Alzchem Group Ag

The floor will be open for upcoming questions following the presentation. We are looking forward to the presentation, and with this, I hand over to you, Mr. Niedermeyer.

Yes, thank you for your short introduction, and thank you for joining us today, and welcome to our first call. This year, as always, we will go through the presentation first, and then we'll be available for questions at the end. Therefore, let's start directly with the presentation and with the highlights here. So we have started the year 2024 quite successfully. In the first quarter this year, we achieved a group turnover of approximately €150 million roughly at the previous year's level. Thanks to our consistent focus on high margin niche products in the specialty chemical segment, we have been able to seamlessly continue the strong performance of the 2023 financial year. The areas of human nutrition with CreaPure, animal nutrition with CreaMino, and defense with NitroGranidine continued to develop particularly well. On the other hand, the business in the custom manufacturing with our multipurpose business and multipurpose plants and nitrites business remained really challenging due to the ongoing strong price-driven competition from China. So overall, the growth segment specialty chemicals was able to convince and successfully compensate for the declining sales development in basis and intermediate segment. And our group EBTA increased significantly by around 32% to approximately 25 or 24.9 million euros in the first quarter of 2024. The free cash flow was very positive due to the operational performance and lower inventories and the analysis will be done later on by Andreas. So at the same time as the very good performance in the operating business, the price of the Altscam share also developed very positively in the first quarter with a significant increase in value with our broad diversification strategy. of products and our high innovation power, we are able to grow steadily, especially with the specialty chemicals here. And for this reason, we also see ourselves in a position to confirm our outlook for 2024, especially for EBTA. So as a special highlight, there is still the investment grant from the other project to report. So on the next slide, I would like to start in our production tree with our product Dicendimide, a versatile intermediate for various markets, including the pharmaceutical industry. So you can see that here. DCD itself is used as the most important raw material for the production of metformin, for example. Metformin is the largest and fastest growing drug. for type 2 diabetes, and we are the only European raw material supplier for that product. So from DCD, we produce very interesting products, such as diehards, the hardeners and accelerators in power paste and liquid form for epoxy resins, products such as wind turbines, bicycle frames, plastic springs, tennis rackets, and even hydrogen cylinders are also part of the application spectrum here. Our guanidine salts, highlighted by the magnifying glass, are often used as modern fuel for gas generators in airbags for your protection and are considered very safe to handle and durable. Highest quality comes from the only Western resource and the only Western manufacturer with us from our company from Alskam. So guanidine salts, especially nitro guanidine, are also used in agrochemicals such as insecticides in the neonicotinoid group of active ingredients here. A third application for nitrogranidine is defense in the context of 155-millimeter ammunition with three bases. Currently, we supply one of the three bases, which is called our product nitrogranidine, to all known Western ammunition manufacturers. The advantage of the modern fuel nitrogen is their high stability during storage. It burns cool, and it produces a high gas volume in the short term. So, that are the same features and advantages as in the airbag application. So, how does this relate to the other project, the EU funding? Last year, the Act in Support of Ammunition Production Project, or short ASAP project, was launched by the EU Commission. This project, with a total tender volume of 500 million euros, is about measures to urgently strengthen the capacities in the EU defence industry in ammunition production. A key goal of this project is the EU level, is the identification of bottlenecks in supply chains. And our Altschem group was granted an investment grant of 34.4 million euros in principle after applying in December 2023 on March now 15th in 2024. The final allocation with the respective call-off plan will take place with the conclusion of a corresponding funding agreement probably still in May or in June this year. So we want to use the funds to increase the bottleneck production capacity of nitroguanidine on the one hand and to renew and expand the existing plans for the production of the precursor of guanidine nitrate on the other hand. What are the financial details? The capex volume will be around 75 million euros over two and a half years. The main expenses will then be in court In 2025 and 2026, the investment grant is deducted tax-neutrally directly from the acquisition costs. And as early as 2025, the first quality increases of nitroglycerin from the bottlenecking project will be available and will be sold to the market. So, so much for these topics. Now, let's take another look at the segments and their contributions to the result. Therefore, I would like to hand over to the floor to Dr. Georg Weichsel-Baumer now.

