Alzchem Group Ag

Dear ladies and gentlemen, welcome to the conference call of Alskam Group AG. At our customer's request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. If any participant has difficulties hearing the conference, please press star key followed by zero on your telephone for operator assistance. They are now handing over to Andreas Niedermeyer, who will start the meeting today. Please go ahead, sir.

Yeah, hello, thank you. Good morning together. Thank you for joining us today and welcome to our Q3 analyst call. As usual, we open with an executive summary and then move on to the figures after some strategic and most interesting topics. At the end of the presentation, we will be available for questions for sure. And so let's skip the disclaimer and go directly to the page five. So I click through the slides and it takes a few seconds, I think. Yeah. So you have certainly noticed that we have a new look and feel and have prepared a so-called branch and brand relaunch act. The Altscam group is setting a new sign here. Altscam group is flying the flag. with a new logo embedded in a new corporate identity in a stylized Pentagon Stand Act or ACT, which is on the one hand our stock exchange abbreviation and on the other hand a clear call to action. We want to help shape the future together competently and with agility and we want to be part of the answer of the global questions of our time and this is exactly what the new logo should reflect and reflect. The motivation, the agility and the values of Alskam Group AG. Tradition also plays an important role in this. The proven is carried forward into the future even as a globally successful company with a leading market position in many fields of activity. Alskam continues to respect and to cultivate its roots in the region. The company will continue to attach importance to being a good neighbor at all sites, a reliable partner for customers, and a company with a sense of social and ecological responsibility. On the next pages, we may give you a few more impressions of the new design world here. Tidy, clear in language, Yes, finding the details you need to work with us should be reflected in this picture. And modern, crisp in our statements with high recognition value should be seen here in this picture. And in the end, throughout all medias, I hope we have inspired your curiosity a little. We invite you to browse. through our pages, and we would be happy to receive your valued feedback about our new brand. But now, after the short introduction, back to the real business, back to the figures, and back to the hard facts. So, we are on slide nine now. Overall here, we can report another very positive quarter for the Altschirm Group. All key figures are well above the previous year as a result, of the implementation of consistent growth in the nine-month period. The third quarter also was well above the previous year, but more on this details later. As a result, we are able to maintain the guidance for the fiscal year 2021 up to 415 million in sales and up to 64 million in EBITDA, despite the significant turbulence in the market. The commissioning phase of the new NITRALS plant has been completed and successfully transferred to regular operational use. There is considerable turbulence on the raw material and energy market. Either shortages are being felt, significant price increases have to be accepted, or there is a fundamental lack of availability, including logistic capacities. So far, we have almost always managed to implement everything on time, both on the supply and on the distribution side. And here, of course, the strength of our verbund comes into play because we produce our main raw material ourselves in the verbund production and can steer them through all production stages to the product with the highest demand. In the third quarter, we started the market launch of Eminex, and fortunately, we won the Responsible Care Award of the VCI of Bavaria. Thank you for that. The implementation of our CreaPure capacity expansion is well on track. Commissioning is scheduled for the end of quarter three next year and is also achievable from today's perspective. COVID is still an issue. Our district of Traunstein is one of the districts with the highest incidence rates. Therefore, We continue to act cautiously and prudently, but we have not had any further restrictions due to COVID diseases. So all in all, we can proudly report a very good quarter, albeit a turbulent one from a management perspective. And at this point, the obligatory strategic question, what happens next? Well, here are a few answers from George Weisselbommer.

