALTANA has 47 service and research

laboratory sites, which offer customers intensive service and

custom-made solutions at the respective location. Nearly

4,800 people work for ALTANA Group companies worldwide.

ALTANA AG is a stock corporation in accordance with

German law. Headquartered in Wesel, it functions as the

Group’s management holding and parent company. At the

beginning of February 2010, 95.04 % of the ALTANA AG

shares were held by SKion GmbH, an investment company

owned by Mrs. Susanne Klatten.

The ALTANA Group consists of 43 operating subsidiar-

ies and associated companies, whose activities are bundled

in four divisions:

– BYK Additives & Instruments

– ECKART Effect Pigments

– ELANTAS Electrical Insulation

– ACTEGA Coatings & Sealants

The divisions are each led by their own managing companies

and operate independently in their customer and supplier

markets. The Additives & Instruments and Effect Pigments

divisions are each managed by an operating company

(parent company structure), while the activities in the Elec-

trical Insulation and Coatings & Sealants divisions are or-

ganized by respective holding companies (holding structure).

Activities and Strategies of the Divisions

Additives & Instruments

The Additives & Instruments division’s activities focus on

applications for treating surfaces.

Its product range includes additives and aids for the

manufacture and processing of coatings, paints, and various

plastics. Wetting and dispersing additives account for a

significant share of the division’s sales. These products are

used for even distribution and stabilization of solids in liq-

uids. The division also produces defoamers and air-release

additives, which eliminate air bubbles, as well as other sur-

face aids. The product range also includes measuring and

testing instruments for determining surface properties,

with a focus on coatings and plastics applications.

The division’s most important production and research

site for coatings and plastics additives by far is located

in Wesel (Germany). It has further production sites in the

Netherlands, the U.S., and China. Instruments are manu-

factured at a site in Germany.

The division has leading market positions in the rele-

vant market segments, and BYK (additives for paint and plas-

tics) and BYK-Gardner (instruments business) have excel-

lent international positions in the industry. The objective is

to further extend these positions in the years to come.

The main focus of the division’s strategy is to enhance

customers’ competitiveness by introducing highly special-

ized, innovative, and environmentally friendly products. This

includes entering new market segments and marketing

Business and Economic Environment40

new application technologies, as is currently being done with

the expansion of the division’s paper surface refinement

activities and its focus on nanotechnology and ecological

products. In this way, the division is striving to achieve

above-average profitable growth.

Effect Pigments

The Effect Pigments division’s product and service portfolio

includes the manufacture of all kinds of metal and pearl-

escent pigments as well as the formulation of finished prod-

ucts ordered by customers.

The principal raw materials used to produce effect pig-

ments are aluminum, copper, and zinc for metallic pig-

ments, as well as the natural raw material glimmer (mica) for

pearlescent pigments. The pigments, which are produced

with a high real net output ratio and in different qualities, are

used by customers for visual effects as well as functional

applications.

The automobile industry is an important customer

sector. The Effect Pigments division primarily provides this

industry with aluminum pigments for use in metal-effect

paints. In addition, the division manufactures aluminum and

copper pigments enabling the graphics industry to create

silver- and gold-colored effects on packaging and other print

products. Pigments are also used in the plastics industry

due to their visual effects and processed directly in master-

batches. In aluminum and zinc pigment applications used

in the manufacture of aerated concrete and in corrosion pro-

tection products, the technical function is the focus. There

are myriad possibilities for using effect pigments in the cos-

metics and personal care segment encompassing both vi-

sual and functional applications.

Business divisions and product portfolio

Paint additives Coatings Primary insulation Converting specialties

Plastics additives Graphic arts Secondary insulation Graphic arts

Measuring and testing instruments Cosmetics and personal care Electronic and engineering materials

Plastics industry

Functional applications


The Effect Pigments’ parent company and its most impor-

tant manufacturing and development site are located in

Güntersthal (Germany). The division has additional produc-

tion sites in North America, Finland, Switzerland, and China.

Due to the division’s extensive production depth and its

wide-ranging offer of metallic and pearlescent products,

ECKART has an excellent global position as a supplier for all

application areas. The division has the most comprehensive

portfolio of products for diverse visual and technical require-

ments. It is the global leader in metal-effect pigments.

The division’s strategy is focusing on expanding its com-

petitive position in technology. By continually developing

new products and application possibilities, it aims to tap

additional market potential. It intends to open up new

growth markets over the complete value chain, including

markets outside of existing application areas. The techno-

logical knowledge resulting from the high production depth

coupled with continuous driving of research and develop-

ment activities serves as a strong basis.

Electrical Insulation

The Group’s competencies in the Electrical Insulation division

are bundled in the development and production of liquid

insulating materials and coatings for the electric and elec-

tronics industries.

The Electrical Insulation division’s wide spectrum of

products includes primary insulation materials for insulating

magnet wires, which in turn are employed in electric mo-

tors, transformers, and generators. The division also delivers

secondary insulation materials, which are used to insulate

entire electrical components, such as coils and motors. Among

the division’s customers are household appliance and infor-

mation technology manufacturers, as well as suppliers for car

manufacturers and producers of wind turbines. It also of-

fers tailor-made solutions for protecting electronic compo-

nents. These products are used, for example, to make cir-

cuit boards or sensors.

As opposed to the manufacturing structures of the two

divisions discussed above that are characterized by a parent

company structure, Electrical Insulation has several sites

with a similar sales volume and a similar number of employ-

ees. Among them are the Italian subsidiaries based in

Ascoli, Collecchio and Quattordio, as well as the sites in the

U.S. (St. Louis) and China (Tongling and Zhuhai). Addi-

tional production sites are located in India, Germany, and

Brazil. The site in Germany (Hamburg) is also an impor-

tant research and development site for the division.

In terms of its primary and secondary insulation mate-

rials business, the division already today plays a leading role

in the world market, which is expected to stabilize in the

years to come, due to the introduction of new insulation

materials tailored to customers’ specifications. Another

essential growth driver for Electrical Insulation is the expan-

sion of the electronic applications area. A large proportion

of research and development work concerns this application

area. By introducing new products, the Electrical Insulation

division aims to give customers an edge in technology, which

will create new potential for the division.

Coatings & Sealants

The Coatings & Sealants division offers a comprehensive range

of products for the printing and packaging industries.

Its main products in the packaging business are specialty

coatings and sealants used as secondary materials in

packaging manufacture. Its portfolio also includes materials

for sealing bottle caps and can ends, as well as coatings

which give packaging materials certain chemical or physical

properties. As many of these products are used in the

food industry, they have to meet high quality requirements.

Further important products are overprint varnishes and

printing inks for customers in the graphics industry. These

products are used to achieve visual effects on packaging

and for other print products, for example press products and

42 Business and Economic Environment

labels. In addition, the division produces adhesives, partic-

ularly for the packaging industry.

The division’s different competencies regarding applica-

tions and technologies are concentrated at different sites

and managed by a joint holding company. Important pro-

duction sites are located in Germany (Bremen, Lehrte,

and Grevenbroich) and in the U.S. (Cinnaminson, Lincoln-

ton, and Wayne). It also has sites in France, Spain, and

China for the development and manufacture of products.

By focusing on the packaging and print product

segments and continually expanding its specialized portfo-

lio, Coatings & Sealants aims to sharpen its profile as a

competent partner for companies in these markets. To this

end, the division is driving new developments in cooper-

ation with customers and adding products to its portfolio

via acquisitions.

Principal Regional Sales Markets

Europe is by far the most important sales region for ALTANA,

accounting for nearly 50 % of the company’s sales. It is

followed by America and Asia, each responsible for around

a quarter of the sales volume. This regional structure was

relatively constant in the last few years, but now it is shift-

ing slightly towards Asia.

All of the divisions have high growth potential, particu-

larly in the Chinese market. For this reason, ALTANA has

continuously expanded its production structure in China in

recent years, adding new plants and laboratory sites. In

America and Europe, however, ALTANA strengthens its pres-

ence primarily by means of acquisitions.

Contributing about 16 % of sales, the Group’s home

market Germany is still ALTANA’s most important sales

market. Nearly 15 % of sales are generated with customers

in the U.S. and about 14 % of the total sales are achieved

in China.

Seasonal Influences

There are no significant product- or market-specific sea-

sonal influences that could lead to a pronounced asymmet-

rical distribution of demand in the course of a business

year.

Group Control, Goals and Strategies

Management and Control

As a stock corporation in accordance with German law,

ALTANA has a dual management and supervisory structure

consisting of two bodies working independently of one

another: the Supervisory Board and the Management Board.

In accordance with the German Codetermination Act

and ALTANA’s articles of association, the Supervisory Board

consists of six employee representatives, who are elected by

the employees for a period of five years, and six share-

holder representatives, who are elected by the Annual Gen-

eral Meeting also for a period of five years. Details on the

composition of the Supervisory Board, on its work in the 2009

business year, and on the compensation of its members

can be found in the Report of the Supervisory Board (page

10ff.) and in the Corporate Governance / Compensation

Report (page 76ff.).

The members of the Supervisory Board appoint the

Management Board, which is responsible for independently

managing the Group in keeping with the company’s inter-

ests. The Supervisory Board advises the Management Board

and monitors the activities of the management. In addition,

it has the right of approval for certain types of business. More

information on the cooperation between the two bodies

and compensation of Management Board members can be

found in the Corporate Governance / Compensation Report

(page 76ff.).

The Management Board implemented the Executive

Management Team to support its work. Together with the


heads of the four divisions, as well as selected executives

of the company, the Management Board regularly discusses

strategic issues and analyzes business development.

Guiding Principles of Company Control and

Overall Aim

As the management holding company, ALTANA AG is

responsible for the strategic control of the Group and deter-

mines the corporate policy and joint values and goals.

Across divisions, the management holding company addition-

ally supports the subsidiaries by means of a centralized

financial management and functional central departments.

Furthermore, the management holding company sup-

ports and promotes the Group-wide implementation of laws,

guidelines, and regulations (so-called compliance mana-

gement).

Company control is geared to a continuous and long-

term increase in ALTANA’s value. Short-, medium-, and

long-term targets or target ranges for different financial

and non-financial performance indicators and for the

operating divisions are derived from this overall aim and

coordinated with one another.

ALTANA’s organizational structure is intentionally de-

centralized. The operating business activities are separated

from the holding company’s tasks and controlled by the

management companies of the divisions and by the divi-

sional heads, who are also in charge of the subsidiaries.

Strategic Orientation of Operating Business Activities

The strategy formulated for the ALTANA Group forms an

essential foundation for company control and serves as

a basis for identifying central control parameters and per-

formance indicators.

ALTANA’s operating activities are focused on business

fields with sustainable growth and above-average profit-

ability, in which ALTANA already has a leading market posi-

tion or in which this seems achievable in the medium term.

At the same time, the underlying market segments have to

have pronounced characteristics of specialty and niche mar-

kets, in which innovativeness and customer orientation are

dominant competitive elements. The strong core competen-

cies of ALTANA’s divisions include customer proximity and

close cooperation with partners in the development of solu-

tions for existing or future needs.

The divisions cooperate closely in order to continually

expand these strengths. This is evident, for example, by

a Key Account Management system set up Group-wide as

well as by various cooperative endeavors to develop new

customer solutions and in materials procurement. In the fu-

ture, these activities will be intensified and comprehensive

synergies will be exploited, forming an important pillar for

increasing the value of the entire Group. Considerable po-

tential is seen particularly in bundling or transferring differ-

ent experiences and market knowledge into joint research

and development projects.

The international presence of the divisions is another im-

portant element of ALTANA’s strategic orientation. Only a

global product and service offer can enable ALTANA to have

close ties with internationally operating customers, who are

very important for the company’s growth. In addition, this

diversifies risks by making the company less dependent on

specific economic and currency zones. In the management of

its divisions and regional control of its activities, ALTANA

relies on a high degree of decentralization. If possible, man-

agement positions are taken over by local employees, in

order to ensure continuity and cultural proximity to custom-

ers, employees, and suppliers.

ALTANA is striving to further supplement its perfor-

mance and company portfolio not only by means of organic

growth, but also via acquisitions. A systematic analysis of

potential acquisition targets is very important. Based on dif-

ferent criteria, the compatibility of the business model of

potential targets is compared with the strategic orientation

and objectives of the ALTANA Group. Of decisive impor-


tance is the similarity of the business model, the corporate

culture, and the technology position, as well as the key

parameters of growth potential and profitability. Acquisi-

tions are only made if they create added value and if the

earnings margin at the Group level is not diluted for a last-

ing period.

The current business performance is continually com-

pared with planned values, and possible deviations are

examined with regard to special factors. In addition, the po-

tential of the business activities is regularly and repeatedly

assessed and analyzed. Based on these findings, together

with those responsible for the operating business, meas-

ures are identified and implemented for those parts of the

company which are not in line with our overall business

strategy. This can result in targeted divestments, a step-by-

step departure from a market, or a strategic realignment

of activities or companies.

Control Parameters and Performance Indicators

Determining and analyzing meaningful and strategy-oriented

key parameters and indicators is a decisive prerequisite for

the Group’s management and control. In addition, financial

resources are allocated based on such analyses, in order to

implement a value-creating investment policy. Moreover, by

taking performance indicators into account in the remu-

neration of managerial staff, we ensure an aligned target

orientation.

Financial performance indicators for determining

growth, profitability, efficiency, and liquidity are very impor-

tant. In a short-term time horizon, these indicators can

be used to analyze business performance and to control

measures. In the long term, they can additionally provide

information on compatibility with strategic targets and on

potential strategic gaps.

The financial performance indicators that ALTANA

primarily uses for control are sales performance, the key

earnings figures EBITDA (earnings before interest, taxes,

depreciation and amortization on property, plant and equip-

ment and intangible assets) and EBIT (earnings before

interest and taxes), as well as development of capital expend-

iture, net working capital (NWC) and return on capital

employed (ROCE). With the exception of ROCE, these key

figures for the Group and the operating divisions are

recorded, analyzed, and discussed by the management on

a monthly basis. ROCE is calculated on the basis of quar-

terly and annual values.

For all of the financial performance indicators men-

tioned, there are medium- to long-term target values which

are examined at regular intervals and adjusted if necessary.

The target for the Group’s sales growth is 10 % on a

long-term average. This increase includes both organic

growth and acquisitions.

In terms of the profitability of business activities, the

EBITDA margin, that is the EBITDA in relation to sales, is an

important key figure for ALTANA. Our target range here is

18 – 20 %. Like growth targets, performance indicators relat-

ed to profitability are used to guarantee that the strategic

focus on rapidly growing markets and markets with above-

average profitability is implemented.

We aim to invest 5 – 6 % of our sales in fixed assets

every year. Via this key figure, capital intensity and liquidity

can be stably controlled, without neglecting investments

in existing assets and assets needed for organic expansion.

By focusing on the key figure net working capital,

we optimize capital employment. Our goal here is to further

improve the key figures at Group level.

The most important control parameter regarding the

capital efficiency in the ALTANA Group is ROCE, which meas-

ures the relationship between earnings and the operating

capital employed, which is provided by equity investors and

lenders. In the calculation of ROCE, the operating capital

available as capital basis corresponds to the sum of equity

and interest-bearing debt (including pension provisions),

which is reduced by financial assets, securities as well as


cash and cash equivalents. The operating earnings, in turn,

result from the EBIT, adjusted for interest expenses for pen-

sion provisions contained in the EBIT, as well as the imput-

ed taxes. Both operating earnings and operating capital are

additionally adjusted for system-related distortions due to

the use of certain accounting regulations, particularly regard-

ing the treatment of acquired intangible assets.

In terms of capital efficiency, Group earnings have to

achieve at least the weighted average capital cost rate. At

present, 8 % is used as weighted average costs of capital.

In addition to financial key figures, there are a series of

non-financial performance indicators. Among the control

parameters analyzed by the management are information on

the efficiency of innovation activities, on the extent of cus-

tomer satisfaction, on the market, competitive, and technol-

ogy positioning, and on the development of the workforce.

Given the Group’s strategic orientation, performance

indicators related to the results of research and development

activities are particularly important at ALTANA. The key fig-

ures regularly used include actual and planned research and

development costs, actual and planned sales generated

from the sale of new products and the profitability of these

new products, the number of patents and patent families,

as well as the technology positioning compared to the com-

petition. For the divisions, different targets exist for research

and development spending in relation to sales. Derived from

this, the target for the Group’s entire research and develop-

ment expenses comprises 6 % of sales.

The relevant key figures for research and development

activities are recorded and analyzed continuously or at

least once a year within the framework of a standardized

evaluation system. Via the development over time and

with regard to planning, changes in innovativeness can be

recognized, their effects on business performance can

be estimated, and possible measures can be introduced.

Another prerequisite for a continuous increase in

ALTANA’s value is a good positioning in its individual mar-

kets. To this end, market developments and competitors

are analyzed. Like the non-financial performance factors in

the area of innovation, information on this issue is gener-

ated via an annual inquiry and analysis, and their effects on

the Group are discussed. The aim is to position the Group’s

individual fields of business among the top three suppliers in

the respective relevant markets.

The principle of customer orientation as a decisive pillar

of our focus on the specialty chemicals business has to

be examined regularly. This is done in a decentralized way

through customer surveys organized by individual Group

companies. The results of the surveys are used to analyze

weaknesses.

Both the financial and non-financial performance indi-

cators are broken down into key figures used for the Group’s

operating divisions and in many cases also for the subsidiar-

ies. The individual targets should ensure that all activities are

uniformly geared to ALTANA’s overall objectives and strate-

gies, but should also take into account the situation of the

respective individual company and the division it belongs to.

The basis for determining and analyzing control param-

eters and performance indicators is integrated financial

reporting, above all in a Group with a decentralized organi-

zation. ALTANA established a transparent reporting system

that makes it possible to record and centrally evaluate de-

fined key figures uniformly and at a high level of quality.

The analysis focuses on the level of the divisions and on the

Group companies which are assigned to them, and is

additionally oriented to regional criteria as well as product

groups.

Survey of Business Performance

General Economic Situation

The global economic crisis, which began back in the fourth

quarter of 2008, got worse at the beginning of the 2009


business year and turned into the most severe recession since

the end of World War II. There were massive economic

slumps in nearly all of the industrialized and emerging coun-

tries. The European countries were most strongly affected.

The Statistical Office of the European Commission estimated

that the gross domestic product of the EU countries fell by

4 %. The U.S. economy shrank by more than 2 %. Only Asia

reported a higher gross domestic product in 2009, prima-

rily driven by China.

But the crisis had very differing effects in the course of

the year. While the global economy was hit hardest in the

first quarter of 2009, the year-to-year decline slowed down

significantly in the following two quarters. In the fourth

quarter, the global economy even improved compared to the

same period of the previous year, which had been very

weak.

The crisis gave rise to strong fluctuations on the raw

material markets. The price of crude oil and metals was par-

ticularly volatile. While a barrel of Brent crude oil traded

at $ 40 a barrel at the beginning of the year, in the fourth

quarter the price rose to almost $ 80, thus doubling in the

course of the year. The prices of important industry metals

showed a similar development. The price of aluminum

reached its low for the year in February / March, at $ 1,250 / t,

but rose to over $ 2,200 / t in the next few months. The

price of copper increased even more dramatically, climbing

from just below $ 2,800 / t at the beginning of the year

to nearly $ 7,100 / t, more than twice as high.

The crisis also caused significant volatility on the cur-

rency markets. While the exchange rate between the

U.S. Dollar and the Euro was $ 1.40 / € at year’s start, it fell

to $ 1.25 / € in the course of the first quarter. But the

Euro steadily appreciated towards the end of the year, clos-

ing 2009 at $ 1.44 / €. The average exchange rate was

$ 1.39 / €.

Industry-specific Framework Conditions

Nearly all of the important chemical product sales markets

were affected by the global economic crisis. In many areas,

the demand for goods and services dropped by double-digit

percentages for the year as a whole. Destocking along the

entire industrial value chain further decreased the demand,

and as a result many markets had to struggle with massive

sales declines far exceeding the gross domestic product de-

crease. Specialty chemicals companies were affected as

strongly as manufacturers of petrochemicals and basic chemi-

cals.

The automotive industry, one of the largest sales mar-

kets for chemical products, was particularly hard hit. Despite

government stimulus programs initiated in many coun-

tries, global production of private and commercial vehicles

declined. Only in China were more cars manufactured than

in 2008 due to continued domestic demand.

The construction industry was adversely affected by the

economic crisis early on, as the collapse of the real estate

sector in the U.S. preceded the collapse of the real economy

and helped trigger the crisis. Building activity in 2009 de-

creased considerably in both the U.S. and Europe. Not even

the economic stimulus plans introduced by the govern-

ments could do much to slow the downswing in construc-

tion.

The strongly declining business in the construction and

automobile sectors had a negative effect on the coatings

and paint markets important for ALTANA. This included both

the large market segment for decorative applications and

the many different application areas for industrial paints.

Since many chemical products are based on raw mate-

rials containing crude oil, the high volatility of crude oil

prices gave rise to further challenges that had to be met dur-

ing the crisis.


Events with a Significant Effect on the Business

Performance

The economic crisis had a strong impact on ALTANA’s busi-

ness activity in 2009. The massive decrease in demand in

some markets led to lower sales. But the intensity of the bur-

dens changed in the course of the year. While the strong-

est sales drops by far were recorded in the first months of

2009, the downward trend weakened in the second quar-

ter. In the second half of 2009, sales grew not only compared

to the very weak first half of the year, but also vis-à-vis the

second half of the previous year.

However, the crisis affected the Group’s essential sales

regions and individual divisions to different extents and at

different speeds.

In the past business year, acquisition- and currency-re-

lated effects had a slightly positive impact on ALTANA’s sales

performance. All of the divisions reported positive sales

effects from acquisitions made in 2008 or in the year under

review, with the biggest sales contributions coming from

acquisitions in the Additives & Instruments and Coatings &

Sealants divisions. Exchange-rate effects also had a pos-

itive influence, particularly the relationship of the Euro

to the U.S. Dollar, to the Chinese Renminbi, and to the

Japanese Yen.

The decrease in sales put a considerable strain on Group

earnings, which, however, could be cushioned significant-

ly by decisive cost-cutting measures. In addition, at times

the prices of important raw materials dropped more than

sales prices, and as a result the materials usage ratio, that is

the relationship between material costs and sales, fell com-

pared to the prior year.

In the 2009 business year, extraordinary burdens re -

sulted from structural measures and impairment tests. These

primarily comprise impairments on property, plant and

equipment and intangible assets in the Effect Pigments divi-

sion, which were not cash-effective.

The impairments were due above all to the negative effects

of the economic crisis and the resulting continual reduction

of the division’s short- to long-term growth and earnings

prospects. Against the background of falling expectations,

the first efficiency-enhancing measures were taken already

in the 2009 business year, and further measures were re-

solved, which led to one-time impairments on property,

plant and equipment.

The annual testing of goodwill, based on the planning

of the companies, resulted in additional impairments, whose

amount was adversely influenced by the rising discount fac-

tor in the course of the year.

Impairments on marketable securities also had a nega-

tive impact on the company’s financial result, whereas

interest expenses and interest earnings had a positive effect

due to lower average annual credit needs.

48 Earnings, Financial, and Asset Situation

Earnings, Financial, and Asset Situation

Business Performance and Earnings Situation

Key figures

2009 2008 ∆ % ∆ % op.1

in € million

Sales 1,181.7 1,341.7 - 12 - 15

Earnings before interest, taxes, depreciation and amortization (EBITDA) 204.1

242.9

- 16

- 20

EBITDA margin 17.3 % 18.1 %

Operating income (EBIT) 49.2 170.3 - 71

EBIT margin 4.2 % 12.7 %

Earnings before taxes (EBT) 39.0 158.7 - 75

EBT margin 3.3 % 11.8 %

Earnings after taxes (EAT) 11.0 103.4 - 89

EAT margin 0.9 % 7.7 %

Earnings per share (EPS) in €

0.08

0.76

- 89

1 Operating deviation, i.e. adjusted for exchange rate as well as acquisition and divestment

effects. This adjustment also applies to other sections in this management report.

Sales Performance

In the 2009 business year, the ALTANA Group achieved sales

of € 1,181.7 million (2008: € 1,341.7 million), 12 % less

than in the prior year. The sales decrease was primarily driven

by the consequences of the economic crisis and the result-

ing downswing in demand. Sales were impacted positively by

exchange rate and acquisition effects, each contributing

2 %. Operating sales fell by a total of 15 %.

The sales performance differed substantially over the

course of the year. In the first two quarters, ALTANA

recorded nominal sales drops of 30 % and 20 % vis-à-vis the

first two quarters of 2008, which were not affected by

the crisis. The demand situation improved significantly in the

third quarter of 2009, with sales only 6 % lower than in

the same period of 2008. In the last quarter, sales were up

by 13 % compared to the fourth quarter of 2008, which was

already hit by the crisis.

While the Group’s operating units showed a heteroge-

neous development, no division reached the prior year’s

sales level. Coatings & Sealants and Additives & Instruments

were less affected by the crisis, reporting sales decreases

of 3 % and 7 %, respectively, while sales in the Effect Pig-

ments and Electrical Insulation divisions were down by

20 % and 16 %, respectively, much lower than the Group

average.

Sales by division

1

4

2

3

23.9 %

23.1 %

35.5 %

17.5 %

in € million 2009 2008 ∆ % ∆ % op.

1 Additives & Instruments 419.9 450.5 - 7 - 12

2 Effect Pigments 282.3 350.7 - 20 - 21

3 Electrical Insulation 272.7 326.5 - 16 - 18

4 Coatings & Sealants 206.8 214.0 - 3 - 8

Total 1,181.7 1,341.7 - 12 - 15

The regional sales distribution changed compared to the prior

year. The demand situation in China and other countries

in the Far East recovered most strongly in the middle of the

year, and as a result the Asian region increased its share

of total sales from 24 % to 27 % in 2009. Amounting to

€ 317.9, sales in these markets were slightly lower than

those in the previous year (2008: € 325.7 million). On the

other hand, the European countries’ share in total sales


fell to 47 % (2008: 50 %). European sales declined by 17 %

in a year-to-year comparison. The American region’s pro-

portion of sales remained stable at 23 %, with sales down

by 12 % for the year, at the level of Group sales.

Sales by region

1

4

2

3

22.7 %

26.9 %

47.0 %

3.5 %

in € million 2009 2008 ∆ % ∆ % op.

1 Europe 555.1 664.8 - 17 - 18

thereof Germany 188.0 231.0 - 19 - 21

2 Americas 267.7 305.9 - 12 - 19

thereof U.S. 178.4 203.7 - 12 - 20

3 Asia 317.9 325.7 - 2 - 7

thereof China 164.3 152.9 7 2

4 Other regions 41.0 45.3 - 10 - 10

Total 1,181.7 1,341.7 - 12 - 15

Order Development

The indicator function of order receipts as a means of fore-

cast for ALTANA’s future sales performance is only useful

to a limited extent, because the period between receipt of

an order and the delivery of products is often only two to

three weeks.

With a short manufacturing lead time, the order situa-

tion therefore largely developed parallel to sales in the

course of the past business year. The continuous improve-

ment of the demand situation, particularly starting in the

third quarter, was reflected by the steady increase in order

entries and order backlogs. But customers’ ordering be-

havior changed compared to the months prior to the crisis

and is now characterized by smaller order sizes with a

higher ordering frequency.

Sales performance per quarter (in € million)

Q12009 251.8

2008 357.6

Q22009 289.2

2008 359.2

Q32009 331.2

2008 350.7

Q42009 309.5

2008 274.2

Earnings Performance and the Development of Key

Positions of the Consolidated Income Statement

The sharp sales declines resulting from the crisis led to a sig-

nificant decrease in Group earnings. Due to the counter-

measures introduced in 2008, however, the earnings losses

could be reduced by cost savings.

Measures applied were varied, depending on where

they were used, and adapted to the volatile demand

development and capacity utilization. This particularly con-

cerned the use of short-time work in nearly all the Ger-

man subsidiaries. The number of employees affected by this

instrument reached its high in March and April. With the

increasing order receipts the intensity abated significantly

starting in the middle of the year. Work-time reductions

made possible by wage agreements with simultaneous pay

cuts were taken advantage of when it was not possible

or sensible to introduce short-time work. Where necessary

and possible, similar instruments were also introduced at

the company’s sites abroad.


A restrictive hiring policy coupled with natural fluctuation

also influenced the reduction of the workforce. In addition

to personnel expenses, the Group-wide cost-cutting plan

focused on other important cost positions. Particularly note-

worthy are maintenance expenses as well as expenses for

consulting services, travel activity, and general marketing.

In the past business year, the Group’s EBITDA amount-

ed to € 204.1 million (2008: € 242.9 million), 16 % lower in

year-to-year terms. The EBITDA margin was 17.3 % (2008:

18,1 %), a satisfactory figure against the background of

the crisis-related sales drop. In addition to the cost savings

achieved through countermeasures, lower material ex-

penses prevented the EBITDA from decreasing to an even

greater extent. The materials usage ratio was 43.2 %

(2008: 45.6 %) and was generally marked by declining raw

materials prices, which rose considerably towards the end

of the year parallel to the recovery of the overall economy.

EBIT totaled € 49.2 million (2008: € 170.3 million). The

development of the EBIT compared to the prior year was

not only influenced by the effects of the sales decline, but

was also strongly influenced by impairments. Impairment

losses on goodwill amounted to € 47.0 million in the Effect

Pigments division, which suffered the strongest sales drop

due to the worldwide economic crisis. In addition, the divi-

sion started to recover later than the other divisions in the

second half of 2009 and developed less dynamically. Within

the framework of the impairment tests carried out in the

fourth quarter of 2009 based on the completed planning, it

became apparent that goodwill had to be written down

to its fair value. The fair value fell due to effects of the crisis

Sales (in € million)

2009 1,182

2008 1,342

2007 1,380

2006 1,294

2005 907

Multi-period overview of the earnings situation

EBITDA (in € million)

2009 204

2008 243

2007 248

2006 186

2005 164


on the short- to medium-term growth and earnings pros-

pects. Furthermore, there were impairments on property,

plant and equipment amounting to € 29.7 million, due

to the structural measures implemented in 2009 or planned

for the future in the Effect Pigments division. More infor-

mation on the impairment of goodwill and property, plant

and equipment can be found in the Notes to the Consoli-

dated Financial Statements (see notes 14 and 15).

As in the previous year, the effects of special factors

were reflected in the financial income for 2009. Apart from

expenses and earnings from borrowing and investment

of cash and cash equivalents, the financial income includes

impairments on long-term investments and financial in-

vestments, which together totaled € 4.8 million and thus

account for a substantial portion of the total financial in-

come of € -11.0 million. Earnings before taxes (EBT) amount-

ed to € 39.0 million for 2009 due to burdens from the

crisis-related decline in demand and special factors (2008:

€ 158.7 million).

Net income (EAT) reached € 11.0 million (2008:

€ 103.4 million), while earnings per share (EPS) amounted

to € 0.08 (2008: € 0.76).

Profit Appropriation Proposal for 2009

Due to the crisis-related significant decrease in earnings, the

Management and Supervisory Boards propose to the

Annual General Meeting to distribute a dividend of € 0.04

per share and to allocate the remaining Group’s income

to retained earnings. This takes into account the ongoing

uncertainty about the economic development.

Segment Reporting


The Additives & Instruments division’s sales decreased by

7 % to € 419.9 million (2008: € 450.5 million). This includes

positive exchange rate influences amounting to 2 % and

acquisition effects of 4 % resulting from the acquisition of

the Dick Peters company (as of December 31, 2008) and

the high-performance additives business of the DyStar Group

(as of March 30, 2009). The course of business in 2009

was marked by a recovery of demand starting in the second

quarter.