Georg Weichsel- Thank you, Andreas. The basics and intermediate segment concluded the reporting period with sales amounting to approximately 15 million euros. Compared to the previous year's level, this represents a decline by 8 million euros or 14 percent. The situation within this segment in Q1 is generally different compared to the first three months of last year. While cost-related price increases led to a rise in sales in the previous year, the development of cost and sales prices has reversed again in the current fiscal year. As shown within the detailed sales analysis, we had to reduce our prices over all products within this segment by approximately 7% compared to last year. These price declines are not intended to keep us with the Chinese or Asian competition, but are the result of various price escalation clauses that are widespread for our products within this segment. Also in this fiscal year, our continued guideline is that volume reductions are consciously accepted if the market does not allow for profitable pricing. We do not see price competition has a sustainable strategy if our competitors work with significantly lower energy and CO2 costs and operate under completely different ESGT conditions than we do. However, we also had to accept volume decreases. The main impact resulted from our nitrates with applications in the pharmaceutical, agrochemical, and basic chemical industry. The competition within this business is currently almost only price-driven And as explained already, Chinese competitors are flooding the market with dumping prices. We work strong with each customer in order to gain back market share with our key arguments, quality, delivery reliability, and made in Bavaria. Sales within our metallurgical business were also slightly below previous year's level. Seasonal competition from Eastern Europe, as well as the general economic condition of European steel producers, were the main cause here. Positive volume developments could be reached within the pharmaceutical sector with the building block Dysine Diamide, as well as in our fertilizer business with our brand Perlcar. The customers are willing to pay a premium for our quality and product specifications. The decline in sales led also to a reduction of segment EVTA. In the first three months of the fiscal year 24, EBITDA amounted to €1.8 million, which is €1 million short to previous year's level. At the same time, EBITDA margin dropped to 3.7%. Even though we could experience some cost reductions for energy compared to the first quarter of 2023, this could not overcompensate the decline in EBITDA based on the volume reductions, especially within the neutralized business. Nevertheless, it is worthwhile to mention that the development within our basics and intermediate segment was generally in line with our expectations, and the segment produced and delivered all raw materials required for the growth of our specialty chemical segment, which I will explain to you now. The specialty chemical segment remains our growth driver and was again able to significantly increase revenue EBITDA and EBITDA margin compared to the previous year's period. Within the first three months of 24, specialty Cambria products reached a sales volume of 93 million euros, which represents an increase of 7 million or 8.4% compared to Q123. This development has increased the segment share of total group sales to 62% after 57% in last year's comparative period. Looking at the segment's detailed sales analysis, we saw an increase in volumes at 7% as well as minor price increases. However, while some business areas within this segment recorded strong volume increases, some areas had to deal with the overall economic situation in the chemical industry and reported volume declines, which were obviously overcompensated by the growth businesses. Most of the product areas within the specialty chemicals have developed as expected. This applies above all and again to the business area of human nutrition and dietary supplements. The demand for our creatine products under the brand names CreaPure, Levadur, and also now CreaVitalis has developed very well again. As we understand there is still growing market potential, we decided again to increase capacity. Especially the market potential for creatine made in Bavaria for use in the food and pharmaceutical industries is promising, and we want to be part of this development. Our sector animal nutrition with the brand Creamino could also grow in volume and sales, but we experience an increased price-intensive competitive situation. However, our global sales network pays off, and we are confident to keep our global market share. As already outlined in our last financial statements, there is an increasing demand for our product nitroglucanidine from the defense sector. The growing importance of applications in the field of military defense has resulted in the further shift in revenues within this product category, moving away from applications in agrochemicals and the automotive industry. Based on the current political circumstances, we believe that this trend will continue. The EU subsidy from ASAP program is just another proof for this development. The products in the pharmaceutical sectors, mainly BioSelect, and in the automotive sector, Diehard, also show a pleasing development. Here, the negative trend from the previous year was reversed. On the other hand, there was a decline in sales in the custom manufacturing of our multipurpose plants. Here we were not able to completely escape the continuing negative development of the chemical industry in Germany. But also here, we are also confident that this business is a chance once the chemical industry recovers. The positive sales development was accompanied by a strong increase in EBITDA and EBITDA margin. EBITDA could be materially increased by €6.7 million to €22.7 million which represents an increase of almost 42% compared to Q1-23. Our ABTA margin reached 24.4% in Q1 after 18.7% within prior year's period. Overall, our specialty chemical segment contributed 91% to our group ABTA after 85% in Q1-23. Let us now move on to our third segment, others and holdings. The revenue in this segment was slightly above the previous year and reached 7.8 million Euro. This development essentially corresponds to passing on of cost increases to the chemical park customers. The services utilized by the chemical park customers of Altschem were predominantly of a variable nature, and represented energy supply, technical services, and network operations. The segment's result was slightly above the previous year's figure, which was associated with an increase in revenue. This was all for our detailed view on the segment development. Let's now hand over to Andreas Loeffler and take a look at the overall group figures.

Okay. Okay. Also, good morning from my side, and thank you, George, for the insights in our segment development in the first quarter of 2024. I will now have a detailed look at our P&L figures first. In terms of sales, we started very well into the year 2024, and most importantly, we started as expected with no surprises. Sales in the first three months of 2024 amounted to 150 million euros, and this almost exactly represents the sales figure from last year. However, and as described already by my colleagues, the segments contributed differently to this sales development. While sales in our growth segment specialty chemicals could be increased by €7 million compared to the previous year, the basics and intermediate segment recorded a revenue decline of €8 million. In the other and holding segment, a slight revenue decline increase of half a million euro was achieved. A closer look at our sales analysis.