Thank you, Andreas. A focal point of today's presentation will be DieHard. DieHard is the brand name for high-performance thermoset epoxy cure systems and was developed based on dye cyanidiamide hardeners. Over time, we have added Euron and Imidazole accelerators and even formulated epoxy resin systems. Those give us a flexible toolbox, which helps us assisting our customers in solving their curing tasks. In the current environment, in-house production of di-cyan-diamide, milling this raw material according to customer demand, and production of neurons in our multipurpose plants ensures seamless availability and leads to growing market share. With own application labs, will help customers finding the right balance between curing time and temperature while creating highly cross-linked composite systems. Die-hard products have their market as flame repartants in electronic equipment and expanded quickly into lightweight parts for sports equipment like bicycles or tennis rackets. Due to the lightweight yet rigid construction possibilities, they made their way into rotors of commercial windmills. Newest applications are for structural parts in automotive, aerospace, and aeronautic systems. In summary, diehard products were always at the forefront of sustainability, creating end products with reduced weight and reduced energy requirement. On the next page, we would like to introduce the newest development along this journey. Diehard products as raw materials for lightweight hydrogen cylinders. Again, the ability to create systems with high stability yet with low weight makes diehard the choice for cylinders in fuel cell electric vehicles. Countries like Japan and Korea rigorously develop passenger cars based on hydrogen-powered fuel cells. And in other areas of the world, hydrogen mobility is considered a serious alternative for heavy-duty vehicles, trains, or ships. For those applications, we have developed a range of die-hard liquid systems, which can be tailored to the development requirements of hydrogen car producers. The system was tested in several end-user applications and approved in pressure cycles exceeding 700 bars of hydrogen pressure. Those cylinders are composed of a carbon fiber matrix as base bone and cured epoxy resin as body. A typical cylinder is shown in the lower right corner of the slide. The production process is called filament winding with a carbon fiber soap in a liquid epoxy curing system while continuously wound around a solid body. Afterwards, the rotating cylinder is cured at elevated temperatures. Advantages of the diehard system in production of cylinders are the long-term stability of the solution during winding, which leads to higher machine utilization, less cleaning and waste, and consequently high productivity, or in other words, high profitability. During the curing process, it is of critical importance for the uniformity of the cylinder that the heat generated during this process is equally dissipated and hotspots are avoided. Here again, the diehard toolbox does its job. Hydrogen-powered vehicles are part of the energy solution for our planet, and diehard is well positioned to be part of this process. With this positive statement, I would like to give the word back to Andreas.