The earnings losses resulting from the sales decline could

largely be offset by countermeasures, and consequently,

at € 119.9 million in 2009 (prior year: € 127.6 million), the

division’s EBITDA was only 6 % down on the previous year.

Effect Pigments

As was already becoming apparent in the fourth quarter

of 2008, the Effect Pigments division was particularly affect-

ed by the crisis in 2009. This is predominantly due to the

high dependency of the effect pigments business on the au-

tomotive and construction industries, which were particu-

larly hard hit by the crisis. As a result, sales fell by 20 % to

€ 282.3 million (2008: € 350.7 million). Adjusted for pos-

itive exchange rate effects (1 %) and acquisition effects (1 %),

operating sales were down by 21 %.

Despite substantial positive effects from the implemen-

tation of cost-cutting measures, the EBITDA decreased to

€ 27.4 million (2008: € 67.2 million). Unlike in the other di-

visions, Effect Pigment’s earnings were adversely affected

by a higher materials usage ratio, which worsened above all

due to sales price pressure with a simultaneous surplus of

raw materials fixations from the previous year. Added to that

were one-time special expenses of € 3.8 million from the

transfer of aluminum paste production from the Italian site

to Germany.


With sales down by 16 % to € 272.7 million (prior year:

€ 326.5 million), the year-on-year sales decrease in the Elec-

trical Insulation division was also greater than that of the

Group as a whole. Operating sales, resulting from nominal


sales adjusted for positive exchange-rate influences of 2 %

and minor acquisition effects, fell by 18 %. Sales began to

recover in the third quarter, primarily driven by business in

China.

Despite the significant sales decline, the EBITDA of

€ 52.0 million was slightly higher than in the prior year

(2008: € 49.7 million). This positive development resulted

from cost-reduction efforts and a reduced materials us-

age ratio.

Coatings & Sealants

With sales decreasing by only 3 % to € 206.8 million (2008:

€ 214.0 million), the Coatings & Sealants division’s sales

decline was the lowest in the ALTANA Group. Nominal sales

were positively influenced by the effects of the acquisition

of the business of Water Ink Technologies Inc. effective as of

October 2, 2009, which amounted to 3 % by the end of

the year, as well as positive exchange rate effects of 2 %. The

great robustness of the division’s activities was due to the

high percentage of sales of products for the packaging and

printing industries, on which the crisis had much less of an

impact.

Primarily on account of the acquisition, a lower materi-

als usage ratio, and the successful cost-cutting measures,

the EBITDA rose to € 29.6 million (2008: € 24.5 million). The

acquired Water Ink Technologies business encompassing

the manufacture and sale of printing inks is characterized

by a high real net output ratio, from which the division

already benefited in 2009.

Holding Companies

The EBITDA of the Group’s holding companies improved

to € - 24.8 million (2008: € - 26.1 million) due to the cost-

cutting measures.

Value-oriented Control System

The average operating capital for the business year 2009 was

€ 1,530.3 million (2008: € 1,477.4 million). The increase

over the previous year is primarily attributable to the adjust-

ment for impairments and special effects in the Effect

Pigments division. Operating earnings, which were also ad-

justed for impairments and special effects, amounted to

€ 117.1 million (2008: € 138.4 million) and were consider-

ably lower than in 2008 due to the negative effects of

the economic crisis.

At 7.6 % (prior year: 9.4 %), the return on capital em-

ployed (ROCE) for the 2009 business year reflects the ad-

verse business conditions. For the first time since ROCE was

introduced as a control parameter, the ROCE was lower

than the capital costs of 8.0 %. As a result, the value added

was - 0.4 % or € - 5.4 million.

Financial Position

Balance Sheet Structure

Key figures

2009 2008 ∆ %

in € million

Total assets 1,707.8 1,749.6 - 2

Shareholders’ equity 1,177.6 1,178.4 0

Net debt1 55.0 99.3 - 45

1 Corresponds to the balance of cash and cash equivalents, marketable securities, debt and

employee benefit obligations.

The ALTANA Group’s solid balance sheet structure was not

significantly affected by the financial and economic crisis.

At the end of the business year, total assets were down by

2 % to € 1,707.8 million (2008: 1,749.6 million). On the

assets side of the balance sheet, intangible assets fell by 6 %

to € 478.3 million (2008: € 510.3 million) on account of

impairments on goodwill carried out in 2009. Property, plant


and equipment also declined, to € 551.7 million (2008:

€ 584.1 million), due to impairments in the Effect Pigments

division and the significantly reduced investment activi-

ties. At balance sheet date, non-current assets amounted to

€ 1,061.1 million, € 62.1 million less than the previous year’s

€ 1,123.2 million. Current assets, on the other hand, rose by

€ 20.3 million to € 646.7 million (2008: € 626.4 million).

Trade accounts receivable increased to € 219.4 million (2008:

€ 207.5 million), attributable to the higher fourth-quarter

sales volume compared to the same period in the prior year.

As a result of the focus on cash flow optimization, inven-

tories could be reduced by € 29.9 million to € 189.2 million

(2008: € 219.1 million). Due to the investment of surplus

liquidity, the volume of marketable securities rose to € 95.0

million (2008: € 56.4 million). At € 103.7 million, the

amount of cash and cash equivalents available was roughly

the same as in the previous year (2008: € 104.2 million).

On the liabilities side of the balance sheet, the equity

ratio improved again, from 67 % in 2008 to 69 % in

the year under review. With shareholders’ equity remaining

roughly the same at € 1,177.6 million (2008: € 1,178.4

million), the reduction of borrowings from banks and the

significantly lower provisions led to a disproportionate

decline in debt. Non-current liabilities amounted to € 261.2

million (2008: € 262.5 million), at the same level as

on December 31, 2008, while current liabilities fell from

€ 308.7 million to € 269.1 million.

Net debt was lower than in the prior year, down by

€ 44.3 million to € 55.0 million (2008: € 99.3 million).

Financial Strategy

In general, an efficient control of Group liquidity and allo-

cation of the available financial resources are centrally orga-

nized in the ALTANA Group. If the operating income is not

sufficient to finance business activities and acquisitions, the

management holding company borrows financial resourc-

es to cover financial gaps. Liquidity surpluses are invested

centrally. Should centralized provision of financial resources

or centralized investment of surplus cash and cash equiva-

lents not be possible due to restrictions on capital move-

ments in some countries, or not seem sensible due to cur-

Structure of consolidated balance sheet

Assets Dec. 31, 2009 Dec. 31, 2008

€ million % € million %

Non-current assets 1,061.1 62 1,123.2 64

Inventories and trade accounts receivable 448.0 26 465.8 27

Cash and cash equivalents and marketable securities 198.7 12 160.6 9

Total assets 1,707.8 100 1,749.6 100

Shareholders’ equity and liabilities Dec. 31, 2009 Dec. 31, 2008

€ million % € million %

Shareholders’ equity 1,177.6 69 1,178.4 67

Non-current liabilities 261.2 15 262.5 15

Current liabilities 269.1 16 308.7 18

Total shareholders’ equity and liabilities 1,707.8 100 1,749.6 100


rency risks, then the financial management is carried out

directly by the respective subsidiaries.

At present, ALTANA’s primary source of outside financ-

ing is a syndicated credit line of € 400 million which is

available until 2012. An agreement has been reached stipu-

lating that € 340 million of this sum is available until 2013.

The credit line can be used in different currencies and is made

available by an international banking consortium. As of De-

cember 31, 2009, € 152.5 million had been drawn. ALTANA

also has access to other local smaller bilateral credit lines,

which, however, can only be used individually and in excep-

tional cases. Due to company acquisitions there are still a

few outstanding loans whose early repayment has not been

possible or sensible thus far.

To enhance the efficiency of liquidity control, a centrally

controlled Euro cash pool was set up in the 2009 business

year. The accounts of all Group companies in the Euro zone

are balanced daily; credit balances are transferred to a cen-

tralized ALTANA account and negative balances are offset. In

this way, interest yields can be optimized and allocation

of liquidity improved. A comparable cash pool for the U.S.

Dollar zone will be implemented in 2010.

To minimize risks from possible bank insolvencies,

the ratings and business situation of partner financial insti-

tutes are checked regularly. To limit risks, financial invest-

ments are generally diversified at different banks. In addi-

tion, ALTANA set up a limit system to which all financial

transactions are subject that are exposed to credit or emit-

ter risks.

Off-balance-sheet Financing Instruments

As in the previous years, ALTANA used off-balance-sheet

financing instruments to a very limited extent in 2009. They

mainly consist of purchasing commitments, operating leas-

ing commitments, and guarantees for pension plans. Details

on existing financing instruments can be found in the Notes

to the Consolidated Financial Statements.

Liquidity Analysis

Key figures

2009 2008 ∆ %

in € million

Cash flow from operating activities 224.6 204.5 10

Cash flow from investing activities (197.1) (148.8) - 32

Cash flow from financing activities (28.0) (55.8) 50

The cash flow key figures developed heterogeneously. Al-

though the Group’s net income was adversely affected

by the economic crisis, cash flow from operating activities

amounted to € 224.6 million (prior year: € 204.5 million)

and was therefore 10 % higher than in 2008. The negative

earnings performance was more than compensated for,

particularly due to reductions in net working capital.

The cash flow from investing activities reflects the lower

investment activity due to the crisis and the increased acqui-

sition activity in 2009. In the past business year, deferred pay-

ments of € 63.9 million were made in connection with the

sale of the pharmaceuticals division in 2006, re sulting from

the completion of the tax audit up until the time of the

sale, as well as from guarantees agreed upon in the purchase

contract. In all, cash flow from investment activities amount-

ed to € - 197.1 million and was therefore higher than in the

previous year (€ - 148.8 million).

Cash flow from financing activities was € - 28.0 million

in 2009 (2008: € - 55.8 million). It was influenced in par-

ticular by the lower dividend payment and the repayment

of current debts.

Capital Expenditure

Towards the end of the business year 2008, the planned

capital expenditure program for 2009 was examined

against the background of the drastic deterioration of the


demand situation and the investment volume was curtailed

significantly. Particularly investments to expand produc-

tion capacities were postponed or extended over longer pe-

riods of time. In 2009, the focus was on carrying out ur-

gently needed replacement investments or projects which

could enhance efficiency in the short term.

Capital expenditure totaled nearly € 54.0 million (2008:

€ 107.9 million), corresponding to just under 5 % of sales.

€ 48.2 million of this amount was invested in property, plant

and equipment, and € 5.8 million in intangible assets. At

€ 33.0 million, the largest share was invested at German

sites.

The Additives & Instruments and Effect Pigments

divisions invested similar amounts, € 19.7 million and € 18.5

million, respectively. The Additives & Instruments invest-

ments include the final payments for the new ALTANA head-

quarters, which went into operation in 2009 and is locat-

ed on the grounds of a subsidiary in Wesel. Investments in

the Effect Pigments division primarily related to the adjust-

ment of production capacities at its main site in Güntersthal

to integrate acquired activities or activities transferred

within the division. The Electrical Insulation division invested

€ 10.2 million. The largest individual project was the com-

pletion of a photovoltaic plant at one of the division’s Italian

sites. The Coatings & Sealants and Group holding company

invested € 3.2 million and € 2.4 million, respectively, in

smaller projects.

Capital expenditure by division

1

5

2

3

34.2 %

18.9 %

36.5 %

4.5 %

4 5.9 %

in € million 2009 2008 ∆ %

1 Additives & Instruments 19.7 52.7 - 63

2 Effect Pigments 18.5 30.8 - 40

3 Electrical Insulation 10.2 17.9 - 43

4 Coatings & Sealants 3.2 5.1 - 37

5 Holding 2.4 1.4 70

Total 54.0 107.9 - 50

Capital expenditure ALTANA Group (in € million)

2009 54

2008 108

2007 91

2006 75

2005 45

Germany Abroad

33 21

26 19

44 31

58 33

71 37

56 Earnings, Financial, and Asset Situation I Research and Development

Overall Statement by the Management Board on the Business Situation

The economic crisis severely affected the ALTANA Group’s busi-

ness performance in 2009. In addition to the downswing in

demand, impairments also had a negative impact on our earn-

ings. But early and consistent countermeasures to cut costs,

as well as a Group-wide reduction of the materials usage ratio,

softened the effects of the crisis on Group earnings. We are

using the crisis to further improve the Group’s long-term posi-

tion. The optimization potential that was discovered due to

the negative business performance is being consistently tapped

and our experiences gained from implementing a worldwide

cost-cutting scheme are being used to sustainably improve cost

structures. Therefore, we are confident that we will be able

to pick up on the strong growth of the past if the business envi-

ronment stabilizes or continues to improve.

Research and Development

Growth rates that outperform the market and high profit-

ability can only be achieved by means of continuous innova-

tions. Therefore, our goal is to constantly expand our re-

search and development activities and gear them closely to

our customers’ current and future needs. For ALTANA, in-

novation means working on new product formulations for

customers, opening up new applications, and modifying

and improving technologies and production processes.

Our research and development activities did not abate

even in the difficult 2009 business year, and ALTANA

continued to invest in new growth potential. Research and

development expenditure amounted to € 71.6 million,

roughly equivalent to that of the prior year (2008: € 72.1

million). Due to the crisis and the resulting sales decreas-

es, the ratio of R&D expenditure to sales in percent even in-

creased to 6.1 % (2008: 5.4 %). The fact that ALTANA

continues to invest disproportionate amounts in innovation

despite the crisis underlines the importance of research

and development activities for the Group.

We invested the largest share into the development of

new and the further development of our existing products.

In many cases, we did so in close cooperation with custom-

ers, for whose specific applications and problems we de-

velop appropriate solutions. Of particular importance are the

technology laboratories, through which ALTANA enables a

high degree of customer, service, and innovation orientation

R&D locations and employees

Research and service locations R&D employees

Additives & Instruments 19 286

Effect Pigments 9 228

Electrical Insulation 10 140

Coatings & Sealants 9 106

Holding – 3


worldwide. Here, researchers and application technologists

work on initial ideas and later carry out practical tests. In ad-

dition, we have central development sites which are

equipped with highly specialized facilities and can test new

products and applications in an environment correspond-

ing to our customers’ production procedures. In the past busi-

ness year, preparations began to expand the Additives &

Instruments division’s research and development capacities

at the Wesel site.

Our continuous further development of products is

strongly geared to current and expected future customer

needs. To retain access to new technologies for a better

and faster implementation of solutions, ALTANA gets involved

in the development of new key technologies and applica-

tions at an early stage. Among these technologies are nano-

technology and industrial biotechnology. If required, we

enter into alliances with universities or other companies, or

acquire know-how needed to increase our product or

technology competencies.

Our development work is closely related to our core

competencies. We continually develop our expertise in new

markets, thus creating new applications and growth po-

tential for ALTANA. At present, a special focus is set on de-

velopments in the areas of functional surfaces and poly-

mer electronics.

To be able to optimally utilize the competencies existing in

the Group and our globally interlinked know-how across

the divisions, we promote information exchange and joint

projects. This is primarily coordinated by the central inno-

vation management at the holding level. Our annual innova-

tion conference is one of the most important instruments.

In the course of 2009, the number of employees work-

ing in research and development increased to 763, com-

prising 16 % of the Group’s total workforce. As a result of

our research and development activities in the past busi-

ness year, 34 new patent families could be registered. A pat-

ent family can consist of more than one patent.

R&D expenses (in € million)

2009 71.6

2008 72.1

2007 67.4

2006 67.7

2005 46.5

58 Employees

Employees

Development and Structure of the Workforce

In the course of business year 2009, the number of em-

ployees continually decreased, primarily due to fluctuation

coupled with a restrictive hiring policy. At the end of the

year, however, on account of the acquisition of the business

and all of the employees of Water Ink Technologies, the

workforce grew to 4,789 (2008: 4,791). The Water Ink Tech-

nologies business was integrated into the Coatings & Seal-

ants division in October. On December 31, 2009, this busi-

ness had 140 staff members.

An important reason for the described development was

the introduction of a qualified hiring freeze, which was

implemented Group-wide back in 2008 as a reaction to the

significant decline in demand. The measure stipulated that

free positions, including jobs becoming available because

temporary contracts expired or due to natural fluctuation,

could only be filled if the position was a strategic one or if

there was a demonstrably urgent need for the position.

As personnel expenses at ALTANA account for a signifi-

cant part of total costs, both in 2008 and 2009 a number

of further measures was introduced to overcome the effects

of the crisis. Among them was the instrument of short-time

work, which was used at almost all of our German sites, as

well as the possibility of reducing the staff’s working hours

and remuneration as regulated in the collective wage agree-

ment.

To make capacities more flexible and as a reaction

to the lower demand, loan employment and temporary jobs

were largely curtailed and flex time was made use of in

so far as possible.

The scheduled adjustment of salaries for employees

to whom the regular pay scale does not apply was suspend-

ed in 2009. At the same time, the variable compensation

component for exempt employees and managerial staff –

partly dependent on earnings performance – helped cut

personnel costs. In addition, employee training measures

already planned for 2009 – if they were not urgently nec-

essary – and the introduction of new retirement plans were

postponed to soften the effects of the demand crisis on

costs.

All of the essential measures taken in the personnel

area were implemented in close cooperation with the works

councils and union representatives. The necessary steps

were accompanied by broadly based communication of the

reasons and explanations of all the effects on employees.

This was an important prerequisite for gaining the employ-

ees’ understanding and support for the measures taken

and for preserving the workforce’s trust and motivation.

Employees by division

1

5

2

3

39.2 %

18.5 %

24.8 %

1.4 %

4 16.1 %

Dec. 2009 Dec. 2008 ∆ %

1 Additives & Instruments 1,189 1,214 - 2

2 Effect Pigments 1,878 1,943 - 3

3 Electrical Insulation 886 920 - 4

4 Coatings & Sealants 770 652 18

5 Holding 66 62 7

Total 4,789 4,791 0

In Germany, we implemented various measures to prevent

structural redundancies as a reaction to the sales crisis.

But although this was a basic principle for the whole Group

and thus all regions from the very outset, we could not

completely refrain from structural measures in 2009. How-


ever, this was not solely a short-term reaction to the eco-

nomic crisis, but was connected with long-term structural

requirements.

The reduction of the workforce resulting from the

measures introduced is reflected differently in the different

divisions. In the Additives & Instruments division, the num-

ber of employees fell in the course of the year by 2 % to

1,189. Effect Pigments reported a 3 % decrease. Employing

1,878 people at the end of the year, the division contin-

ued to account for the largest share of the Group’s total

workforce. Staff numbers also dropped in the Electrical

Insulation division in 2009. The number of employees was

down by 4 % to 886 at balance sheet date. Of the four

operating divisions, only Coatings & Sealants increased its

workforce, but solely due to the acquisition made during

the business year. At the end of the year, the division’s sub-

sidiaries employed 770 people, an increase of 18 %. The

Group holding companies also reported higher employee

numbers, particularly due to regrouping of employees

from other Group companies and to filling strategic posi-

tions that were open at the end of 2008.

Employees by area of operation

1

4

2

3

15.9 %

15.9 %

52.4 %

15.8 %

Dec. 2009 Dec. 2008 ∆ %

1 Production and logistics 2,509 2,522 0

2 Marketing and sales 763 765 - 4

3 Research and development 763 750 1

4 Administration 754 754 - 1

Total 4,789 4,791 0

Employees by region

1 2

3

16.3 %

14.1 %

69.6 %

Dec. 2009 Dec. 2008 ∆ %

1 Europe 3,333 3,393 - 2

thereof Germany 2,739 2,772 - 1

2 Americas 781 697 12

thereof U.S. 742 658 10

3 Asia 675 701 - 4

thereof China 371 369 1

Total 4,789 4,791 0

On account of the acquisition of the business of Water Ink

Technologies, which has employees in the U.S. and Canada,

the regional distribution of Group employees shifted to-

wards the American region in 2009. The largest percentage

of the workforce by far continued to be employed in Ger-

many (57 %), mainly at our sites in Güntersthal (Effect Pig-

ments) and Wesel (Additives & Instruments and the hold-

ing company). The proportion of employees at American sites

rose to 16 %, while 14 % of the Group’s staff worked for

Asian companies.

Philosophy and Initiatives In spite of the crisis, in the past business year ALTANA con-

tinued to work on enhancing the appeal of the Group as an

employer. By doing so, the company aims to create and

maintain the conditions needed to obtain competitive, mo-

60 Employees I Other Information

tivated employees and managers and to bind them to the

company in the long term.

Special focus was put on the further development of

employee retirement benefits. This was a reaction on the

part of the Group to the accelerated demographic devel-

opment and the number of government initiatives imple-

mented in recent years, which present new challenges to

employees.

Starting in the 2010 business year, ALTANA will offer

new instruments in this area to be able to include further

Group companies and regions. The introduction of life

work-time accounts in 2010 will offer a new possibility of

retirement benefit management. Apart from the compa-

ny’s contribution of a demographically related sum as agreed

in the collective agreement, employees can deposit addi-

tional amounts in their life work-time accounts and thus in-

fluence the age at which they receive retirement benefits.

Thus, ALTANA now offers its employees the entire spectrum

of instruments through which they can actively shape the

financing of their retirement plans and decide themselves

when to retire from the company.

ALTANA has always attached a great deal of importance

to a largely variable and motivating incentive system. For

example, the compensation system for employees and ex-

ecutives provides for a basic salary as well as a bonus,

which comprises between 20 and 70 % of the total income

depending on the level of management. The amount of

the variable compensation component depends on the per-

sonal targets achieved and on the economic success of the

respective division and the whole Group. With the stronger

focus on Group liquidity in 2009, the achievement of cer-

tain net working capital targets was introduced as a compo-

nent of the evaluation system for the first time.

In 2010, additional success participation components

will be added to this basic concept of variable compensation.

Plans will be set up for employees and managers that aim

to have the character of share-based compensation mod-

els and to ensure that employees and managers can partici-

pate in the ALTANA Group’s sustainable value and earnings

growth. The Group’s managers in particular will be bound

to the company in the long term via personal investments

and will be motivated to help shape ALTANA’s success. In

these models, the payment of profit-sharing sums depends

on the development of Group earnings and whether the

company achieved a specific value based on multiples derived

from a reference group of listed chemical companies.

Following a global employee survey, different areas

were identified in which ALTANA’s attractiveness as an em-

ployer can be further developed. In 2009, work groups

took up these issues and initiated or implemented new in-

struments or measures, which have a positive influence

on the working environment of individual employees and

interaction between all employees. Examples include the

areas of health protection, internal communication, career

development, and the compatibility of family life and

career.

In order to continuously further develop and train

employees and prepare them for higher tasks within the

Group, a program was added to the existing international

and national training programs which promotes interdisci-

plinary and cross-border moves of employees within the

Group.

Furthermore, the possibilities of identifying employees

with above-average development potential are being

increased. On the one hand, university marketing is being

steadily expanded to enable talented individuals to begin

their careers at ALTANA. On the other, in 2010 a program

is to be established in cooperation with members of the

works council through which employees can better recog-

nize their strengths, potential, and goals, so that they

can choose individual career paths within the Group at an

early stage.


Description of Essential Features of the Internal Control and Risk Management System Re-garding the Group Accounting Process in Accor- dance with Section 315 (2) of the German Commercial Code (HGB)

At ALTANA, monitoring of the Group accounting process is

a component of our integrated control and risk manage-

ment system and serves to identify and limit risks which pose

an obstacle to the consolidated financial statements’ con-

forming to regulations and thus could lead to erroneous

statements in external reporting (information on ALTANA’s

risk management system can be found on pages 64ff. of this

report). Essential accounting-related risks result from ex-

traordinary and non-routine issues, for example from record-

ing of acquisitions and divestments, accounting of finan-

cial instruments, dealing with critical and complex processes

at the end of the year, as well as possible criminal activities

or erroneous applications.

With regard to the Group accounting process, the

internal control system includes an internal control system

supplemented by process-integrated and cross-process

monitoring components.

The internal control system regulates the responsibilities

and documentation processes of all areas and employees

involved in Group accounting. At ALTANA, the accounting

process is decentralized and the respective companies are

responsible for the organization of bookkeeping in accor-

dance with Group specifications and country-specific par-

ticularities. The procedures are set up taking into account

essential integrated process controls (dual control princi-

ple, separation of functions, clear responsibilities, access

regulations in the IT system, among others). In addition,

the managements of the subsidiaries are obliged to make

sure that the annual financial statements are correct and

complete and have to confirm this.

Other Information

In the holding company, the Finance & Controlling depart-

ment ensures that the accounting-relevant regulations

pertaining to the Group are adhered to. To enable a stan-

dardized procedure, the required guidelines, handbooks,

process descriptions, instruments, training programs, and

consulting services are made available to the Group com-

panies. Furthermore, certain parameters and calculations are

specified and carried out centrally to make accounting

uniform. External reports and statements are obtained on

special topics, for example retirement benefits and com-

pany mergers.

The process documentation is checked regularly, opti-

mized based on observations from the process, and adapted

to new conditions. Developments in the national and inter-

national rendering of accounts are continually monitored. Rel-

evant topics are identified and, depending on the priority

of the issues, corresponding implementation projects are de-

rived and communicated worldwide.

To ensure that internal and external reporting deadlines

are kept, the process of generating the financial statements

is geared to a Group-wide binding schedule, which is moni-

tored and which has to be confirmed by all affected units.

The process-integrated monitoring system includes both

manual and IT-supported control measures. The manual

monitoring measures begin already at the level of the Group

companies with the auditing of the financial statements

by the respective auditor or Group auditor. In addition, at

the division and Group holding company level, the data

provided are checked for plausibility by means of a thorough

analysis of key figure developments undertaken by the

Group’s accounting and controlling departments. Further-

more, monitoring controls are made by additional special-

ist departments in the holding company, which focus on spe-

cific components of the financial statements or processes,

for example tax auditing and compliance. Moreover, in ev-

ery process related to the preparation of the financial

statements, essential changes to the units incorporated in

62 Other Information I Subsequent Events

the Group financial statements are investigated and eval-

uated in order to continually identify possible accounting

issues.

In the first step, IT-supported process controls include

decentralized checking of the Group accounting data in the

local IT systems. The transfer of the certified report data of

the Group companies into the Group’s consolidation system

is regulated via a clear definition of processes and inter-

faces to derive the individual components of the consolidat-

ed financial statements. Subsequently, at the holding com-

pany level the data in the consolidation system is validated

and checked for plausibility to prevent erroneous data

from being processed into the consolidated financial state-

ments. Required corrections are generally made at the

level of the individual Group companies; after every report

phase feedback is provided on every single company’s

improvement potential.

Cross-process monitoring systems encompass the

checking of issues and processes set up in Group account-

ing by Group committees (the Supervisory Board, the

Audit Committee of the Supervisory Board), the auditors of

the financial statements and the consolidated financial

statements, as well as the Internal Audit department within

the holding company. Identified optimization potential

culminates in adjustment projects to ensure the Group-wide

transfer of best-practice solutions.

Explanatory Report Regarding the Information in Accordance with Section 315 (4) of the German Commercial Code (HGB)

Details on the composition of the issued capital and infor-

mation on participations in capital can be found in the

Notes to this report, on pages 133 (note 22: Equity) and

156 (note 30: Related Party Transactions). In their deci-

sion to acquire or sell shares, ALTANA AG shareholders are

not restricted by German laws or by the company’s articles

of association. Nor is the Management Board aware of any

restrictions which affect voting rights or the transfer of

shares of ALTANA AG. Employees of the Group who are

shareholders in the company can exercise their voting

rights directly. There are no shares with special rights that

grant control authority.

In accordance with section 179 of the German Stock

Corporation Act, changes to the articles of association

require a resolution by the Annual General Meeting. Sec-

tion 23 (1) of the articles of association stipulates that

resolutions made by the Annual General Meeting require

the simple majority of the votes issued, as long as the

law does not require a different kind of majority. This is the

case, among other things, concerning changes of the ob-

ject of the company, capital increases and capital reductions,

where a majority of three fourths of the nominal capital

represented when passing the resolution is required.

The Shareholders’ Meeting of ALTANA AG authorized

the Management Board, with approval from the Supervisory

Board, to issue new no-par value shares.

In accordance with section 4 (4, 5, and 6) of the arti-

cles of association, the authorization comprises an increase

of the company’s share capital by up to € 70 million; it

expires on April 30, 2013. More information on this autho-

rization can be found in the Notes on page 133 (note 22).

On account of the resolution reached at the Annual

General Meeting on May 5, 2008, the Management Board

was authorized to buy back a total of 10 % of the compa-

ny’s shares via the stock exchange until October 31, 2009.

As long as the shares that were acquired were not resold

on the stock exchange, the Management Board was autho-

rized to sell the shares for cash at a price close to the

market price to third parties, retire these shares, or offer or

transfer them as quid pro quo within the framework of

company acquisitions or participations.


There is an agreement which in the event of a change of

control at ALTANA AG can have significant effects on the

company’s business and financing. It concerns a syndicated

credit line of € 400 million agreed with a consortium of

banks. According to the credit agreement, ALTANA has to

indicate a change of control to the lenders, who are then

entitled to prematurely terminate their participation in the

credit line and to demand repayment of the loan. On

December 31, 2009, only part of this credit line had been

drawn (€ 152.5 million).

Report in Accordance with Section 312 of the German Stock Corporation Act

For the financial year 2009, the Management Board of

ALTANA AG prepared a report in accordance with section

312 of the German Stock Corporation Act on relations

with related companies and concluded that the consider-

ation received by ALTANA AG for the transactions listed

in the report were adequate considering the circumstances

known at the time the company entered into said transac-

tions.

Subsequent Events

On February 2, 2010, SKion GmbH informed us that it held

95.04 % of the shares in ALTANA AG and, pursuant to

section 327a (1) of the German Stock Corporation Act, re-

quested that ALTANA convene a shareholders’ meeting

at which a resolution was to be passed on the transfer of

the shares held by the minority shareholders to SKion

GmbH in return for an appropriate cash compensation

(squeeze out).

64 Risk Report

Risk Report

With a sales decrease of 12 %, the past business year was

one of the most difficult years in ALTANA’s history. A more

precise analysis of the company’s earnings, however, shows

that ALTANA succeeded in softening the effects of the

sales losses on earnings by means of decisive action and

thus achieved ambitious operating profitability even in

the crisis year. To be sure, this outcome is also due to the

company’s organization and the resulting integrated risk

management and control system concept.

Integrated Risk Management

ALTANA’s corporate strategy is the basis of its risk policy.

Concrete activities and measures are derived from the cor-

porate strategy. The task of the risk management system

is to recognize, identify, evaluate, and document strategic

and operating risks in order to be able to take appropriate

measures based on solid data.

ALTANA counters the challenges of risk management

with an integrated risk management and control system.

The completeness of the recording of risks while avoiding

redundancies, the risk appraisal partially influenced by

subjective expectations, the uniform evaluation of risks, and

recording of overall contexts play a special role. As it is

not possible to completely record the complexity of our busi-

ness, we will concentrate here on the essential parameters.

Apart from the established structures and processes, a

general transparency relating to the development of busi-

ness and the business environment, which must always be

based on open communication, is essential for an ade-

quate risk management. For us, it is important that the incor-

poration of the responsible management within the risk

management processes is guaranteed.

We control risks via various information, communica-

tions, and monitoring processes established in the company.

Important components include the annual strategy process,

the planning and forecast processes, the established compli-

ance organization, the monthly financial reporting, the

implemented internal control system, in general, which is

oriented to the internationally acknowledged COSO

model, as well as systematic investigation, evaluation, com-

munication, and documentation of the risks within the

framework of risk management in a narrower sense. Apart

from the annual risk inventory and overall investigation,

acute risk changes are addressed by a defined ad-hoc risk

process.

Risk management at ALTANA is based on a clear as-

signment of responsibilities, regulated business processes,

and an adequate reporting system. Within the scope of

these processes, we have the options of avoidance, protec-

tion against, or deliberate assumption of a risk position.