I'm sorry for interrupting, but it seems that we cannot hear you anymore. Could you please check? Maybe you have unmuted yourself.

No, there is something in the line. Can you hear us again?

Yes, now we can hear you well again.

But you can't see the presentation, I guess.

Yes, the presentation did also...

Yeah, so I think there was a short interruption in whatever. So we tried to restart the presentation.

Sure, no worries.

Hold on a second, please.

Recording stopped.

So hopefully you should see the presentation again.

Yes, we can see the presentation again.

Recording in progress.

Yeah, sorry for that short interruption, but there must be a mistake in the line or in the Internet. Yeah. So I think, Andreas, you should start your analysis again. Yeah. Yeah.

I think I don't know when the interruption happened. Yeah. how long you could hear me, so I will start again, taking into account that maybe something is told twice. We start with our sales analysis. In terms of sales, we started very well into the year 24, and most importantly, we started as expected with no surprises. Sales in the first three months of 24 amounted to 150 million euro, and this almost exactly represents the sales figures from last year. However, and as described already by my colleagues, the segments contributed differently to this sales development. While sales in our growth segment specialty chemicals could be increased by 7 million euro compared to the previous year, the basics and intermediate segment recorded a revenue decline of 8 million euro. In the other end holding segment, a slight revenue increase of half a million euro was achieved. A closer look at our sales analysis shows that group-wide volume increases of approximately 2% were offset by price reductions at the same level. Regarding the price declines, it should be noted that the previous period was still characterized by the very high energy and raw material prices of that time, which kept prices very high. On a regional basis and compared to the previous period, the revenue shift into our specialty chemical segment also led to higher revenues in Asia and South America, while European sales dropped slightly. Our EBITDA developed very well in the first quarter of 2024 and was also in line with our expectations. As already experienced within the last quarter of 2023, the higher revenue portion of products and specialty chemicals is associated with an increase in EBITDA. Overall, EBITDA improved materially by €6 million This represents 32% more EBITDA than last year in Q1. We have improved EBITDA not only in absolute terms, but could also materially improve our EBITDA margin from 12.6% in last year to 16.6% in Q1 2024. This development is mainly caused by reduced costs for energy, which was still high, which was still on a high level in the first quarter of last year, and our ongoing strategy not to compete in business areas with negative margin impacts. The increase in EBITDA as well as reduced financing costs also led to an increase in net result and earnings per share. Our net results ended up at €12.2 million after €7.7 million last year, and earnings per share could be increased by €1.20 per share last representing an increase of almost 60%. That was the big picture of our P&L. Now let's move to the balance sheet. Our total assets increased by 23 million euro to almost 448 million euro, which was mainly driven by the developments in current assets, which I will now explain in more detail. While our fixed assets are basically at the same level of last year's reporting date, Deferred tax assets decreased by 1.5 million euro because of changes in interest rates used for the calculation of non-current provision. On the other hand, our current assets have developed contrary and have increased overall by approximately 25 million euro. This was driven by three major impacts within working capital. Firstly, inventories could be reduced significantly compared to last year as a combination of volume and price declines. Secondly, trade receivables increased based on the strong revenue we made in the first quarter of this year. And thirdly, the highest impact came from our strong cash development, leading to an increase in cash amounting to 24 million euros. Our equity increased by 15 million euro to 179 million euro, which also led to an increase in the equity ratio to 40% by the end of March 2024. Again, equity was increased by our strong net result, but also by the development of interest rates for pension obligations, which contributed approximately 3.5 million euro to our equity increase. On the other hand, the interest rate fluctuation from 3.2% to 3.5% led to a reduction of our pension obligation by 5.5 million euro. Our non-current liabilities increased mainly because of our strong business activities. That's it for the balance sheet analysis, and let us now have some words about our cash flow. As already mentioned, cash developed very well and healthy in the first months of 2024, and so we can report an overall increase in cash of 24 million euro since end of December of last year. Our strong net result in combination with a very close look at our working capital management led to an operating cash flow of 33.5 million euro, which represents an increase of 23 million euro compared to last year's first quarter. We invested approximately €7 million within Q1 2024, and this is €2 million above previous year's level. It needs to be remembered that we had a very cautious investment policy within the last year. Our major projects within the first three months of 2024 were capacity expansions in creatine and nitroguanidine, infrastructure renewals, and the construction of a photovoltaic plant at our Trostberg site. Financing cash flow was mainly impacted by scheduled repayments of bank loans. In Q1 2024, we were neither required to use our short-term financing nor our factoring lines. It was basically the other way. We were able to invest some excess cash and earn interest on that. That's all for our figures in Q1 2024, and we will now have a closer look at our outlook for 2024. From today's perspective, we can confirm the outlook given in our last financial statements, and the developments in Q1 2024 have confirmed our estimates. Sales are expected to grow to approximately €570 million, and EBITDA is expected to grow to approximately €90 million. The planned sales growth shall continue to be achieved organically. The fundamental growth drivers are volume effects within segment specialty chemicals, which shall overcompensate a sales decline in segment basic and intermediates. Further growth in the specialty chemical segment shall be achieved through volume increases in the products Creapure, Creamino, as well as Nitroguanidine. The sales development in segment basic and intermediates will mostly be influenced by price formulas, with stable volume developments. Based on a stable cost structure at the current level and the growing importance of segment specialty chemicals for the whole group, we expect this segment to be the growth driver with main impact on a growing EBTA, leading to an expected EBTA margin of approximately 16%. So, that's it from our side with the information for the first quarter of 2024 and the outlook for the remaining nine months of the year. At this point, we would like to thank you for your appreciated attention and are now at your disposal for possible questions.

