Basf Se S/Adr

Good morning, ladies and gentlemen. On behalf of BRZEF, I would like to welcome you to our conference call on the first quarter 2024 results. Throughout today's recorded presentation, all participants will be in listen-only mode. The presentation will be followed by a question and answer session. If you have any difficulties hearing the conference, please press the star key followed by zero on your telephone for operator assistance. This presentation contains forward-looking statements. These statements are based on current estimates and projections of the Board of Executive Directors and currently available information. Forward-looking statements are not guarantees of the future developments and results outlined therein. These are dependent on a number of factors. They involve various risks and uncertainties, and they are based on assumptions that may not prove to be accurate. Such risk factors include those discussed in Opportunities and Risks of the BRSF Report 2023. BRSF does not assume any obligation to update the forward-looking statements contained in this presentation above and beyond the legal requirements. With me on this early morning call today are Martin Kudermüller, Chairman of the Board of Executive Directors, and Dirk Elvermann, Chief Financial Officer. Please be aware that we have already posted the speech on our website at brsf.com slash Q1 2024. Now I would like to hand over to Martin Brudermüller.

Good morning, ladies and gentlemen. Sirk Elbermann and I welcome you to our analyst conference call. Today we will provide you with details regarding our business development in the first quarter of 2024. Let's start with the development of chemical production by region. Based on the currently available data, global chemical production grew by 5.4% in Q1 2024 compared with the prior year quarter on account of a strong growth in China. As in previous quarters, the growth in China was driven by recovering domestic demand and exports. However, this volume growth in China was still associated with low sales prices and is influenced by positive base effects. In North America, chemical production was essentially flat, while in the European Union, production increased slightly compared with the week prior year quarter, and in Asia, excluding China, production decreased slightly. To sum up, the volume recovery continued, but slowly this trend is also seen in a sequential comparison as volumes increased slightly in Q1 2024 compared with Q4 2023. Still, we cannot yet confirm a fundamental turnaround in industry dynamics. For this, we will need to see the current positive trend continuing in the coming quarters. We now move on to BASF's performance in the first quarter of 2024 compared with the prior year quarter. Overall, BASF group sales were 12% lower at 17.6 billion euros. This was mainly due to lower sales prices, which declined across almost all segments. Prices predominantly decreased on account of lower raw material prices. In agricultural solutions, we were able to slightly increase prices. Currency headwinds dampened sales in all divisions. Volumes of the ESF group increased by 0.5%. Excluding precious and base metals, volume increased by 2.1% compared with the prior year quarter. In terms of earnings development, we had a solid start to the year. EBITDA before special items amounted to 2.7 billion euros. This is slightly below the figure of the prior year quarter and slightly ahead of analyst consensus. Higher earnings in the nutrition care, materials, industrial solutions, and chemical segments more than compensated for the decline in other agricultural solutions and service technologies. Let's take a closer look at the volume development by segment. Volumes in the chemicals, materials, nutrition care, and industrial solution segments increased, while agricultural solutions and service technology recorded a decline. Higher volumes in our upstream businesses led to improved utilization rates at our major plants and positively impacted profitability. Excluding precious and base metals, The service technology segment recorded a volume decline of only 0.9% on account of the catalyst division. Volumes in the coatings division increased. In agricultural solutions, volume declined mainly to lower sales of herbicides and fungicides compared with the record prior year quarter. And with that, I hand over to Dirk for more financial information.