ALTANA’s system for early risk recognition was audited

in accordance with section 317 (4) of the German Com-

mercial Code (HGB) and was deemed capable of recogniz-

ing dangerous risks at an early stage.

Economic and Industry Risks

The massive sales decline at the end of 2008 and in the first

half of 2009, as well as the measures subsequently intro-

duced, show that ALTANA’s business reacts to cyclical chang-

es at an early stage. Our most important customers are in

the automobile, printing, electronics, packaging, cosmetics,

and constructions industries, as well as the mechanical

engineering sector. Thus, our customers are active in eco-

nomically sensitive industries. However, the packaging

market, which is served by our Coatings & Sealants division,

reacts relatively slowly to economic impetus, and thus

reported the lowest sales losses in the past business year. In

addition to economic effects, trends in customer behavior

also have an impact on business performance. Sales in the

Effect Pigments division were particularly influenced by


customers’ preference for silver and gold colored paints and

packaging materials. If consumers choose these colors to

a lesser degree, there is a lower demand for aluminum and

bronze pigments.

Regional economic fluctuations can be partially compen-

sated for by our global presence and our significant sales

on European, American, and Asian markets. In our planning,

we have assumed that the global economy will recover

slightly in the next year. But we cannot rule out further set-

backs within the framework of the development of the

economic environment. The fiscal and monetary policies are

of decisive importance for a further recovery, particularly

regarding interest rate development.

As a result of ALTANA’s broad diversification no single

product or customer has a significant influence on our

business performance (in 2009, around 3 % of Group sales

was achieved with our biggest customer).

We react to unexpected economic downturns based on

the situation, but normally we immediately implement

cost-cutting measures using the flexible instruments available

to us, particularly concerning adjustment of personnel

costs. As a rule, structural adjustments of the cost structure

are made when our expectations regarding satisfactory

business are not met in the medium or long term and against

the background of strategic restructuring.

Corporate Strategy Risks

Our corporate goals include customer orientation, innovation,

having a global presence, maintaining leading market

positions, and sustainable growth. We pursue these aims

with an organizational model that delegates tasks to de-

centralized units wherever sensible rather than central con-

trol. The organizational and Group structure is an expres-

sion of our company and thus of our risk management phi-

losophy. The first risk manager is therefore invariably the

respective responsible local management. We have selected

the structures such that relevant information – with risks

being a component of the flow of information – is recog-

nized and communicated without delay.

Risks Regarding Global Presence and Customer

Proximity

For our company to be successful, it is essential that we op-

erate close to our customers. We are represented by our

own organizations in all important markets. The customer

proximity connected with this enables us to offer solutions

tailored to the specific needs of our customers. Many of our

development projects are carried out for or together with

our customers, which makes it probable that marketable

products will be developed. If we do not manage to main-

tain close relationships with customers, this will have a neg-

ative effect on our future business performance.

ALTANA expects to achieve disproportionate growth

in the Asian markets in the future compared to the estab-

lished regions of Europe and America. In some countries

which ALTANA has identified as growth markets and where

it thus made corresponding investments, the political, so-

cial, economic, and legal general conditions are less stable

than in Western Europe. Furthermore, business activity

can be impaired by an inadequate infrastructure, currency

and trade limitations, or by insufficiently developed legal

and administrative systems.

Risks Regarding Innovations and Market Leadership

Moreover, ALTANA’s competitive success strongly depends

on our innovative ability, our market position compared to

the competition, and our technology leadership.

ALTANA is the market and / or technology leader, or

is striving for this position, in all of the areas in which we are

active. If in the future we cannot satisfy the needs of our

customers with innovative solutions, as we are able to do

right now, this would impact negatively on our business

66 Risk Report

performance. Our know-how regarding the manufacture and

proper use of our products is partially protected by patents

and other protection rights. The protection of this know-how

is essential for the success of our company. Know-how

that cannot be patented or that is not patented is also of

outstanding importance for our success. If our competi-

tors manage to catch up with us in terms of the know-how

lead we have in some areas, or to patent technologies

which we already use without registering our own patent,

this would likely have a negative effect on the develop-

ment of our business.

Due to the importance of innovations for our business

model, we invest a disproportionate amount in research,

compared to the industry average, but primarily in develop-

ment of new products, so that we can maintain our com-

petitive edge.

Sustainable Growth

ALTANA wants to achieve an annual average growth of 10 %

in the medium to long term. This growth should be both

organic and generated through acquisitions. Acquisitions are

complex transactions involving high risks. If an acquisition

project does not fulfill the expected goals or synergy effects,

this can lead to a restriction of the further financial scope

of the company as well as to impairments on goodwill and

other acquired assets (impairment risk). ALTANA reduces

these risks by undertaking a comprehensive examination of

the object of acquisition (due diligence), by transferring

certain risks to the seller, and through a multi-stage analysis

and approval process.

In 2009 for the first time, ALTANA carried out more ex-

tensive impairments on acquisition-related property, plant

and equipment and goodwill, which concerned the Effect

Pigments division acquired in 2005. Beyond that, we regard

the risk of impairment relating to acquisitions as being low.

In the 2009 business year, no acquisitions were made which

had a significant effect on ALTANA’s asset, financial, or

earnings situation.

With investments in buildings, technical facilities,

and machines, there is the risk of faulty need analyses which

could lead to inadequate utilization. We counter this risk

with approval processes for planned capital expenditure de-

fined Group-wide.

Performance-related Risks

Procurement

For the manufacture of our products it is important that the

right raw materials are available in the right amount and

quality at the right time. A secondary aim of purchasing is

providing the goods and services needed with defined

qualities at attractive conditions.

For certain products, we need raw materials that are

offered by only a few suppliers. In addition, disruptions of

suppliers’ activities can lead to capacity bottlenecks for

limited periods of time and thus to supply limitations. We

counter this situation, on the one hand, by looking for,

building up, and subsequently qualifying further suppliers,

and, on the other hand, through targeted replacement

of critical raw materials in our formulations. Availability of

important raw materials is guaranteed via specification

of minimum amounts.

The quality of the materials provided can have a signifi-

cant effect on the properties of the products we market.

For this reason, we systematically examine the quality of crit-

ical materials right after they are delivered in accordance

with specified control and testing procedures.

The prices of many raw materials and of energy have

been subject to strong fluctuations in the recent past.

As a rule, ALTANA has middle-range demand needs on the

market. Due to their market power, larger competitors


can push through better prices and thus sometimes achieve

cost advantages. While retaining the high flexibility of our

decentralized business units, ALTANA tries through central

purchasing to enable procurement of certain raw materials

at optimum conditions.

A large part of our raw materials are offered on the

world market. These products include solvents, whose price

development correlates with the development of oil prices.

In addition, metals, particularly aluminum, copper, and zinc,

constitute a large proportion of the Effect Pigments divi-

sion’s raw materials applications. We try to compensate for

short- to medium-term fluctuations of the market prices

of these raw materials by shaping delivery contracts accord-

ingly.

Sustained cost increases are translated into correspond-

ing price increases by means of price calculations. For

products and services whose unique selling propositions are

less pronounced, in some cases cost increases may not

be passed on completely, which has a negative effect on

our profitability.

Production and Logistics

Our production processes can be impeded by technical

or other disturbances. We try to reduce the effects of such

disturbances by setting-up alternative production plants,

particularly for critical semi-finished and finished products.

Production, filling, packaging, storage, and transport of

chemical products are exposed to the risk of disturbances

which can lead to harm to people or damage to the envi-

ronment or property. Moreover, in the Effect Pigments divi-

sion there are risks related to the processing of metals.

Within the scope of the production process, extremely

small particles (so-called nanoparticles) are manufactured

and processed. At present, we have no evidence that these

particles cause damage to the environment or human

health. Nevertheless, we are attentively observing further

studies in this area.

We counter production and logistics risks through appropri-

ate quality assurance measures within the framework of

the quality, health, environmental, and safety management

as well as by concluding insurances.

Environmental Protection

As a producing company, ALTANA is subject to extensive

environmental protection regulations as well as to chemicals

and hazardous substances laws. In keeping with these re-

quirements, ALTANA has high technical and safety standards

when it comes to building, operating, and maintaining

production plants. With production sites in all of the impor-

tant markets, we are amenable not only to German law,

but also to the legislation of the EU and other countries. Fu-

ture sharpening of regulations relevant to ALTANA’s busi-

ness operations can lead to considerable investments or other

expenses, can have negative effects on our production

costs and our product portfolio, or can trigger significant

liability risks.

Financial Risks

ALTANA achieves a large part of its sales outside the Euro

zone, and so exchange rate fluctuations influence the

amount of earnings. To limit transaction risks from existing

business or business that is expected with a sufficient

degree of certainty, ALTANA implements forward foreign

exchange contracts. Speculative forward contracts are

not concluded.

At present, ALTANA is financed to only a small degree

by debt. Our net debt amounted to € 55.0 million at the end

of the business year.

Interest payments for existing loans are safeguarded

against interest rate changes to a very large extent. In addi-

68 Risk Report

tion, credit conditions (covenants) are continually monitored.

To ensure liquidity, particularly regarding potential future

liquidity needs, we have access to a line of credit of € 400

million provided by a consortium of banks. We use surplus

liquidity not needed for operating business or investments in

the short term to reduce financial liabilities. Surplus liquid-

ity of European companies is transferred to a Euro cash pool

set up by the holding company and invested exclusively

with business partners who meet our credit rating require-

ments. Our essential worldwide cash and cash equivalents

positions as well as short- and medium-term financing needs

are monitored centrally.

More information on our evaluation and accounting

procedures for hedges can be found in the Notes on page

142 (note 28).

Risks from Investments

Due to the setback in economic activity towards the end of

2008 and above all in the first half of 2009, the earnings

and distribution perspectives of ALTANA’s investments have

worsened. This concerns both fully consolidated compa-

nies and investments reported at equity.

On account of the Effect Pigments division’s clouded

business prospects we recorded impairment losses for intan-

gible assets and property, plant and equipment, based on

an impairment test, of € 76.7 million in the 2009 business

year. As a result, on December 31, 2009, goodwill of

€ 198.5 million was recorded in ALTANA’s balance sheet.

Additional impairment losses on investments of € 1.8

million were recorded in the period under review. Further

information on impairments on investments can be found

in the Notes on page 129 of this annual report (note 16).

Personnel Risks

Our success is the result of the work of our employees.

Competition for specialists and managers remains fierce. In

Europe, we expect to have increased difficulty recruiting

and binding qualified specialists and managers in the me-

dium to long term. Thus, there is the risk that in the fu-

ture we might not have access to qualified personnel in the

required scope.

An expression of our efforts to bind employees to the

company in the long term is the fact that in Germany no

employee was laid off as a result of the demand crisis in the

past business year.

We offer attractive compensation as well as training

and education programs to bind employees to the company

in the long term and for the company to be of interest to

new employees. At least just as important for us is the culti-

vation of a trustworthy corporate culture with a balanced

relationship of rights and responsibilities.

Information Technology Risks

IT applications have to be used for most operational pro-

cesses to run smoothly. High-performance and error-free IT

is thus a prerequisite for efficiently running business pro-

cesses. Therefore, risks are posed by possible breakdowns or

other impairments to the corresponding systems. Apart

from the availability of IT services, data and know-how pro-

tection as well as data integrity are essential for our busi-

ness operations. The continued advancement of information

technology networks is generally leading to an increase in

IT risks. We are continually maintaining and enhancing infor-

mation security through a number of projects. The aim is

to achieve as much security as possible.


Legal and Compliance Risks

As a globally operating Group, we comply with the laws and

customs of the countries in which we are active. We deal

with the risk of violating valid norms, which apart from hav-

ing negative effects on the asset, financial, and earnings

situation can also tarnish our reputation, preventively through

training and information measures, as well as through our

Code of Conduct and our compliance management program.

Our compliance program focuses on corruption

avoidance, antitrust law, personnel, financial reporting, the

capital market, IT, taxes, environmental protection, safety

and health (EH & S), customs and external economic rela-

tions, and, as of this year, the topic of data protection.

We also approach compliance risks by means of control mea-

sures such as tests carried out by our Internal Audit and

by establishing a so-called “whistle-blower hotline,” by

means of which employees can anonymously provide

information about misbehavior.

Moreover, in the course of its normal business activity

ALTANA is occasionally involved in legal disputes or can

be threatened with lawsuits. For information on current

legal disputes see page 158 of the Notes (note 33).

Other Risks

As far as possible we limit the risks of liability and damages

that can occur in our corporate activities by means of in-

surances. In particular, cases of liability and damages result-

ing from business interruptions are largely covered by our

insurance policies.

At present, no third parties have made claims against

ALTANA from which we expect a material influence on our

asset, financial, and earnings situation.

Overall Statement on the Risk Situation

We regard the following as significant risks: the development

of the markets relevant for us, particularly in light of the eco-

nomic situation, intensifying competition, new technological

developments, changing color trends, and further consolidations

on the part of suppliers and customers. Thus, we expect a pos-

sible renewed economic downswing to have significant negative

effects. On the whole, ALTANA’s management still assesses

the company’s risks as being limited and manageable. We did

not identify any risks which could endanger the existence of

the company.

70 Outlook

Outlook

Orientation of the Group in the Next Two Business Years

Future Business Policy

We do not plan on making any basic changes to our busi-

ness policy in the next two years. In the future, too, the

Group’s product and service spectrum will focus on offering

sophisticated, high-quality specialty chemicals solutions

for rapidly growing and innovation-driven markets. We in-

tend to retain or expand our current market positions by

continuing to concentrate on innovations, through a high

degree of customer orientation, and by means of acquisi-

tions. In addition, we aim to sustainably heighten our com-

pany’s value through efforts to improve efficiency.

However, our short-term orientation can change de-

pending on the current and expected development of the

business environment, in particular regarding the implemen-

tation of cost-cutting measures and measures to control

liquidity.

Future Sales Markets

The technological developments within the ALTANA Group

are not causing sudden changes to our product and service

portfolio or to our application and target markets. But our

orientation to the core markets and our positioning in ex-

isting application areas can change due to acquisitions. This

concerns both activities in the existing divisions and pos-

sible expansion of Group activities through the establishment

of a new division.

Although some markets are growing more rapidly than

others, the regional sales structure should not be signifi-

cantly influenced by this development in the years to come.

However, short-term shifts can arise due to acquisitions.

General Business Setting in the Next Two Years

Overall Economic Situation in the Future

We expect the stabilization tendency of the global economy

as observed in the second half of 2009 to continue at a

moderate level in 2010. We anticipate that the industrial

countries of Europe and North America will post only

slight growth, while many emerging countries might report

higher sales growth. The global economy will probably

achieve a lower single-digit percentage growth.

On account of the continued uncertainty and lack of

stability in the ongoing economic recovery, it is difficult

to make forecasts about the general business environment

in 2011. We assume the gradual improvement of the

global economy will continue after 2010, primarily driven

by a growing demand for products and services from

the Asian and South American regions.

But it is still too early to predict a sustained recovery.

Uncertainty regarding the general economic situation re-

mains high. There are risks particularly due to the expiration

of the massive economic stimulus packages that have been

implemented by governments in many regions in the recent

past. The speed of the recovery will also be influenced by

the monetary and fiscal policies of the important economic

nations, and it is questionable whether these policies will

be continued in the long term due to the tense public bud-

get situation.

Furthermore, there are risks due to a renewed instabil-

ity of the financial sector and a resulting underprovision

of the economy with loans and equity. Here, too, the further

development of the current, in many cases expansive mon-

etary policy of the reserve banks is very important.

So far, private consumption during the crisis has re-

mained satisfactorily stable. As the development of unem-

ployment in many areas is delayed to a certain extent

compared to that of the industrial production, there are also


risks related to private sector consumer behavior which can

affect the economy.

These risks particularly concern the industrialized coun-

tries, but they also affect the emerging countries in Eastern

Europe, whose economic performance in 2009 was dimin-

ished to a high degree by the crisis and the decreasing de-

mand of their neighboring countries in Europe. The emerg-

ing nations in Asia and South America, however, have

mastered the crisis better, and higher growth is expected

in these regions in the coming years as well.

The great uncertainty about the development of indus-

try and private sector demand, coupled with continued risks

regarding the development of the financial sector, should

influence volatility on the currency markets. We expect the

degree of fluctuation in the exchange rates between the

Euro and the U.S. Dollar and the Euro and other currencies

important for ALTANA to remain high. This makes it diffi-

cult to predict the development of the exchange rates. In

general terms, we expect the exchange rate relations im-

portant for us not to change significantly from the relations

that existed at the end of 2009.

Future Situation in the Chemical Industry

As an important supplier for all essential markets and indus-

tries, the chemical industry will not be able to detach itself

from the general economic development. Another determin-

ing factor for the demand situation will be the develop-

ment of inventories. While in 2009 inventory effects played

an important role in the negative sales performance of the

chemical industry, they can also have a major impact on the

future performance. An improvement of the general eco-

nomic situation can lead, via a simultaneous increase in in-

ventories along the entire value-added chain, to a notice-

able recovery of chemicals sales. On the other hand, another

economic downturn could lead to renewed destocking,

which could exacerbate negative sales development.

As a result, the challenges facing the chemical industry will

particularly consist in managing the uncertainty and the

probable high volatility of demand as efficiently as possible.

However, we do not expect production in the chemical

industry to return to the pre-crisis level in the short term.

It will probably take several years before this occurs.

The crisis can lead to changed competitive structures in

individual markets. Acquisitions of or mergers with insol-

vent or financially weakened companies can result in a shift

of market shares.

Nor is it possible to make a reliable forecast about the

business development of the most important industries

we sell our products to. The factors of influence are too var-

ied and the signals from the different sectors are too het-

erogeneous in part. For the construction industry, at least a

short-term recovery is expected due to government stim-

ulus programs. But the intensity and length of this influence

is uncertain. There are also different development fore-

casts for automobile manufacturing, an important sector for

chemical products, depending on the location. While the

number of vehicles made in Europe should continue to de-

crease, automobile production in China, and particularly

in North America, should increase significantly in the com-

ing years.

The continued instability of the markets and the het-

erogeneous recovery perspectives will continue to influence

raw material markets important for the chemical industry

and will keep price volatility high. Regarding the oil price de-

velopment, moreover, geopolitical risks – particularly in

the Middle East – and the situation on the financial markets

have to be taken into account.

72 Outlook

Expected Earnings Situation

Due to the uncertainty with regard to a forecast of general

economic and industry-specific developments, it is not

possible to quantify the sales and earnings performance ex-

pected for ALTANA. We anticipate that the business sit-

uation can develop as discussed in the following if currency

exchange rates remain virtually unchanged and raw mate-

rials prices increase moderately.

Anticipated Business Performance in 2010

The stabilization of economic recovery should give rise to a

growing demand for our products and services in 2010

compared to the 2009 business year as a whole. As a result,

Group sales should show a positive development. However,

we expect sales to continue to lag behind the volume reached

in 2007 and 2008. The anticipated sales growth includes

the effects of the acquisitions integrated into the company

in 2009, particularly in the Coatings & Sealants division.

Further influences from additional acquisitions made in the

course of the 2010 business year are not taken into account

in this forecast.

As the development of sales generally serves as the ba-

sis for the development of earnings, we expect our earn-

ings situation to improve due to the sales recovery. Against

the background of the expected volatility on the raw mate-

rials markets in conjunction with the great importance of ma-

terial expenses for Group earnings, however, a direct earn-

ings effect cannot be directly deduced from a positive sales

performance. In addition, one must consider the fact that

many of the measures to cut costs and improve liquidity im-

plemented in 2009 can only be continued in part and de-

pending on the utilization of capacities. Therefore, the ex-

pected sales recovery will not necessarily result in improved

profitability.

Anticipated Business Performance in 2011

ALTANA’s recovery from the sales decline in 2008 and 2009

should last into 2011. In that year, at the earliest, we expect

a return to the pre-crisis sales level. The extent to which

earn-ings performance and profitability will be positively in-

fluenced by this development depends on many different

factors and cannot be forecast due to general uncertainties

regarding the raw material markets, possible changes

in competitive structures, and important cost factors – for

example, an increase in personnel costs.

Expected Asset and Financial Situation

Planned Capital Expenditure

After ALTANA reduced capital expenditure considerably in

the wake of the economic crisis, concentrating on urgently

needed projects and projects with strategic significance,

in the years to come we will increase our capital expenditure

ratio again to a level of over 5 % of sales. The figure can

be even higher in 2010 and 2011, depending on our sales

performance and due to catch-up effects. This figure does

not include expenses for the acquisitions of companies.

Important major projects planned include the expansion

of our research and development capacities in Germany,

and the expansion and modernization of production capaci-

ties and IT projects.

Planned Financing Measures

The development of cash flow from business activities is in-

fluenced by the development of earnings and particularly by

our net working capital management. We will continue our

efforts to optimize net working capital. On account of various

extraordinary influences from the crisis and the expected

recovery, it is extremely difficult to make a forecast regard-

ing this parameter in comparison to 2009.


Due to higher investment expenditure compared to the pre-

vious year, we expect the ordinary free cash flow for 2010

to be lower than that for 2009. However, in the years to fol-

low the ordinary free cash flow should hinge again on the

amount of cash flow from business activities.

We do not expect our capital structure to change signif-

icantly in the coming years. Surplus cash flows that have

been generated will be used to reduce existing debts or will

be invested. A possible need for cash and cash equivalents –

for example, resulting from acquisition projects – might

make it necessary to take out more loans. For this purpose,

ALTANA still has access to the agreed credit line for the

time being. Liquidity surpluses or an increasing need for

credit can have effects on the Group’s financial result.

Opportunities

In many cases, the issues and scenarios discussed in the risk

report can also yield opportunities, arising due to a better

than expected development of the business environment,

processes, or other factors of influence.

Opportunities from the Development of the General

Economic Setting

On the basis of the promising market positions that ALTANA

holds in its different divisions and its individual activities,

the Group can greatly benefit from a global economic up-

swing. A higher than expected global economic growth

could lead to a significant increase in the demand for our

products and services. This concerns not only the estab-

lished industrialized countries, but particularly our business

in Asia, especially China. Continued rapid growth in this

region can have a significantly positive impact on our perfor-

mance. Thanks to the production and laboratory infra-

structures we have built up in recent years, we are prepared

for this kind of development.

An appreciation of the U.S. Dollar against the Euro would

also improve our earnings beyond expectations. The

same applies to the exchange rate developments of the

Chinese Renminbi and the Japanese Yen.

Corporate Strategy Opportunities

Acquisitions are an essential component of the Group strat-

egy and will therefore continue to have a decisive effect

on our sales and earnings performance in the future. We

believe it is possible for us to further structurally strengthen

our earnings situation and exceed our growth expectations

by making one large acquisition or several smaller acquisi-

tions.

We see the possibility of similar potential arising from

promoting our research and development activities. If we

succeed in implementing the commercialization of new or

modified products faster than planned, this will give rise

to new growth potential. Particularly through an even better

interlinking of all the activities within the whole Group, we

should be able to further accelerate development times and

idea generation, and thus convert the results into economic

success as fast as possible.

Competitive Opportunities

Opportunities can arise if raw materials prices decrease be-

low the expected level. Even if this relief was passed on to

the market step for step, our profitability for the transition

period would be positively influenced.

With the emergence of the crisis in 2008, numerous

measures were identified and implemented to cut costs

within the framework of the Group-wide coordinated cost

savings program. Many of these measures were conceived

as a short-term reaction to the slump in demand and will be

phased out as utilization of capacities increases. However,

if we succeed in converting these efforts into a long-term

improvement of the cost structure, there will be potential

to increase our earnings.

74 Outlook

The Management Board’s Overall Statement on the Anticipated Development of the Group

We expect – despite the recognizable signs of an at least short-

term recovery of the general economic situation – a business en-

vironment that will continue to be marked by high uncertainty

and volatility. Therefore, it will become increasingly important in

the years to come to analyze the short-term development of

business very closely, in order to be able to introduce measures

to cushion possible decreases in demand consistently and as

fast as possible whenever necessary. Due to the positive experi-

ences that we gathered in the course of the crisis, however,

we are confident that we are optimally prepared for the conceiv-

able and probable development scenarios. As we were able to

at least maintain our positioning during the crisis, and even ex-

tend it in certain areas, we are very well placed to take advan-

tage of the opportunities that are offered by a steady economic

recovery.

Corporate Governance Report 76

Compensation Report (also Part of the Group Management Report) 80

Corporate GovernanceCorporate governance is very important to the ALTANA Group. The company almost completely implements the recommendations and suggestions made by the German Corporate Governance Code. In the next pages, the Management and Supervisory Boards report on the concrete implementation in the Group. The subsequent Compensation Report provides information about the composition and amount of compensation for the Management and Supervisory Boards.

Recommendations and Suggestions Made by the German Corporate Governance Code

In the annual declaration of compliance issued once a year in

accordance with section 161 of the German Stock Corpo

ration Act on November 26, 2009, the Supervisory and Man

agement Boards explained that ALTANA AG has complied

since November 25, 2008, the date of the preceding decla

ration of compliance, with the recommendations made

by the Government Commission German Corporate Gover

nance Code, has complied with the recommendations

made by the Code in the version of June 18, 2009, since they

were published in the Federal Gazette (Bundesanzeiger)

on August 5, 2009, and will continue to do so in the future.

Only the following recommendations of the German Cor

porate Governance Code have not been and are not applied.

No nomination committee (section 5.3.3)

ALTANA does not comply with the recommendation to form

a nomination committee composed exclusively of share

holder representatives which proposes suitable candidates to

the Supervisory Board for recommendation to the Annual

General Meeting. Due to the size of ALTANA’s Supervisory

Board, which consists of six shareholder representatives

and six employee representatives, the establishment of a

nomination committee is not expected to enhance effi

ciency.

No severance payment cap agreed upon

(section 4.2.3)

The newly concluded Management Board contracts of 2009

with Dr. Matthias L. Wolfgruber and Martin Babilas do not

contain provisions according to which payments including

fringe benefits made to them on premature termination

of their contracts without serious cause must not exceed the

value of two years’ compensation (severance payment

cap). Nor do Management Board contracts contain a promise

of payments in the case of premature termination of their

contracts due to a change of control. It is legally doubtful

whether a severance payment cap in the form stipulated by

the German Corporate Governance Code can be effec

tively agreed upon in the case of a termination of a Mana

gement Board contract without serious cause.

Suggestions

ALTANA also basically follows all of the suggestions of the

German Corporate Governance Code in the version of June

18, 2009. The variable compensation of ALTANA’s Super

visory Board members is calculated based on the absolute

EBIT of the respective business year. In the course of time

the company’s longterm success is also reflected, through

the development of the EBIT, by the amount of compen

sation provided to the Supervisory Board. Thus, the success

oriented compensation of Supervisory Board members, in

accordance with the suggestion in section 5.4.5 of the Ger

man Corporate Governance Code, also contains compo

nents related to the company’s longterm success.

At present, ALTANA is not planning to broadcast the

Annual General Meeting on the Internet. Thus, ALTANA

would not follow the suggestion of the German Corporate

Governance Code in section 2.3.4.

Management and Supervisory Boards

The Management and Supervisory Boards cooperate closely

to benefit the company. The Management Board is respon

sible for managing the company and is committed solely to

the company’s interests. It informs the Supervisory Board

regularly, without delay and comprehensively, about business

development, the economic situation of the company, im

portant events, corporate planning and the Group’s strategic

further development. The Supervisory Board monitors and

advises the Management Board in its management activities.

76 Corporate Governance

Corporate Governance Report


The Supervisory Board discusses business development and

planning, as well as the strategy and its implementation,

at regular intervals.

Between Supervisory Board meetings, the Chairman of

the Management Board informs the Chairman of the

Supervisory Board about important developments and events

and consults with him about upcoming or planned deci

sions. Important acquisitions and sales of shareholdings and

business areas require the approval of the Supervisory

Board.

Conflicts of interest of Management Board or Super

visory Board members which have to be revealed to the

Supervisory Board without delay did not occur in the business

year 2009. Mrs. Susanne Klatten is the Deputy Chair

woman of the Supervisory Board of ALTANA AG and is the

sole shareholder and managing director of SKion GmbH.

In November 2009, SKion GmbH made ALTANA shareholders

a voluntary public offer to acquire all ALTANA shares not

held by SKion. In accordance with section 27 of the German

Securities Acquisition and Takeover Act (Wertpapierer

werbs und Übernahmegesetz, WpÜG), the Supervisory and

Management Boards issued a joint statement on the

ac quisition offer. In order to prevent possible conflicts of in

terest, Mrs. Susanne Klatten did not participate in the

deliberation or decision of the Supervisory Board regarding

the joint statement, and did not exert influence in any

other way.

Since the company’s Annual General Meeting held in

2006, Supervisory Board members have been regularly

elected on an individual basis.

Supervisory Board Committees

Besides the legally required Mediation Committee, the

Supervisory Board formed an Audit Committee and a Human

Resources Committee, each consisting of two shareholder

representatives and two employee representatives, in accor

dance with section 27 (3) of the German Codetermination

Act. In connection with the voluntary public acquisition offer

made by SKion GmbH to the shareholders of ALTANA AG,

a Special Committee of the Supervisory Board was formed.

The task of the Special Committee was, on the one hand,

to work out the details of the joint statement issued by the

Supervisory and Management Boards on the acquisition

offer, and on the other hand the Special Committee is to

accompany further proceedings in conjunction with the

acquisition offer and possible legal measures resulting from

the offer. The Chairman of the Human Resources Com

mittee, of the Mediation Committee in accordance with sec

tion 27 (3) of the German Codetermination Act, and of

the Special Committee is the Chairman of the Supervisory

Board, Dr. Fritz Fröhlich. The Chairman of the Audit Com

mittee is Dr. KlausJürgen Schmieder. He has the necessary

knowledge and expertise in the fields of accounting and

auditing in accordance with the regulations of the German

Stock Corporation Act.

Annual General Meeting

ALTANA AG shareholders assume their rights at the Annual

General Meeting and exercise their voting rights there. As

of December 31, 2009, the company’s issued share capital

was divided into 136,097,896 common shares, with each

share being granted one vote at the Annual General Meet

ing. To make it easier for shareholders to exercise their

rights, ALTANA puts proxies at their disposal who are obliged

to vote in accordance with the instructions they have been

given. Shareholders can also be represented by a proxy of

their choice.

78 Corporate Governance

Capital Market Law

The requirement that any buying and selling of shares be re

ported, in accordance with section 15a of the German

Securities Trading Act (WpHG), pertains to all members of the

Management and Supervisory Boards of ALTANA AG.

The following transactions were reported to ALTANA AG in

the past business year:

Date of transaction

Person subject to disclosure requirement

Transaction subject to disclosure requirement Price (€)

Number of shares

Transaction volume (€)

December 17, 2009 SKion GmbH Purchase 14.00 1,163,604 16,290,456

December 14, 2009 SKion GmbH Purchase 14.00 91,345 1,278,830


December 10, 2009 SKion GmbH Purchase 14.00 25,361 355,054





November 27, 2009 SKion GmbH Purchase 14.00 262,056 3,668,784

November 20, 2009 SKion GmbH Purchase 14.00 279,725 3,916,150

November 16, 2009 SKion GmbH Purchase 14.00 69,290 970,060

October 22, 2009 SKion GmbH Purchase 14.00 319 4,466

October 22, 2009 Susanne Klatten Sale 14.00 319 4,466

October 22, 2009 SKion GmbH Purchase 14.00 10,000 140,000

March 23, 2009 SKion GmbH Purchase 12.85 406,000 5,217,100

February 11, 2009 SKion GmbH Purchase 12.83 405,000 5,196,150


The annual document, which can be seen at

www.altana.com, lists all of the compulsory publications of

ALTANA AG from 2009.