Thank you very much, first of all, for your presentation. Coming now to the Q&A session, you can either place your questions in the chat box or alternatively by audio line. Please note that we can only accept the questions by audio line if you have dialed in with your real name. You can change the name with clicking on the click on your name with the right mouse click and then change it. If you have dialed in by a phone, please press the star key followed by number nine and then the star key followed by number six. We will start with the first questions from Oliver Schwarz. Please go ahead.

So good morning, ladies and gentlemen. Thank you so much for taking my questions. I hope the connection is well and you can hear me okay. First of all, congrats on the spectacular start into Q1 2024. Well done. However, I've got some questions, especially regarding the expansion or the plant expansion of the nitro-guanidine guanidine salt business that you have. First of all, Ms. Anita may stress that those products are still used in agriculture, especially for the production of neonicotinoids. Those products, the neonicotinoids, have been banned in Europe and all The exceptions that were in place last year have been scrapped after the EU put the reins on that as well. So I was wondering how much of your production still goes into neonicotinoids. Secondly, if you could highlight perhaps percentage-wise, in regard to specialty chemicals, how much of specialty chemical sales in 2023 or Q1 2024 was actually related to those nitroguanidine and guanidine salts? That would be my second question. And the third one, judging from the overall capex of 75 million euros that you highlighted for the next two and a half years in that regard. Obviously, this capacity expansion will provide you means to notch up your sales with those products quite substantially. As those doesn't seem to be, let's say, greenfield expansion, but are rather brownfield expansions or expansions of existing facilities, Could you give us a ballpark of how much additional sales are to be expected from that expansion? I would assume, given the size, perhaps 75% or 100% of the capex or so of the 75 million a year in sales, would that be a fair assumption, that ballpark region, or is that too high or too low? That would be my first round of questions. Thank you very much.

Yeah, hello, Oliver. Thank you for the congratulations. We always think that very nice and are likely to have that available for sure. So to answer your last question, so usually you're right. In the chemical industry, if you invest approximately 100 million, then you can receive 100 million turnover. That's a good thumb figure, but in that case, it's a little different because the main portion of that 75 million is a renewal of the existing plants for the precursor of the nitroguanidine, the guanidine nitrate. So that's more to secure the delivery and the supply chains. So from that point of view, the additional turnover is much lower. So there is an incremental increase planned for the nitrogranidine plant for sure that could be available with the beginning or in the second or latest third quarter in 2025. But, therefore, we are talking about minor figures. So roughly, I guess, 5 to 10 million additional turnover approximately. But we think a big up. So as already reported, we think about hopping over to U.S. We think about investing additional capacities for nitrogen. So there is nothing to disclose at this stage, but we think that the next step could be an additional capacity increase for the downstream products. And from that point of view, I hope that we can disclose that information during that year. We work hard on the decisions. We work hard on the investment projects. And from that point of view, we can't disclose more at this stage. So you asked NQ for neonicotinoids. Yes, they are banned in Europe for sure. They are banned, I think, since 2013 or since 2014, something like that. But we always had a good business with neonics because what you have to take into consideration, Europe is not the world. So the world takes neonicotinoids very seriously, and they need the neonics, and the growth of the neonicotinoids is not as bad. So there was always and there is always a good growth rate behind that, and we had a good business. But with the new situation, we changed ourselves from the neonicotinoids away and, yeah, are doing more defense business now. We reduced the neonics business a lot. only to step or to stay in that business and to have all the market information in the future available. But for sure, we sell the main nitrogen now into the defense business. So the nitrogen, to be honest, in the last years was very low for defense business. But now it's remarkable because all the neonicotinoid business switched to the defense business more or less. And from that point of view, you will see that already in the P&L, I guess, with a share of 5% or more in sales, but not more. So from that point of view, the creatine growth is significant. at least as important as the nitrogranidine because we added a big quantity into the creatine plant. So we added capex all the last years, as you remember, and we have completely sold out from that point of view. We added or we tried to add additional capacities for creatine as well. So the growth is ongoing here because of the high quality and the well-known product out of Germany. So we are the single producer here out of Germany, out of the Western world. Nobody can produce creatine on itself, on the raw materials, instead of Alskam. So from that point of view, that's the main growth driver as well for our group.

