Clariant AG

Ladies and gentlemen, welcome to the Clarion First Quarter Figures 2025 Conference Call and Live Webcast. I am Maria, the course call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star 1 on your telephone. For operator assistance, please press star and 0. The conference must not be recorded for publication or broadcasting. At this time, it's my pleasure to hand over to Andreas Schwarzwasser, Head of Investor Relations. Please go ahead, sir.

Thank you, Sandra. Ladies and gentlemen, good afternoon. Sorry, Maria. I apologize. We are so used to Sandra. Thanks, Maria. Ladies and gentlemen, good afternoon. My name is Andreas Schwarzwasser. It's my pleasure to welcome you to this call. Joining me today are Conrad Kaiser, Clarion CEO, and Bill Collins, Clarion CFO. Conrad will start today's call by providing a summary of the first quarter developments, followed by Bill, who will guide us through the business unit results, performance improvement programs. Conrad will then conclude with the outlook for the full year 2025. There will be a Q&A session following our presentation. At this time, all participants are in listen-only mode. I would like to remind all participants that the presentation includes forward-looking statements which are subject to risk and uncertainty. Listeners and readers are therefore encouraged to refer to the disclaimer on slide two of today's presentation. As a reminder, the conference call will be recorded. A replay and a transcript of this call will be available in the investor relations section of the Clarion website. Let me now hand over to Conrad to begin the presentation. Thank you, Andreas.

Clarion delivered a strong start to the year in the first quarter of 2025. with further improved profitability in a challenging environment. Let me start by highlighting some key achievements. We delivered sales of 1.013 billion Swiss francs. This result represents a 1% increase in local currencies and a stable performance in Swiss francs. Our EBITDA before exceptional items increased by 3% in absolute terms 290 million Swiss francs with a corresponding margin improvement of 70 basis points to 18.8%, driven by strong profitability across all business units. We are steadfastly delivering our performance improvement programs and have achieved an important milestone with the completion of our 175 million Swiss francs cost savings program. I would like to thank our teams for delivering these structural savings on time and in full. These savings have supported our margin improvement in the past years and will enhance operating leverage going forward. In November 2024, we announced a new savings program, which is set to deliver 80 million Swiss francs by 2027, with a significant contribution already expected this year. In Q1, we achieved savings of 3 million Swiss francs and booked 38 million Swiss francs of restructuring charges. As a reminder, we expect to book a total of 75 million Swiss francs restructuring charges related to this program in 2025. We are pleased with the strong operational performance of Lucas Meyer Cosmetics in Q1 2025, with sales of 25 million Swiss francs and a continued high level of profitability. Our Lukas Meyer cosmetics and personal care team was also recently recognized at the Ink Cosmetics Global International Trade Show for the beauty and personal care industry in Amsterdam. The joint team received six innovation awards for three products meeting growing customer demand for high value natural ingredients. For 2025, our guidance remains unchanged with local currency sales growth at the lower end of the 3% to 5% range and an underlying EBITDA margin improvement of 17% to 17% to 18% before exceptional items. The environment has become increasingly uncertain and our 2025 guidance reflects current conditions. assuming no further escalation in trade tensions and tariffs. I will cover this in further detail later. Today, we announced a planned transition in the CFO position, as Bill Collins has made his decision to retire after three years with Clarion. The board has appointed Oliver Ritken as Bill's successor, starting on August 1st. a comprehensive handover process will be implemented to ensure a smooth and seamless transition. I've known Bill for over 10 years and we've worked closely together, including during our careers before Clarion. I sincerely thank Bill for his invaluable contributions and ongoing support. He took responsibility for Clarion's finance organization after we faced some serious legacy issues. And since then, he has established a true performance management culture and high-performing finance organization. Together with the businesses, he expanded our approach towards shared services and significantly improved our practices around free cash flow generation and capital efficiency in the company. Thank you for everything, Bill. As of August 1st, we are pleased to welcome Oliver Ritken. to the Clarion team after having spent nearly 25 years in senior management roles at Bayer. Most recently, he served as CFO of Bayer's crop science division. Oliver brings extensive financial expertise as well as experience navigating complex business environments. We are confident that Oliver is the right person to drive continued financial excellence in the next phase of our journey. to introducing Oliver to the financial community. Now, looking at our performance in the first quarter of 2025, we delivered sales of 1.013 billion Swiss francs. In local currency, this corresponds to a 1% increase, with a negative currency impact of 1% in the reported figure. We maintain pricing discipline across our portfolio, with a year-on-year increase in care chemicals and stable pricing in catalysts and adsorbents and additives. Our organic volumes decreased by 2% overall, as growth in adsorbents and additives and care chemicals did not offset the expected decline in catalysts, where increased volumes in ethylene were more than offset by declines in other segments. The acquisition of Lucas Meyer Cosmetics had a positive scope impact of 2%. Q1 EBITDA. Turning to profitability, our Q1 EBITDA before exceptional items increased by 3% to 190 million Swiss francs, corresponding to an EBITDA margin of 18.8%. This represents a 70 basis point improvement versus the first quarter of 2024. Profitability from Lucas Meyer Cosmetics partly compensated for the exceptionally strong contribution in the prior year from the seasonal aviation business. In Catalyst, we were able to partly offset the double-digit volume decline with a favorable mix and continued margin management. In adsorbents and additives, profitability was positively impacted by operating leverage due to an improved cost base and volume growth in editors. Reported EBITDA decreased by 12% to 152 million Swiss francs, representing a reported margin of 15.0%, including the 38 million Swiss francs restructuring charges booked in the quarter. With that, I now hand over to Bill for further details on our business performance in the first quarter.