Yes, thank you, George. Then I will move on, on page 12. In the third quarter of 2021, sales jumped by approximately 20% year-on-year to 95.9 million. In absolute terms, again, the two segments, specialty chemicals and basic intermediates, contributed to the sales growth. The significant increase in turnover also had a positive effect in absolute EBITDA and EBITDA margin. The third quarter of 21, this was 13.8 million and thus 1.8 million or 15.4% higher than in the same period of the previous year. Supported by the positive product mix in terms of margin and high raw material prices, the EBITDA margin for the third quarter has now reached a level of 14.4%. For the first nine months, this means an increase in turnover of 11.7% to now 311 million. and on EBITDA growth of even 20% to now 49.6 million. Earnings per share rose from 146 to 2.14. The increase is mainly caused by the very good earnings situation here. The overall growth is volume-based with a growth rate of almost 11%. And in total, we were able to adjust our prices upwards by about 2% in line with the volume increases What cost us profitability compared to the previous year, however, were unfavorable exchange rates, especially in the US dollar. This single effect amounted to about minus 3.7 million. All in all, it was a very successful nine months, despite the turbulent market environment, and so much for the big picture, and the overview will let us now analyze in more detail the different segments. So and therefore I move over to page 15. So segment, the basic and intermediate segment comprises the production of basics and intermediate products that either required for the manufacture of specialty chemicals or market as standalone products. With sales growth across all profit centers of 31.4%, the basics and intermediate business performed very well in quarter three. For the full year, we achieved a sale increase of 20.7%. Both in quarter three and for the full year, volume increases with the additional contribution margins played the key role here. Delivery capability and delivery reliability for our metallurgical products, our fertilizers, and our pharmaceutical raw materials are the criteria that count in these days. We see a significant increase in the implementation of price increases in the third quarter with 6.4% and for the full year with 4.2%, we are also able to pass on first cost increases to our customers. This is also clearly reflected in the EBITDA and especially in the EBITDA margin. Volumes increased significantly and economies of scale were realized. Furthermore, a significant part of the increased raw material and electricity costs could be passed on to the market. At the same time, various Six Sigma projects along the entire NCN chain are having noticeable effects, which is clearly reflected in the favorable cost items. In total, the segment EBITDA increased by 3.3 million, or around 50% year-on-year, with around half of the increase achieved in Q3 alone. This segment can therefore be summarized as sales are largely driven by volume and margins significantly improved mainly by economy of scale and first price increases. So much for the basics. Let us now move on to the specialty segment, which is now the page 17. So the specialty segment. was able to contribute significantly to the overall growth of Alskam Group in the first nine months with a sales increase of 7% and in quarter three even by almost 10% here. With very significant volume growth, the product areas diehard for lightweight construction and renewable energies and nitroguanidine for automotive applications in particular shown reinforcing the positive trend since the fourth quarter of 2020 over the past period of fiscal year 2021. So with very significant volume growth in the mid double digit percentage range, the market share of dietary supplements based around CreaPure was also strongly expanded. The capex of 11 million that has been initiated will enable us to continue to develop this market position in the future. BioSelect products for COVID testing fluctuate with the pandemic. For example, demand was rather weak in the summer, but picks up again significantly in the winter. Creamino is running at about the same level as the previous year, although we were able to win many new customers. The specialty segment was not spared the turbulences on the raw materials and logistic markets in some campaigns. For example, plans had to be changed at short notice due to delays in the delivery of raw materials or postponements of collection dates. Nevertheless, all orders were delivered, all plants operated at high to very high capacity utilization rates, and unplanned plant shutdowns have been avoided to date. So, all effects combined resulted in EBITDA of 38.8 million in the segment and an increase of 4.8 million or 14% compared to the previous year. Price increase rounds have also been started in this segment and should be able to absorb future raw material price increases well. So let us now move on to the third segment, others in holding, which is shown on the page 19. So in the first nine months, The other than holding segment was able to essentially repeat the development of the same period of the previous year, chemical power customers purchased services at a similar level as before. There was also no significant change in the individual services. All in all, sales of 6.3 million were approximately at the previous year's level and earnings of 0.5 million were in line with expectations. So let us now look at the balance sheet, which is shown on page 20, and I think you should see already the slide. So the balance sheet in total increased from 354 to 381 million. What were the main changes on the assets? Tangible assets were more or less stable on the level of 194 million. Inventories are 7.2 million higher than at the last balance sheet date. This reflects two effects. Firstly, increased raw material costs led to a higher valuation of inventories. On the other hand, products are currently being produced in stock to ensure supply to our customers, thus increasing the quantity held. In the area of receivables, in addition to reporting date-related reasons, among other things, the considerable increase in quarterly sales led to a significant increase in trade receivables up to 56.6 million. It can be assumed that at the end of the year, we will be back at about the same level as the previous year because there were no payment delays. What else is there to discuss about the liability side? Equity increased by 12.6 million to 81.3. This led to an equity ratio of 21.3% compared to 19.4 in the previous year. Long-term valuation rates for pensions changed from 0.5 to 0.7%, but This was offset by pension trends, which had to be raised from 1.5% to 2% here, and this is the reason for a slight increase in pension accrues. Current liabilities mainly reflect the effects of the sharp rise in business volumes. The biggest increase was in trade accounts payable due to the increased purchasing volume and higher raw material prices. The short-term utilization of financing lines also led to an increase in current liabilities.

Ladies and gentlemen, we seem to have a technical issue. Please stay on the line while we fix this. Thank you. © transcript Emily Beynon Thank you. Ladies and gentlemen, thank you for standing by. We will now resume the conference call.