Very clear. Thank you very much. I'll step back into the line. Yeah.

Thank you for your questions, Mr. Schwarz. We will now continue with the questions from Peter Thilo-Hassler. Please go ahead.

Yes. Hi, everybody. Thanks for having me ask some questions. First, I would like to ask also just to confirm what I just heard. So you expect from the investments of 75 million an additional turnover of nitrogen from about 5 to 10 million. Is that what I heard?

Yes, right. For that stage, yes. But as already disclosed, we think bigger and we think that we can add in the future some nitrogen quantities as well, but we are not prepared to disclose more about that project in that stage.

And since the defense ministries are desperate to get hold of nitrogen, I expect this to be a high-margin business for you.

Yeah, as you have seen, Yeah, as you have seen, the margin within the specialty chemicals is not as bad, so it's 20 plus. But that's the part for all of the products in that product group. So only two parts of that product group are missing, actually, that EBITDA margin as disclosed from George. So the multipurpose plant and the neutral plant is more on break-even or sometimes loss-making, actually. And from that point of view, we think that could be a chance for the future as well and adding additional growth and additional EBITDA probably next year when chemical industry regains back and are in better shape.

So if I look at the specialty chemical segment and we have a price increase in the first quarter of 1.5%, And then if you look at sales in EBITDA in absolute figures, so this was a $7 million increase in sales and also a $7 million increase in EBITDA. So I suppose that these additional sales were not 100% margin. There must have been a change in the product mix here too. So is this the segment that you just mentioned that lost of importance in the first quarter?

Yeah, yeah.

Yeah, that's the case. Okay. Then I have a question on the cost of materials ratio. The materials ratio fell significantly in the first quarter, also against the backdrop of the reduction in the inventories. Can we assume that the effect of the inventory reduction will be at least diminished in the coming quarters?

No, as already outlined, In our forecast, we expect inventory increase during the year. We will probably see the peak in inventories in autumn. This is because we are running right now with two furnitures to produce carbide. And as we already mentioned, we try to use the cheaper energy months to increase our inventory stock. And then after autumn, when we probably in Q4, when we probably shut down the second furnace again, then we will see an inventory decline by the end of the year. And we expect inventory probably at the same level as last year's reporting date.

I see. Okay. Thank you very much. And congratulations to this start of the year. This was really spectacular, as Oliver said. Yes, thank you.

Thanks. Thank you for your questions, Mr. Hartler. We now take the questions from Duarte Muata. Please go ahead.

Hello. Thank you for the presentation, and congratulations on a very strong quarter. I have a few questions. Maybe we could start on specialty chemicals. As a percentage of EBITDA, this increased from about 85% to 91% of group EBITDA in Q1. Taking into account your visibility for full year, What do you expect this split to be for the entirety of 2024? And what is your long-term target in regards to specialty chemicals as a share of ABTA?

Yeah, as we already signed out, as we already mentioned, we see the development in the first quarter and also the development in the last quarter of 2023 as a good prediction of EBITDA share for specialty chemicals for the whole group, for 2024, for the whole year consideration as well. So keep it stable would be a good assumption.

And in regards to long-term target, do you have any idea on that, where you would like to get started?

Usually, I mean, that's a good situation right now, and we would be happy to keep the situation stable as we see that this EBTA portion pays off. But nevertheless, we are also happy to increase the EBTA in specialty chemicals in basic and intermediate segment as well. So right now, we feel very good with this share of specialty chemicals, but if If basic and intermediate increases and PTA overall increases as well, we are also happy.

Thank you. And since you touched on basics and intermediates, what's your expected PTA margin for 2024? I think you mentioned we should expect a decline versus last year. Do you have any idea where this might land for the year?

So probably it will be a good assumption to keep that stable like in the first quarter. But to be honest, we work quite hard to increase the EBITDA margin in that segment as well. So as already mentioned, the neutralized business is facing a very bad market situation. and loss-making, actually, or close to break-even, hopefully by the end of the year. If we are in the position to reverse that back, then I see the possibility at least to have 8% to 10% EBITDA margin in the basic and intermediate segment as well. And I think we need that for capital costs and for CapEx reasons to have that level, yeah.

So you mean 8% to 10% in 2024 if you manage to reverse the nitrile situation?

In 2024, that target could not be managed from my point of view, I think. Okay. We can manage that for the next year. In that year, you should more calculate between 1% and 3% or 3.5% EBITDA margin.

Okay. No, that's understood. Thank you. So there was a seasonal effect in this quarter as perhaps operating capacity was still low in Q1 2023. If yes, does this mean that growth in the second half will be more contained from an year-over-year perspective?