Thank you, Conrad, and good afternoon, everyone. I will now discuss our first quarter development by business unit, starting with Care Chemicals. We recorded 2% organic growth in local currency with a 1% organic increase in pricing. Volumes also increased slightly as we saw a continued recovery in crop solutions and good aviation season in North America, including scope. Sales grew by 6% in local currency, driven by the positive contribution of Lucas Meyer Cosmetics. On a quarterly sequential basis, sales increased by around 7% in local currency, driven by volumes as pricing was stable. We recorded strong double-digit organic growth in crop solutions as the demand environment improved compared to the prior year, which was impacted by destocking. Base chemical sales increased at a high single-digit percentage rate, driven by good seasonal aviation volumes in North America in particular. Personal and home care sales were stable organically, with a strong operational performance by Lucas Meyer Cosmetics contributing positively. Industrial applications declined at a low single-digit percentage rate, driven by lower volumes. Sales in mining solutions declined at a high single-digit percentage rate, against a high comparison base as increased pricing did not offset lower volumes. Oil services also came in lower against a high comparison base, driven by lower volumes due to temporary oil field production issues with key customers. Regionally, sales increased organically in EMEA at mid-single-digit percentage rate and Asia Pacific at a low single-digit percentage rate. while sales in the Americas decreased at a low single-digit percentage rate. We recorded EBITDA before exceptional items of 130 million Swiss francs versus 125 million Swiss francs in the first quarter of 2024. This translated into a margin of 21.7%, exceeding the 21.5% margin of the prior year when the business had an exceptionally strong margin contribution from the seasonal aviation business. Profitability was positively impacted by the strong operational performance of Lucas Meyer Cosmetics, as well as the growth in crop solutions and aviation businesses. On a quarterly sequential basis, Care Chemical's underlying EBITDA margin improved by 410 basis points due to improvements in the seasonal business, maintenance impacts, and fixed cost absorption. Catalyst sales declined by 13% in local currency, as well as in Swiss francs, driven entirely by a volume decline of 13% versus Q1 2024, as the economic environment remained weak and utilization rates continued to trade below long-term averages. Sales in ethylene catalysts increased at a double-digit percentage rate, while sales in syngas and fuels declined at a mid-single-digit percentage rate, with a more significant decline in specialties appropriately. Regional dynamics were driven by the project nature of the business, with sales increasing at a mid-teens percentage rate in the Europe, Middle East, and Africa region, primarily driven by growth in the Middle East. Sales in the Americas declined at a mid-20s percentage rate, primarily driven by the project nature of the business, which had some non-recurring projects in the USA in the prior year. In Asia Pacific, sales decreased at a low 20s percentage rate, with a more significant drop in China due to lower propylene sales. In the first quarter, EBITDA before exceptional items increased by 8% to 26 million Swiss francs, representing an underlying margin of 16.0% versus 12.8% in the prior year. A positive mix in margin management partially offset the impact of lower volumes in the quarter, while the absence of a negative impact from sun liquid contributed positively. Reported EBITDA margin of 14.2%, was negatively impacted by restructuring charges of 4 million Swiss francs in the quarter. Moving to absorbance and additives. Sales increased by 2% in both local currency and Swiss francs. Volumes increased by 2% while pricing was flat. Sequentially, sales decreased by 3% as additives was slightly weaker in China and absorbance weaker in the USA. Looking now by segments, adsorbent sales decreased at a low single-digit percentage rate, driven by lower volumes in Europe, as the region's industrial activity remained muted. In the additive segments, sales increased at a double-digit percentage rate, as strong volume growth was supported by slightly positive pricing. Regionally, we recorded sales growth in Asia Pacific at a low teens percentage rate, with China sales increasing at a high teens percentage rate, driven by volume growth in additives in particular. In the Americas, sales increased at a low single-digit percentage rate with both positive pricing and volumes, particularly driven by growth in additives. In EMEA, sales declined at a low single-digit percentage rate as growth in additives was unable to offset a decline in absorbance due to ongoing weakness in the region's automotive industry. EBITDA, the four exceptional items, increased by 2% to 47 million Swiss francs, representing an underlying margin of 18.7%, which was stable versus the prior year. Profitability was positively impacted by operating leverage due to volume growth in additives. Reported EBITDA of 37 million Swiss francs increased by 3% compared to prior year. This corresponds to a slight margin improvement to 14.7%. Moving on to our cost savings initiatives. In the first quarter, as Conrad mentioned, we achieved an important milestone by completing our full 175 million Swiss francs performance program as we deliver cost savings of 5 million Swiss francs. For the new savings program that we announced at our investor day back in November of last year, we expect full run rate savings of 80 million Swiss francs from business unit and corporate actions to be delivered by end of 2027. We expect a significant contribution to be realized from these initiatives in 2025 and expect to book a corresponding restructuring charge of 75 million Swiss francs in 2025. As Conrad also mentioned earlier, we have already booked 38 million Swiss francs restructuring charges in Q1 and started to deliver the first 3 million Swiss franc savings. And with this, I close my remarks and hand back to Conrad.