So I'm very sorry that we have lost a line, but I think the telephone lines in Germany are not as stable as they used to be. So I've heard already in the radio today that the lines are not really stable and now it happened with our conference call as well. So I restart my presentation at the page 21 at the cash flow. So in principle, the cash flow development continues to be very positive here. The cash inflow from operating activities amounted to 24.9 million and is thus behind the previous year. as we have significantly built up receivables. If we were to exclude the networking capital buildup, we would be well above the previous year, which is permissible from our point of view, as we expect to see lower networking capital again at the end of the year. The cash outflow from investing activities has risen compared to the previous year. Major individual projects were missing in the previous year, This year, the completion of the NITRAL plant and the RTO, which is standing for Regenerative Thermal Oxidation Plant, are the main drivers. Payment for Alskam's financing activities amounts to 13.7 million, which corresponds approximately to the previous year. Okay, so that's it for cash flow after this analysis. A few words to our targets on page 22. So, in principle, on the target list, we are well on our way with the general development towards sustainability. We have also included this topic at the top of our target list. Here, all analyzes are running at full speed. We expect to be able to present our analyzes by the end of the year, respectively, at the beginning of the next year. So, we are here on our time schedule. And here are some few comments. On the other targets on the list, starting with the commissioning of the next capacity step of NITRALS product group, the NITRALS plan started up on time and on budget in May. Capacity utilization is at high level and is already supporting the growth of the basics in the second half of the year. Increasing our involvement and sales in the pharmaceutical market, we have been delivering here since quarter one. Working on the topic of creatine for healthy nutrition for the market development of creatine, a target extension for a significant capacity increase of our CreaPeer product has risen here. Commissioning is already planned in stages from quarter two of next year, and the project is on schedule both in terms of time and cost. With regard to our CreaMino sales volumes, we're roughly level with the previous year. New customer's acquisition is going well. although there has certainly been competition so far. So nevertheless, we expect good growth rates in the coming month here. So the management of COVID-19 effects has been joined by other issues. We have to pay more and more attention to the security of raw material supplies and see that we manage the logistics in all directions so that we can facilitate all planned transactions and sales. So finally, let's move to our outlook, which is printed on page 23 here. Also, we see major turbulence in the raw material and logistic markets. We are sticking to our outlook for this year, which we raised again on July 15th. Order intake is very good, and therefore plant utilization is high. The risks lie in successful managing the following effects. COVID-19. We are located with our production in the high incident area of Germany. Currently the incident rates are often above 800 and I checked the internet today and I think we are close to 1000 actually. Thanks to the cautiousness of our employees, we are safe on the road so far. Raw material availability. So far, we have always succeeded in procuring oil raw materials on time. The price increases are partly immense, which is why we are very much in talks with our customers in order to be able to pass on these price increases. So far, our customers have been receptive to this. Electricity prices, you all know that the price of electricity is an important input factor for us. In some cases, industrial electricity prices for band and spot had multiplied. We are hatched at about 70% for this year, so the impact is still manageable. However, we are already seeing significantly declining electricity prices for the next year already. And with our electricity-based chemistry, we are definitely in a better position from a sustainability perspective than crude oil-based chemistry. With more and more renewable electricity, our input factors automatically become more sustainable. And then the fourth point, logistics. This is the biggest challenge for us. We are putting off ever higher order backlogs because we often get the goods on the ship late. We will make every effort to meet all delivery deadlines here as well, but it remains still challenging. Okay, as I said, tough times. I always say that we sail the stormy weather and so far we are getting it right and are doing very well. So that's it from our side with the information for quarter three and the nine months for the year. At this point, we would like to thank you for your appreciated attention and sorry for the cut it line. And we are now at your disposal for possible questions. Thank you.

Ladies and gentlemen, we will now begin our question and answer session. If you have a question for our speakers, please dial zero and one on your telephone keypad now to enter the queue. Once your name has been announced, you can ask a question. If you find your question is answered before it is your turn to speak, you can dial zero and two to cancel your question. If you are using speaker equipment today, please lift the handset before making your selection. One moment, please, for the first question. And the first question is from . Your line is now open. Please go ahead.

Yeah. Hello. Many thanks for commenting on the energy cost so far. Can you maybe give us an idea of how much of your energy cost is now hedged for the year 2022 and 2023? And what do you expect from the potential end of the EEG tax? Can you give us maybe some insights on your thoughts there? And also on the CO2 cost, that would be my second question. How many certificates do you maybe have bought by now, and how do you expect that to impact your cost structure in the future. Many thanks.

Yeah, so some information about the electricity. As we have already heard today, we are secure at the 70% level for this year. For the next year, we have already pre-purchased approximately 50% for the overall group at a favorable price. From the days of you, a very favorable price for sure. And what we see is that the electricity price is coming down slightly for the next year and we expect definitely lower prices, lower marketing prices as well. So we have had first discussions with our customers as you have already seen in our P&L. We have been successful to increase the prices and price increase round is going on. Our customers are definitely receptive for that and we think that we will have higher prices and compensation for this higher raw material prices for the next year. So this is the issue on electricity prices of CO2 topic was the second thing. So we do not really need CO2 certificates only on one side. This is the Swedish side. We have already purchased CO2 certificates for this side, and we are fully filed, I think, for the next few years. And therefore, we don't see direct effects of CO2 within our P&L here.