SKion GmbH, Bad Homburg v.d.H., whose sole share

holder is Mrs. Susanne Klatten, owned 93,55 % of ALTANA

AG’s share capital at balance sheet date. At the beginning

of February 2010, SKion GmbH informed ALTANA that it had

increased its stake in the company to 95.04 %. Neither

Management Board nor Supervisory Board members hold

shares in the company.

Compensation of the Management and Supervisory Boards

The compensation of Management and Supervisory Board

members including details about the compensation sys

tem and individualized information is shown in the compen

sation report to follow (see pages 80ff.).

Responsible Risk Management

Early recognition of risks is highly important to ensure the

longterm existence of the company. ALTANA’s risk manage

ment system is audited in accordance with section 317 (4)

of the German Commercial Code (HGB) to ascertain whether

it is adequate to recognize, identify, and evaluate risks at

an early stage so that suitable preventive and other measures

can be taken. Details can be found in the risk report on

pages 64ff.

Voluntary Commitment to Responsible Behavior

ALTANA’s Code of Conduct calls on all executives and em

ployees to act lawfully and in accordance with ALTANA’s

goals, sets standards for issues related to antitrust and insider

law, environment and safety, corruption and granting of

undue advantages, discrimination and conflicts of interest.

Together with the Guiding Principles of the company, the

Code of Conduct provides one of the bases for responsible

corporate action. Furthermore, the Audit Committee of

the Supervisory Board resolved a Code of Ethics for members

of the Management Board and the Head of Finance and

Controlling which aims to particularly ensure the avoidance

of conflicts of interest as well as the fulfillment of the

company‘s disclosure and publication obligations.

The Guiding Principles, the Code of Conduct, and

the Code of Ethics are published on our website

(www.altana.com).

ALTANA joined the U.N. “Global Compact” Initiative,

whose members are voluntarily committed in their corporate

policy to adhere to social and environmental standards as

well as the protection of human rights. By joining “Global

Compact,” ALTANA not only acknowledged the principles

of the Compact, but also showed a general willingness to

support and promote overall U.N. aims.

80 Compensation Report

Compensation Report

The compensation report outlines the principles governing

compensation of the Management Board of ALTANA AG,

as well as its structure and the amount of compensation. In

addition, it includes explanations on the composition, and

amount of the Supervisory Board compensation.

The report contains information which is part of the

Notes to the Financial Statements in accordance with section

314 of the German Commercial Code (HGB). As a result,

the information provided in this report is not presented again

in the Notes to the Financial Statements. This report is at

the same time part of the Group Management Report.

Compensation of the Management Board

In accordance with the recommendations of the German

Corporate Governance Code, the Management Board com

pensation system as well as the essential elements of the

Management Board contracts were examined and resolved

by the entire Supervisory Board. In accordance with the

regulations provided in the Act on the Appropriateness of

Executive Remuneration (VorstAG), which came into ef

fect on August 5, 2009, in the future the entire Supervisory

Board will be responsible for defining the total remuner

ation of the individual Management Board members.

The amount of compensation of the Management Board

members of ALTANA AG is related to the size of the com

pany, to its economic and financial situation, as well as to the

amount and structure of Management Board compen

sation in comparable companies. Furthermore, the scope of

duties, the experience, and the contribution of the respec

tive Management Board member, as well as the compensa

tion structure that otherwise exists in the company, are

taken into account when assessing the compensation.

The compensation of the Management Board is pre

dominantly dependent on performance. It consists of three

components: a fixed compensation, a variable bonus, and

a compensation component with a longterm incentive ef

fect. In addition, the Management Board members receive

pension grants.

The fixed basic compensation which is not dependent

on performance is paid monthly as salary. It is reviewed in

the course of contract extensions. Additionally, the Manage

ment Board members receive noncash compensation,

primarily from company car usage, and premiums for insur

ances.

The variable compensation is conceived as an incentive

system combining an absolute earnings component

and a relative earnings component in the form of return on

capital. The bonus is assessed based on the development

of the operating income before depreciation and amortiza

tion (EBITDA) and the return on capital employed (ROCE)

each in comparison to the target values.

For 2009, the target values for EBITDA and ROCE were

stipulated by the Human Resources Committee of the

Supervisory Board on the basis of the corporate planning

adopted by the Supervisory Board. 100 % of the variable

compensation is due when 100 % of the specified target val

ues for EBITDA and ROCE are achieved. The effective

variable compensation can range from 0 % to 150 % of the

variable target compensation defined in advance, depen

dent on whether the specified EBITDA and ROCE target val

ues are achieved. In 2009, the degree of target achieve

ment was 84.3 %. Explanations on the value management

system and on the calculation of the ROCE can be found

on pages 52ff. in the Management Report.

Cash compensation of the Management Board includ

ing benefits in kind in 2009 amounted to € 1.9 million

(2008: € 1.8 million). It is attributable to the members of the

Management Board as follows:


Other emoluments of the Management Board members in

clude noncash compensation from company car usage

amounting to € 31 thousand (2008: € 30 thousand) and pre

miums for insurances of € 3 thousand (2008: € 5 thousand).

As compensation components with a longterm incen

tive effect, in 2008 the members of the Management

Board additionally received performance shares from the

“ALTANA Share Performance 2008” plan. In 2008, the

Management Board was granted a total of 29,818 perfor

mance shares. Each performance share, provided it ful

filled certain conditions, which depended half on the perfor

mance of the ALTANA share in the performance period

of three years compared to the development of the MDAX

index, and half on the earnings per ALTANA share, was

entitled to the payout of a profit. More information on the

ALTANA Share Performance 2008 plan can be found on

page 136 in the Notes to the Group Financial Statements.

Since already at the beginning of the 2009 business

year the free float percentage of ALTANA’s shares went down

to below 10 % following the public purchase offer made

by SKion GmbH to ALTANA AG shareholders, the Supervisory

Board came to the conclusion that it was not sensible to

continue the share performance plan and therefore resolved

to provide compensation for it.

The amount payable on settlement of € 13.00 per perfor

mance share, along with the actuarial value of the per

formance shares at the time they were allotted, was ascer

tained by an independent assessor based on the Monte

Carlo method. In accordance with International Financial

Reporting Standards 2 (IFRS 2) “sharebased compen

sation,” the Monte Carlo method is also the basis for the

recording in the Consolidated Income Statement. The

amount payable on settlement results from the mean value

of a valuation of the performance shares on November 6,

2008, the day on which SKion announced its decision to

make its first offer to acquire ALTANA shares, and on De

cember 31, 2008. The settlement amount will be paid after

termination of the original period of the plan in July 2011.

The settlement amount of the performance shares

from the ALTANA Share Performance 2008 plan amounts to

€ 258 thousand for Dr. Matthias L. Wolfgruber and € 129

thousand for Martin Babilas.

The expense for granting performance shares to the

Management Board members within the framework of the

ALTANA Share Performance 2008 plan amounted to € 129

thousand in 2009 (2008: € 56 thousand).

Fixed compensation Bonus Other

Cash compensation for the

business year

in € thousand

Dr. Matthias L. Wolfgruber 2009 450 759 7 1,216

2008 450 690 7 1,147

Martin Babilas 2009 276 337 27 640

2008 276 307 28 611

Total 2009 726 1,096 34 1,856

2008 726 997 35 1,758

82 Compensation Report

No successor plan was launched in 2009. For 2010, the

Supervisory Board opted for the longterm incentive program

“ALTANA Equity Performance 2010” as a compensation

component with a longterm incentive effect for the mem

bers of the Management Board.

In addition, the members of the Management Board

have individual pension grants in the form of fixed amounts

which are oriented to the market. The grants include gen

The present value of the total obligation (Defined Benefit Ob

ligation / DBO) from pensions granted to former members

of the Management Board and their surviving dependents

totaled € 12,541 thousand as of December 31, 2009

(2008: € 11,832 thousand); the pension payments amounted

to € 1,091 thousand (2008: € 1,028 thousand). In addi

tion, in 2009 deferred compensation elements from previous

years amounting to € 742 thousand were paid out to for

mer members of the Management Board.

The members of the Management Board have the pos

sibility of investing part of their compensation into a pen

sion commitment for a private retirement plan. Within the

framework of these regulations, the members of the Man

agement Board are entitled to retirement income or provi

sions for surviving dependents.

None of the members of the Management Board was

entitled to further benefits in the case of premature termi

nation of activities (compensation grants, transitional com

pensation, Change of Control clause, and similar benefits).

eral disability benefits as well as payments for surviving

dependents in the form of widow, orphan, and semiorphan

pensions. In the event of pension entitlement, the amount

of pension is reviewed every three years in accordance with

the Occupational Retirement Provision Act or increased

annually by 1 %. The fixed amounts granted as well as the

additions to provisions for pensions in 2009 are listed in

the following table:

The members of the Management Board do not receive

loans from the company.

A directors and officers (D&O) liability insurance is taken

out for the members of the Management Board. This in

surance covers personal liability risks in cases where members

of the Management Board are liable for financial losses

while performing their duties. An appropriate deductible is

agreed upon in the insurance contracts. When the insur

ance contract is renewed, which is planned for March 2010,

the deductible will be adapted to the legal requirements

of VorstAG.

Compensation of the Supervisory Board

The compensation of the Supervisory Board is determined in

section 18 of the articles of association. The amount of

Supervisory Board compensation is oriented to the tasks and

Pensions grants

Annual payment(December 31, 2009)

Service cost in 2009

in € thousand

Dr. Matthias L. Wolfgruber (Chairman) 90 111

Martin Babilas 29 12

Total 119 123


responsibilities of the Supervisory Board members and to

the size and economic success of the company.

The compensation of the members of the Supervisory

Board is comprised of a fixed and a variable component.

The fixed compensation for each member of the Supervisory

Board amounts to € 35 thousand a year. The variable com

pensation is determined based on the operating income of

the ALTANA Group (EBIT) and amounts to € 100 for every

full € 1 million of EBIT in excess of 4 % of the nominal capital,

but a maximum of € 35 thousand a year. The Chairman of

the Supervisory Board receives two and a quarter times

and the deputy chairmen receive one and a half times the

compensation. The chairmen of one or more committees

receive a further threequarters and a member of one or more

committees a further onequarter of the compensation.

The compensation of the Supervisory Board amounted to

€ 0.7 thousand in the business year 2009 (2008: € 0.9

thousand). It is attributable to the members of the Supervi

sory Board as follows:

Fixed compensation

Variable compensation

Total compensation

in € thousand

Dr. Fritz Fröhlich (Chairman) 105 13 118

Ulrich Gajewiak (Deputy Chairman) 61 8 69

Susanne Klatten (Deputy Chairwoman) 61 8 69

Dr. Helmut Eschwey 35 4 39

Ralf Giesen 44 5 49

Armin Glashauser 44 5 49

Olaf Jung 44 5 49

Dr. Götz Krüger 35 4 39

Dr. Klaus-Jürgen Schmieder 61 8 69

Werner Spinner 44 5 49

Dr. Carl Voigt 35 4 39

Walter Ziegler 35 4 39

Total 604 75 679

In addition, all expenses arising in connection with the man

date, as well as the added VAT, are reimbursed to the

members of the Supervisory Board.

Supervisory Board members are also included in the

D&O liability insurance scheme. An appropriate deductible

was agreed upon. With the renewal of the insurance con

tract, which is planned for March 2010, the deductible for

Supervisory Board members, following the recommen

dation of the German Corporate Governance Code, will be

adapted to the legal requirements for the Management

Board stipulated by VorstAG.

The members of the Supervisory Board do not receive

loans from the company.

Dialog 85

Product Responsibility 85

Work Safety and Health Protection 87

Environmental Protection 88

Environment, Safety and Health Protection

“ Responsible Care,” the chemical industry’s worldwide voluntary environmental policy initiative, is a central guideline for ALTANA. With “Responsible Care” the chemical industry complies with essential aspects of the United Nations Global Compact. In keeping with this initiative, ALTANA intends to meet today’s generation’s needs without jeopardizing the opportunities of future generations.


In concrete terms, Responsible Care means making a volun

tary commitment to continually improving product quality,

occupational safety, health protection, process safety, environ

mental protection, and transport safety, and to promote

open dialog. In this endeavor, companies adhere to essential

basic principles:

– Heightening employees’ awareness

– Respecting the public’s need for transparency

– Continually improving the safety of products and pro

duction processes

– Providing information about safe dealings with products

– Increasing knowledge about the effects of products and

processes on people and the environment

– Marketing restrictions, where appropriate

– Using the knowledge to develop laws

– Dialog with participants

These principles guide us in the representation of our activi

ties.

Dialog

In 2009, we published our second comprehensive environ

mental report. Available as a digital document on the

Internet at www.altana.com, it provides indepth information

about our individual projects and activities including key

figures.

An environmental report alone, however, is not enough

for dialog. Due to current experiences in industry pro

jects in the German federal state of North RhineWestphalia,

where our headquarters is located, the state government

founded an alliance “pro industry and sustainability” togeth

er with companies, company associations and unions.

The aim is for partners to take appropriate measures in their

sphere of influence to heighten the acceptance of indus

ALTANA’s Path to More Safety and Improved Environmental and Health Protection

trial projects. In our understanding, this includes openly

providing information about existing effects on the environ

ment and potential risks.

In addition, it is important to supply information about

how our company benefits and contributes to society, par

ticularly to the local surroundings. This is done, for example,

by means of openhouse days, tours of operations for in

terested people, by providing information to neighbors about

construction projects, by actively informing the local press,

by cultivating contact with community representatives, by

getting involved in education or by making donations to

local institutions.

Another kind of open communication is dialog with

policymakers. We want our expertise and knowledge about

our markets to be incorporated in political decisionmak

ing processes, in order to support laws that benefit society.

We view this as a contribution to sustainability. A current

example is the discussion about nanotechnology legislation.

Product Responsibility

In keeping with Responsible Care, product responsibility in

cludes continual improvement of the safety of products in

terms of the choice of raw materials, of manufacturing, and

of usage. To this end, ALTANA is constantly trying to re

place raw materials classified as dangerous with less danger

ous ones. An example from China: By means of targeted

modification of the basic components of a polyurethane wire

enamel, our subsidiary ELANTAS Tongling enabled this

coating to be partially dissolved in a different solvent. As a

result, the product no longer has to be labeled as toxic

and is less expensive.

Companies in the chemical industry are continuously ex

panding their knowledge about their products’ potential

effects on people and the environment. This, too, is a basic

86 Environment, Safety and Health Protection

principle of Responsible Care. Another one: The chemical

industry is actively using its knowledge and experience to

develop practical and effective laws, to guarantee lasting

protection of people and the environment. ALTANA’s activi

ties in this area can be illustrated well using nanotechnol

ogy as an example. ALTANA carries out intensive research in

the field of nanotechnology and already has some nano

technology developments on the market. Examples include

the additives Nanobyk3650, Nanobyk3651, and Nano

byk3652, which heighten the scratch resistance of coatings

and thus their durability. These products make surfaces

both hard and elastic. Scratch resistance is produced by in

creased hardness. But it normally also increases the brittle

ness and reduces the chemical durability of a coating. The

new additives containing nanoparticles produce optimum

surface protection, as there is a fast backflow effect. This en

sures that a coating is not damaged or scratched. Through

this effect, which improves the longterm protection of a

coating, resources are conserved at the same time.

However, there are also critical assessments of nano

materials, as the changed properties could also mean

changed toxicity and ecotoxicity. ALTANA takes these con

cerns very seriously, dealing with them, for example, in

the following ways:

– During the manufacturing process, nanomaterials in

powder form are handled in a closed system and / or such

that employees are protected from inhalation

– Nanomaterials are not delivered to our customers in

powder form, with the danger of dust being inhaled, but

dispersed in fluids

– In safety data sheets, customers are informed about the

proportion of nanomaterials

– When used in coatings in the supply chain, in the end the

nanomaterial is firmly integrated in the coating matrix.

Here there are concerns that nanomaterials could be re

leased through grinding, abrasion, or weathering.

ALTANA / BYK is investigating this issue in a joint study with

the German Paint Makers Association. The findings so

far show that the materials are not released through grind

ing and abrasion. The weathering results are not in yet.

In this context, we would like to refer to the results of the

“Nanocare” project that has been running for years.

Here the German Federal Ministry of Education and Research,

together with 16 partners from research and industry,

was studying eleven nanomaterials. The findings, which can

be viewed at www.nanopartikel.info, could ease worries

about risks, but they are hardly acknowledged in public de

bate. Furthermore, within the framework of REACH regis

tration of substances, risk evaluations are also being carried

out for applications with fine powders.

Within the scope of product responsibility, we also at

tach importance to developing products that help our

customers reduce environmental problems. Here are three

examples:

– Reduction of solvent emissions. In the last three years,

ACTEGA Rhenacoat has replaced a further 25 % of its sol

ventbased coatings by waterbased coatings.

– Energy efficiency: ECKART developed a pigment that

reflects infrared radiation. Applied on the exterior, it could

reduce overheating of buildings. Applied to interior

walls, the room temperature can be decreased by 1° to

2° Celsius. Both applications reduce the use of air

conditioning or heating.

– Resource efficiency: The new BYKC8000 improves the

mechanical properties of unsaturated polyester or

acrylic systems. As a result, the wall thickness of piping,

for example, could be reduced by around 25 %.


Work Safety and Health Protection

Work safety is manifested in ALTANA’s Guiding Principles as

one of our most important values. An important indicator

for measuring work safety is the worldwide commonplace

key figure “number of workrelated accidents with lost

work time of a day or more per million work hours.” Based

on this indicator, ALTANA improved from 11 workrelated

accidents per million work hours in 2008 to 8 in 2009.

Our goal for 2010 is to reduce the number of work

related accidents per million work hours to below 5.

A key element for achieving this is to improve our em

ployees’ attitude and behavior and thus firmly anchor a

safety culture in the companies. To this end, in nearly all sub

sidiaries, extensive training programs and workshops have

been introduced, campaigns have been launched, and proj

ects have been initiated. An example is the project “Be

haviorbased safety,” which was carried out at one of our

Italian sites. Apart from workshops with supervisors and

employees, it consists of safety rounds carried out regularly

by all supervisors who follow a checklist. Both good and

bad behavior is documented, discussed with employees, and,

if necessary, measures are derived from the results. The

results can be statistically evaluated anonymously, to verify

developments. The site has been accidentfree for over

a year now. We will continue to intensify the improvements

initiated in 2009 and use the opportunity to reach our

2010 target.

Another major chemical industry topic in the public eye is

plant and process safety. Problems that arise in this area

can endanger third parties and the environment. The German

Chemical Industry Association therefore laid down new

key figures (“lagging indicators”) to be able to define new

targets. The key figure records material or energy release

that is above certain limits or that can be harmful to people.

In 2009, ALTANA had three events that fell under

this definition. All of them involved deflagration causing

property damage. There were no personal injuries, and

no chemical substances made their way into the environ

ment. In 2008, we had had four events. While ALTANA

has never had a damagefree calendar year, more than ten

months have elapsed since the last case of damage in the

first quarter of 2009.

In accordance with the “Luxembourg Declaration,”

which ALTANA signed, committing itself to systematic pre

ventive health protection, we continued the activities we

began at the Wesel site in 2008 as well as offering various

courses. There were activities at other sites, too, including

the ECKART site in Güntersthal. Using these experiences as

a basis, we will expand the measures further in 2010.

Work Accident Indicator (Number of workrelated accidents with lost work time per million work hours)

2009 8.15

2008 11.31

2007 12.13

2006 15.21


Environmental Protection

We report extensively on our environmental protection

activities in both our “Environmental Report 2009” and in

individual publications on the Internet. We regularly up

date our environmental and safety key figures.

ALTANA’s significant effects on the environment are:

– Energy consumption coupled with CO2 emissions

– Emissions of volatile organic compounds (VOC) in the air

– Emissions of dust in the air (predominantly at ECKART)

– Consumption of raw materials and waste production

– Consumption of drinking water.

In addition, there is of course the transport of our prod

ucts, whose CO2 emissions we do not record quantita

tively, however. A few examples regarding the abovemen

tioned points follow.

Energy consumption and carbon dioxide emissions

Beginning in 2007, ALTANA’s goals have been to reduce

specific CO2 emissions (related to quantity produced) by 10 %

by 2012 and by 30 % by 2020.

As a result, it is important to heighten our energy effi

ciency. Numerous small measures at the sites contribute

to this. Among them are heat recovery, optimization of com

pressed air systems, speedcontrolled electric motors, and

efficient lighting. The new ALTANA headquarters is not only

equipped exclusively with modern energysaving illumina

tion. Due to the high transparency and large amount of glass,

also inside of the building, natural light can be used to a

great extent. Not only the energy recovery in mechanical ven

tilation reduces heating and cooling needs; the building

itself with the closedoff inner courtyard makes a significant

contribution to energy efficiency.

We have also made a first major step in our use of re

newable energy. On August 24, 2009, the photovoltaic

plant installed by ELANTAS Deatech in Ascoli Piceno was

officially connected to the Italian national electricity net

work. Thanks to the favorable geographic location of the re

gion, sufficient sunlight is guaranteed for most of the year.

The unit covers a roof area of 6,500 square meters and

consists of 2,948 monocrystalline silicon panels as well

as 1,920 amorphous silicon panels with a rated output of

785 kWp. The installation will generate at least a million

kilowatt hours per calendar year, thus covering a fifth of the

factory’s current electricity needs. The aim of the instal

lation was not only to reduce electricity costs, but also to help

ALTANA achieve its environmental targets. With the

planned performance, the unit will improve the plant’s CO2

balance by 542 tons per year and prevent the combus

tion of 223,000 liters of fuel.

Resources and waste

Increasing use of water at ALTANA instead of raw materials

which are based on fossils is a concrete contribution to

resource efficiency, as water remains as a solvent in the natu

ral cycle.

The amount of waste produced by ALTANA related to

products manufactured is 5.8 kg / ton, or approximately

0.6 %. By implication, this means that the degree of conver

sion of raw materials into finished products is 99 %. This

shows that we no longer have much room for improving our

resource efficiency.

In terms of waste, our goal is to reduce the specific

amount of waste produced between 2007 and 2012 by 5 %,

and the waste that has to be dumped by 10 %.

In July 2009, as a replacement for three washing units

working according to different principles, a tank cleaning

unit went into operation at ACTEGA Rhenania. The manu

facture of packaging coatings is very colorful in a literal

sense: A large part of the product range consists of formula

tions in different colors, which during manufacture leave

traces in the tanks and on the tools needed. For purposes of

care, but also to guarantee that the quality of the prod

ucts is and remains perfect, regular cleaning is therefore in


dispensable. Previously, this had been carried out in the

plants using spray nozzles and brushes as well as a solvent

based medium. The high consumption of organic solvents

and the burden caused by unavoidable emissions were fur

ther disadvantages.

For inner cleaning and outer rinsing, the unit is suitable

for closed, halfopen and open tanks. The cleaning effect

is based on a hot, aqueous solution which is applied to the

dirty surface via a moveable, rotating highpressure spray

nozzle. As a result, excellent cleaning results are achieved

even on extremely dirty equipment. The new unit also

sets standards regarding protection of employees working in

production. A burden on the atmosphere caused by or

ganic components can no longer be traced, and the odor

nuisance has decreased significantly. Fire and explosion

protection are largely unnecessary here.

The investment was also worthwhile from an environ

mental policy point of view, as around 480 tons of petro

chemical products can be saved each year.

In connection with resource efficiency, there is a fierce

public debate about the use of raw materials based on

renewable sources. An example of such a product is a new

series of solventfree polyurethane adhesives for pack

aging composite films introduced by ACTEGA Rhenania. This

series does not need solvent for processing, and lower

quantities are required than with conventional solventcon

taining polyurethane adhesives. The new polyurethane

adhesives consist of polyoles with a high proportion of re

newable raw materials. The polyurethanes formed are

based 65 – 80 % on renewable raw materials. They are pri

marily solidified materials from castor oil.

Emissions in the air

Since with many products, ALTANA works with volatile

organic solvents, VOC emissions arise even during the man

ufacturing processes. In the past two years, we installed

and began operating exhaust air treatment facilities making

use of combustion at three sites. To generate energy for

these facilities, we can partially use waste solvents and re

cover the combustion energy. Due to the petroleum and

waste cost savings, we expect an amortization of the plants

in 2 – 3 years.

Thus, we have equipped the larger VOC emitters in our

company with exhaust air treatment facilities. The other

sites have much lower emissions on account of the smaller

quantities of products produced.

Last but not least, one should also mention the many

products for which we use water as a solvent and which

of course do not cause any VOC emissions during manufac

turing and thus do not need an exhaust air treatment facil

ity. The ACTEGA Terra and ACTEGA Artística sites, for exam

ple, which primarily manufacture waterbased products,

do not need exhaust purification.

Water

Drinking water is a resource that experts believe will become

increasingly scarce, albeit with regional differences. Thanks

to two investment projects in the relatively arid regions Italy

and Spain, we have been able to significantly reduce our

drinking water consumption in recent years. These projects

have an amortization period of less than two years. Con

siderable savings were also achieved at other sites.

Overall, we want to reduce specific drinking water con

sumption within the Group by 5 % from 2007 to 2012.

Measures such as more intensive usage of ground and

surface water and collection of rainwater will contribute

to this goal. Closed cooling circuits also play an important

role.


Transport

Regarding transport of ALTANA’s finished products as well as

raw materials, the primary environmental issues are com

bustibility and the water hazard classification, as well as natu

ral CO2 emissions from transport and the strain on roads.

Here, too, the increase in waterbased, solventfree products

features prominently. They are not only noncombustible,

but the “raw materials delivery” is carried out free of truck

traffic via “pipelines” – water pipes.


Consolidated Financial Statements




ALTANA Group Consolidated Statement of

Comprehensive Income


Financial Position

Consolidated Statement of Changes in

Shareholders’ Equity of ALTANA Group


Cash Flows


1. Basis of Presentation

2. Significant Accounting Policies

3. Business Combinations and Dispositions

4. Segment Reporting

5. Cost of Sales

6. Selling and Distribution Expenses

7. Other Operating Income

8. Other Operating Expenses

9. Financial Income

10. Financial Expenses

11. Income from Associated Companies

12. Income Taxes

13. Other Information on the Income Statement

14. Intangible Assets

15. Property, Plant and Equipment

16. Long-term Investments

92

93

94

95

96

98

100

102

102

102

113

114

118

118

119

119

120

120

120

120

122

124

127

129

130

130

131

132

133

133

136

136

137

141

142

142

154

156

157

157

158

158

158

159

160

161

162

163

17. Investments in Associated Companies

18. Inventories

19. Trade Accounts Receivable

20. Marketable Securities

21. Other Assets

22. Shareholders’ Equity

23. Employee Incentive Plans

24. Debt

25. Employee Benefit Obligations

26. Other Provisions

27. Other Liabilities

28. Additional Disclosures for Financial Instruments

29. Commitments and Contingencies

30. Related Party Transactions

31. Compensation of the Supervisory Board

and Management Board

32. Fees Paid to the Auditor

33. Litigation

34. Subsequent Events

35. Additional Information

36. Statement of Compliance with the German

Corporate Governance Code

Supervisory Board of ALTANA AG


Management Board of ALTANA AG

Major Consolidated Companies

92 Management Board Responsibility Statement I Independent Auditors’ Report


The consolidated financial statements in this Annual Report have been prepared by the

Management Board of ALTANA AG, which is responsible for the completeness and accuracy

of the information contained therein. The consolidated financial statements have been

prepared in accordance with the International Financial Reporting Standards (IFRS), as en-

dorsed by the EU and in accordance with the requirements of German commercial law

pursuant to section 315a of the German Commercial Code (HGB). Additionally, the consoli-

dated financial statements are prepared in full conformity with the International Financial

Reporting Standards.

The information contained in the consolidated financial statements and the Group Man-

agement Report is based on the information reported, in accordance with consistent guide-

lines in force throughout the Group by the companies included in the consolidated financial

statements. The integrity of the reporting process is safeguarded by effective internal con-

trol systems established at these companies under the direction of the Management Board.

This assures a true and fair view of the performance and results of the Group and enables

the Management Board to recognize potential investment risks and negative developments

at an early stage and take appropriate countermeasures.

By resolution of the Annual General Meeting, the Chairman of the Audit Committee of

the Supervisory Board appointed PricewaterhouseCoopers Aktiengesellschaft Wirtschafts-

prüfungsgesellschaft as independent auditor of the consolidated financial statements. The

auditors’ report is reproduced on the following page. The consolidated financial statements,

the Group Management Report and the auditors’ report have been made available to the

Supervisory Board for detailed discussion. The report of the Supervisory Board is contained

on pages 10 – 15 of this Annual Report.

To the best of our knowledge and in accordance with the applicable reporting principles the

consolidated financial statements give a true and fair view of the net assets, financial posi-

tion and results of operations of the Group and the Group management report includes a fair

review of the development and performance of the business and the position of the Group,

together with a description of the principal opportunities and risks associated with the ex-

pected development of the Group.

Wesel, Germany, February 22, 2010

The Management Board

Dr. Matthias L. Wolfgruber Martin Babilas



We have audited the consolidated financial statements prepared by the ALTANA Aktiengesellschaft,

Wesel, comprising the income statement, the statement of comprehensive income, the consoli -

dated statement of financial position, the statement of cash flows, the statement of changes in share-

holders’ equity and the notes to the consolidated financial statements, together with the group

management report for the business year from January 1 to December 31, 2009. The preparation of

the consolidated financial statements and the group management report in accordance with the

IFRSs, as adopted by the EU, and the additional requirements of German commercial law pursuant

to section 315a (1) HGB (“Handelsgesetzbuch“: German Commercial Code) are the responsibility

of the parent Company’s Board of Managing Directors. Our responsibility is to express an opinion on

the consolidated financial statements and on the group management report based on our audit.

In addition we have been instructed to express an opinion as to whether the consolidated financial

statements comply with full IFRS.

We conducted our audit of the consolidated financial statements in accordance with section 317

HGB and German generally accepted standards for the audit of financial statements promulgated

by the Institut der Wirtschaftsprüfer (Institute of Public Auditors in Germany) (IDW). Those standards

require that we plan and perform the audit such that misstatements materially affecting the pre-

sentation of the net assets, financial position and results of operations in the consolidated financial

statements in accordance with the applicable financial reporting framework and in the group man-

agement report are detected with reasonable assurance. Knowledge of the business activities and the

economic and legal environment of the Group and expectations as to possible misstatements are

taken into account in the determination of audit procedures. The effectiveness of the accounting-

related internal control system and the evidence supporting the disclosures in the consolidated

financial statements and the group management report are examined primarily on a test basis within

the framework of the audit. The audit includes assessing the annual financial statements of those

entities included in consolidation, the determination of the entities to be included in consolidation, the

accounting and consolidation principles used and significant estimates made by the Company’s

Board of Managing Directors, as well as evaluating the overall presentation of the consolidated finan-

cial statements and the group management report. We believe that our audit provides a reason-

able basis for our opinion.

Our audit has not led to any reservations.

In our opinion based on the findings of our audit the consolidated financial statements comply

with the IFRSs as adopted by the EU, the additional requirements of German commercial law pur-

suant to section 315a (1) HGB and full IFRS and give a true and fair view of the net assets, financial

position and results of operations of the Group in accordance with these requirements. The group

management report is consistent with the consolidated financial statements and as a whole provides

a suitable view of the Group’s position and suitably presents the opportunities and risks of future

development.