Thank you, Martin. Good morning, ladies and gentlemen. I will now provide you with further financial details for the first quarter of 2024 compared with the prior year quarter. As Martin already mentioned, EBITDA before special items decreased by 5% and amounted to 2.7 billion euros. EBIT before special items declined by 9% and came in at 1.8 billion euros. Net income declined by 12% to 1.4 billion euros. In Q1 2024, the tax rate was 20% compared with 17% in the prior year quarter. ESF cash flows from operating activities improved by 49% to minus 513 million euros, and free cash flow was minus 1.5 billion euros compared with minus 1.9 billion euros in Q1 2023. I will comment on the cash flow development in more detail on one of the next slides. BASF's equity ratio remained very solid. It amounted to 47.2% at the end of March 2024. Now let's take a look at the development of EBITDA B4 special items by segment compared with the prior year quarter. BASF's group earnings performance was driven in particular by the significant decline in earnings in other segments. which was primarily attributable to higher bonus provisions as well as high expenses from the long-term incentive program and lower contributions from DSF internal insurance companies. Agricultural solutions and surface technologies also recorded a decline in ABDA before special items. In agricultural solutions, this was mainly due to lower volumes. The decline in earnings in the surface technology segment was due to lower precious metal prices in the catalyst division. This was partially offset by the increase in earnings in the coatings division. All other segments, nutrition and care, materials, industrial solutions, and chemicals, increased ABDA before special items, in some cases significantly, mainly due to fixed cost reductions and higher contribution margins, predominantly driven by higher volumes. For detailed explanation of the earnings development by segment, please refer to BSS quarterly statement Q1 2024 published this morning. I will now continue with more details of our cash flow development. In the first quarter of 2024, cash flows from operating activities improved by 502 million euros to minus 530 million euros. Changes in net working capital led to a cash outflow of 3.2 billion euros compared with the cash outflow of €3.6 billion in the prior year quarter. This positive development was due to lower payments from declining accounts payable. Changes in inventories were almost stable. Overall, this once again demonstrates a strong focus on inventory management and cash generation. Compared with the prior year quarter, payments made for property, plant and equipment and intangible assets rose by 9% to €943 million. This increased was mainly attributable to the construction of our new plant site in South China. In Q1 2024, the free cash flow improved by 426 million euros to minus 1.5 billion euros. Typically, DSL's free cash flow is negative in Q1 and recovers in the course of the year. This is mainly due to the seasonality of the cash flows from operating activities in our agricultural solution business. Let's now turn to our balance sheet at the end of March 2024 compared with year-end 2023. Total assets amounted to €81.7 billion. This is an increase of €4.3 billion, mostly on account of higher current assets, which increased by €3.4 billion. This increase is mainly attributable to the previously mentioned seasonality of our businesses, particularly in the agricultural solutions segment, which resulted in higher trade accounts receivable compared with year-end 2023. Higher additions to property, plant, and equipment were the main driver for the slight increase in non-current assets compared with year-end 2023. That increased to 18.2 billion euros at the end of March 2024, compared with 16.6 billion euros at the end of December 2023. At 47.2%, our equity ratio at the end of March 24 was at the same level as our year-end 2023. And with that, back to you, Martin.

Thank you, Dirk. Now I will conclude with the outlook. The ESS outlook for 2024 and the underlying assumptions remain unchanged. As published in the BSF report 2023, we expect ESS Group's EBITDA before special items to rise to between €8.0 billion and €8.6 billion in 2024. Our forecast for BSS Group 3 cash flow is between 0.1 billion and 0.6 billion euros. This is based on expected cash flows from operating activities of between 6.6 billion and 7.1 billion euros, minus expected payments made for tangible assets and property, plant, and equipment in the amount of 6.5 billion euros. CO2 emissions are expected to be between 16.7 million tons and 17.7 million metric tons in 2024. We anticipate additional emissions compared with the previous year from higher production volumes based on rising demand. We will counteract this increase with targeted emission reduction measures. Thank you, and now Dirk and I am glad to take your questions.

Ladies and gentlemen, I would now like to open the call for your questions. If you wish to ask a question, press star followed by one on your touch-tone telephone. For the best sound quality, we kindly ask you to be sure to unmute your phone and use your headset when asking your question. Since time is rather short today, please limit your questions to only ideally one or two at a time so that everybody has a chance to ask their questions. The first question will be from Sam Perry, UBS. We will then have Christian Feist and then Matthew Yates. Perry, UBS, please go ahead.

Hi there. Thanks for taking my questions. Two, please. Firstly, on upstream volumes clearly recovering from low levels, where are utilization rates currently and how far away from the point at which you think you might be able to drive some pricing? And then secondly, on ag, can you talk through the moving parts on the margin improvement year over year here? Just quite surprised to see stepping up year over year when volumes are down significantly and only low single digit pricing. Is there any sort of cost phasing or something else in there? And if so, any implications for Q2? Thank you.