Okay.

Thank you.

Ladies and gentlemen, as a reminder, if you would like to ask a question, please press 0 and 1 on your telephone keypad now. And the next question is from . Your line is now open. Please go ahead.

Hi, everybody. Thanks for having the opportunity to ask some questions. First would be on knee trials and the capacity expansion. Where are you now in your target and are there going to be further CAPEX in the knee trials area?

I'm not clear on the background of the question when you say, where are you on your targets? I mean, we have expanded capacity. And we have already high utilization of the capacity. It's not completely full yet. And at the time being, we do not consider any additional expansion of neutral capacities.

Okay.

That was the question.

That was the question, exactly. Thank you. And on CREA pool, you mentioned that the capacity extension is on track. When do you expect to reach the expected capacity?

Yeah, so we try to have the commission of the plant between quarter two and quarter three next year. So we have already purchased all the material which is used to build up the plant. So the delivery dates are actually on time and therefore we feel confident that we can commission a plant in the next year, quarter two, quarter three, between these dates, I think.

And just to add, we do everything possible to advance the commissioning because the market is waiting for that expansion and if it means that we need to spend a little higher expense to get the plant commissioned earlier, we are doing this because it's a good opportunity for us and we are just waiting for being able to supply to the market.

We are fully sold off of creatine and we can sell every kilo at the end of the day actually. And big customers are really waiting, and we are in the position to sell creatine already for the next two to three years, and to get a long-term contract for creatine as well. So the situation is really, really good, actually, for us.

Congratulations. And a final question on Aminex. You mentioned that the market, the product launch has been reached. Maybe you could give us an indication how it was, how is it going right now? And especially I would like to know what is the incentive for a farmer to buy this product?

Actually, you almost answered your question yourself because that is the real question. What is the incentive? When we look at Eminex, it saves quite a lot of methane emissions from liquid manure storage. This has been defined as one of the biggest targets of methane reduction within the EU, the recent summit. So we think we are very right on timing with it. On the other side, we also are aware that the farmers need assistance, potentially subsidies to really absorb MNX. However, the methane reduction is not the only advantage of MNX. It also reduces the space requirements for liquid manure. It also, we have proven that in real examples increases the yield in certain crops since fertilizer is more readily available. And as a consequence, we have been, we have started selling MNX and it is received in the market over and above of what we had initially expected because even farmers are buying the material at the prices at which we asked for without a compensation for their expenses. So apparently there is a need for the product and people would like to try it.

I get it. So the increase in the yield is right now the driver for you, assuming that the farmer will not spend money for saving the climate.

Correct. I mean, as I said, it's not just increasing yields, it's also easier handling of manure. So it has a couple of advantages for farmers, which will most likely not fully pay for the increased price, but it makes it easier for people to get advantage and at least try to see how it works.

But additionally, we are in a discussion with some farmers and a group of farmers. They are very close to the topic of sustainability, and they want to use and they plan to use this product as well on a on their own decision because they want to be really sustainable and they use this as an advertising argument as well. But at the end of the day, the success is dependent on the compensation for the farmers. Is this the compensation of some state's payment or something like that? I don't know, but we are in deep discussion with the authorities, and we think that this compensation will come.

Very good. Okay. Thank you very much. Yeah.

And there are currently no further questions. So as a final reminder, if you would like to ask a question, please press 0 and 1 on the telephone keypad now. And we haven't received any further questions at this point. So I hand back to the speakers for closing remarks.

Okay, thank you for your questions here. We can now offer you the opportunity to visit us again virtually or in person at the conferences as shown above here. We are pleased to invite you to this event. If you are interested, you should register quickly as we are already pretty well So otherwise, we will be back with year-end information on February 24th next year. We have revised the year-end process and will report significantly earlier. And should we not see each other by then, stay safe and sound. Stay in our good graces and thank you and goodbye.

Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.