Düsseldorf, Germany, February 26, 2010

PricewaterhouseCoopers Aktiengesellschaft

Wirtschaftsprüfungsgesellschaft

Peter Albrecht Klaus Höfer

German Public Auditor German Public Auditor

94 ALTANA Group Consolidated Income Statement I ALTANA Group Consolidated Statement of Comprehensive Income

Notes 2009 2008

in € thousand

Net sales 4 1,181,675 1,341,665

Cost of sales 5 (742,560) (850,306)

Gross profit 439,115 491,359

Selling and distribution expenses 6 (161,456) (179,186)

Research and development expenses (71,568) (72,068)

General administration expenses (76,998) (79,688)

Other operating income 7 7,196 13,445

Other operating expenses 8 (87,094) (3,510)

Operating income (EBIT) 49,195 170,352

Financial income 9 6,278 13,739

Financial expenses 10 (17,277) (26,175)

Financial result (10,999) (12,436)

Income from associated companies 11 755 768

Income before income taxes (EBT) 38,951 158,684

Income taxes 12 (27,965) (55,280)

Net income (EAT) 10,986 103,404

thereof attributable to non-controlling interests 554 356

thereof attributable to shareholders of ALTANA AG 10,432 103,048

Basic earnings per share (EPS)1 (in €) 0.08 0.76

1 No dilutive transactions occurred in the years reported.



2009 2008

in € thousand

Net income (EAT) 10,986 103,404

Translation adjustments 2,654 10,923

thereof attributable to non-controlling interests 110 (462)

Profit and loss from available-for-sale securities 2,939 3,428

Profit and loss from derivative financial instruments 3,431 1,356

Change in fair value of available-for-sale securities (239) (3,612)

Change in fair value of derivative financial instruments 545 (13,698)

Change in actuarial gains and losses (7,729) 2,536

Income taxes 277 2,877

Other comprehensive income 1,878 3,810

Comprehensive income 12,864 107,214

thereof attributable to non-controlling interests 664 (106)

thereof attributable to shareholders of ALTANA AG 12,200 107,320

ALTANA Group Consolidated Statement of Comprehensive Income

96 ALTANA Group Consolidated Statement of Financial Position

Assets Notes Dec. 31, 2009 Dec. 31, 2008

in € thousand

Intangible assets 14 478,293 510,295

Property, plant and equipment 15 551,660 584,070

Long-term investments 16 2,921 6,020

Investments in associated companies 17 9,045 6,637

Income tax receivables 700 0

Deferred tax assets 12 8,475 9,410

Other non-current assets 21 10,010 6,780

Total non-current assets 1,061,104 1,123,212

Inventories 18 189,220 219,112

Trade accounts receivable 19 219,438 207,517

Income tax receivables 12 12,068 14,845

Other current assets 21 27,263 24,373

Marketable securities 20 95,047 56,359

Cash and cash equivalents 103,694 104,163

Total current assets 646,730 626,369

Total assets 1,707,834 1,749,581

ALTANA Group Consolidated Statement of Financial Position


Liabilities, provisions and shareholders’ equity Notes Dec. 31, 2009 Dec. 31, 2008

in € thousand

Share capital 1 136,098 140,400

Additional paid-in capital 146,949 146,949

Retained earnings 937,969 1,163,145

Revaluation reserve (3,418) (8,740)

Translation adjustments (43,101) (45,082)

Treasury shares 0 (220,765)

Total equity of the shareholders of ALTANA AG 1,174,497 1,175,907

Non-controlling interests 3,057 2,446

Shareholders’ equity 22 1,177,554 1,178,353

Non-current debt 24 107,276 109,823

Employee benefit obligations 25 89,031 80,682

Other non-current provisions 26 14,901 11,615

Deferred tax liabilities 12 43,539 54,828

Other non-current liabilities 27 6,432 5,533

Total non-current liabilities 261,179 262,481

Current debt 24 57,437 69,286

Trade accounts payable 81,114 77,028

Current accrued income taxes 12 36,915 54,026

Other current provisions 26 57,887 76,739

Other current liabilities 27 35,748 31,668

Total current liabilities 269,101 308,747

Total liabilities, provisions and shareholders’ equity 1,707,834 1,749,581

1 Share capital, no-par value shares, 206.097.896 and 210,400,000 shares authorized, 136.097.896 and 140,400,000 issued and 136,097,896 and 135.986.792 outstanding at December 31, 2009

and 2008, respectively.

98 Consolidated Statement of Changes in Shareholders’ Equity of ALTANA Group

Share capital issued Additional paid-in capital Treasury shares Non-controlling interests

Number of shares Share capital

due to employee

incentive plans

paid-in by the shareholders of

ALTANA AGRetainedearnings

Revaluationreserve

Actuarial gains and

lossesTranslation

adjustmentsNumber

of sharesPurchase

price

Equity of theshareholders of

ALTANA AGShareholders’

equityTranslation

adjustmentsShareholders’

equity

in € thousand

Balance at Jan. 1, 2008 140,400,000 140,400 15,059 136,480 1,159,076 219 (31,472) (56,467) (4,413,208) (226,467) 1,136,828 2,823 (217) 1,139,434

Comprehensive income 103,048 (8,959) 1,846 11,385 107,320 356 (462) 107,214

Employee incentive plans 111,104 5,702 5,702 5,702

Loss from sale of treasury shares (4,590) (4,590) (4,590)

Dividends paid (69,353) (69,353) (54) (69,407)

Balance at Dec. 31, 2008 140,400,000 140,400 15,059 131,890 1,192,771 (8,740) (29,626) (45,082) (4,302,104) (220,765) 1,175,907 3,125 (679) 1,178,353

Comprehensive income 10,432 5,322 (5,535) 1,981 12,200 554 110 12,864

Retirement of treasury shares (4,302,104) (4,302) (216,463) 4,302,104 220,765 0 0

Dividends paid (13,610) (13,610) (53) (13,663)

Balance at Dec. 31, 2009 136,097,896 136,098 15,059 131,890 973,130 (3,418) (35,161) (43,101) 0 0 1,174,497 3,626 (569) 1,177,554

Consolidated Statement of Changes in Shareholders’ Equity of ALTANA Group


Share capital issued Additional paid-in capital Treasury shares Non-controlling interests

Number of shares Share capital

due to employee

incentive plans

paid-in by the shareholders of

ALTANA AGRetainedearnings

Revaluationreserve

Actuarial gains and

lossesTranslation

adjustmentsNumber

of sharesPurchase

price

Equity of theshareholders of

ALTANA AGShareholders’

equityTranslation

adjustmentsShareholders’

equity

in € thousand

Balance at Jan. 1, 2008 140,400,000 140,400 15,059 136,480 1,159,076 219 (31,472) (56,467) (4,413,208) (226,467) 1,136,828 2,823 (217) 1,139,434

Comprehensive income 103,048 (8,959) 1,846 11,385 107,320 356 (462) 107,214

Employee incentive plans 111,104 5,702 5,702 5,702

Loss from sale of treasury shares (4,590) (4,590) (4,590)

Dividends paid (69,353) (69,353) (54) (69,407)

Balance at Dec. 31, 2008 140,400,000 140,400 15,059 131,890 1,192,771 (8,740) (29,626) (45,082) (4,302,104) (220,765) 1,175,907 3,125 (679) 1,178,353

Comprehensive income 10,432 5,322 (5,535) 1,981 12,200 554 110 12,864

Retirement of treasury shares (4,302,104) (4,302) (216,463) 4,302,104 220,765 0 0

Dividends paid (13,610) (13,610) (53) (13,663)

Balance at Dec. 31, 2009 136,097,896 136,098 15,059 131,890 973,130 (3,418) (35,161) (43,101) 0 0 1,174,497 3,626 (569) 1,177,554

Consolidated Statement of Changes in Shareholders’ Equity of ALTANA Group

100 ALTANA Group Consolidated Statement of Cash Flows

Notes 2009 2008

in € thousand

Net income (EAT) 10,986 103,404

Depreciation and amortization of intangible assets and property, plant and equipment 14, 15 78,172 72,585

Impairment of intangible assets and property, plant and equipment 14, 15 76,746 0

Impairment on long-term investments and marketable securities 16, 20 4,844 6,787

Net result from the disposal of intangible assets and property, plant and equipment

3, 7, 8

(160)

638

Net result from the disposal of long-term investments and marketable securities 9, 10 (134) (39)

Expenses from employee incentive plans 23 0 512

Change in inventories 18 31,877 2,759

Change in trade accounts receivable 19 (8,382) 36,640

Change in income taxes 12 20,311 (7,163)

Change in provisions 25, 26 11,944 (12,978)

Change in trade accounts payable 4,362 (11,858)

Change in other assets and other liabilities 21, 27 (5,471) 13,751

Other (517) (541)

Cash flow from operating activities 224,578 204,497

Capital expenditure on intangible assets and property, plant and equipment 14, 15 (54,006) (107,946)

Proceeds from the disposal of intangible assets and property, plant and equipment

14, 15

861

3,551

Acquisitions, net of cash acquired 3 (42,583) (25,031)

Payment related to sale of the Pharmaceuticals business 3 (63,856) (3,952)

Purchase of long-term investments 16 (392) ( 336)

Proceeds from the disposal of long-term investments 16 1,644 1,164

Purchase of marketable securities 20 (77,609) (26,168)

Proceeds from disposal of marketable securities 9, 10 38,880 9,898

Cash flow from investing activities (197,061) (148,820)

ALTANA Group Consolidated Statement of Cash Flows


Notes 2009 2008

in € thousand

Dividends paid 22 (13,663) (69,407)

Proceeds from sale of treasury shares 23 0 600

Repayment of long-term debt 24 (2,549) (6,053)

Net increase / decrease in short-term debt 24 (11,779) 19,085

Cash flow from financing activities (27,991) (55,775)

Effect of exchange rate changes 5 4,733

Change in cash and cash equivalents 2 (469) 4,635

Cash and cash equivalents as of January 1 2 104,163 99,528

Cash and cash equivalents as of December 31 2 103,694 104,163

Additional information on cash flows included in the cash flows from operating activities

Paid income taxes (78,842) (68,815)

Paid interest (15,830) (11,006)

Received income taxes 17,928 7,601

Received interest 1,739 3,286

Received dividends 477 1,092

102 Notes to Consolidated Financial Statements

The consolidated financial statements of ALTANA AG and its subsidiaries (the “Company” or

“ALTANA”) are prepared in accordance with International Financial Reporting Standards

(IFRS), issued by the International Accounting Standards Board (IASB) as endorsed by the

EU, and in accordance with section 315a of the German Commercial Code (HGB). The

consolidated financial statements are prepared in full conformity with the International Finan-

cial Reporting Standards. The consolidated financial statements were authorized for issue

by the Management Board on February 22, 2010 and were approved by the Supervisory Board

in the Supervisory Board meeting on March 16, 2010.

ALTANA AG is incorporated as a stock corporation (“Aktiengesellschaft”) under the laws

of the Federal Republic of Germany and located in Wesel, Germany. All amounts are report-

ed in Euro thousands if not stated otherwise.

Consolidation

The consolidated financial statements of the Company include 14 (2008: 14) subsidiaries in

Germany and 45 (2008: 45) subsidiaries abroad, in which ALTANA either directly or in-

directly holds the majority of the voting rights or has the power to govern the subsidiaries’

financial and operating policies.

In 2009, the Company completed three acquisitions through asset deals which taken as

a whole, had no significant impact on the Company’s net assets, financial position and

result of operations. Additionally, for the purpose of the acquisition of the net assets of Water

Ink Technologies Inc., located in the United States of America, the ACTEGA Wit Inc., also

located in the United States of America, was founded. In the Netherlands the Dick Peters B.V.

was merged with BYK-Cera B.V.

ALTANA holds a 39 % interest in Aldoro Indústria de Pós e Pigmentos Metálicos Ltda.,

Brazil (Aldoro) and accounts for it by applying the equity method of accounting.

All intercompany balances and transactions have been eliminated in consolidation.

The financial statements of the consolidated subsidiaries are prepared in accordance

with the Company’s accounting policies.

The main subsidiaries included in the consolidated financial statements are listed on

page 163 of the annual report. A complete list of all subsidiaries of the ALTANA Group is

published in the electronic Federal Gazette (elektronischer Bundesanzeiger).

New Accounting Pronouncements Endorsed by the EU

In November 2006, the IFRIC issued IFRIC Interpretation 12, “Service Concession Arrange-

ments“, effective for annual periods beginning on or after January 1, 2008. This Interpre-

tation had no effect on the Company’s consolidated financial statements because ALTANA is

not operating in businesses where service concessions agreements are usually issued.

In November 2006, IFRS 8, “Operating Segments” was issued and is effective for annual

periods beginning on or after January 1, 2009. IFRS 8 replaces IAS 14, “Segment Report-

1. Basis of Presentation

2. Significant Accounting Policies



ing“ and adjusts the Standard in line with the joint convergence project with the Financial

Accounting Standard Board (FASB) to the US GAAP Statement of Financial Accounting

Standards No. 131. Only publicly listed companies are required to apply IFRS 8, which requires

the identification of operating segments based on internal management reporting (“man-

agement approach”). ALTANA already adopted IFRS 8 as of December 31, 2008, which re-

sulted in changes in the segment reporting (see note 4).

In March 2007, the revised IAS 23, “Borrowing Cost“, effective for annual periods begin-

ning on or after January 1, 2009 was issued. In the revised standard the option of imme-

diately recognizing borrowing costs that relate to qualifying assets as an expense was elimi-

nated but their capitalization was required. ALTANA adopted the revised IAS 23, however,

no qualifying projects occurred in 2009.

In June 2007, the IFRIC issued the IFRIC Interpretation 13, “Customer Loyalty Programs“,

which is effective for annual periods beginning on or after July 1, 2008. IFRIC 13 address-

es the accounting of loyalty award credits that are granted by manufacturers and service pro-

viders themselves or through third parties to customers. Consideration from the initial sale

shall be allocated to the award credits and have to be deferred. Revenue is only recognized

when the award credits are redeemed or have expired. The first adoption of this Interpre-

tation had no effect on ALTANA’s consolidated financial statements.

In September 2007, a revised IAS 1, “Presentation of Financial Statements”, effective for

annual periods beginning on or after January 1, 2009 was issued by the IASB. The main

changes of the revised IAS 1 relate to the compulsory presentation of changes of sharehold-

ers’ equity not resulting from transactions with shareholders, to the presentation of an

opening balance of the earliest comparative figures presented in specific cases and to the

particularities of a statement of comprehensive income. The revisions also include changes

in the titles of some of the financial statements. ALTANA already adopted the revised IAS 1

as of December 31, 2008.

In January 2008, a revised IFRS 3, “Business Combinations“ and the amendments to

IAS 27, “Consolidated and Separate Financial Statements“ were issued by the IASB. The

amendments are effective prospectively for business combinations completed in annual peri-

ods beginning on or after July 1, 2009. Early adoption was only permitted for an annual

period beginning on or after June 30, 2007. IFRS 3 and IAS 27 require major changes of the

accounting of business combinations, disposal of equity interest as well as acquisitions of

non-controlling interests. ALTANA has not early adopted these amendments and revisions and

is currently evaluating its impacts on the Company’s consolidated financial statements.

In January 2008, an amendment to IFRS 2, “Share-based Payments“ was issued by the

IASB and is effective for annual periods beginning on or after January 1, 2009. The amend-

ment clarifies the definition “vesting conditions” and “cancellation“. The adoption of the

amendment to IFRS 2 in the course of the newly issued employee incentive plans as of

July 1, 2008 had no effect on ALTANA’s consolidated financial statements.

In February 2008, an amendment to IAS 32 “Financial Instruments: Presentation“ and

IAS 1 “Presentation of Financial Statement“ was issued by the IASB. The amendments are

effective for annual periods beginning on or after January 1, 2009. The amendment to IAS 32

establishes principles for presenting financial instruments as liabilities or equity. The amend-

ment permits the classification of some puttable financial instruments as equity under certain

conditions. Therefore, as a rule, it should be allowed for German partnerships to present


their company capital as equity in their financial statements in accordance with IFRS. The

amendment had no effect on the presentation of ALTANA’s consolidated financial statements.

In May 2008, “Improvements to IFRSs“, a collection of amendments to IFRSs was

issued by the IASB within the framework of the first annual improvement project. The amend-

ments relate to changes for presentation, recognition and measurement purposes and

terminology or editorial changes. The amendments are mainly effective for annual periods

beginning on or after January 1, 2009. The amendments had no significant effect on

ALTANA’s consolidated financial statements.

In May 2008, an amendment to IFRS 1, “First-time Adoption of International Financial

Reporting Standards“ and IAS 27, “Consolidated and Separate Financial Statements“

was issued by the IASB. The amendments are effective for annual periods beginning on or

after January 1, 2009. The amendments facilitate the measurement of investments for

first-time adopters in their separate financial statements. The amendments relate also to the

removal of the definition of the cost method from IAS 27 and to changes to a specific

type of reorganization in an existing group structure. The amendments had no significant

effect on ALTANA’s consolidated financial statements.

In July 2008, the IFRIC issued IFRIC Interpretation 15, “Agreements for the Construction

of Real Estate“ effective for annual periods beginning on or after January 1, 2009, which

is to be applied retrospectively. This Interpretation has no effect on the Company’s consoli-

dated financial statements because ALTANA is not operating in the construction business

in terms of IFRIC 15.

In July 2008, the IFRIC issued IFRIC Interpretation 16, “Hedges of a Net Investment in a

Foreign Operation“, effective for annual periods beginning on or after October 1, 2008.

IFRIC 16 clarifies that a parent entity may designate as a hedged risk only the foreign ex-

change differences arising from the difference between its own functional currency and

that of its foreign operation. The Interpretation had no effect on ALTANA’s consolidated finan-

cial statements.

In July 2008, an amendment to IAS 39, “Financial Instruments: Recognition and Mea-

surement“ was issued by the IASB. The amendment is effective for annual periods begin-

ning on or after July 1, 2009 and has to be applied retrospectively. The amendment clarifies

how the existing principles underlying hedge accounting should be applied to a one-sided

risk and inflation in a hedged financial item. The amendment had no effect on ALTANA’s con-

solidated financial statements.

In October 2008, amendments to IAS 39 “Financial Instruments: Recognition and Mea-

surement“ and IFRS 7 “Financial Instruments: Disclosure” permitting the reclassification

of financial instruments were issued by the IASB. The amendments have been effective since

July 1, 2008. The amendments allow the reclassification of non-derivative financial instru-

ments from the categories “fair value through profit and loss“ and “available-for-sale“ to

“loans and receivables“. ALTANA does not apply this alternative treatment.

In November 2008, the IASB issued a clarification regarding the application date to the

amendment of IAS 39, “Financial Instruments: Recognition and Measurement“ and to

IFRS 7, “Financial Instruments: Disclosures“ issued in October 2008. The amendment specifies

that reclassifications of financial instruments made on or after November 1, 2008 shall

take effect only from the date when the reclassification is made and shall not be applied

retrospectively. ALTANA does not apply this alternative treatment.


In November 2008, an amendment to IFRS 1, “First-time Adoption of International Financial

Reporting Standards“ effective for annual periods beginning on or after July 1, 2009,

was issued. The amendment does not change the regulations of IFRS 1 but distinguishes

between the general and specific rules in the Standard. The amendment had no effect

on ALTANA’s consolidated financial statements.

In November 2008, the IFRIC issued IFRIC Interpretation 17, “Distribution of Non-cash

Assets to Owners“ effective for annual periods beginning on or after July 1, 2009. IFRIC 17

clarifies how an entity should measure assets other than cash distributed as dividends to its

owners. ALTANA does not expect that the interpretation will have an impact on its consoli-

dated financial statements.

In January 2009, the IFRIC issued IFRIC Interpretation 18, “Transfers of Assets from

Customers“ which is effective for annual periods beginning on or after July 1, 2009. IFRIC 18

clarifies the accounting for agreements in which an entity receives from a customer an

item of property, plant and equipment that the entity must then use either to connect the

customer to a network or to provide the customer with ongoing access to a supply of

goods or services. ALTANA does not expect that this interpretation will have an effect on its

consolidated financial statements.

In March 2009, the IASB issued an amendment to IFRS 7, “Financial Instruments: Disclo-

sure”, effective for annual periods beginning on or after January 1, 2009. The amendment

enhances disclosures about fair value measurements and the liquidity risk of financial instru-

ments and insignificantly affects disclosures relating to financial instruments (see note 28).

In March 2009, the IFRIC issued an amendment to IFRIC Interpretation 9, “Reassessment

of Embedded Derivatives” and the IASB issued an amendment to IAS 39, “Financial Instru-

ments: Recognition and Measurement”, effective for annual periods beginning on or after

January 1, 2009. The Interpretation clarifies that on reclassification of financial assets all

embedded derivatives have to be reassessed and if necessary, separately accounted for in the

financial statements. The amendment had no effect on ALTANA’s consolidated financial

statements.

In October 2009, an amendment to IAS 32, “Financial Instruments: Presentation” was

issued, effective for annual periods beginning on or after February 1, 2010. The amend-

ment addresses the accounting for rights issues, options or warrants on equity instruments

that are denominated in a currency other than the functional currency of the issuer,

ALTANA does not expect that the amendment will have an impact on its consolidated finan-

cial statements.

New Accounting Pronouncements not yet Endorsed by the EU

The following new Standards and Interpretations have not yet been endorsed by the EU.

ALTANA has not early adopted these Standards and Interpretations.

In April 2009, “Improvements to IFRSs II“, a collection of amendments to IFRSs was

issued by the IASB within the framework of the “Annual Improvement Process” project. The

amendments issued relate to changes for presentation, recognition and measurement pur-

poses and terminology or editorial changes. The amendments are mainly effective for annual

periods beginning on or after January 1, 2010. ALTANA is currently evaluating their im-

pacts on the Company’s consolidated financial statements.


In June 2009, an amendment to IFRS 2, “Share-based Payment” was issued, effective for

annual periods beginning on or after January 1, 2010 and has to be applied retrospec-

tively. The amendments clarify the accounting for group cash-settled share-based payment

transactions. ALTANA does not expect that the amendment will have an impact on its

consolidated financial statements.

In July 2009, an amendment to IFRS 1, “First-time Adoption of International Financial

Reporting Standards” was issued, which has to be applied for annual periods beginning

on or after January 1, 2010. The amendment addresses the retrospective application of IFRSs

to particular situations and is aimed at ensuring that entities applying IFRSs will not face

undue cost or effort in the transition process. ALTANA does not expect that the amendment

will have an impact on its consolidated financial statements.

In November 2009, the IASB revised IAS 24, “Related Party Disclosures” effective for

annual periods beginning on or after January 1, 2011, with earlier application permitted.

The amendments simplify the disclosure requirements for government-related entities and

clarify the definition of a related party. ALTANA does not expect that the amendment will

have an impact on its consolidated financial statements, because ALTANA is not a govern-

ment-related entity.

In November 2009, the IASB has completed the first phase of a reform project regarding

the accounting for financial instruments with the publication of IFRS 9, “Financial Instru-

ments: Classification and Measurement”. This Standard is part of a project to replace IAS 39,

“Financial Instruments: Recognition and Measurement”, which shall be completed in 2010.

IFRS 9 replaces the measurement categories of IAS 39 in phase one by the categories “am-

ortized cost” and “fair value”. Regulations for the measurement of financial liabilities are

not included. ALTANA is currently evaluating the impact on its consolidated financial state-

ments.

In November 2009, the IFRIC issued IFRIC Interpretation 19, “Extinguishing Financial

Liabilities with Equity Instruments” effective for annual periods beginning on or after July 1,

2010, with earlier application permitted. IFRIC 19 clarifies the requirements when an entity

renegotiates the terms of a financial liability with its creditor and the creditor agrees to accept

the entity’s shares or other equity instruments to settle the financial liability fully or partially.

ALTANA does not expect that the amendment will have an impact on its consolidated financial

statements.

In November 2009, the IFRIC issued an amendment to IFRIC Interpretation 14,

“IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their

Interaction” effective for annual periods beginning on or after January 1, 2011, with ear-

lier application permitted. The amendment applies in the limited circumstances when an en-

tity is subject to minimum funding requirements and makes an early payment of contribu-

tions to cover those requirements. The amendment permits such an entity to treat the bene-

fit of such an early payment as an asset. ALTANA does not expect that the amendment

will have an impact on its consolidated financial statements.


Foreign Currency

The consolidated financial statements of ALTANA are expressed in Euro “€”.

Financial statements of subsidiaries where the functional currency is a currency other than

the Euro are translated using the functional currency principle. For these entities, assets

and liabilities are translated using the middle rate at year end, while revenues and expenses

are translated using the average exchange rates prevailing during the year. Equity is trans-

lated at historical exchange rates. Adjustments for cumulative foreign currency translation

fluctuations are excluded from net income and are reported as a separate component of

other comprehensive income in equity.

Transactions realized in foreign currencies are translated to the local currency using the

exchange rate prevailing at the transaction date.

Transaction gains and losses that arise from exchange rate fluctuations on transactions

denominated in a currency other than the functional currency are generally included in

other operating income or other operating expenses and as far as they relate to the translation

of financial assets or liabilities in financial income or expenses.

The following table provides the exchange rates for ALTANA’s most important currencies

to the Euro:

Middle rate Average rate years ended Dec. 31

Dec. 31, 2009 Dec. 31, 2008 2009 2008

1 Euro

U.S. Dollar 1.44 1.39 1.39 1.47

Pound Sterling 0.89 0.95 0.89 0.80

Japanese Yen 133.16 126.14 130.34 152.45

Chinese Renmimbi 9.84 9.50 9.53 10.22

Indian Rupie 67.04 70.09 67.36 64.12

Brazilian Real 2.51 3.24 2.77 2.67

Revenue Recognition

Revenues mainly result from the sale of products and goods and are recognized if the revenue

can be reliably measured, it is probable that the economic benefits of the transaction will

flow to the Company and all related costs can be reliably measured. As such, ALTANA records

revenue from product sales when significant risks and rewards of ownership of the goods

are transferred to the customer. Provisions for discounts and rebates to customers and returns

of goods are recorded in the same period in which the related sales are recorded and are

based on management’s best estimate.

Research and Development Expenses

In accordance with IAS 38, research costs, defined as costs of original and planned research

performed to gain new scientific or technical knowledge and understanding, are expensed

as incurred. Development costs are defined as costs incurred to achieve technical and commer-

cial feasibility and are capitalized if certain criteria are met. Uncertainties regarding the


commercialization of products inherent in the development of ALTANA’s products preclude

the capitalization of development costs under intangible assets according to IAS 38.

Therefore, development costs are expensed as incurred.

Income Taxes

Income taxes include current and deferred income taxes. Current income taxes relate to all

taxes levied on taxable income of the consolidated companies. Other taxes such as pro-

perty taxes or excise taxes (power supply, energy) are classified as function costs.

Under IAS 12, “Income Taxes“, deferred tax assets and liabilities are recognized in the

consolidated financial statements for all temporary differences between the carrying

amount of assets and liabilities and their tax bases, for tax credits and operating loss carry-

forwards.

For purposes of calculating deferred tax assets and liabilities, the Company uses the

tax rates that have been enacted or substantively enacted at the reporting date. The effect of

a change in tax rates on deferred tax assets and liabilities is recognized in the period the

legislation is substantively adopted. A deferred tax asset is recognized only to the extent that

it is probable that future taxable income will be available against which the credits and tax

loss carry-forwards can be applied.

Earnings per Share

Basic earnings per share are computed by dividing net income attributable to the shareholders

of ALTANA AG by the weighted average number of shares outstanding for the year.

In 2009 and 2008 diluted earnings per share were not calculated because there were no

dilutive items in the years reported.

2009 2008

Basic earnings per share

Net income attributable to shareholders of ALTANA AG 10,432 103,048

Weighted average shares outstanding 136,981,890 136,000,449

Earnings per share (basic and diluted) in € 0.08 0.76

Intangible Assets

Intangible assets, including software, are accounted for in accordance with IAS 38 “Intangible

Assets“, and are capitalized if (a) the intangible asset is identifiable (i. e., it is separable or

arises from contractual or other legal rights), (b) it is probable that the expected future econo-

mic benefits (e.g. cash or other benefits such as cost savings) that are attributable to the

asset will flow to the entity and (c) the cost of the intangible asset can be measured reliably.

Intangible assets with a definite useful life are measured at cost less accumulated

amortization. They are amortized straight-line over the shorter of their contractual term or

their estimated useful lives.


The following amortization periods are applied:

Years

Patents, licenses and similar rights 5 to 20

Other intangible assets 1 to 10

Amortization expense of all intangible assets with a definite useful life is recorded based on

their function as cost of sales, selling and distribution expenses, research and development

expenses or general administration expenses.

Intangible assets with an indefinite useful life as well as goodwill are not amortized but

tested for impairment regularly (see “Impairments of Intangible Assets and Property, Plant

and Equipment“). Impairment losses of these assets are recorded in other operating expenses.

Property, Plant and Equipment

Property, plant and equipment are valued at cost less accumulated depreciation. Cost includes

certain costs that are capitalized during construction, including material, payroll and direct

overhead costs. Borrowing costs that are directly attributable to qualifying assets are capita-

lized. Government grants are deducted from the acquisition or manufacturing costs.

Property, plant and equipment are depreciated on a straight-line basis over the estimated

useful lives of the assets:

Years

Buildings 2 to 75

Plant and machinery 2 to 30

Assets under finance lease 2 to 25

Equipment 2 to 30

Maintenance and repairs are expensed as incurred while replacements and improvements, if

the item qualifies for recognition as an asset, as well as asset retirement obligations, are

capitalized. Gains or losses resulting from the sale or retirement of assets are recognized in

other operating income or expenses.

Depreciation expenses of property, plant and equipment are recorded based on their

function as cost of sales, selling and distribution expenses, research and development expens-

es or general administration expenses.


Impairments of Intangible Assets and Property, Plant and Equipment

Irrespective of whether there is any indication of impairment, the Company tests goodwill

acquired in a business combination and intangible assets with an indefinite useful life for

impairment at least annually. For the purpose of impairment testing of goodwill, goodwill is

allocated to cash-generating units that are expected to benefit from the synergies of the

business combination. In accordance with IAS 36, “Impairment of Assets“, an impairment loss

is recognized when the carrying amount of the cash-generating unit, to which goodwill

was allocated, exceeds the higher of its fair value less costs to sell or its value in use.

In the event that facts and circumstances indicate that the Company’s property, plant and

equipment or intangible assets including goodwill, may be impaired, an impairment test

is performed. This is the case regardless of whether they are to be held and used or to be dis-

posed of. An impairment loss is recognized when an asset’s carrying amount exceeds the

higher of its fair value less costs to sell and its value in use. Value in use is based on the dis-

counted cash flows expected to arise from the continued use of the asset and from its

eventual disposal.

If these tests result in an impairment the related loss is recorded in other operating ex-

penses.

If there is any indication that the considerations which led to an impairment of prop-

erty, plant and equipment or intangible assets no longer exist, the Company would consider

the need to reverse all or a portion of the impairment charge except for goodwill.

Government Grants

Taxable and non-taxable government grants for the acquisition of certain non-current assets

are recorded as a reduction of the cost basis of the acquired or constructed assets. Non-

refundable reimbursement of cost is recorded as other operating income to the extent that

the conditions stipulated are met. The reimbursement received in 2009 for the social secu-

rity tax levied from the employer in respect of the cyclical short-time work was treated as a

government grant and offset with personnel expenses.

Long-term Investments and Marketable Securities

In accordance with IAS 39, the Company classified all marketable securities and certain long-

term investments (see note 16) as available-for-sale. Therefore, at the reporting date these

securities are carried at fair value or acquisition cost, with unrealized gains and losses recorded

in other comprehensive income (revaluation reserve), net of deferred income tax.

Long-term investments and marketable securities are recognized on the settlement date.

The Company derecognizes these assets when the contractual right to the cash flows ex-

pires or the assets are transferred and the Company retains no contractual rights to receive

cash and assumes no obligations to pay cash from the assets.

Impairments of marketable securities are recognized in the income statement if at the

financial reporting date the decrease in value is material and permanent in nature. The

Company evaluates impairments based on individual marketable securities at each financial

reporting date. Impairments of marketable securities are reported as financial expenses.