Thank you, Bill. At Clarion, we established an internal task force to assess potential impacts and provide mitigation actions related to tariffs and trade tensions. Overall, the extent of our local production with 68 factories globally and local raw material sourcing means we are well placed to deliver resilient results in the current environment. In the US, local production stands at around 70% of sales. with around 90% of raw materials being sourced locally. For Europe, this stands at around 90% for local production and some 85% for local sourcing. Local production currently accounts for around 50% of sales in China. This will significantly improve, however, with the finalization of our expansion in care chemicals and additives. The percentage of locally sourced raw materials in China already stands at around 80%. Our current assessment of tariffs therefore shows manageable direct impacts due to our resilient business model, which includes a well-balanced regional sourcing and production footprint, our local-for-local strategy, and our strong track record of value-based pricing. Indirectly, however, these trade tensions will have a negative impact on the global demand environment and consumer sentiments and thus present an increasing risk to volumes. The current assessment of Oxford economics is for a moderate slowdown in global GDP to 2.3% and related reduced global industrial production outlook of only 1.3% for 2025. This broadly aligns with Clarion's cautious assumptions taken at the beginning of the year, which brings me to our outlook for 2025. We note the increased level of risk and uncertainty due to tariffs and trade tensions and their impacts on global growth expectations. With that external environment considered and assuming no further escalation in trade tensions and tariffs, we continue to anticipate sales growth towards the lower end of our guided 3% to 5% range in local currency. Chemicals and adsorbents and additives are expected to grow, while catalyst sales are expected to be at levels similar to those of 2024. We continue to expect to further improve profitability in 2025, delivering an EBITDA margin before exceptional items between 17% and 18%. As Bill mentioned, exceptional items in 2025 are expected to include restructuring charges of around 75 million Swiss francs related to the savings programs announced during our investor day and other exceptional items of around 20 million Swiss francs. We therefore guide for a reported EBITDA margin for 2025 of between 15 and 15.5%. We also aim to further improve cash conversion towards our 40% targets. I reiterate our commitment to the medium-term targets we outlined at our November investor day, achieving 4 to 6% local currency sales growth and 19 to 21% reported EBITDA margin in normalizing trading conditions and around 40% free cash flow conversion by 2027 at the latest. With that, I now turn the call back over to you, Andreas.

Thank you, Conrad, and thank you, Bill. Ladies and gentlemen, we are now opening the floor for questions. To ensure everyone has a chance to participate, please ask no more than two questions per person. Thank you for your cooperation. Maria, please go ahead.