So, yeah, that's a very good question. I wanted to inform you about that as well because that was not in the presentation. So we had or we have seen a quite good quarter one. But please be not surprised if the second quarter is not at 150 million turnover. So it could be a little less. And from EBITDA-wise, it could be a little less as well. So the third quarter, we see them more or less on the same level than the second quarter. And what we see is a very strong fourth quarter back. And with that development, we think that we can easily reach the 90 million EBITDA, hopefully a little more and not less. But the second and the third quarter could be a little lower than the very strong first quarter. And please be not surprised about that development.

And just to clarify, you expect a very strong Q4 based on possible reversions in the situation for the markets and markets that are more affected, right?

Yeah, so because of the product range, we sell in the fourth quarter because usually we always have a very strong September or October business, and it depends on when the business comes back out of the holiday season. And from that point of view, for that year, we plan a very strong fourth quarter, more or less on the same level as the first quarter. And from that point of view, if you summarize that, you can take the math and see that the second and the third quarter will come a little lower than the first and the fourth quarter.

Perfect. And last question from my side. Do you have an update on the U.S. investment? And I want to understand the balance with the new neutral warranty investments.

Yeah, I'm very sorry to say that. We are not allowed to say anything about that project in that stage, but hopefully in the next few weeks or months, not years. Nice.

So just to clarify, this Nitro-Gonadin investment was not in last year's business plan, so it carries extra capex, so 35% from the EU, the remaining from your side. And you mentioned possibly, I know you can't disclose, but you managed possibly a second round of investments for actually to run it in increased production. Could this required capex impact any U.S. investment or also could it affect the dividend outlook?

It only goes with capex for sure, but we work quite hard on the financing issues as well, and we will see how we can finance that business. We try to do that with our customers together and to keep the CapEx or the cash quite low, the cash amount for that CapEx volume, but we can't disclose more at this stage. I'm very sorry.

No, absolutely. Thank you very much, and congratulations on what was a very strong course. Yeah, thank you. Thank you.

Thank you for your questions. We continue with the questions from Konstantin Wichert.

Hi, good morning. Also congratulations from my side. Maybe a couple of questions left. First, the clarification regarding the inventory again. Is it right that in the first quarter the inventory reduction was mostly through semi-finished and finished goods or more from the raw materials side? That would be the first Um, and then what would be interesting also, if you could give some more color on what has to change, uh, with regards to the nitrites business to really, uh, also improve your situation, uh, in, in competition with the Asian, uh, competitors. And, uh, maybe also whether the turmoils in the red sea have not led to any positive effect yet. Um, Yeah, and then maybe the last question, or if I may, I would have two more questions. One is regarding the creatine business here. Again, strong demand and growth from CreaPure. You also mentioned CreaVitalis shortly, but maybe you could give some more color also on the development of CreaVitalis and Livadur, maybe both sequentially and also year over year, and also what you expect for the rest of the year. And then the last question would be around what you've said, increased competition in the Criamino business. If you could give some more details here as well, also especially with regards to whether this intensified competition is, in your view, of temporary nature or whether competitors have become more aggressive maybe also over the midterm. Thank you so much.

Okay, thank you, Konstantin, for your decent questions. I will start with the first question regarding the inventory. Coming from end of December last year, we saw an inventory decline in about 10 million euro. And as we already mentioned, half of the decline comes from quantity and the other half comes from pricing impact. If it comes to quantity, you can say that maybe half of it was raw material and finished goods and semi-finished goods, and the other half was finished goods. As we mentioned, we had the second furnace shut down during Q1, during almost Q1, and we reentered production in the second furnace by the end of March. So we needed... to increase our carbide level by the end of the year, last year, and we used our carbide during Q1 in this year. So this was the main impact on the raw materials and semi-finished side. And on the finished goods side, we could also manage to decrease our stock level, especially in the segment specialty chemicals.

Okay. George, do you want to add something to nitrites?

Yeah. When we look at nitrites, I mean, we mentioned already in the presentation the reason for the shortcomings. There is the very hefty competition from China, which is not only the case on our product level, but it has a huge impact on the overall pigments business, whether Chinese manufacturers are take market share away from established companies in Europe. I mean, when you look into the press, you see that one of them, Weibach, which was the previous Clarion business, actually had to report insolvency. What do we do about that? I mean, two things. A, I think there is, like in all the other areas, room for European producers, and we hook up with our customers regularly. to see that we can maximize both ours and their share in the business with taking us in as a raw material supplier. We work hard on that. The second thing is that we have, I think, spoken about that already. We have two or three new products where the current producer actually exited or is exiting the business, will take over that business, and that will – happen not so much this year as we had hoped, but mainly starting in next year. And this will bring up also Nitral's business again, to which level remains to be seen. But despite the fact that it won't be very good this year, we see prospects that we can get it back to profitable business again. The next question was about Clea Vitalis, Livadur. I mean, also there we have mentioned that clear adverse tiles will not make a huge impact in terms of sales and volume this year. But we have quite a few promising developments for end products where it could be in the market already next year. Do not ask for which customers because it's too early to tell, but it is for well-known brands where it will go into the food applications, and we actually are ahead of the schedule which we have set ourselves for Crea Vitalis. Last question was about Crea Mino and competition. I mean... Next topic, same explanation. Everybody, when we look at CREAMINO, the competition comes from China, directly from China on one side, but also we have one European competitor who sources material from China. So there is price competition also. But in the meantime, we have established a very, very good global network and we gain in various regions of the world. So we are balanced and we are well on the way to achieve the volumes for which we have invested into our production blend.