Investments in Associated Companies

Associated entities are companies in which ALTANA holds between 20 % and 50 % of the

voting power of the investee and therefore can exercise significant influence.

Investments in associated companies are accounted for by applying the equity method in

accordance with IAS 28, “Investments in Associates“. The investment is initially recognized

at cost and the carrying amount is increased or decreased to recognize ALTANA’s share of

changes in the investee’s equity after the acquisition. ALTANA’s share of profit and loss of

the investee is recognized in the Company’s income statements while changes in the invest-

ee’s other comprehensive income are recognized directly in the Company’s other compre-

hensive income. Goodwill included in such investments is not tested for impairment separately

in accordance with IAS 36, “Impairment of Assets“. Instead, the entire carrying amount

of the investment is tested for impairment in accordance with IAS 39, “Financial Instruments:

Recognition and Measurement“, by comparing the carrying amount with the recoverable

amount.

Inventories

Inventory is valued at the lower of acquisition or manufacturing costs or net realizable value

at the reporting date. Net realizable value is the estimated selling price in the ordinary

course of business, less the estimated cost to complete and the estimated selling expense.

Generally, acquisition and manufacturing costs are determined on the basis of weighted

average costs. Manufacturing costs comprise material, payroll and direct overhead, including

depreciation and amortization.

Trade Accounts Receivable

Trade accounts receivable are initially recognized at their fair value. Subsequently, accounts

receivable are valued at amortized cost. The Company estimates an allowance for doubtful

accounts based on a review of individual customer receivables and historical uncollectibility.

Cash and Cash Equivalents

ALTANA considers cash in banks and highly liquid investments with original maturities of three

months or less to be cash and cash equivalents. The components of cash and cash equiva-

lents are consistent with the financial resource fund in the cash flow statement.

Financial Instruments

In accordance with IAS 39, the Company recognizes all financial assets and liabilities, as well

as all derivative financial instruments, as assets or liabilities in the statement of financial

position and measures all at fair value apart from some exceptions (e.g. loans and receivables).

Changes in the fair value of derivative instruments qualifying for hedge accounting are

recognized in income or in other comprehensive income (revaluation reserve) depending on

whether the derivative is designated as a fair value or a cash flow hedge. For derivatives

designated as fair value hedges, changes in fair value of the hedged item and the derivative


are recognized in the income statement. For derivatives designated as a cash flow hedge,

changes in fair value of the effective portion of the hedging instrument are recognized in

other comprehensive income (revaluation reserve) until the hedged item is recognized in the

income statement. The ineffective portion of derivatives designated as cash flow hedges

and fair value changes of derivatives which do not qualify for hedge accounting are reco-

gnized in the income statement in financial income (expenses) immediately. This is also

applicable to components excluded from hedging instruments qualifying as cash flow hedges.

At the inception of the hedge the Company documents the designation and hedging

relationship between the hedged item and the hedging instrument. Additionally, at the incep-

tion of the hedge and on an ongoing basis, the hedging instrument is assessed to actually

compensate the change in the fair value of the hedged item (assessing hedge effectiveness)

throughout the financial reporting periods.

Employee Incentive Plans

The Company accounts for share-based employee compensation in accordance with IFRS 2

“Share-based Payment“. In accordance with the provisions of IFRS 2, share-based emplo-

yee compensation is measured at fair value at the grant date by references to the fair value

of the instruments granted, taking into account the vesting conditions upon which those

instruments were granted. The cost of employee compensation so determined is expensed

over the required service period. Depending on the settlement of share-based payment

transactions either in equity instruments or cash, the Company records an increase in equity

or a liability. If the share-based payment transaction is settled in cash, the resulting liability

is re-measured periodically and its changes are recognized in the income statement.

Employee Benefit Obligations

The accounting for pension liabilities is based on the projected unit credit method in accor-

dance with IAS 19, “Employee Benefits“ and is measured based on an actuary’s opinion.

Actuarial gains and losses are fully recognized in other comprehensive income in the period

they occur. The provisions therefore generally equal the fair value of the obligations at the

reporting dates.

Provisions

In accordance with IAS 37, “Provisions, Contingent Liabilities and Contingent Assets“, the

Company recognizes a provision when it has a present obligation as a result of a past

event, it is more likely than not that an outflow of resources embodying economic benefits

will be required to settle the obligation, and a reliable estimate can be made of the

amount of the obligation.

Obligations in connection with product warranties are estimated based on the actual

expenses of the last two or three years, depending on the segment they relate to. Based

on this experience, the Company calculates a warranty percentage and applies it to net prod-

uct sales and records the estimated obligation under provisions. The provision is adjusted

to reflect actual warranty claims and changes in estimates. Personnel related provisions in-

cluded in the item other provisions are measured in accordance with IAS 19.


Use of Estimates and Assumptions

The preparation of the consolidated financial statements requires management to make

estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure

of contingent assets and liabilities reported at the end of any given period and the re-

ported amounts of revenues and expenses for that reported period. Actual results may differ

from these estimates.

At the reporting date management mainly made the following key assumptions concern-

ing the future and identified key sources of estimation uncertainty that might pose a sig-

nificant risk of causing a material adjustment to the carrying amounts of assets and liabilities

within the next financial year:

Employee Benefit Obligations: The valuation of the various pension plans is based on the

projected unit credit method applying different parameters, including the expected dis-

count rate, the rate of compensation and pension increase, and the return on plan assets as

of the reporting date. If the relevant parameters developed in a materially different manner

than expected this could have a material impact on the defined benefit obligation (see note

25).

Impairments: The impairment analysis for goodwill, other intangible assets and property,

plant and equipment is principally based upon discounted estimated future cash flows

from the use and eventual disposal of the assets. Factors like lower than anticipated sales and

resulting decreases of net cash flows as well as changes in the discount rates used could

lead to impairments. Regarding the carrying amounts of goodwill, other intangible assets and

property, plant and equipment see note 14 and note 15.

In accordance with IFRS 3, the Company accounts for business combinations by applying the

purchase method as of the date when control over the financial and operating policies is

effectively obtained. Any excess of the cost of the business combination over the fair value of

the net assets acquired is recorded as goodwill, which is allocated to those cash generating

units that are expected to benefit from the business combination. Goodwill is not amortized

but tested for impairment at least annually. Necessary impairment losses of goodwill are

recognized directly in the income statement. The results of operations of the acquired busi-

nesses are included in the Company’s consolidated financial statements from the respective

dates of acquisition until the date of sale.

Acquisitions in 2009

On October 2, 2009 ALTANA acquired the net assets of the North American company Water

Ink Technologies Inc., by way of an asset deal. The business with water-based and ultra-

violet inks as well as varnishes and coatings for narrow web applications was integrated in the

segment Coatings & Sealants.

The purchase price was € 29.5 million and was paid in cash. The total acquisition cost

amounted to € 30.2 million.

3. Business Combina-tions and Disposi-tions


The following table provides a preliminary allocation of the acquisition cost to the net assets

acquired as of the acquisition date. The purchase price allocation will be finalized as soon

as all necessary information is available and the economic transfer of ownership is completed.

in € million

Goodwill 10.0

Intangible assets 15.0

Property, plant and equipment 0.4

Inventories 2.6

Trade accounts receivable 3.6

Liabilities (1.4)

Total acquisition cost 30.2

thereof purchase price 29.5

thereof costs directly attributable to acquisitions 0.7

Prior to the acquisition date, the carrying amount of the net assets acquired was € 5.2 million.

Since its acquisition, the business generated revenues of € 5.8 million and contributed

€ 0.6 million to consolidated net income. Had the business from Water Ink Technologies

already been acquired on January 1, 2009, the business would have contributed sales

of approximately € 23.4 million and € 4.3 million to the Company’s consolidated net income.

Additionally, in 2009 some smaller acquisitions were completed. In the segment

Additives & Instruments the High Performance Additives business of the DyStar Group was

acquired in an asset deal effective as of March 30, 2009. The Company’s net sales amount-

ed to € 7.5 million in 2008. The purchase price was € 4.5 million, and goodwill of € 2.1 million

was recognized. In the segment Electrical Insulation parts of the Formulated Products busi-

ness of Quadrant Chemical Corp. was acquired in an asset deal. The Company’s net sales

amounted to U.S. Dollar 4.7 million in 2008. The preliminary purchase price was € 5.5 mil-

lion, of which an amount of € 2.9 million was paid in cash in the reporting period. The pur-

chase price was allocated in full to the intangible assets acquired and no goodwill was

recognized.

The following segment reporting is prepared based on the management approach in accor-

dance with IFRS 8 “Operating Segments“. ALTANA has adopted the regulations already

as of December 31, 2008. Accordingly, the operating segments information is reported based

on the internal organization and management structure, which is the internal financial

reporting to the chief operating decision maker, which is represented by the Management

Board of ALTANA.

ALTANA has identified four reportable segments, which are separately organized and

managed according to the products sold and services provided, the brands, the produc-

tion processes, the sales channels and the customer profiles. The segment managers, respon-

sible for the segment operating income, report directly to the chief operating decision

4. Segment Reporting


makers of ALTANA. For the purpose of applying IFRS 8 the segment Holding was identified

as an additional, fifth operating segment.

The segment Additives & Instruments comprises activities in the area of additives for

coatings, printing inks and plastics and instruments to measure surface characteristics under

the worldwide trademark “BYK“.

The segment Effect Pigments produces and distributes effect pigments. The product

range comprises metallic and pearlescent effect pigments as well as metallic printing ink for

applications in coatings, plastics, packaging and in the cosmetics industry under the world-

wide trademark “ECKART“.

The segment Electrical Insulation develops, produces and distributes wire enamels, im-

pregnating resins, compounds and casting resins for the use in electrical and electronic

components under the worldwide trademark “ELANTAS“.

The segment Coatings & Sealants develops, produces and distributes products for pack-

aging and general industrial end applications and print colors under the worldwide trade-

mark “ACTEGA“. The products range from overprint varnishes and coatings used for flexible

packaging to sealing compounds for closures and cans.

The segment Holding mainly contains the Group holding company ALTANA AG which is

responsible for strategic management decisions with respect to the segments and for the

governance of ALTANA.

The column Consolidation contains the elimination of inter-segment transactions.

The internal management and reporting of ALTANA comply with the regulations of the

International Financial Reporting Standards (see note 2).

ALTANA’s performance measure is earnings before interest, income taxes, depreciation

and amortization and impairment losses (EBITDA), excluding income from associated com-

panies. The inter-segment transactions are concluded at arm’s length.

Capital expenditure, depreciation and amortization and impairments relate to property,

plant and equipment as well as to intangible assets with a definite useful life. In 2009,

an impairment loss on goodwill of € 47.0 million (see note 14) and on production units in the

Unites States of America, Finland, and Italy of € 29.7 million (see note 15) was recorded

in the segment Effect Pigments.

Segment assets consist of total assets; the inter-segment transactions are included in the

column Consolidation.

Additions from business combinations relate to intangible assets (including goodwill) and

property, plant and equipment, including intangible assets with an indefinite useful life.



Effect Pigments


Coatings & Sealants Holding

Consoli-dation

ALTANA Group

in € million

External sales 2009 419.9 282.3 272.7 206.8 0.0 0.0 1,181.7

2008 450.5 350.7 326.5 214.0 0.0 0.0 1,341.7

Sales to other segments 2009 2.5 0.3 0.1 0.0 0.0 (2.9) 0.0

2008 2.2 0.1 0.1 0.0 0.0 (2.4) 0.0

Net sales 2009 422.4 282.6 272.8 206.8 0.0 (2.9) 1,181.7

2008 452.7 350.8 326.6 214.0 0.0 (2.4) 1,341.7

EBITDA 2009 119.9 27.4 52.0 29.6 (24.8) 0.0 204.1

2008 127.6 67.2 49.7 24.5 (26.1) 0.0 242.9

Depreciation and amortiza-tion (excluding impairment) 2009 22.5 34.5 12.9 7.0 1.3 0.0 78.2

2008 20.3 32.7 12.1 6.6 0.9 0.0 72.6

Impairment 2009 0.0 76.7 0.0 0.0 0.0 0.0 76.7

2008 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Operating income (EBIT) 2009 97.4 (83.8) 39.1 22.6 (26.1) 0.0 49.2

2008 107.3 34.5 37.6 17.9 (27.0) 0.0 170.3

Income from associated companies 2009 0.0 0.8 0.0 0.0 0.0 0.0 0.8

2008 0.0 0.8 0.0 0.0 0.0 0.0 0.8

Assets Dec. 31, 2009 505.8 730.0 365.5 203.5 2,103.8 (2,200.8) 1,707.8

Dec. 31, 2008 453.9 800.3 338.4 185.6 1,986.4 (2,015.0) 1,749.6

Investments in associated companies

Dec. 31, 2009 0.0 9.0 0.0 0.0 0.0 0.0 9.0

Dec. 31, 2008

0.0

6.6

0.0

0.0

0.0

0.0

6.6

Capital expenditure 2009 19.7 18.5 10.2 3.2 2.4 0.0 54.0

2008 52.7 30.8 17.9 5.1 1.4 0.0 107.9

Additions from business combinations 2009 4.9 (0.3) 6.6 25.4 0.0 0.0 36.6

2008 17.7 4.3 0.0 0.0 0.0 0.0 22.0


The following table provides a reconciliation of segment sales to Group sales, from earnings

before interest, income taxes, depreciation and amortization and impairment losses of

the segments (EBITDA) to income before tax (EBT) of the Group and from segment assets to

Group assets:

2009 2008

in € million

Net sales

Sales of reportable segments 1,184.6 1,344.1

Consolidation (2.9) (2.4)

Group sales 1,181.7 1,341.7

EBITDA

EBITDA of reportable segments 204.1 242.9

Depreciation and amortization (excluding impairment) (78.2) (72.6)

Impairment (76.7) 0.0

Financial income 6.3 13.7

Financial expenses (17.3) (26.1)

Income from associated companies 0.8 0.8

Income before income taxes (EBT) 39.0 158.7

Assets

Assets of reportable segments 3,908.6 3,764.6

Consolidation (2,200.8) (2,015.0)

Group assets 1,707.8 1,749.6

The following table presents selected financial information by geographic region:

Sales by location of customers Non-current assets

2009 2008 2009 2008

in € million

Europe 555.1 664.8 815.1 873.9

thereof Germany 188.0 231.0 611.0 638.3

America 267.7 305.9 163.7 161.3

thereof U.S. 178.4 203.7 110.5 139.4

Asia 317.9 325.7 70.2 72.6

thereof China 164.3 152.9 44.6 47.9

Other regions 41.0 45.3 0.0 0.0

Group 1,181.7 1,341.7 1,049.0 1,107.8


Due to the structure of the customer base and the multitude of business activities of ALTANA,

there was no concentration of risk relating to one single customer, region or segment in

the years reported.

Non-current assets comprise intangible assets, property plant and equipment, invest-

ments in associated companies and the non-current portion of other assets.

Cost of sales was as follows:

2009 2008

Material expenses 511,011 611,880

Production expenses

Personnel expenses 110,203 106,964

Depreciation and amortization 49,095 46,203

Energy expenses 22,470 23,430

Maintenance and repair expenses 12,436 17,661

Other 37,345 44,168

742,560 850,306

Selling and distribution expenses were as follows:

2009 2008

Personnel expenses 53,372 52,258

Shipping, duties, insurance 32,255 36,517

Commissions 19,072 23,199

Depreciation and amortization 15,421 14,276

Other 41,336 52,936

161,456 179,186

Selling and distribution expenses reflect the worldwide activities of the distribution network,

with specific emphasis on customer, product and application consulting by employees,

delegates or agents. Distribution and selling expenses also contain expenses for the participa-

tion in international fairs, the preparation of multilingual product information, customer

trainings and sample distributions.

5. Cost of Sales

6. Selling and Distribution Expenses


2009 2008

Release of allowance for doubtful accounts 547 505

Gains on disposal of property, plant and equipment 364 566

Government grants 388 269

Foreign exchange gains / (losses), net 0 4,249

Other 5,897 7,856

7,196 13,445

Upon meeting all conditions stipulated, the Company receives cost reimbursements as non-

refundable government grants.

Foreign exchange gains and losses were as follows:

2009 2008

Foreign exchange gains 6,644 14,994

Foreign exchange (losses) (9,156) (10,745)

Net gain / net (loss) (2,512) 4,249

2009 2008

Bad debt expense 3,025 1,132

Losses from disposal of property, plant and equipment 204 1,204

Exceptional expenses in the segment Effect Pigments (see below) 80,510 0

Foreign exchange gains / (losses), net 2,512 0

Charitable donations 255 348

Other 588 826

87,094 3,510

The exceptional expenses in the segment Effect Pigments were as follows:

Notes 2009

in € million

Impairment of intangible assets (incl. goodwill) 14 47,048

Impairment of property, plant and equipment 15 29,698

Severance pay and cost of disposal relating to the relocation of production from Italy to Germany 3,764

80,510

In 2009 no such expenses were incurred.

8. Other Operating Expenses

7. Other Operating Income


2009 2008

Interest income 1,600 3,193

Gains on disposal of marketable securities 135 42

Gains on derivative financial instruments 3,983 9,310

Dividends received 151 406

Other financial income 409 788

6,278 13,739

2009 2008

Interest expense 3,746 10,243

Impairment 4,845 6,787

Losses on disposal of marketable securities 1 4

Losses on derivative financial instruments 8,316 9,112

Other financial expenses 369 29

17,277 26,175

In 2009, impairment losses on investment funds of € 3.0 million were recorded. Additionally,

in 2009 and 2008, the Company recorded impairment losses of € 1.1 million and

€ 2.3 million, respectively, relating to the investment in Nanophase Technologies Corporation.

In 2009, the Company also recognized impairment losses of € 0.7 million relating to the

investment in METAPOL S.A. de C.V.

In 2008, impairment losses of € 3.4 million which related to shares in investment funds

held for an employee pension plan were recorded.

Income from associated companies amounted to € 0.8 million in both years reported.

Income tax expense was as follows:

2009 2008

Total current taxes 38,822 44,210

Total deferred taxes (10,857) 11,070

Income taxes 27,965 55,280

9. Financial Income

11. Income from Associated Companies

12. Income Taxes

10. Financial Expenses


According to the 2008 German Corporate Tax Reform the corporate tax rate and the solidarity

surcharge on corporate tax in Germany remain unchanged at 15 % and 5.5 %. Due to the

increase in the average collection rate of the trade tax in 2009, trade tax increased to approxi-

mately 13 % compared to 12 % in 2008. Therefore the combined income tax rate was

approximately 29 % and 28 % for 2009 and 2008, respectively.

For the years ended December 31, 2009 and 2008, income tax expense differed by ap-

plying the expected combined income tax rate of approximately 29 % and 28 %, respec-

tively, from the effective income tax as follows:

2009 2008

Income before income taxes (EBT) 38,951 158,684

Tax expense at the applicable expected average income tax rate 11,296 44,432

Non-deductible expenses 15,168 4,586

Tax rate differential (3,425) 104

Tax free income (1,599) (799)

Tax related to prior years 416 5,366

Other 6,109 1,591

Income taxes 27,965 55,280

Effective income tax rate 71.8 % 34.8 %

In 2009, the effective income tax rate was influenced by impairments recorded in the segment

Effect Pigments for which deferred tax assets were not entirety recognized.

Deferred income tax assets and liabilities related to the following items in the statement

of financial position:

Dec. 31, 2009 Dec. 31, 2008

Assets Liabilities Assets Liabilities

Intangible assets 2,216 (21,963) 3,248 (26,015)

Property, plant and equipment 5,013 (26,316) 4,531 (26,732)

Long-term investments 1,193 (4,269) 1,007 (4,121)

Inventories 6,106 (1,670) 6,645 (4,683)

Receivables and other assets 550 (1,938) 566 (2,453)

Marketable securities 62 (80) 15 (14)

Employee benefit obligations 8,773 (816) 6,349 (1,144)

Other provisions 5,635 (10,456) 4,750 (12,846)

Liabilities 1,871 (1,259) 3,249 (1,442)

Tax loss carry-forwards 2,284 – 3,668 –

Other – – 4 –

Netting (25,228) 25,228 (24,622) 24,622

Deferred taxes, net 8,475 (43,539) 9,410 (54,828)


13. Other Information on the Income Statement

The periods in which the tax loss carry-forwards can be used are as follows:

2009 2008

Tax loss carry-forwards 55,788 37,017

unlimited carry-forwards 19,961 12,660

will expire until 2014 (prior year: 2013) 2,767 2,039

will expire after 2014 (prior year: 2013) 33,060 22,318

Deferred tax assets on tax loss carry-forwards of € 49.0 million and € 26.6 million were not

recognized as of December 31, 2009 and 2008, respectively, due to the fact that the

future utilization against taxable income is not probable. Tax loss carry-forwards for which no

deferred tax assets were recognized amounting to € 13.6 million have unlimited carry-

forward periods, € 2.3 million will expire through 2014, and € 33.1 million will expire after

2014.

As of December 31, 2009 and 2008, a deferred tax liability was not recorded for the

amounts of € 25.3 million and € 22.0 million, respectively, which represent the tempo-

rary differences for financial reporting under IFRS and the undistributed earnings over the tax

bases of certain investments in subsidiaries as the timing of their reversal can be con-

trolled and is not probable in the foreseeable future.

Personnel Expenses

Personnel expenses consisted of the following items:

2009 2008

Wages and salaries 207,923 199,917

Social security contributions 37,796 35,204

Expenses for pensions and other post-retirement benefits 10,364 7,511

256,083 242,632

Expenses incurred relating to severance packages for employees in connection with the

production plant relocation in the segment Effect Pigments amounted to € 3.3 million.

In 2009 and 2008, share based compensation expenses were recognized in personnel

expense for the employee incentive plan for key members of management (ALTANA

Share Performance) of € 0.7 million and € 0.3 million, respectively. In 2008, share-based com-

pensation expense of € 0.5 million for the employee incentive plan (ALTANA Investment)

was recorded (see note 23).


The expenses were incurred for the following average number of employees:

2009 2008

Number of employees by segment

Additives & Instruments 1,194 1,166

Effect Pigments 1,888 1,926

Electrical Insulation 887 917

Coatings & Sealants 668 658

Holding 66 60

4,703 4,727

The average number of employees classified in the main categories was as follows:

2009 2008

Number of employees by categories

Blue collar 1,911 1,980

White collar 2,406 2,344

Management 386 403

4,703 4,727

Amortization, Depreciation and Impairments

Amortization, depreciation and impairment charges for intangible assets and property, plant

and equipment were as follows:

2009 2008

Amortization of intangible assets 29,002 29,238

Depreciation of property, plant and equipment 49,170 43,347

Impairment of intangible assets 47,048 0

Impairment of property, plant and equipment 29,698 0

154,918 72,585

Regarding the impairment charges for intangible assets and for property, plant and equipment

recognized, see note 14 and note 15. Impairment losses recognized on long-term financial

assets and marketable securities are reported in financial expenses (see note 10).

124

14. Intangible Assets

Patents,licenses and

similar rights GoodwillSoftware

and others Total

Cost

Balance at Jan. 1, 2008 349,875 221,091 44,564 615,530

Additions 148 0 9,622 9,770

Disposals (1,104) 0 (474) (1,578)

Transfers 0 0 468 468

Translation adjustments 2,739 2,527 274 5,540

Changes in reporting entities 9,871 9,169 0 19,040

Balance at Dec. 31, 2008 361,529 232,787 54,454 648,770

Additions 8 0 5,806 5,814

Disposals (14,420) 0 (178) (14,598)

Transfers 0 0 173 173

Translation adjustments 501 1,038 (150) 1,389

Changes in reporting entities 24,513 11,718 0 36,231

Balance at Dec. 31, 2009 372,131 245,543 60,105 677,779

Accumulated amortization

Balance at Jan. 1, 2008 81,724 0 27,658 109,382

Additions 22,642 0 6,596 29,238

Disposals (1,104) 0 (495) (1,599)

Impairment 0 0 0 0

Transfers 0 0 1 1

Translation adjustments 1,296 0 157 1,453

Changes in reporting entities 0 0 0 0

Balance at Dec. 31, 2008 104,558 0 33,917 138,475

Additions 23,745 0 5,257 29,002

Disposals (14,420) 0 (178) (14,598)

Impairment 44 47,000 4 47,048

Transfers 0 0 0 0

Translation adjustments (334) 0 (107) (441)

Changes in reporting entities 0 0 0 0

Balance at Dec. 31, 2009 113,593 47,000 38,893 199,486

Carrying amount

Dec. 31, 2009 258,538 198,543 21,212 478,293

Dec. 31, 2008 256,971 232,787 20,537 510,295



In 2009, additions related to software and software licenses in the segment Additives &

Instruments in the amount of € 4.6 million.

In 2008, additions related to software and software licenses in the segments Additives &

Instruments in the amount of € 5.3 million and in Coatings & Sealants in the amount of

€ 1.1 million.

The following table presents expected amortization expense related to patents, licenses,

similar rights and software for each of the following periods. The actual amortization

may differ from the expected amortization.

2010 31,988

2011 30,203

2012 28,479

2013 26,914

2014 23,822

Thereafter 116,722

As of December 31, 2009 and 2008, respectively, the carrying amount of goodwill by cash-

generating unit was as follows:

Dec. 31, 2009 Dec. 31, 2008

Additives & Instruments 10,430 8,439

Effect Pigments 69,339 116,795

Electrical Insulation 74,732 73,313

Coatings & Sealants 44,042 34,240

198,543 232,787

Impairment Test for Goodwill

The Company performed impairment tests on goodwill. The impairment tests are performed

at least once a year in the fourth quarter of each year based on long-term planning. The

recently performed tests were based on the financial budgets for the years 2010 to 2014. The

budgets were based on historical experience and represent management’s best estimates

about future developments. The weighted average growth rates used in the budgets were

derived from corresponding industry forecasts. In order to perform impairment tests, the

Company estimated cash flow projections beyond the budgets by extrapolating the projec-

tions using a steady growth rate for subsequent years. The Company then calculated the

fair value less costs to sell for each cash-generating unit by applying the discounted cash flow

method. The following parameters were applied in both years reported: discount rate

after taxes of 8.5 %; growth rates: Additives & Instruments 2.0 %, Effect Pigments 2.0 %,

126

Electrical Insulation 1.5 %, Coatings & Sealants 1.5 %. The fair value calculated was then

compared to the carrying amount of the cash-generating unit.

The impairment tests were performed based on fair values. Furthermore, to support the

results of these impairment tests, the Company calculated the value in use for each cash-

generating unit.

Based on the impairment test performed in the segment Effect Pigments for the subsid-

iaries ECKART Pigments Ky, located in Pori, Finland, ECKART American Corp., located in

Painesville, Unites States of America, and ECKART Italia s.r.l., located in Rivanazzano, Italy,

impairment losses were recognized for property, plant and equipment (see note 15).

Apart from these impairment losses, the impairment test for goodwill in the segment Effect

Pigments resulted in an impairment of € 47.0 million in the reporting year.

An increase of the interest rate by 50 basis points (with all other parameter remaining

unchanged) would result in an additional impairment loss of € 46 million in the segment

Effect Pigments. In all other segments such an increase of the interest rates would not result

in an impairment loss.

In the period since the performance of the impairment test until December 31, 2009, no

additional impairment indicators occurred.

In 2008, no impairment of goodwill was recorded.

Impairment Test for Intangible Assets other than Goodwill

In 2009 and 2008, no impairment losses for intangible assets with an indefinite useful life

were identified.



Land,leasehold and

buildingsPlant and

machinery Equipment

Advances / construction

in progress Total

Cost

Balance at Jan. 1, 2008 314,484 305,383 120,634 64,912 805,413

Additions 10,194 21,214 13,495 53,273 98,176

Disposals (5,363) (4,567) (5,692) (5) (15,627)

Transfers 20,734 18,966 6,489 (46,657) (468)

Translation adjustments 1,494 3,574 1,766 1,321 8,155

Changes in reporting entities 2,128 659 6 201 2,994

Balance at Dec. 31, 2008 343,671 345,229 136,698 73,045 898,643

Additions 10,847 16,013 6,619 14,713 48,192

Disposals (612) (414) (3,311) (54) (4,391)

Transfers 36,984 13,514 2,047 (52,718) (173)

Translation adjustments (564) (1,606) (808) 24 (2,954)

Changes in reporting entities 0 169 191 0 360

Balance at Dec. 31, 2009 390,326 372,905 141,436 35,010 939,677

Accumulated depreciation

Balance at Jan. 1, 2008 80,660 121,406 78,167 0 280,233

Additions 11,842 21,861 9,644 0 43,347

Disposals (2,437) (4,141) (4,839) 0 (11,417)

Impairment 0 0 0 0 0

Transfers (2) (50) 51 0 (1)

Translation adjustments 678 742 991 0 2,411


Balance at Dec. 31, 2008 90,741 139,818 84,014 0 314,573

Additions 13,913 24,922 10,335 0 49,170

Disposals (220) (350) (3,120) 0 (3,690)

Impairment 3,959 25,637 102 0 29,698

Transfers 0 400 (400) 0 0

Translation adjustments (445) (794) (495) 0 (1,734)


Balance at Dec. 31, 2009 107,948 189,633 90,436 0 388,017

Carrying amount

Dec. 31, 2009 282,378 183,272 51,000 35,010 551,660

Dec. 31, 2008 252,930 205,411 52,684 73,045 584,070

15. Property, Plant and Equipment

128

In 2009, additions of € 4.7 million related to the new administrative building of ALTANA

located in Wesel and € 4.2 million to a photovoltaic plant located in Ascoli, Italy. The Com-

pany invested € 8.7 million in the location Güntersthal, Germany, and an additional

€ 2.2 million in the extension of the location in Geretsried, Germany.

In 2008, additions of € 18.9 million related to the construction of the new administrative

building of ALTANA located in Wesel; an amount of € 5.8 million related to the distribu-

tion center for additives in Wesel. The Company invested € 13.8 million in the location of

Güntersthal, Germany, and additional € 6.4 million in the construction of a production

plant in Geretsried, Germany.

As of December 31, 2009 and 2008, € 3.9 million and € 5.4 million, respectively, of the

net book value, related to property, plant and equipment under finance leases. The Com -

pany did not receive any significant taxable or non-taxable government grants in 2009 and

2008.

In 2009, the Company recorded impairment losses of € 29.7 million, of which € 12.6 mil-

lion relate to a production plant located in the Unites States of America, € 12.4 million to

a production plant located in Finland, and € 4.7 million related to a production plant in Italy.

In 2008, no impairment loss was recognized for property, plant and equipment.

Bank borrowings of € 6.5 million and € 10.5 million were secured by mortgages (land and

other assets) as of December 31, 2009 and 2008, respectively.



In 2009 and 2008, respectively, impairment losses on the investment in Nanophase Technolo-

gies Corporation in the total amount of € 1.1 million and € 2.3 million were recognized.

Additionally, in 2009 an impairment loss of € 0.7 million was recognized on the investment

in METAPOL S.A. de C.V.

In 2009 and 2008 an amount of € 0.3 million of other long-term financial assets related

to long-term employee loans bearing a weighted average interest rate of 4.3 % in 2009.