We will now begin the question and answer session. Anyone who wishes to ask a question or make a comment may press star and 1 on the touch-tone telephone. You will hear a tone to confirm that you've entered the queue. If you wish to remove yourself from the question queue, you may press star in two. Participants are requested to use only handsets when asking a question. Anyone who has a question or a comment may press star in one at this time. Our first question comes from Christian Fights. Kepler Shriver, please go ahead.

Yes, thank you. Good afternoon, good morning, everyone. Two comments, two questions, please. First, congrats on the results. Second, Bill, all the best for your post-Clarion time. And here are my two questions. Can you please give us an indication of how the profitability... Yes. Can you hear me? Yes. Okay. All right. So first of all, congrats on the results. And for Bill, all the best for his post-Clarion time. Thank you. First question would be, can you please give us an indication of how the profitability of Lucas Meyer has developed? You talk about on-track profitability, but could you please elucidate this a bit and put some meat on the bone? And second, can you please comment on the sequential performance during Q2? So has March been better than February and February better than January? Or how did your overall business do in terms of demand trends? Thanks very much.

Yes, Christian, good afternoon. With regards to Lucas Meyer and the profitability, let me start by saying that we see a continued strong sales achieved by Lucas Meyer. We recorded high single-digit sales up for this business. You see some of the reporting on global luxury brands slowing down. What we see is Lucas Meyer is extremely well positioned also towards the indie brands. And together with Clarion, we also actually have good access to some of the local Chinese brands. So overall, the revenue continues to be very strong. And that translates then also in continued strong profitability, where we see margins. You asked specifically about profitability. We see EBITDA margins between 45 and high 40s actually for this business. As far as your second question on Q1 and what we saw over the months, I think it's important first to note that we didn't see significant pre-buying effects, which had been reported by some other companies. So we basically saw a quarter which shows the usual pattern with a strong finish in March that we had. What we saw was particularly strengths, by the way, in additives. So if there is one unit that may have seen some positive effects on potential pre-buying, it may have been additives where we saw particularly strong sales for the electronics business with our flame retardants. But other than that, nothing out of the ordinary.

And has March been equally strong as, let's say, FAP or...

But that's not unusual for us.

Okay. Yeah. Great. Very helpful. Thanks very much. Thank you.

The next question comes from . Please go ahead. Thanks and hi everyone.

Two questions for me please. First is on the catalyst division. I appreciate the volume comes relatively high in Q1 last year. But the volume decline is quite worrying in my view. Could you please give us a bit more color on the conversations you're having with customers as to when they're planning to refill their plants and maybe their mindset on navigating the rest of the year? And my second question is on the performance program. How should we think about the cadence of the restructuring charges and the saving programs into the rest of the year?

Thank you. Yeah, thank you, Tia. I'll leave the question on the performance improvement programs and phasing to Bill. I'll make a few comments on Catalyst. So, yes, we saw a weak quarter in Catalyst, just as we also previously guided for. Keep in mind, we had quite a strong finish last year. But the most important thing here is the operating rate. So we're running right now at a 70% to 80% capacity utilization rate. And at that level, yeah, we actually are not seeing the pickup in Catalyst yet. So what we expect for Catalyst and what we hear based on customer feedback is that the pickup is not going to be this year. This year, we likely finish around the same levels that we saw last year with a gradual build up from quarter to quarter, but no strong recovery yet for our Catalyst business. Bill, over to you for the restructuring phase.

Yeah, thanks, Conrad. Hi, Dia. So we mentioned that we are anticipating $75 million of restructuring charges in 2025, specifically relating to this new cost savings program. We already booked $38 million in Q1, and we should probably be in the ballpark of $35 million in Q2. It has been our intent all along to try to get as much of that restructuring charge pulled into the first half of 2025. A, not only so that we can really get going on the implementation of these programs, but also so that we would have in Q3 and Q4 cleaner quarters than what we've had in the past. We are really committed to getting the restructuring kind of out of the way and really having clean, postable quarters going forward. That's helpful.

Thank you.

The next question comes from Katie Richards from Barclays. Please go ahead.

Hi there. Thank you for taking my questions. I've also got two. My first is on tariffs. You mentioned that you'd set up the Tariff Task Force, and I noticed that you'd moved some of your absorbance production in Mexico over to the U.S. So my question is, have your designated team found any weaknesses beyond the absorbance production in Mexico? And my second question relates to catalysts. I'm wondering what your expectations for the Chinese PDH demand going forward is, given that a key source of revenue for the catalyst business is highly reliant on the US imports of propane, to my understanding. How pronounced do you think an impact on PDH utilization could be here and how fast would we see this impact and what are the consumers communicating to you at the moment here?