Thank you so much. Just to add on this, so you say you will grow volumes, but you also expect to maintain attractive margins on this. So that has not changed, right? And just a second, Ed, I think either I missed it or could you also say something on the development of Libadur? Thank you.

Yeah, Libadur, sorry that I have not mentioned it. I mean, Libadur is a product which very much supports our whole story because it allows us, to get the news out into the market about the things which creatine can do. We are working very hard to go directly to Libertour and how it develops. We are working very hard with practitioners and physical therapists Because the ad really can help. Because if you want to get sales in that area, you need to hit pain points. And I think the pain points which we have hit is people who have problems with their muscles, who have to recover from injury. And that could be a very promising area in order to expand the lever-doer. That application is not very well organized. So we have to go into the business one by one, step by step, approaching very different touch points. We are on that. We've actually intensified the staffing for Livadur because it will take some resources to do it, but we are still certain that it will pay off, not just for Livadur, but also for overall Crea team.

So, but to be honest, the main business is Crea Pure, and that's developing quite well. Livadur is more... a developing case, more a market case, more a learning case, more a feedback case to get the direct feedback from the Creatine users. And that's good to learn. And we are doing some advertising via Instagram and something like that. You can find us there. So from that point of view, it's a learning case for us. But the main case where we earn our money back is CREAP here in the sports and fishing market.

Thanks. And again, clarification on Creamino. So margin-wise, nothing has changed as well. Is that right?

No, nothing has changed. Okay, thanks. It still has.

All right. Thank you very much for your questions, Mr. Richard. For now, we have one final follow-up question left in the queue from Mr. Schwarz. Please go ahead.

I'm sorry to say it's more than one question. I hope you can bear with me.

Sure, please go ahead.

Okay, it's not more than two pages, I promise. Firstly, just a clarification point. You stated that nitroguanidine salts, nitroguanidine is approximately perhaps 5% of sales. Just to specify, is that specialty chemical sales or is that group sales? For sure specialty chemicals.

Okay. Group sales basis. Sorry. It was on the basis of the group sales, but it's incorporated on specialty chemicals.

Yeah, right. Okay. Okay. So we are on the same page here. Okay. In addition, are there any caveats connected to the investment grant that you receive out there? And let's say milestones that you need to achieve that could become a bit tricky if things don't work out the way you expect them to do. Is there anything that could... let's say come in the way between you and receiving the full amount of, of these, uh, this investment grant. That would be my second question. And, um, perhaps, uh, to finalize that, uh, that theme here, when, when you said that you shifted most of your sales from neonicotinoids and also from airbags to the defense sector for obvious reasons, um, I just wonder who stepped in and because as far as I know, and as you said, neonicotinoids are still sold outside Europe and also new cars still come with airbags. So who's basically providing that product now? Who has taken over your market share when you decided to proactively step out of those markets? And is there any, let's say, reasoning why you should be able to get back that market share if you decide to, let's say, took a closer look on that market. Again, probably with the expansion of production capacity in tune with your investments or planned investments in North America.

So first step to be precise, we didn't and we haven't stepped out of the market for airbags for sure. So the airbag market is very interesting and we deliver to the airbag market. We only shifted capacities away from the neonics and therefore I think George is prepared to inform you more about the market development of neonics.

I'm in It was mentioned before that the neonics are banned in Europe, but when you look at the volumes which are sold into the neonicotinoid market and have been sold, Europe was not really or didn't really make an impact. I mean, the main market for neonicotinoids is North America, but even more South America and spreading also to Southeast Asia. The end products actually more and more and increasingly come from China, And with the end products, also the nitrogen guanidine, which is required for the production comes from China. And to give you some ideas about capacities for nitrogen guanidine, with our current capacity, we have 10, 15% of the production capacity for nitrogen guanidine in the world. I mean, the most of it comes from China and also here in the neon mix market, We play the same game as we do with the nitriles, as we do with Criamina. We are the reliable Western supplier, which our customers need. And that has kept us in nitrogen guanidine. And now we are reducing that share into the nitrogen guanidine. But as Andreas mentioned, we will never exit nitrogen guanidine for neonicotinoids customers. Because if you exit, you're out. You're not in touch with the market anymore. We do not make that mistake. We will stay in that market. And it is certain that as the nitrogen demand for defense purposes goes up, sooner or later it will go down again. And then we want to make certain that we are present and take our market share again and get our liquidity rates again.

