January 24, 2005

Degussa and cathay biotechnology establish new joint venture for production of L-Lysine in China

Degussa (China) Co., Ltd., Beijing, an affiliate of Degussa AG, Germany, and Shandong Cathay Lineng Biotechnology Co., Ltd. ("Cathay"), Shandong, China, have signed a joint venture contract to establish a company for the production of L-Lysine, an essential amino acid for animal nutrition.

The name of the joint venture company will be Degussa Cathay Biotechnology Co., Ltd. Degussa will be the majority shareholder of the joint venture, with a 51 percent stake for Degussa and a 49 percent stake for Cathay.

During the course of 2005, the joint venture will construct an L-Lysine production plant at the Cathay site in Jining, Shandong province. The initial annual capacity of the new plant will be 40,000 tons of Biolys®, Degussa's globally-established L-Lysine product. The L-Lysine plant will be fully back-integrated into corn processing and will benefit from the energy cogeneration plant on site. It is scheduled to begin operation in 2005. The joint venture concept also includes plans to expand the plant's total annual capacity to 120,000 tons by the year 2007/2008.

The new joint venture utilizes the common strengths of Cathay and Degussa in terms of their expertise and their leading know-how in biotechnology. Moreover, there will be synergies resulting from Cathay's experience in successfully operating biotechnology plants in China and Degussa's position as a global amino acid supplier with a

sales and marketing network close to its customers. Degussa will be the exclusive marketing channel for Biolys® within China and elsewhere.

"Degussa is making rapid progress in the growth market of China. During the past few months we have undertaken a series of successful measures that will secure our long-term success in China", explained the Degussa Management Board Chairman, Prof. Utz Hellmuth Felcht.

"With this joint venture we are taking a decisive step into the Chinese market that is strategically important for our Feed Additives business. This brings us close to our Asian customers," notes Dr. Hubert Wennemer, Head of the Feed Additives Business Unit.

Dr. Xiucai Liu, CEO of Cathay, comments: "Cathay has been a pioneer in promoting biotechnical production in China of key chemicals, food and feed additives for the Chinese and world markets. The partnership with Degussa, a well known global amino acid supplier, will result in a clear competitive advantage for the new joint venture. We are pleased to have attracted such a strong partner."

L-Lysine optimizes feed formulations, reduces the cost of animal production and minimizes the excretion of nitrogen. This essential amino acid has consistently improved the quality and productivity of livestock. As a result L-Lysine is now a key feed additive for the growing pork and poultry market in China.

Degussa is the only manufacturer to offer all four of the important amino acids for animal nutrition: DL-Methionine, Biolys® (L-Lysine), L-Threonine and L-Tryptophan. These amino acids are produced at six sites in five countries. The company's Feed Additives Business Unit sells its products in 100 countries throughout the world.