Yeah, Katie, thanks for your questions. First, as far as tariffs and how well we are positioned, I mentioned in the speech that actually we feel we're very well positioned with our 68 sites. We mentioned 90% of revenue in Europe being locally manufactured, 70% in the US, and 50% in China. But in China, after bringing up the two new plants on stream later this year for chemicals, next year for edifice, we are closer to 70%. I think what's important to note is that of the remainder of materials that we're bringing in into the US primarily, that only a very small fraction of that is coming in from China. And actually, it's interesting to see also that, for instance, on the raw material side, with items like aluminum powder, we benefit from these exempts. It's our estimate that, by the way, there will be more and more exemptions coming in the coming weeks. And that leads me also, I think, to your next question on catalysts. So you mentioned PDH demand in China. And indeed, PDH, where we supply the catalyst for the conversion from propane to propylene, indeed, the propane is coming from the US to some extent. And what you see is then 125% tariff on that. So it's clear that our PDH customers don't make any money with such expensive propane. But what you see already is a relocation actually of their propane sourcing from the US to the Middle East primarily. So yes, there are some temporarily challenges for our PDH customers in China, but certainly for propane, they can actually relatively easily relocate materials in their sourcing to the Middle East. By the way, the propane issue is not unique for ethane. You see a very similar dynamic with ethylene suppliers, manufacturers in China being dependent on ethane coming in from the US. So I think Yeah, sort of the conclusion overall of all of this is there will be more exemptions because chemicals are not finished products, but are intermediate products and raw materials, which means that if you basically put such high tariffs on it, you are actually damaging your domestic industry. So China, for example, may very well exempt ethane, but also propane from retaliatory tariffs.

The next question comes from Georgina Fraser, Goldman Sachs. Please go ahead.

Hi there. Nice to speak to you both, Conrad and Bill. Thanks for taking my questions. First one is for you, Bill. Very sad to see you go and good luck with what comes next. I was wondering if you could talk us through... If you could talk us through some highlights of your time at Clarion and what advice you would give to your successor. And then my second question, this one I think for you, Conrad, and it's a bit of a broader topic, which is more on how you see the surfactant industry as a whole developing. Can you talk about how the competitive environment has trended over the last five years through inflation, supply chain disruption, big changes in China. Just what's your view on what's been going on in the industry and what underpins Clarion's position as a leader in this industry for the longer term? Thank you.

You want me to go first? Yeah, please go.

Okay. Well, I don't know. I mean, we might have to extend the call for me to do a full accounting here. But I mean, I came to Clarion three years ago with really two main missions in mind. One was to rebuild the finance organization after the accounting challenges that we had on the restatement in 2021 and early 2022. And then to help Conrad with the transformation of Clarion and to basically make sure that we put in place a strong and robust plan operating model in the company. And I think on both of those accounts, we've really done that. I mean, within the last three years, we've literally swapped out the entire finance leadership team, except for Andreas, thank God. We've done a lot of hiring. We've done a lot of training. We've put a lot in the way of internal controls. We've spent a lot of time on accounting ethics and transparency. not only within the company, not only outside the company, but also transparency in terms of financial reporting to the board. So I feel really good about that. The second element is around implementing the new operating model. So this is something that Conrad and I had done together at Axel Nobel. So I knew a bit the playbook. And I have to say, and I've said it many times before, that I'm really, really happy with how that has gone. We fundamentally operate differently today than we did three, four years ago. I am so excited about the margin trajectory that we see. I mean, just as a reminder, back in 2023, we're at 14.6%. Even though before exceptional 16% last year, I feel really good about the 17 to 18% this year. So I think we have done all the right things in the company to really put us on the right track for hitting these targets. So all good there. Not to mention the amount of legacy topics that we've kind of been challenged with cleaning up in the meantime. You just think back to the, well, the divestment of our North America land oil business in late 22, early 23. The challenges that we had with biofuels over the course of the last year. I mean, this has taken quite an enormous amount of time. PFAS, ethylene. I mean, so these are really quite chunky things that we've dealt with over the past three years. And in spite of all those, I think that we have an enormously strong and resilient, profitable company going forward. It is with a, you know, a bit of emotion that you step away from these things. But I think what I'm leaving behind is a really, really well-structured finance organization and, you know, this new operating model that we have. And Oliver should, I think, do a fantastic job, you know, leading the finances of the company forward from here.