So there was one question about the ASAP grant, but can you elaborate a little bit on the question again? Sorry.

Yeah, I was basically just wondering, as you said, that the Chinese competitors took the market share, and I was wondering if you really decide to – perform a major increase in production capacity of nitro-guanidine salts and nitro-guanidine in the wake of your U.S. project, whether you'll be able to tap into, let's say, nicotine-needs markets once again and also in airbag markets, obviously markets that you didn't decide to leave completely, which I'm pleased to hear. But nevertheless, I guess a lot of that comes down to the price points that your Chinese competitors are able and willing to give to the respective customers. So is your thinking when it comes to NitroQ and Nadine basically ride the wave of defense spending? Because even, let's say, if the Ukrainian... crisis or situation resolves tomorrow. I don't think so, but nevertheless, I think we are still in a phase of rearmament from a NATO perspective because there are more problems out there than in hyphens here, just Russia invading Ukraine and So there might be, even in the long term, more demand, more structural demand for nitrogen guanidine and guanidine salts from the defense sector overall that could last well over 10 years from now because the lead times there are nothing to trifle with.

Oliver, when I read the newspaper – So everybody is asking about 155-millimeter munition. Alskam is the single producer in the Western world of nitroglenadine, and nitroglenadine is used in the triple-based 155-millimeter munition. And from our point of view, that munition will be produced for the next five to ten years. And from that point of view, there must be demand out there. And, yeah, so I can't disclose more. about the project details, but I think the main growth will come from the 155 use and not from the neonics. But the neonics, we will stay in that market. We are in good mood with our customers. We are in good relationship with them. And we are, at the end of the day, we would be prepared to deliver them more quantities if they ask for more, for sure.

Very well. As I seem to be the last one in the queue, I'll press my luck and go for an additional question. However, I guess to your relief, it's more related to Korea Pua and Korea Mino. As your plants or your production capacity at the moment seems to be sold out at least until the end of this year, and you're speaking about increased competition from China nevertheless, might it be fair to assume that due to those products are increasingly taken up by existing and also by new markets, that it's also a bit of, let's say, a push-pull situation that because you weren't able to satisfy the full customer need here in Europe with your product, due to capacity restraints, that those customers might have been forced to turn and go for products from their Chinese competition as well, despite this competition not being as reliable and maybe not as high quality as your product is.

Hopefully not. So we try to fulfill all customer demands. We invested a lot in the past, and we are in the middle of the CapEx additional process for creatine. So from that point of view, we can grow with the customer demand from our point of view. So there should be no real demand out there from our customer which couldn't be fulfilled from AltScan. So if there is any demand, we try to fulfill that, actually. And we are adding capacity, and from that point of view, next year we will see a good growth in creatine as well, as we will see in that year.

Yeah, I guess I catch your drift. Thanks for that. Just a quick one that just sprung to my mind. I think you already answered that, but I'm not sure because I can't recall. The Red Sea gas situation, has that had any impact on the population? let's say, the competitive pressure from your Chinese competition? Or is there, let's say, or has there been some relief in Q1? Or is there some coming in Q2 or Q3 from your point of view? Or is that just a situation that happened but didn't really have an impact on your specific markets?

It takes a little bit longer until it arrives. It's a little bit more expensive when it arrives. But goods are there, so very little impact.

Thank you very much for that.

There is moral support for our business because we are the reliable resource of Europe. And from that point of view, that helps the business more than it hurts the business.

Very clear. Thank you. That's about it for my questions. Thank you very much for your time and, yeah, your elaborations.

Yeah. So there is one question in the chat available here. I read that again. You said that 75 million investment is mainly for increasing guanidine nitrate production. By which factor does it increase capacity versus the status quo? So what I said is that 75 million is more for the precursor of the guanidine nitrate production. So We will see only an incremental increase for guanidine nitrate production. We will see a big increase in the precursor guanidine salts. And the 75 million is more for the precursor of nitroguanidine than for nitroguanidine itself.

Yeah.

And we just received a follow-up question regarding that topic. And for the precursor, what factor is it?

So, actually, we are thinking to replace more or less the precursor's capacity because that was and that is a very old plant. And we are thinking about doubling the capacities, but we are not decided, actually. Okay.

All right. Thank you very much. As we did not receive any further questions in the meantime, we are coming to the end of this earnings call. Again, thank you very much for taking the time and also all your questions. And I hand over to Mr. Niedermeyer for some final remarks before closing.

Yes, thank you for the questions. Thank you for the one hour and a quarter. we can now offer you the opportunity to visit us again, for sure, virtually or in person at the conferences. I think the next conference will be in 14 days in Frankfurt. And otherwise, we will back with quarter two information on August 1st or at the annual general meeting next week on Tuesday, I think. Yeah, on Tuesday. So should we not see each other by then, stay safe and stay sound. Stay in our good graces and goodbye. Thank you.