Other

investments

Other long-term

financial assets Total

Cost

Balance at Jan. 1, 2008 10,631 3,642 14,273

Additions 0 336 336

Disposals (63) (1,134) (1,197)

Translation adjustments 76 84 160

Balance at Dec. 31, 2008 10,644 2,928 13,572

Additions 0 392 392

Disposals (579) (1,488) (2,067)

Translation adjustments (59) (7) (66)

Balance at Dec. 31, 2009 10,006 1,825 11,831

Accumulated impairment

Balance at Jan. 1, 2008 5,056 0 5,056

Impairment 2,633 0 2,633

Disposals (33) 0 (33)

Changes in fair value recorded in other comprehensive income (104) 0 (104)

Balance at Dec. 31, 2008 7,552 0 7,552

Impairment 1,802 0 1,802

Disposals (423) 0 (423)

Changes in fair value recorded in other comprehensive income 0 0 0

Translation adjustments (21) 0 (21)

Balance at Dec. 31, 2009 8,910 0 8,910

Carrying amount

Dec. 31, 2009 1,096 1,825 2,921

Dec. 31, 2008 3,092 2,928 6,020

16. Long-term Investments

130

17. Investments in Associated Companies

18. Inventories

Investments in associated companies

Balance at Jan. 1, 2008 7,699

Additions 768

Disposals (263)

Translation adjustments (1,567)

Changes in reporting entities 0

Balance at Dec. 31, 2008 6,637

Additions 755

Disposals (326)

Translation adjustments 1,979

Changes in reporting entities 0

Balance at Dec. 31, 2009 9,045

The investment of 39 % in the associated company Aldoro was accounted for by applying the

equity method of accounting. At the acquisition date in 2005, ALTANA’s share of the net

assets acquired was € 2.8 million which resulted in the recognition of goodwill of € 4.4 million.

The following financial information relates to Aldoro and represents 100 % and not

the proportionate 39 % share of the Company:

Dec. 31, 2009 Dec. 31, 2008

Assets 12,656 8,879

Liabilities 1,323 1,042

Net sales 12,125 13,830

Net income (EAT) 1,935 2,163

Employees (annual average) 72 71

Dec. 31, 2009 Dec. 31, 2008

Raw materials and supplies 65,780 72,951

Work in progress 39,248 51,468

Finished products and goods 83,905 94,370

Prepayments 287 323

189,220 219,112

In 2009 and 2008, respectively, inventory write-downs of € 16.8 million and € 18.9 million

were recognized and deducted from the respective inventory categories.



Dec. 31, 2009 Dec. 31, 2008

Trade accounts receivable 225,749 211,774

Non-current trade accounts receivable (see note 21) (741) (73)

Allowance for doubtful accounts (5,570) (4,184)

219,438 207,517

Write-downs are recorded in other operating expenses. The roll-forward of the allowance for

doubtful accounts was as follows:

2009 2008

Allowance at the beginning of the year 4,184 4,405

Translation adjustments (34) 54

Additions 3,025 1,132

Release (547) (505)

Utilization (1,072) (905)

Changes in reporting entities 14 3

Allowance at the end of the year 5,570 4,184

The exposure to credit risk at December 31, 2009 and 2008 was as follows:

As of December 31, 2009 and 2008, respectively, there was no indication that trade accounts

receivable that were neither written-down nor past due could not be collected. In 2009

and 2008, respectively, the change in the allowance for doubtful accounts was € 1.4 million

and € - 0.2 million.

19. Trade Accounts Receivable

Trade accounts receivable including non-current portion

Carrying amount

Of which neither written-down nor past

due at the reporting date

Of which not written-down at the reporting date and past due in the following periods

Written-down (net)

less than 30 days

between 30 and 60 days

between 61 and 90 days

more than 90 days

Dec. 31, 2009 220,179 189,749 19,014 5,080 1,762 3,172 1,402

Dec. 31, 2008 207,590 166,798 24,119 8,543 2,553 3,245 2,332

132

Amortized cost Fair valueUnrealized

gainsUnrealized

losses

Dec. 31, 2008

Money market fund 23,720 23,790 70 0

Debt securities 14,997 14,548 0 449

Equity securities 20,168 18,021 3 2,150

58,885 56,359 73 2,599

Amortized cost Fair valueUnrealized

gainsUnrealized

losses

Dec. 31, 2009

Money market fund 78,413 78,567 163 9

Equity securities 16,480 16,480 0 0

94,893 95,047 163 9

20. Marketable Securities

In accordance with IAS 39, available-for-sale marketable securities are recorded at their fair

value. If a fair value is not available, marketable securities are valued at cost. Amortized

cost, fair value and unrealized holding gains and losses per category of the marketable secu-

rities, which are recorded in the revaluation reserve, net of income tax, were as follows:

In 2009 and 2008, in accordance with the Company’s policy (see note 2), ALTANA recognized

an impairment loss on marketable securities in an amount of € 3.0 million and € 4.2 million,

respectively, because the decrease in the fair value of these securities was material and per-

manent in nature.

The contractual maturities of debt securities were as follows:

Dec. 31, 2009 Dec. 31, 2008

Due within one year – 9,903

Due after one year through five years – 4,645

– 14,548



Dec. 31, 2009 Dec. 31, 2008

Other currentassets

Other non-current assets

Other currentassets

Other non-current assets

Balances due from employees 287 44 679 106

Cash surrender value of life insurance 0 1,908 0 1,784

Balances due from fiscal authorities 8,459 279 10,589 2,665

Prepayments 855 0 970 0

Loans 0 6 0 6

Balances due from related parties 181 0 94 0

Prepaid expenses 2,026 329 2,234 536

Derivative financial instruments 1,303 66 223 558

Non-current trade account receivable 0 741 0 73

Other 14,152 6,637 9,584 1,052

27,263 10,010 24,373 6,780

Issued Share Capital

Due to the retirement of treasury shares (see “Treasury Shares”) the share capital was reduced

from € 140,400,000 to € 136,097,896, represented by 136,097,896 no-par value shares

representing € 1 per share. The share capital is fully paid in.

Authorized Capital

As of December 31, 2009, the Management Board was authorized to increase the Company’s

share capital with the approval of the Supervisory Board in a singular transaction or in

fractions by up to € 28.0 million in exchange for cash (authorized capital I) and by up to

€ 28.0 million in exchange for cash and / or contributions in kind (authorized capital II).

The Management Board was also authorized to increase the share capital by up to € 14.0 mil-

lion in exchange for cash with the exclusion of shareholders’ subscription rights at an issue

price that is not significantly lower than the market price at the time of issuance (authorized

capital III), in accordance with the articles of association of ALTANA. These authorizations

will expire as of April 30, 2013. None of the authorized capital has been issued.

Additional Paid-in Capital

The additional paid-in capital contains excess amounts over the calculated value resulting from

the issuance of shares of ALTANA AG and from several equity-settled share-based payment

transactions.

21. Other Assets

22. Shareholders’ Equity

134

Treasury Shares

The Management Board was authorized by the shareholders at the Annual General Meeting

(AGM) on May 5, 2008 to purchase treasury shares on the stock market by up to 10 % of

the authorized capital until October 31, 2009.

In 2009, no ALTANA shares were purchased by the Company. In March 2009, the

Management Board decided with the approval of the Supervisory Board to retire all 4.302.104

treasury shares. This resulted in a reduction of issued shares from 140.400.000 to

136.097.896 shares and a corresponding reduction of the Company’s share capital.

Appropriation of Retained Earnings

Under the “German Stock Corporation Act”, retained earnings available for distribution to

shareholders are based on the unconsolidated unappropriated retained earnings of

ALTANA AG as reported in its financial statements determined in accordance with the German

Commercial Code (HGB).

Unappropriated retained earnings of ALTANA AG total € 9,757 thousand. At the Annual

General Meeting, the Management Board and Supervisory Board plan to propose to

the shareholders to allocate from unappropriated retained earnings to appropriated retained

earnings an amount of € 4,313 thousand and to distribute the remaining € 5,444 thou-

sand as dividend to the shareholders as follows:

Distribution on issued and outstanding shares (136,097,896 shares):

Dividend for 2009 of € 0.04 per share 5,444

Revaluation Reserve

In accordance with IAS 39, accumulated unrealized gains and losses resulting from changes in

fair values of available-for-sale marketable securities are recorded in a revaluation reserve

net of income tax unless an impairment loss is recognized. The revaluation reserve is a sepa-

rate section of shareholders’ equity. Additionally, accumulated changes in the fair value of

derivative financial instruments qualifying as cash flow hedges are recognized in the revalua-

tion reserve net of income tax, if all hedge accounting criteria under IAS 39 are met.



Additional Disclosures for Capital Management

The capital management of the Company comprises the management of cash and cash

equivalents and marketable securities, shareholders’ equity and debt. The main objectives are

to ensure the availability of liquid funds within the Group and the management of liquidity.

The majority of ALTANA’s operations are financed by the Company’s operating cash flows.

Excess funds required are financed by borrowings.

In 2009, ALTANA’s shareholders’ equity decreased by € 0.8 million to € 1,177.6 million.

Due to the distribution of the ordinary dividend of € 0.10 per share, shareholders’ equity

was reduced by € 13.6 million, which was partly offset by the 2009 income after income tax

of € 11.0 million. The debt to asset ratio decreased from 33 % as of December 31, 2008,

to 31 % as of December 31, 2009. Long-term debt represented 15 % and short term debt

represented 16 % of total liabilities, provisions and shareholders’ equity. A line of credit of

€ 400 million is available to ALTANA as an external financing source. This credit line was made

available by an international banking syndicate and can be drawn in different currencies

(see note 24). The agreed term of the line of credit expire in 2012. For a partial amount of

€ 340 million the term was extended until 2013 by the international banking syndicate

and can be extended for an additional year if approved by the syndicate.

According to the agreement with the international banking syndicate a ratio (“financial

covenant“) of net debt to EBITDA of 3.0 to 1 at the maximum has to be complied with.

As of December 31, 2009 ALTANA reports a net cash position. If this financial covenant is not

met the international banking syndicate can early terminate the credit line or renego-

tiate the terms.

The Company aims for a balance between equity and liabilities, which allows for further

growth either through operational growth or acquisitions. Currently, the Company is not

Other Comprehensive Income

The following table shows the income and expenses directly recognized in other comprehen-

sive income and the income tax effects thereon:

2009 2008

beforeIncome Tax Income Tax

net ofIncome Tax

beforeIncome Tax Income Tax

net ofIncome Tax

Translation adjustments (including minority interests) 2,654 (563) 2,091 10,923 0 10,923

Profit and loss from available-for-sale securities 2,939 22 2,961 3,428 (51) 3,377

Profit and loss from derivative financial instruments 3,431 (1,029) 2,402 1,356 (389) 967

Change in fair value of available-for-sale securities (239) (183) (422) (3,612) (102) (3,714)

Change in fair value of derivative financial instruments 545 (164) 381 (13,698) 4,109 (9,589)

Change in actuarial gains and losses (7,729) 2,194 (5,535) 2,536 (690) 1,846

Other comprehensive income 1,601 277 1,878 933 2,877 3,810

136

23. Employee Incentive Plans

externally rated by a rating agency. The existing and the aspired structure of the state-

ment of financial position – including bolt-on acquisitions – should be adequate for the

requirements of an investment grade rating.

ALTANA Share Performance (ASP)

On July 1, 2008 ALTANA initiated a share-based compensation plan for key members of the

management, the ALTANA Share Performance Plan (ASP plan). The ASP plan allowed for

issuance of virtual shares (performance shares). The fair value of these shares would be settled

in cash after a service period of three years (June 30, 2011) to those eligible. 153,980

performance shares were granted to key members of the management.

Due to the increase of the holding of SKion GmbH in ALTANA the free float of ALTANA

shares fell below 10 %. As a result, ALTANA dropped out of the MDAX in January 2009.

This affected the plan’s major valuation parameters, which could no longer be determined

appropriately. Therefore the Management and Supervisory Boards concluded to termi-

nate the ASP and indemnify the eligible employees. For each preliminary granted performance

share ALTANA will pay an indemnification of € 13 to eligible employees in June 2011.

This amount is based on the average of the ASP performance share valuation as of Novem-

ber 6, 2008 and December 31, 2008, performed by an external expert.

In 2009 and 2008 the share-based compensation expenses amounted to € 0.7 million

and € 0.3 million, respectively.

ALTANA Investment (AI)

On September 1, 2008, ALTANA initiated a share-based compensation plan for employees

who are not eligible to participate in the ASP plan. Employees could purchase ALTANA

shares at a previously set share price of € 10.67 per share. Each employee received an allo-

wance, which was determined based on the increase of earnings per share in 2007, with

2007 earnings per share corresponding to the adjusted earnings per share of € 0.78. During

the subscription period of four weeks the average share price of the ALTANA share was

€ 9.69.

In 2008, 111,104 of ALTANA treasury shares were granted to employees. An amount of

€ 0.5 million of share-based compensation was included in personnel expense. The ex-

pense was measured at the average share price of the distributed ALTANA shares less the

employees’ contribution of € 0.6 million.

In 2009, no new share-based compensation plan was issued.

Dec. 31, 2009 Dec. 31, 2008

Non-currentdebt

Currentdebt

Non-currentdebt

Currentdebt

Borrowings from banks 103,376 57,157 105,690 68,284

Lease obligations 3,900 233 4,133 807

Other 0 47 0 195

107,276 57,437 109,823 69,286


24. Debt


ALTANA has received lines of credit amounting to € 400.0 million from a banking syndicate

consisting of 17 banks for general corporate purposes. The line of credit may be drawn

in different currencies. As of December 31, 2009, the Company has drawn € 152.5 million

(€ 100.0 million and U.S. Dollar 75.7 million) and reported an amount of € 100.0 million

in non-current debt and € 52.5 million in current debt. As of December 31, 2008, the Com-

pany had drawn € 157.3 million (€ 100.0 million and U.S. Dollar 79.7 million) and reported

an amount of € 100 million in non-current debt and € 57.3 million in current debt. This re-

sulted in unused lines of credit of € 247.5 million and € 242.7 million as of December 31,

2009 and 2008, respectively. The terms and conditions are based on market conditions and

no collateral is provided.

As of December 31, 2009 and 2008, respectively, bank borrowings included € 56.0 mil-

lion and € 64.9 million, denominated in foreign currencies. Of these borrowings, amounts

of € 52.5 million and € 57.3 million were denominated in U.S. Dollars as of December 31,

2009 and 2008, respectively.

As of December 31, 2009 and 2008, the aggregate amounts of indebtedness maturing

during the next five years and thereafter were as follows:

Dec. 31, 2009 Dec. 31, 2008

Due in 2010 (prior year 2009) 57,204 68,479

Due in 2011 (prior year 2010) 229 593

Due in 2012 (prior year 2011) 234 221

Due in 2013 (prior year 2012) 100,240 1,476

Due in 2014 (prior year 2013) 2,187 100,231

Due thereafter 486 3,169

Total 160,580 174,169

Lease obligation (see note 29) 4,133 4,940

Total debt 164,713 179,109

The Company’s employee benefit plans consist of defined contribution as well as defined

benefit plans.

The defined contribution plans are mainly located in non-German subsidiaries. Addition-

ally, the Company pays contributions to governmental and private pension insurance

organizations based on legal regulations. The contributions are recognized as expense based

on their function in the respective year and amount to € 17.9 million and € 15.9 million

in 2009 and 2008, respectively. No further obligation exists beside the contributions paid.

The majority of the employee benefit plans are defined benefit plans, either funded

or unfunded. Plan assets consist mainly of fixed interest bearing marketable securities and

insurances. The majority of the Company’s employee benefit obligations relate to German

employees.

Employee benefit obligations are determined based on the years of service, the expected

discount rate, estimated compensation increase and country specific mortality (for Germany

by applying the guiding tables of Prof. Dr. Klaus Heubeck RT 2005 G). Employee benefit obli-

25. Employee Benefit Obligations

138

gations are generally measured based on the aforementioned parameters, as well as salaries

and number of employees as of September 30. The applied parameters and underlying

data are reviewed for unexpected fluctuations as of December 31, and a remeasurement is

performed if material deviations from September 30 are identified.

Obligations for other post-retirement benefits mainly relate to German employees.

The provisions for the Company’s pension benefits and other post-retirement obligations

were as follows:

Dec. 31, 2009 Dec. 31, 2008

Defined benefit obligation – unfunded 82,818 73,477

Defined benefit obligation – funded 29,595 25,628

Defined benefit obligation 112,413 99,105

Less fair value of plan assets 25,976 21,517

Less past service cost not yet recognized 15 –

Employee benefit obligations 86,422 77,588

Provision for other post-retirement benefits 2,609 3,094

Total 89,031 80,682

Funded defined benefit obligations are in excess of the plan assets by € 3.6 million and

€ 4.1 million as of December 31, 2009 and 2008, respectively.

As of December 31, for each of the periods presented below, the significant amounts

in respect of the provision for employee benefit obligations were as follows:


Dec. 31, 2009 Dec. 31, 2008 Dec. 31, 2007 Dec. 31, 2006 Dec. 31, 20051

Defined benefit obligation 112,413 99,105 97,245 106,605 414,453

Fair value of plan assets 25,976 21,517 19,738 19,444 63,976

Funded status 86,437 77,588 77,507 87,161 350,477

Adjustments based on experience 1,051 (1,036) (1,043) 1,160

thereof plan assets 2,247 (2,364) (327) (93)

thereof defined benefit obligation (1,196) 1,328 (716) 1,253

1 The amounts reported include discontinued operations.


The provision for pensions was as follows:

The following table shows the different asset categories into which the plan assets are

divided:

Dec. 31, 2009 Dec. 31, 2008

Asset category

Equity securities 7,237 28 % 5,561 26 %

Bonds 10,775 42 % 7,928 37 %

Real estate 564 2 % 0 0 %

Other 7,400 28 % 8,028 37 %

25,976 100 % 21,517 100 %

2009 2008

Germanplans

Non-Germanplans

Germanplans

Non-Germanplans

Defined benefit obligation

Balance at Jan. 1 71,320 27,785 73,571 23,674

Changes in reporting entities 0 0 0 2,328

Translation adjustments 0 (213) 0 (139)

Service cost 2,185 662 2,214 505

Past service cost not yet recognized 0 15 0 0

Interest cost 4,011 1,511 4,046 1,254

Actuarial gains / (losses) 6,174 3,802 (5,623) 729

Other changes 11 (873) 0 (272)

Benefits paid (3,083) (894) (2,888) (294)

Balance at Dec. 31 80,618 31,795 71,320 27,785

Plan assets

Balance at Jan. 1 0 21,517 0 19,738

Changes in reporting entities 0 0 0 3,563

Translation adjustments 0 66 0 (916)

Expected return on plan assets 0 1,198 0 1,196

Actuarial gains / (losses) 0 2,247 0 (2,364)

Employer contribution 0 1,497 0 1,031

Benefits paid 0 (532) 0 (691)

Other changes 0 (17) 0 (40)

Balance at Dec. 31 0 25,976 0 21,517

Funded status at Dec. 31 80,618 5,819 71,320 6,268

Less past service cost not yet recognized 0 15 0 0

Provision to Dec. 31 80,618 5,804 71,320 6,268

140

ALTANA aims to hedge future payments under the pension obligation with long-term returns

from the portfolio of the plan assets. Therefore, the composition of the plan assets is

geared to the sustainability of the income generated by increases in market values of the

assets as well as dividends and interest income.

The expected long-term return on plan assets per asset class is determined based on

capital market analyses and predicted return on assets. The major part of the plan assets

relates to bonds (42 %). The actual return on the plan assets was € 3.4 million and € - 1.2 mil-

lion for 2009 and 2008, respectively.

The Company expects to pay benefits to the retirees of € 3.4 million and make contribu-

tions to the plan assets in an amount of € 1.1 million in 2010.

The following table provides the underlying actuarial assumptions for the pension plans:

Dec. 31, 2009 Dec. 31, 2008

Germanplans

Non-Germanplans

Germanplans

Non-Germanplans

Weighted average assumptions

Discount rate 5.3 % 5.3 % 5.8 % 5.6 %

Expected return on plan assets – 5.5 % – 5.5 %

Rate of compensation increase 3.5 % 1.7 % 3.5 % 1.7 %

Rate of pension increase 2.0 % 1.0 % 2.0 % 0.7 %

The components of net periodic pension costs were as follows:

2009 2008

Germanplans

Non-Germanplans

Germanplans

Non-Germanplans

Service cost 2,185 662 2,214 505

Interest cost 4,011 1,511 4,046 1,254

Expected return on plan assets 0 (1,198) 0 (1,196)

Other 0 (398) 0 0

Net periodic pension cost 6,196 577 6,260 563



The components of net periodic pension costs were allocated to the functional cost as

follows:

2009 2008

Cost of sales 2,320 2,139

Selling and distribution expenses 1,130 1,343

Research and development expenses 1,501 1,512

General administration expenses 1,822 1,829

6,773 6,823

The employee-related provisions are mainly comprised of accruals for anniversary and vacation

entitlements. The non-current portion mainly relates to partial retirement (“Altersteilzeit”).

Provisions for sales and marketing pertain primarily to sales bonuses and commissions.

Provisions for warranty cover commitments in connection with goods delivered and ser-

vices rendered. ALTANA expects that the current portion of the provisions will be utilized

during 2010.

The item Other includes the expected remaining purchase price from the acquisition

of the business of Quadrant Chemical Corp., provisions for taxes other than income taxes

and similar fees, pending litigation, legal costs and professional fees. The utilization

shown under the item Other primarily relates to the contractual obligation to Nycomed

(€ 20.7 million).

EmployeesSales and

marketing Warranty Other Total

Balance at Jan. 1, 2009 34,304 10,543 1,541 41,966 88,354

Additions 26,824 9,705 463 17,210 54,202

Utilization (19,088) (8,848) (265) (38,498) (66,699)

Release (1,737) (690) (144) (748) (3,319)

Translation adjustments (163) (46) 0 (152) (361)


Balance at Dec. 31, 2009 40,605 10,719 1,595 19,869 72,788

Thereof non-current

at Dec. 31, 2009 14,030 94 108 669 14,901

at Dec. 31, 2008 11,065 241 0 309 11,615

26. Other Provisions

142

Dec. 31, 2009 Dec. 31, 2008

Othernon-current

liabilities

Othercurrent

liabilities

Othernon-current

liabilities

Othercurrent

liabilities

Payroll taxes 0 6,721 0 7,160

Wages and salaries 0 1,725 0 2,364

Social security contributions 0 2,313 0 2,507

Commissions 0 2,643 0 2,348

Credit notes to customers 0 1,951 0 925

Balances due to related parties 0 299 0 299

Derivative financial instruments 5,924 1,437 4,953 5,513

Deferred income 415 145 475 193

Other 93 18,514 105 10,359

6,432 35,748 5,533 31,668

27. Other Liabilities Other liabilities consisted of the following:

Measurement of Financial Instruments Based on Categories

ALTANA holds different classes of financial instruments. In accordance with accounting

regulations for financial instruments, these financial instruments can be classified based on

their nature into several valuation categories. The following tables provide reconciliation

from the items of the statement of financial position to the different categories of financial

instruments, their carrying amounts and their fair values at December 31, 2009 and

2008.

For financial instruments measured at fair value the following regulations apply. The fair

value of marketable securities and equity investments corresponds to quoted prices for

identical financial assets on active markets (hierarchy level 1). The fair value of derivative finan-

cial instruments was determined applying valuation techniques for which all significant

inputs are based on observable market data (hierarchy level 2).

The carrying amounts of cash and cash equivalents as well as trade accounts receivable

approximate their fair values due to the short-term maturities of these instruments.

The carrying amounts of marketable securities and equity investments equal their fair

values, provided that the fair values can be determined reliably. For marketable securities

traded on the stock exchange the fair values correspond to the quotation on the stock ex-

change. Investments not traded on the stock exchange are valued at cost, because their

future estimated cash flows cannot be determined reliably. A sale of these investments is

currently not planned.


28. Additional Disclosures for Financial Instruments


The carrying amount of derivative financial assets and liabilities equal their fair values. The fair

value is calculated by employing present value models using market parameters.

The fair values of interest bearing other non-derivative financial assets and liabilities

measured at amortized cost and of lease obligations equal the present values of their future

estimated cash flows. The present values are calculated at each reporting date taking the

currency, interest rates and duration parameters into consideration.

Trade accounts payable and other non-interest bearing non-derivative financial instru-

ments are generally short-term, therefore, their carrying amount approximates their fair

value.


Dec. 31, 2009Carrying amount

Dec. 31, 2009Fair value

Loans and receivables

Available-for-sale financial assets


Financial assets at fair value

through profit and loss

Hedging instruments

(hedge accounting)

Amortized cost Cost Fair value Fair value Fair value


thereof in



thereof in


Other non-current assets 741 741

Other current assets 205 205

Other interest-bearing non- derivative financial assets 16,536

16,523

thereof in

Long-term investments 1,530 1,517

Other non-current assets 5,006 5,006

Other current assets 10,000 10,000

Other non-interest-bearing non-derivative financial assets 181

181

thereof in



Marketable securities and long-term investments

17,871 78,568

96,439

thereof in

Long-term investments 1,391 0 1,391

Marketable securities 16,480 78,568 95,048

Derivative financial assets – hedge accounting

1,369 1,369

thereof in



Derivative financial assets – without hedge accounting

0

thereof in

Other current assets 0




Loans and receivables



Financial assets at fair value

through profit and loss

Hedging instruments

(hedge accounting)

Amortized cost Cost Fair value Fair value Fair value


thereof in



thereof in




Other interest-bearing non- derivative financial assets 2,639

2,596

thereof in

Long-term investments

Other non-current assets 2,633 2,590


Other non-interest-bearing non-derivative financial assets 94

94

thereof in



Marketable securities and long-term investments

15,082 44,664

59,746

thereof in

Long-term investments 2,080 1,307 3,387

Marketable securities 13,002 43,357 56,359

Derivative financial assets – hedge accounting

777 777

thereof in



Derivative financial assets – without hedge accounting

4

4

thereof in





Financial liabilities Financial liabilities at fair value through

profit and loss

Finance leases according to IAS 17

Hedging instruments (hedge accounting)

Amortized cost Fair value Amortized cost Fair value

Lease obligations 4,133 4,133

thereof in

Non-current debt 3,900 3,900

Current debt 233 233


thereof in


Other current liabilities 4,594 4,594

Other interest-bearing non- derivative financial liabilities 160,880

160,778

thereof in


Current debt 57,204 57,204

Other current liabilities 300 300

Other non-interest-bearing non-derivative financial liabilities 13,725

13,725

thereof in

Current debt 0 0


Derivative financial liabilities – hedge accounting

7,361 7,361

thereof in

Other non-current liabilities 5,924 5,924


Derivative financial liabilities – without hedge accounting

0

thereof in

Other non-current liabilities 0

Other current liabilities 0




Financial liabilities Financial liabilities at fair value through

profit and loss

Finance leases according to IAS 17

Hedging instruments (hedge accounting)

Amortized cost Fair value Amortized cost Fair value

Lease obligations 4,940 4,940

thereof in




thereof in



Other interest-bearing non- derivative financial liabilities 174,273

173,921

thereof in


Current debt 68,284 68,284


Other non-interest-bearing non-derivative financial liabilities

2,559

2,559

thereof in



Derivative financial liabilities – hedge accounting

10,351 10,351

thereof in

Other non-current liabilities 4,953 4,953


Derivative financial liabilities – without hedge accounting

115

115

thereof in

Other non-current liabilities 0 0



Net financial result

Net operating result Net result

Loans and receivables 2009 1,600 (8,392) (6,792)

2008 3,192 4,462 7,654

Available-for-sale financial assets 2009 (4,216) 0 (4,216)

2008 (5,710) 0 (5,710)

Financial liabilities measured at amortized cost 2009 (3,054) 165 (2,889)

2008 (8,889) (635) (9,524)

Financial instruments at fair value through profit and loss 2009 0 0 0

2008 (553) 0 (553)

Total 2009 (5,670) (8,227) (13,897)

2008 (11,960) 3,827 (8,133)

Income Effect According to Valuation Categories

The following table provides the net result from financial instruments according to the valua-

tion categories. The net financial result contains interest income, interest expense, changes

in the fair value of financial instruments valued through profit and loss, gains and losses from

the sale of financial instruments and dividends received. The net operating result includes

write-downs of trade accounts receivable and exchange differences. The net result does not

include financial income or expense generated from non-financial instruments and their

categories like interest expense from lease obligations or changes in the fair value and interest

on hedging instruments.

Interest income and interest expense from financial instruments not measured at fair value

through profit and loss is calculated in accordance with the effective interest method

and amounts to € 1.6 million and € 3.3 million in 2009 and 2008, respectively. Total interest

expense amounts to € 3.0 million and € 8.9 million in 2009 and 2008, respectively. The

net result of € - 1.4 million and € - 5.6 million in 2009 and 2008, respectively, is included in

net financial result.

Risk Analysis

Liquidity Risk: To assure the solvency and financial flexibility of ALTANA, the Company retains

a liquidity reserve through cash and cash equivalents and lines of credit.

The following tables show the contractual amortization including the undiscounted inter-

est payments for non-derivative and derivative financial instruments with a positive and

negative fair value. All non-derivative and derivative financial instruments as of December 31,

2009 and 2008, respectively, for which contractual payments were already agreed, are

included in the table. Variable interest payments were estimated based on the interest rates

applicable at the respective reporting dates. Budgeted amounts for future expected liabili-

ties are not considered. Foreign currency amounts were reported based on the exchange rates

as of the reporting dates.


Due within one year

Due within two years

Due within three years

Due within four years

Due within five years

Due afterfive years

Lease obligations Dec. 31, 2009 365 684 684 2,739 0 0

Dec. 31, 2008 989 365 684 684 2,739 0

Trade accounts payableDec. 31, 2009 85,423 51 0 0 0 0

Dec. 31, 2008 80,127 36 91 0 0 0

Other interest-bearing non-derivative financial liabilities Dec. 31, 2009 60,914 1,460 1,460 101,460 2,268 508

Dec. 31, 2008 75,992 5,010 4,597 5,811 104,545 3,219

Other non-interest-bearing non-derivative financial liabilities Dec. 31, 2009 13,772 0 0 0 0 0

Dec. 31, 2008 2,559 0 0 0 0 0

Total Dec. 31, 2009 160,474 2,195 2,144 104,199 2,268 508

Dec. 31, 2008 159,667 5,411 5,372 6,495 107,284 3,219

Due within one year

Due within two years

Due within three years

Due within four years

Due within five years

Due afterfive years

Forward foreign exchange contracts with positive fair value

Cash inflow Dec. 31, 2009 25,182 4,803

Cash outflow Dec. 31, 2009 (24,430) (4,765)

Net Dec. 31, 2009 752 38

Cash inflow Dec. 31, 2008 6,151 9,350

Cash outflow Dec. 31, 2008 (5,933) (8,952)

Net Dec. 31, 2008 218 398

Forward foreign exchange contracts with negative fair value

Cash inflow Dec. 31, 2009 23,074 10,678

Cash outflow Dec. 31, 2009 (24,837) (11,175)

Net Dec. 31, 2009 (1,764) (497)

Cash inflow Dec. 31, 2008 47,264 7,987

Cash outflow Dec. 31, 2008 (52,280) (8,924)

Net Dec. 31, 2008 (5,016) (937)

Interest rate swaps with positive fair value

Cash inflow Dec. 31, 2009 0 0

Cash outflow Dec. 31, 2009 0 0

Net Dec. 31, 2009 0 0

Cash inflow Dec. 31, 2008 1,831 1,083

Cash outflow Dec. 31, 2008 0 (2,771)

Net Dec. 31, 2008 1,831 (1,688)

Interest rate swaps with negative fair value

Cash inflow Dec. 31, 2009 2,298 3,139 2,445 644 184 0

Cash outflow Dec. 31, 2009 (6,761) (5,241) (4,164) (517) (196) 0

Net Dec. 31, 2009 (4,463) (2,102) (1,719) 127 (12) 0

Cash inflow Dec. 31, 2008 6,820 5,177 5,020 2,534 24 9

Cash outflow Dec. 31, 2008 (9,483) (4,518) (4,481) (3,396) (30) (11)

Net Dec. 31, 2008 (2,663) 659 539 (862) (6) (2)

150

Market risk: The market risk of ALTANA mainly depends on the volatilities of its marketable

securities. At December 31, 2009 the Company was not exposed to any significant market

risk, because the marketable securities held in 2008 amounting to € 6.3 million were either

sold or impaired entirely. A 10 % increase or decrease of the stock prices of traded mar-

ketable securities at December 31, 2009 would have increased or decreased the revaluation

reserve in equity by:

Change in revaluation reserve

stock priceplus 10 %

stock priceminus 10 %

Stock corporations / funds Dec. 31, 2009 0 0

Dec. 31, 2008 621 (621)

Credit risk: The Company is exposed to credit risk if business partners do not fulfill their con -

tractual obligation. ALTANA analyses the creditworthiness of significant debtors. Based on

its international operations and a diversified customer structure ALTANA has no concentration

of credit risk. The Company does not generate sales of more than 3 % with one single

customer and less than 20 % with its ten most significant customers combined. Receivables

are monitored regularly and decentralized in the operating subsidiaries. Financing trans-

actions are mainly carried out with contractual partners that have a credit rating of at least

A - or are members of a deposit insurance association. Additionally, a credit limit is assi-

gned to each contracting party.