Yeah, basically, thanks, Bill, by the way. And I want to recognize as well from my side all these achievements, Bill. And it has been an enormous pleasure to work together. And I personally will miss you. But more to that maybe after. Okay. On care chemicals, Georgina, and sort of an industry perspective and what we're seeing here, first of all, what we saw behind us in recent years and what we're seeing ahead, I think sort of high level what you see is in care chemicals for Clarion, but also some of our competitors have followed this trajectory, is an increasing focus on segmentation whereby clearly a chemical business has consumer facing segments like personal and home care, for example, cosmetics, health care, crop solutions. Many people put in that category as well. And then the more sort of industrial segments, including oil and mining. What you see there is also a number of peers have increasingly prioritized the consumer-facing segments. Typically, these are less technical businesses, and typically they also provide for higher margins, especially when it's about bioactives and ingredients that provide a certain unique performance in cosmetics and in healthcare. For Clarion, we are, I think, well on our way there. You've seen us also make acquisitions in these areas with the active ingredient business first in Brazil, more recently Lucas Meyer. We now have more than 50% of the chemical business consumer facing, and we're very happy with that. Now, will we go as far as divesting the industrial segments? That is not on the agenda right now. We see a clear synergy between these segments, both in terms of footprint and even in terms of technology platform. But we are executing a differentiated growth strategy where we prioritize the consumer-facing segments, first and foremost for organic growth, but also when it comes to bold on acquisitions, we still see interesting opportunities out there.

And sorry, just to follow up, that kind of continued discussion participation in the industrial focused market. Is that around your ability to keep your volumes and plant utilization up to be able to leverage the growth opportunities in consumer chemicals? Or am I thinking about it the wrong way?

Well, you definitely make an important point there that assets are in many cases shared. So there is definitely a cost advantage from that for our consumer facing businesses and But also, if you look at the technology platforms, what you may have seen is that on the industrial side, we actually are repositioning. So, for instance, the North America oil land business, we divested. This was very much a commoditized segment where customers were not willing to pay for sustainability and for performance. Whereas deep sea, we actually see for oil and gas that customers there are very much focused on sustainability and biodegradable products and performance. And likewise in mining, where we, with our flotation chemistry, really have biodegradable products, where customers also increasingly are willing to pay premiums for. So I think also on the industrial side, we are seeing a repositioning towards more sustainability. And there is not only this asset footprint synergy that you highlight, but there's also a technology synergy.

That's really interesting. Thank you, Conrad. Thanks, Bill. Good luck.

Thank you. Thank you.

The next question comes from Chetan Odeshi, JP Morgan. Please go ahead.

Yeah, hi. Thanks for taking my questions. I had a couple of them, and thanks very much for the slide where you give your regional sort of exposures, domestic versus exports or imports. You mentioned about US, but I'm just curious about China, where you have local production share of only 50% now. I know you are expanding local footprint, but just curious, where is the remaining 50% imported from? Is it North America, US, or is it Europe, if you can? Is there any tariff implication at the moment as you sort of build your local footprint? for the part that you are importing from the rest of the world. And the second question, I mean, at least the way I'm understanding, Conrad, your comments, you know, it doesn't feel like you have seen any major changes in the business trend re-enforce the announcement of U.S. tariffs. Is that a right interpretation or you are actually seeing, as we speak... some wobbles in any of the businesses.

Thank you. Thanks for your questions. First on your comments regarding China and domestic versus imports and our current share of local production, which is 50% and the vulnerability that we may have here. So in China, I think it's important to sort of look back Back in 2021, what we announced was a strategy in China for China, and we've put several new plants on stream in recent years. We brought up local manufacturing from roughly 30%, 35% to slightly over 50% right now. So we're making good progress there. And after the startup of the new care chemical plants later this year, As well as the second flame retardant line next year, we will be approaching 70% of local manufacturing in China. What we still import, to specifically answer your question, is not coming from the US. So we feel we're not that exposed here. It is mainly coming from Europe. But that doesn't mean that we want to sort of slow down on this strategy, especially chemicals. It always has been the right strategy to be local for local, to develop products for the local markets with local clients based on local manufacturing and local raw materials. So we continue to be committed to that. And as far as your point in terms of vulnerability, we feel we actually don't have a significant vulnerability here coming from the terrace, which is primarily related to China-US and US-China trade. As far as your second question on business trends, have we seen any impact from tariffs on our trading and our order books? I mentioned already some of the challenges that some of our customers are having, particularly in China. It has not translated in a reduced order book for us. But what we are seeing is people being clearly more nervous. We see more higher frequency in orders, smaller orders. We also have seen people placing orders, but they're not calling off the product to sort of secure them for future deliveries. So those kind of things we have seen, but we haven't seen a major slowdown yet. in our order books, but obviously we cannot be ignorant to the fact that tariffs drive up inflation, slow down economic growth, and you've seen the projections by IMF taking global GDP down. We saw a very recent update here from Oxford Economics, which basically slows down their GDP forecast from 2.6 to 2.3%, but more importantly, what they basically say is a significant slowdown in industrial production with the projection now for negative industrial production this year, again in Europe and also in the US. This is for us obviously a fundamental trend. For a big recovery in chemicals, we need to see durable goods spending up. We need to see industrial production up.

And maybe last question. Perhaps you might not want to answer this, but there have been some press reports about... you know, Clarence Ford conducting some strategic review, et cetera, et cetera. Can you, are you able to comment at all on what might be the, let's say, part of that strategic review that you want ongoing? Thank you.

Yeah, Tito, there has been a report by Bloomberg, which basically was a report on an investor survey that we've been doing with our most important investors. This is a common practice which we do actually on an annual basis where we solicit investor feedback on the company. So what are they thinking about our strategy? What is their view on our performance? So all the sort of standard questions that you would ask in an investor perception survey. So there's nothing out of the ordinary here. And I personally didn't see a lot of news value in this article.

That's very clear. Thank you. Thank you.

The next question comes from Tricia Lamotte, Deutsche Bank. Please go ahead.

Thanks. Two questions, please. The first is on phasing in Q2. I was just wondering if there are any items you'd like to flag to consider in Q2 versus Q1, maybe de-icing and refining and any other sequential changes in end market to flag there? And then the second question is on the trends that you're seeing in raw materials, energy and other costs and how that's comparing to your pricing. Is your pricing slightly lagging those raw material increases or is that kind of already matched? And are you already starting to see kind of rises related to the tariffs yet or is that not yet flowing through? Thanks. Thanks.

Yeah, as far as phasing, Tristan, first looking at Q2 versus Q1, usually our Q2 is a bit weaker than Q1. There is seasonality in our business. So what we typically see is in Q1, bee icing and refinery. That's not in Q2. We also see Q1 typically being the planting season for crop, so that is actually running out now in Q2. So typically from Q1 into Q2, you would see overall slightly weaker trading conditions. This year we don't see anything different than that, so we are expecting that normal pattern. We also typically see a weaker start in the first quarter for Catalyst. Typically Catalyst is built throughout the year with a strong finish in Q4, which is also what we're expecting this year. As far as your second question on raw materials and pricing, what we saw in the first quarter is some inflation, both sequentially on raw materials from Q4 into Q1, but also year on year, roughly 1% up our raw materials. In terms of our pricing, we basically saw that overall fairly flat in ANA and in Catalyst, but here we also didn't see those increases as much as in Care Chemicals. Keep in mind, we come off an oil price of $85 brand pricing. That is actually now down to sort of $65. So what we also may see is an easing of raw materials if you purely look at oil and gas prices. Gas prices in Europe are actually quite low at the moment, like low 30s per megawatt hour. But at the same time, we see inflation coming from tariffs. So it's not so easy to give you an outlook for the year in terms of raw materials. We ourselves think it might be 1% or 2% up for the year. And that is sort of the balance of easing energy, oil and gas prices and derivative products. But at the same time, some inflation coming from tariffs. Great. But the key message is we price through raw material increases. And that is also being a consistent track record. Yeah.

The next question comes from Walter Bamert, Zürcher Kantonalbank. Please go ahead.

Hello everybody. You mentioned that you do not see a price erosion in the premium cosmetic ingredients. Do you see a trading downtrend in other areas consumer related? And is the market still willing to switch and to pay for sustainable products?

Yeah, so I think there's two things here, Walter. There is, on the one hand, our positioning and there's what's happening in the market. So if you look at the broader markets and you've seen some of the reports from luxury cosmetic brands, they are seeing a slowdown based on lower consumer confidence, particularly in China, but increasingly also in the U.S., If you look at our unique positioning in cosmetics, which is really this high-end segment of anti-aging and hair care products, here we're dealing with a very loyal consumer base group. where the products actually do work and do provide a certain benefit. And if you stop using them, that benefit disappears. So we see a very loyal customer base and we're not seeing this erosion. Certainly not on prices. The performance that we basically deliver is extremely valuable to these luxury cosmetic brands. And finally, I think... If you look at our revenue split, we, through the Lucas Meyer acquisition, have a very significant position with the so-called indie brands. And these are promoted on social media through influencers, and they are gaining actually share. versus the luxury brands. And that's why probably overall we see continued strong revenue growth, high single digits, because we're so well positioned. But no trading down in the segments where we are supplying.