The carrying amount of all receivables (see also note 19), long-term financial investments,

marketable securities and cash and cash equivalents represents the maximum credit risk

of ALTANA. At the reporting date, there were no significant arrangements which reduced the

maximum credit risk.

Currency risk: The Company is subject to foreign currency risks associated with its interna-

tional operations. Foreign currency risk occurs for monetary financial instruments which are

denominated in another than the functional currency. Foreign currency translation risk resul-

ting from the consolidation of foreign subsidiaries is not considered. For hedging instru-

ments used by the Company to limit the exposure to foreign currency rate fluctuations see

“Hedging”.

The majority of the currency fluctuation risks relate to exchange rate changes of the

U.S. Dollar and the Japanese Yen.



The following table provides the effects of a 10 % change of foreign currency exchange

rates by implicit quotation on profit and loss and the revaluation reserve (see table

“Foreign Currency“ in note 2):

Effect on profit and lossChange in

revaluation reserve

exchange rate plus 10 %

exchange rate minus 10 %

exchange rate plus 10 %

exchange rate minus 10 %

U.S. Dollar

Derivatives Dec. 31, 2009 (235) 235 3,260 (3,260)

Dec. 31, 2008 858 (1,049) 3,732 (4,561)

Other financial instruments Dec. 31, 2009 (3,396) 3,396 – –

Dec. 31, 2008 (4,193) 5,124 (553) 676

Total Dec. 31, 2009 (3,631) 3,631 3,260 (3,260)

Dec. 31, 2008 (3,335) 4,075 3,179 (3,885)

Japanese Yen

Derivatives Dec. 31, 2009 316 (316) 1,762 (1,762)

Dec. 31, 2008 485 (593) 1,755 (2,144)

Other financial instruments Dec. 31, 2009 (485) 485 – –

Dec. 31, 2008 (499) 610 – –

Total Dec. 31, 2009 (169) 169 1,762 (1,762)

Dec. 31, 2008 (14) 17 1,755 (2,144)

Interest rate risk: The Company is exposed to changes in interest rates. The majority of the

interest sensitive assets and liabilities are marketable securities (money market fund),

cash and cash equivalents and debt. If these assets or liabilities are variable rate instruments,

changes in the interest rate will result in changes of the expected cash flows and will

affect net income. The change in the interest rate of financial assets measured at fair value

affects the fair value and as such is reported in the revaluation reserve in equity.

The following table shows the profit and loss effect as well as changes in the revaluation

reserve on interest bearing assets, liabilities and interest rate swaps resulting from a

change in the average market rate of interest of 100 basis points (Bp):

Effect on profit and lossChange in

revaluation reserve

plus 100basis points

minus 100basis points

plus 100basis points

minus 100basis points

Derivatives Dec. 31, 2009 1,362 (1,362) 2,940 (3,060)

Dec. 31, 2008 1,034 (1,034) 3,230 (3,367)

Other financial instruments Dec. 31, 2009 (1,452) 1,452 786 (786)

Dec. 31, 2008 (1,358) 1,358 (116) 118

Total Dec. 31, 2009 (90) 90 3,726 (3,846)

Dec. 31, 2008 (324) 324 3,114 (3,249)


Interest payments resulting from hedged transactions and from cash flow hedges were

presented separately.

Hedging

ALTANA has established policies and procedures for assessing risks related to derivative

financial instruments activities and uses derivative financial instruments exclusively for hedging

purposes.

Forward Foreign Exchange Contracts: The Company uses forward foreign exchange contracts

to hedge foreign currency exchange risks resulting from expected intercompany trans-

actions except for net investments in foreign operations. Hedging instruments are used to

hedge U.S. Dollar and Japanese Yen sales transactions between subsidiaries with terms

of up to 18 months. In accordance with the hedging strategy of the Company, 75 % of the

forecasted transactions of the first six months, 60 % of the second six months, and 30 %

of the last six months of the forecasted transactions are hedged. Forecasted transactions are

only hedged to the extent that the risk related to the transaction is not neutralized by

off-setting items. The volume of the hedged transactions as described above is reduced when

the occurrence of the transactions is not highly probable.

Currently, the maturity dates of these contracts are less than two years. The amounts

recorded in the statement of financial position do not always represent amounts ex-

changed by the parties and, thus, are not necessarily an indicator of the exposure of the

Company through its use of derivatives.

Interest Rate Swaps: Most of ALTANA’s debts are variable rate instruments. The Company

uses interest rate swaps to limit the cash flow risk from interest rate fluctuations of the

long-term debt drawn under the syndicated lines of credit.

Cash Flow Hedges

Hedging of Intercompany Transactions: ALTANA has entered into forward foreign exchange

contracts for forecast sales transactions denominated in U.S. Dollar and Japanese Yen

with consolidated subsidiaries and has designated them as cash flow hedges. At Decem-

ber 31, 2009 and 2008, the fair values were as follows:

Positivefair value

Negativefair value

Totalfair value

U.S. Dollar Dec. 31, 2009 740 (535) 205

U.S. Dollar Dec. 31, 2008 457 (1,478) (1,021)

Japanese Yen Dec. 31, 2009 417 (380) 37

Japanese Yen Dec. 31, 2008 59 (3,080) (3,021)


Forward foreign exchange contracts reported in the revaluation reserve are reclassified into

income when the hedged foreign currency risk is realized. In 2009, the revaluation reserve

was increased by € 2.1 million due to fair value fluctuations and expenses of € 2.7 million were

realized as a reduction of net sales.

The following table shows the forecasted cash flows of the hedged transactions of the

subsidiaries which correspond to the maturities of the forward foreign exchange transactions.

Totalnominal value

Nominal value due in 2010

(prior year: in 2009)

Nominal value due in 2011

(prior year: in 2010)

in thousand foreign currency units

U.S. Dollar Dec. 31, 2009 45,400 31,300 14,100

U.S. Dollar Dec. 31, 2008 52,930 37,430 15,500

Japanese Yen Dec. 31, 2009 2,295,000 1,535,000 760,000

Japanese Yen Dec. 31, 2008 2,460,000 1,610,000 850,000

Hedging of External Debt: ALTANA entered into interest rate swaps for external loans which

exchange variable to fixed-interest payments. The interest rate swaps were classified as

cash flow hedges. The maturities of the interest payments are either six or twelve months. At

December 31, 2009 and 2008, respectively, the fair values of these interest rate swaps

were:

Positivefair value

Negativefair value

Totalfair value

Interest swap Dec. 31, 2009 0 (5,951) (5,951)

Interest swap Dec. 31, 2008 175 (4,576) (4,401)

Currently, the maturities of the interest rate swaps are between 1 and 4 years.

In 2009, the revaluation reserve decreased by € 1.6 million due to fair value fluctuations

and expenses of € 0.7 million were realized in financial expenses.


29. Commitments and Contingencies

Fair Value Hedges

Hedging of Intercompany Transactions: At December 31, 2009 and 2008, ALTANA had

entered into forward foreign exchange contracts with a nominal value of U.S. Dollar

6.0 million and U.S. Dollar 6.2 million and of Japanese Yen 375.0 million and Japanese Yen

641.9 million, respectively. These contracts relate to intercompany sales transactions

denominated in U.S. Dollar and Japanese Yen with consolidated subsidiaries and are classified

as fair value hedges. At December 31, 2009 and 2008 the fair values were as follows:

Positivefair value

Negativefair value

Totalfair value

U.S. Dollar Dec. 31, 2009 163 (31) 132

U.S. Dollar Dec. 31, 2008 16 (171) (155)

Japanese Yen Dec. 31, 2009 49 (210) (161)

Japanese Yen Dec. 31, 2008 69 (714) (645)

In 2009 and 2008, the effect on profit and loss was € 5.2 million and € - 1.6 million, respec-

tively, and was offset by the effect of the measurement of the hedged transaction.

Hedging of Internal Foreign Currency Debt: The Company enters into foreign exchange

contracts to hedge intercompany debt denominated in foreign currencies, if the exposure is

not limited by offsetting items. As of December 31, 2009 and 2008, these hedges were

designated as fair value hedges and had a nominal value of U.S. Dollar 9.8 million and U.S.

Dollar 10.1 million, respectively, and negative fair value of € 0.3 million in both years

reported. The cumulative income statement effect was € - 0.3 million and € - 0.5 million in

2009 and 2008, respectively, and was offset by the effect of the measurement of the

hedged transaction.

Guarantees and Other Commitments

Dec. 31, 2009 Dec. 31, 2008

Commitments for intangible assets 272 1,676

Commitments for property, plant and equipment 5,820 10,056

Guarantee for pension obligation from divestments 12,992 13,409

19,084 25,141

Upon selling its Pharmaceuticals business in 2006, ALTANA AG extended the customary gene-

ral warranties and guarantees on the sales transaction to the purchasing party. In addition

to the customary generated warranties, the Company extended guarantees and indemnifica-


tion clauses especially with regard to taxes and environmental risks. The total amount of the

liability is limited to an amount of € 300 million. Except for tax guarantees, a threshold of

€ 10 million was agreed to. In 2009, the acquirer asserted a claim with regard to the tax in-

demnification, which had already been covered by provisions.

In 1995, the Company sold its Dietetics business line. In accordance with the German

Civil Code, the Company remains liable for the pension commitments for holders of an-

nuities and prospective beneficiaries since the sale was consummated as an asset deal. The

Company is obliged to make payments on demand of the former employees, but has the

right of refund from the acquirer according to the purchase agreement. No payments have

been requested so far.

Rental and Lease Arrangements

The Company rents and leases property and equipment used in its operations. These leases

are classified either as operating or finance leases. Lease obligations are amortized over

the term of the respective lease. The lease contracts expire on various dates in the future.

Future minimum lease payments for non-cancelable operating and finance leases were:

Finance lease Operating lease

Dec. 31, 2009 Dec. 31, 2008 Dec. 31, 2009 Dec. 31, 2008

2010 (prior year: 2009) 365 989 8,827 6,295

2011 (prior year: 2010) 684 365 6,110 3,961

2012 (prior year: 2011) 684 684 4,995 2,166

2013 (prior year: 2012) 2,739 684 3,235 1,355

2014 (prior year: 2013) 0 2,739 567 843

Due thereafter 0 0 916 2,035

Total minimum lease payments 4,472 5,461 24,650 16,655

Less amount representing interest 339 521

Present value of lease payments

4,133

4,940

Less current portion 233 807

Non-current lease obligation 3,900 4,133

Total rent and lease expense was € 10.3 million and € 10.5 million for the years ended

December 31, 2009 and 2008, respectively. The present value of the lease payments becomes

due as follows: due in 2010: € 0.2 million (2008: € 0.8 million due in 2009) due in 2011

until 2014: € 3.9 million (2008: € 4.1 million, due in 2010 until 2013). In 2009 and 2008, no

amounts are due in later periods.


30. Related Party Transactions

Mrs. Susanne Klatten is the sole shareholder of SKion GmbH. In 2009, SKion GmbH increased

its holding from 88.3 % of the shares in ALTANA AG to 93.55 %, due to a voluntary

purchase offer and additional purchases of shares. She is therefore considered a related party.

Furthermore, she is deputy chairwoman of the Supervisory Board. During the years report-

ed, there were no transactions between her and the Company except for dividends distrib-

uted and the regular compensation for her function on the Supervisory Board.

Mrs. Susanne Klatten is also shareholder and member of the Supervisory Board of

Baye rische Motoren Werke AG (BMW). In 2009 and 2008, the Company purchased or leased

company cars from the BMW group. The lease and purchase contracts were all con-

cluded at arm’s length.

Associated companies that are not included in the consolidated financial statements are

considered related parties. Balances due to and due from related parties are recorded in

other assets and other liabilities.

All balances und transactions with related parties are as follows:

Dec. 31, 2009 Dec. 31, 2008

Balances due from related parties 184 102

Balances due to related parties 471 523

2009 2008

Related party transactions

Sales 575 663

Services and goods acquired 765 2,043

Lease expense 1,727 1,012

Interest income 2 0

Interest expense 1 0

The lease expense relates to leasing contracts for company cars with Alphabet Fuhrpark-

management GmbH (BMW Group). Further transactions with BMW Group are included

in sales and services and goods acquired each in the amount of € 0.1 million. In 2008, sales

with BMW Group amounted to € 0.1 million and services and goods acquired amounted

to € 0.1 million.


In 2009 and 2008, the compensation of the Supervisory Board amounted to € 0.7 million and

€ 0.9 million, respectively. Of the total compensation for 2009 and 2008, € 0.6 million

were fixed in both years reported, and € 0.1 million and € 0.3 million, respectively, related to

the variable portion.

The fixed compensation for each member of the Supervisory Board amounts to

€ 35 thousand a year. The variable compensation is based on the operating income (EBIT) of

the ALTANA Group and amounts to € 100 per € 1 million EBIT exceeding 4 % of share

capital, limited to a maximum of € 35 thousand a year. The chairman of the Supervisory Board

receives two and a quarter times these amounts; the deputy chairman as well as the

deputy chairwoman receive one and a half times these amounts. The members of one or

more committees receive a further quarter and each chairman of one or more commit-

tees receives a further three quarters of these amounts a year.

The total compensation paid in cash to the Management Board including remuneration

in kind amounted to € 1.9 million and € 1.8 million for the years 2009 and 2008, respec-

tively.

In 2008, the Management Board members received performance shares as compensa-

tion with a long-term incentive impact based on the stock option plan for key members

of the management (ASP). 29,818 performance shares with a fair value at the date of grant

of € 0.2 million were granted. As a result of the reduction of the free float below 10 %

of the ALTANA shares, the Supervisory Board decided to terminate the plan and compensate

Management Board members. For more details relating to the ASP see note 23.

For former members of the Management Board and their surviving dependents, a pen-

sion provision in the amount of € 12.5 million and € 11.8 million was recorded as of

December 31, 2009 and 2008, respectively. The pension payments totaled € 1.1 million and

€ 1.0 million in 2009 and 2008, respectively. Additionally, in 2009 an amount of € 0.7 mil-

lion was paid to former members of the Management Board resulting from deferred compen-

sation elements from prior years.

A more detailed presentation referring to the compensation of the Supervisory Board and

Management Board is given in the Compensation Report (see pages 80ff.).

2009

Audit of the financial statements 966

Other assurance services 2

Tax advisory services 55

Other services 424

1,447

31. Compensation of the Supervisory Board and Manage-ment Board

32. Fees Paid to the Auditor


35. Additional Information

34. Subsequent Events

Litigation and Related Risks

From time to time, the Company is party to or may be threatened with litigation arising in the

ordinary course of its business. The Management Board regularly analyzes current infor-

mation including, as applicable, the Company’s defenses and insurance coverage and, as

deemed necessary, recognizes provisions for probable liabilities for the eventual disposi-

tion of these matters. The ultimate outcome of these matters is not expected to materially

impact the Company’s net assets, financial position and results of operation.

In Mexico, our co-shareholder in METAPOL S.A. de C.V. in which our subsidiary OBRON

Atlantic Corporation has a shareholding of 49 %, has initiated arbitration proceedings

against OBRON Atlantic Corporation alleging violation of partner obligations, claiming dam-

ages of about € 20 million. On January 4, 2010, the arbitration court has rejected the

majority of the claims of our co-shareholders as inadmissible. Management expects that the

action will not be successful, as the remaining claims are also not substantial.

On February 2, 2010 SKion GmbH informed ALTANA that it holds 95.04 % of the shares in

ALTANA AG. SKion GmbH has requested that in accordance with section 327a (1) of

the German Stock Corporation Act (AktG) a shareholders’ meeting shall be convened to

resolve upon the transfer of the shares of the remaining shareholders to SKion GmbH

for an adequate cash consideration.

Companies that are exempt from the preparation of consolidated financial statements

according to section 264 (3) and to section 264b of the German Commercial Code (HGB):

ALTANA Chemie GmbH, Wesel

ACTEGA GmbH, Wesel

ELANTAS GmbH, Wesel

ALTANA Chemie Beteiligungs GmbH, Hartenstein

BYK-Chemie GmbH, Wesel

BYK-Gardner GmbH, Geretsried

MIVERA Vermögensanlagen GmbH, Wesel

ACTEGA DS GmbH, Bremen

ACTEGA Rhenania GmbH, Grevenbroich

ACTEGA Terra GmbH, Lehrte

ELANTAS Beck GmbH, Hamburg

ECKART GmbH, Hartenstein

ECKART Beteiligungs GmbH, Hartenstein

33. Litigation


36. Statement of Compliance with the German Corporate Gover-nance Code

On November 26, 2009, the Management and Supervisory Boards of the Company recon-

firmed the corporate governance statement of compliance in accordance with section

161 of the German Stock Corporation Act (AktG). This statement is available on the website

of the Company (see chapter Corporate Governance on pages 75ff. of the annual report).


Supervisory Board of ALTANA AG

Dr. Fritz Fröhlich

Chairman

(appointed until the Annual General Meeting 2012)

Former Deputy Chairman and Chief Financial Officer of

Akzo Nobel N.V.

Other functions:

ABP Vermogenbeheer2

Aon Jauch & Hübener GmbH1

Allianz Nederland N.V.2

ASML Holding N.V.2

Draka Holding N.V.2 (Chairman)

Randstad Holding N.V.2 (Chairman)

Rexel SA2

Ulrich Gajewiak*

Deputy Chairman


Chemical Technician

Chairman of the Group’s works council

Susanne Klatten

Deputy Chairwoman


Entrepreneur

Other functions:

Bayerische Motoren Werke AG1

SGL Carbon SE1

UnternehmerTUM GmbH2

Dr. Helmut Eschwey


Former Chairman of the board of Heraeus Holding GmbH

Other functions:

Almatis Coöperatief 2 (Chairman)

Exova Group Ltd.2

Kurtz Holding GmbH2

Reifenhäuser GmbH & Co. KG Maschinenfabrik2

TMD Friction Group S.A.2

Ralf Giesen*


Degree in Economics

Mining, Chemical and Energy Industrial Union

Secretary of the board VB 1

Other functions:

EVONIK Industries AG1

Armin Glashauser*


State Certified Electrical Engineering Technician

Full-time member and head of works council

ECKART GmbH

Other functions:

ECKART GmbH1

Olaf Jung*


Staff member production ACTEGA DS GmbH

Dr. Götz Krüger*


Business line manager Plastics Additives BYK-Chemie GmbH



Former Management board member of L’Air Liquide S.A.

Other functions:

Air Liquide International S.A.2

Air Liquide Santé International S.A.2

Carba Holding S.A.2

Schülke & Mayr GmbH2

Air Liquide Welding S.A.2

LURGI GmbH1

Air Liquide Japan2


Werner Spinner


Degree in Business Administration

Former Management Board member of Bayer AG

Other functions:

CSM N.V.2

Cryo-Save N.V.2

Senator Group USA2

Dr. Carl Voigt


Degree in Chemistry

Former Management Board member of Degussa AG

Other functions:

H.C. Starck AG1 (Chairman)

Freudenberg New Technologies KG2

Walter Ziegler*


Former worldwide production manager of metallic effect

pigments of ECKART GmbH

* Employee representative

1 Membership in other statutory supervisory boards2 Membership in other comparable domestic and foreign supervisory bodies


The Supervisory Board of ALTANA AG has established four

committees.

Human Resources Committee

Dr. Fritz Fröhlich (Chairman)

Ulrich Gajewiak

Olaf Jung

Susanne Klatten

Audit Committee

Dr. Klaus-Jürgen Schmieder (Chairman)

Ralf Giesen

Armin Glashauser

Werner Spinner

Mediation Committee

(in accordance with section 27 (3) of the German

Codetermination Act)


Ulrich Gajewiak

Susanne Klatten

Walter Ziegler

Special Committee regarding the purchase offer

from SKion GmbH


Ulrich Gajewiak

Dr. Götz Krüger



Management Board of ALTANA AG

Dr. Matthias L. Wolfgruber

Chairman

(appointed until June 30, 2015)

Other functions:

BYK-Chemie GmbH1 (Chairman)

BYK USA, Inc.2 (Chairman)

ECKART GmbH1 (Chairman)

ELANTAS Beck India Ltd.2 (Chairman)

ELANTAS Deatech s.r.l.2

ELANTAS PDG, Inc.2 (Chairman)

Martin Babilas

Chief Financial Officer

(appointed until May 2, 2015)

Other functions:

BYK-Chemie GmbH1

ECKART GmbH1

ELANTAS Beck India Ltd.2 (until March 23, 2009)

1 Membership in other statutory supervisory boards2 Membership in other comparable domestic and foreign supervisory bodies


Major Consolidated Companies

Amounts for 2009 Share of capital Equity1 Sales1

Earnings forthe year1 Employees

in % in € million in € million in € million

Holding

ALTANA AG, Wesel 1,836 – (83) 61

ALTANA Chemie GmbH, Wesel 100 1,433 – 662 5


BYK-Chemie GmbH, Wesel 100 113 299 812 673

BYK-Gardner GmbH, Geretsried 100 10 23 22 130

MIVERA Vermögensanlagen GmbH, Wesel 100 59 – 62 2

BYK USA Inc., Wallingford (U.S.) 100 62 58 4 105

BYK-Cera B.V., Deventer (NL) 100 40 59 5 108

BYK Japan KK, Tokio (J) 100 8 38 2 42

BYK (Tongling) Co. Ltd., Tongling (CN) 100 9 14 1 34

Effect Pigments

ECKART GmbH, Hartenstein 100 500 208 (57)2 1,378

ECKART America Corp., Painesville (U.S.) 100 (4) 42 (31) 184

ECKART Italia s.r.l., Rivanazzano (I) 100 17 24 (9) 64

ECKART Pigments Ky, Pori (FI) 100 3 8 (20) 65

ECKART Suisse SA, Vétroz (CH) 100 37 9 1 38

ECKART Asia Ltd., Hong Kong (CN) 100 24 27 0 28


ELANTAS Beck GmbH, Hamburg 100 32 25 (1)2 123

ELANTAS Beck India Ltd., Pune (IND) 89 26 29 5 199

ELANTAS PDG Inc., St. Louis (U.S.) 100 25 54 4 166

ELANTAS Deatech s.r.l., Ascoli Piceno (I) 100 93 65 7 134

ELANTAS (Tongling) Co. Ltd., Tongling (CN) 100 21 45 11 81

ELANTAS (Zhuhai) Co. Ltd., Zhuhai City (CN) 100 19 23 4 70

ELANTAS Camattini SPA, Collecchio (I) 100 13 24 2 66

Coatings & Sealants

ACTEGA Rhenania GmbH, Grevenbroich 100 9 39 42 130

ACTEGA DS GmbH, Bremen 100 7 41 42 114

ACTEGA Terra GmbH, Lehrte 100 6 40 82 108

ACTEGA Kelstar Inc., Cinnaminson (U.S.) 100 32 39 1 74

ACTEGA Artística S.A.U., Vigo (E) 100 15 10 2 38

1 Amounts in accordance with International Financial Reporting Standards2 Amounts before transfer of results

Lorem ipsum dolore164164

Glossary

Code of ConductA guideline which is geared to ALTANA Group employees and which describes requirements regarding employees’ legal and ethical behavior.

ComplianceStands for adherence to legal requirements, regulatory standards, and additional rules which apply to the company and the actions of its employees and managers.

Corporate GovernanceEncompasses values and principles for good and responsible company management. A further aspect is the development and implementa-tion of management and control structures.

COSO Stands for Committee of Spon-soring Organizations of the Tread-way Commission, a U.S. organi-zation that developed an internationally accepted model for the documentation, analysis, and shap-ing of internal control systems in financial reporting (the so-called COSO model).

Earnings per share The after-tax net income achieved within a certain period of time (quarter, financial year) divided by the average number of shares issued by the company. Earnings per share is not identical to the divi-dend.

EBITShort for Earnings before Interest and Taxes.

EBITDAShort for Earnings before Interest, Tax, Depreciation and Amortization.

Financial IncomeFinancial income minus expenses in a financial year. The financial income consists of: income (or ex-penses) from investments in affiliated companies, net interest income (or expenses) and other financial income.

Free floatThe shares of a company that are freely traded on the market and not in the possession of strategic in vestors who want to permanently participate in the enterprise.

IFRSShort for International Financial Reporting Standards. The IFRS are reporting standards which had to be adopted by stock market listed companies following a resolution by the EU in 2002. They encompass the standards of the International Accounting Standards Board (IASB), the International Accounting Standards (IAS) of the International Accounting Standards Committee (IASC), as well the interpretations of the International Financial Reporting Interpretations Committee (IFRIC) and the former Standard Interpreta-tions Committee (SIC).

ImpairmentA decrease in the value of assets exceeding their scheduled amortiza-tion and depreciation in accor - dance with IAS 36.

Income before minority interests Earnings after taxes, including profit attributable to minority interests.

Initiative “Responsible Care“This worldwide initiative stands for the will of the chemical industry, independent of legal specifications, to strive for the constant improve-ment of the companies in the areas of the environment, health and safety, and to show this progress publicly on a regular basis.

Key Performance Indicator (KPI)Key Performance Indicators (KPI) are financial and non-financial metrics used to quantify objectives to reflect the strategic performance of an organization.

Market capitalizationCalculated by multiplying the share price times the total number of shares issued by the company.

Nanotechnology A nanometer is a billionth of a meter (10- 9 m). This scale designates a limit in which the surface properties play an ever bigger role compared to the volume properties of materials. Examples of applications are the further miniaturization of semi-conductor technology and the lotus effect, enabling surfaces to clean themselves.

Net Working Capital The net working capital is the total current assets of a company less the total of all of its current liabilities.

Prime StandardThe segment of the Frankfurt Stock Exchange organized under private law with the highest transparency standards and at the same time the prerequisite for admission to the DAX, MDAX, TecDAX, and SDAX indexes. Stock corporations in the Prime Standard have to fulfill international transparency require-ments going beyond the general standards, e. g. they have to use international accounting standards and quarterly reporting.

REACHA European Community regulation, short for Registration, Evaluation, Authorisation and Restriction of Chemicals. The regulation has been legally valid in every EU member state since January 1, 2007.

Return on sales Earnings before taxes divided by sales. After-tax return on sales: → income before minority interests divided by sales.

ROCEShort for Return on Capital Employed. ROCE is a profitability figure used to measure the returns a company is realizing from its capital employed in a given period.

Share capital The capital fixed in the articles of incorporation (bylaws) of an AG (stock corporation). The company issues shares to this amount. The bylaws also determine how many shares the nominal capital is divided into.

VOC Short for Volatile Organic Compound. An organic compound which at least partially volatilizes by itself in the respective surround- ing conditions (temperature and pressure).

Glossary

Achim Struchholz

Head of Corporate Communications

Abelstr. 43

46483 Wesel, Germany

Tel + 49 281 670 - 2460

Fax + 49 281 670 - 1114

[email protected]

Our up-to-date financial calendar is available on www.altana.com

under “Investor Relations”.

Contact

Financial Calender

Credits

Publisher

ALTANA AG

Abelstr. 43, 46483 Wesel, Germany

Tel + 49 281 670 - 200

Fax + 49 281 670 - 1114

[email protected]

www.altana.com

Design

Heisters & Partner

Büro für Kommunikationsdesign, Mainz

Oliver König

Head of Investor Relations

Abelstr. 43


Tel + 49 281 670 - 2499

Fax + 49 281 670 - 1114

[email protected]

Photography, Teams

Robert Brembeck, Munich

Page 12: Andreas Pohlmann, Munich

Further photos: ALTANA AG

Reproduction

Gold GmbH, Munich

Printing

Universitätsdruckerei H. Schmidt, Mainz

Overview of ALTANA locations

Sales company Production company

Latin America

ELANTAS Isolantes Elétricos do Brasil Ltda., Cerquilho, Estado de São Paulo (BR)

100 %

U.S.

BYK USA Inc., Wallingford, CT

100 %

BYK Gardner USA Inc., Columbia, MD

100 %

ECKART America Corporation, Painesville, OH

100 %

ELANTAS PDG Inc., St. Louis, MO

100 %

ACTEGA Kelstar Inc., Cinnaminson, NJ

100 %

ACTEGA Radcure Inc., Fairfield, NJ

100 %

ACTEGA WIT Inc., Lincolnton, NC

100 %

Central America

BYK Chemie de Mexico, S. de R.L. de C.V., San Pablo Xalpa (MX)

100 %

ECKART de Mexico Industries, S.R.L. de C.V., San Pablo Xalpa (MX)

100 %

Europe

BYK-Cera B.V., Deventer (NL)

100 %

ECKART Benelux B.V., Uden (NL)

100 %

ECKART France SAS, Saint-Ouen Cedex (F)

100 %

ECKART Pigments KY, Pori (FI)

100 %

ECKART Italia s.r.l., Rivanazzano (I)

100 %

ECKART Suisse SA, Vétroz (CH)

100 %

ECKART UK Ltd., Ampthill, Bedfordshire (GB)

100 %

ELANTAS Camattini S.p.A., Collecchio (I)

100 %

ELANTAS Deatech s.r.l., Ascoli Piceno (I)

100 %

ELANTAS UK Ltd., Manchester (GB)

100 %

ACTEGA Artística S.A.U., Vigo (E)

100 %

ACTEGA Rhenacoat S.A., Sedan (F)

100 %

Overview of ALTANA locations

Sales company Production company

Asia

BYK Asia Pacific Pte Ltd., Singapore (SGP),

100 %

BYK Japan KK, Tokyo (J)

100 %

BYK Solutions (Shanghai) Co., Ltd., Shanghai (CN)

100 %

BYK (Tongling) Co., Ltd., Tongling (CN)

100 %

ECKART Asia Ltd., Hong Kong (CN)

100 %

ECKART Zhuhai Co., Ltd., Zhuhai (CN)

100 %

ELANTAS Beck India Ltd., Pune (IND)

89 %

ELANTAS (Tongling) Co., Ltd., Tongling (CN)

100 %

ELANTAS (Zhuhai) Co., Ltd., Zhuhai (CN)

100 %

ACTEGA Foshan Co., Ltd., Foshan (CN)

100 %

Germany

ALTANA AG, Wesel

ALTANA Chemie GmbH, Wesel 100 %

BYK-Chemie GmbH, Wesel

100 %

ECKART GmbH, Hartenstein

100 %

ELANTAS GmbH, Wesel100 %

ACTEGA GmbH, Wesel100 %

BYK-Gardner GmbH, Geretsried

100 %

ELANTAS Beck GmbH, Hamburg

100 %

ACTEGA DS GmbH, Bremen

100 %

ACTEGA Rhenania GmbH, Grevenbroich

100 %

ACTEGA Terra GmbH, Lehrte

100 %

ALTANA AG

Abelstr. 43


Tel + 49 281 670 - 200

Fax + 49 281 670 - 1114

www.altana.com

Documents

irpages.equitystory.comirpages.equitystory.com/download/companies/altana/Annual Reports... · Key figures at a glance 2009 2008 ∆ % in € million Sales 1,181.7 1,341.7 -12 Earnings