And when it comes to the Trump government approach to sustainability and mining and oil services, do you see any changing trends there?

Yeah, when it comes to sustainability, what we're seeing is some effects here and there, particularly also if you look at items like renewable diesel or SAF, those are businesses that in the past, certainly renewable diesels, did benefit from subsidies. One of these subsidies has come down. So, yeah, this basically... It means if you have a longer-term outlook that a lot of these announcements about new plants, it's questionable if they all will come through. But on the existing business, we do not see an effect well. And then secondly, let's not forget that if you look at what Trump is saying, drill, baby, drill, we do have obviously an exposure to oil and gas with our oil and gas business. in chemicals, but we're not seeing a real positive impact there yet of any of this.

Thank you very much. Thank you.

The next question comes from James Hooper, Bernstein. Please go ahead.

Hi, good afternoon. Thank you very much for taking my questions. I have two, please. Firstly, can you give us an update on the status of the legal investigations? And then secondly, it looks like to make the 25 revenue guidance that ANA growth has to accelerate slightly from here in what looks to be a more difficult macro environment. Can you give us some guidance on how to think about that and why ANA can be resilient? Thank you.

Your first question was regarding ethylene investigation. Is that what you said? Yes, Nico. Indeed, yes. Okay. So, the ethylene situation. In the first quarter, we have reported that we received a claim from both BASF and Total. We also reported that we do not see any correlation ourselves between the behavior here in the past and the ethylene prices in the market. We have actually strong data here, including a strong and detailed economic study. So we also said that we will fiercely fight these claims. And there's nothing more to report at this stage. As far as your second question on the outlook and acceleration required in ANA, I think if you look at the performance in ANA on the additive sides, we are very much on track. In fact, we had double-digit growth. It is actually on the absorbance side of it where the conditions will need to improve a little bit. What we're seeing is two things. In absorbance, we saw in Europe, we saw a slowdown associated with automotive and with foundry. And we saw in Asia a slowdown because of a weak crop for palm oil purification. We do expect gradually over the year, ANA numbers overall to come out stronger. And that's primarily based on the pickup that we see for renewable diesel where we start up the new plant in Quincy. And that will bring in additional revenues. Overall, if you look at our outlook, it's not so much ANA that needs to pick up its catalyst. And that's sequentially what we also anticipate. So we said it's a yearly build throughout the year with a weak Q1 and a strong finish. And that's actually where the biggest sort of pickup will need to happen.

Thank you very much. Thank you.

Today's last question comes from Reynolds Orr from Citi. Please go ahead.

Hi there. Just one last one from me, thanks. It's just on catalysts where I'm keen to hear your longer-term perspectives for the business. I mean, I guess we're seeing very high risk or damage to businesses aggregate demand from U.S. policy over capacity in many chains. And so I guess I'm thinking the prospect of even a 2027 recovery seems to be diminishing. And so just keen to hear your thoughts on how you manage the business through this and for potentially a more extended downturn.

Thank you. Yeah, sure. Yeah, Ranulph, certainly short term, there are some challenges. I mentioned ethane cracking in China and propane to propylene in China. But if you look at the long-term fundamentals for catalysts, if you look at petrochemicals, if you look at plastics demand in the world, that has been historically and will be in the future in line with GDP. So where there are some regional demand shifts, certainly some demands leaving Europe and showing up in China, in the Middle East, Overall, globally, the fundamentals for petrol chemicals and base chemicals are still in place. And I think if you look at our own business, which the biggest region is actually Asia for us, we have a very strong position in the Middle East. So we are well positioned to actually deal with these regional demand shifts. There are regional demand shifts, but if you look globally and if you look at the fundamentals, then these are all still intact. Great. Fine. Thank you. Thank you.

So, ladies and gentlemen, this is Andreas speaking. This concludes today's conference call. A transcript of the call will be available on the Clarion website in due course, and obviously the investor relations team is available for any further questions you may have. Once again, thank you for joining the call today, and goodbye.

Ladies and gentlemen, the conference is now over. Thank you for choosing Coral School, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.