Yeah, Sam, I can take your questions. First on the upstream, utilization rates are recovering for now. And, you know, we came from a low level in 2023. We are now again crossing the 70s. There is still obviously further room for improvement, but alone by the fact that we had our crackers in Europe all running, you can already see infer that there is higher demand certainly than we had in 2023. On your egg question, the volumes development certainly as expected. Let's remind us we have the second best first quarter of the egg. It is lower compared to the strongest first quarter that we had last year, but it is still the second best. So volumes down as predicted. And the better margins predominantly come from the mix, as we have less sales in the chemicals parts, so the herbicides and fungicides. But this is pricing-wise then compensated by higher sales in seeds, which you know in our case are predominantly canola, soy, and also cotton. So the product mix makes a difference.

Thanks very much.

So we move on to Christian's slides. Kepler-Schebrug.

Yes. Good morning, Martin, Dirk, Stephanie, and team. First of all, Martin, all the best for your last day in an operating function at BASF, and obviously all the best for the future post-BASF. Many thanks for all the good interactions we had throughout these years. And all of you, I wish a successful and, in particular, short AGM. My one question is... You saw a decline in emission catalyst volumes. How were volumes in automotive OEM paints? I assume they were likewise negative. Would you see volumes in your automotive OEM activities normalizing at some point this year? And also, was there a particular reason why you saw a considerable increase in automotive refinish?

So, Christian, first of all, thank you very much for the nice words, and particularly the visual for short HEM. We are looking forward to that one. I think when we look on the automotive business, we have also to take really into account the BEF and the ICE development. So we have really seen, particularly in China, where the BEF development is quite impressive, that our volumes for the catalysts have been significantly down. That was the major impact which we actually had was the Chinese markets. Overall, we had much better development in the codings division. It was only slightly down the volume side. It was more or less a rollover from the business before. So it is basically the change between the BEV and the ICE, which, however, I have to say, BEV is developing slower all over the world than expected. But the codings business is much more robust in this situation.

Okay, thank you very much.

So the next one is Matthew Yates. We will then have Jaideep Pandya and then Chris Cunningham. So now Matthew Yates, Bank of America. Please go ahead.

Okay, thank you, Stephanie. Good morning, everyone. Sorry to ask such a short-term question, but you note in the release that there was some benefit from the Red Sea disruption in Q1. Should we think of this as just a one-time benefit and the environment so far in Q2 is not as good? Or are you seeing a continued positive development of the order book in recent weeks? And if I can just squeeze in a second one, maybe for Dirk. On winter shoal, why is the disposal price of the weaker infrastructure assets not been disclosed? Thank you.

So, Matthew, I think this is the opportunity maybe to give it a little bit of a summary again. So let me really say we have been happy with the development in the first quarter, particularly also on the volume side, but you saw also that we are a little bit cautious yet to see whether this is a solid foundation that it thinks really improved. Because I think there are some effects that actually helped in Q1, and that is for sure that the inventory level was extremely high on year's change. So I think people get a little bit more confident and with that also starting to order a little bit more. They want to be prepared that, let's say, their inventory situation is more normal. And there is indeed this effect which we see in some of the businesses that they reconsider their supply chain strategies because there have been interruptions from the long sea journey of materials, and they have to go around the longer journey. So they are worried about that, and I think they ordered higher volumes also of some of the suppliers from Europe, and we clearly benefited from that. So with that also, I would be cautious to take this in the baseline because I would expect that this is a problem that is not over tomorrow, but I would also not expect that this is a long-term problem because I think somehow the world is arranging with this For that reason, we are also a little bit cautious. We are very positive, I have to say, but we are very cautious still to say whether this development with all these special effects will continue in Q2 and Q3. So, is that Bindesal for Dirk?

Yeah, good morning, Matthew. Disposal trials for WIDA is not disclosed for the simple reason that confidentiality has been agreed. But what I can say is we are very happy with this second deal now after the Harvard deal now, the deal with CEPA, which is actually the German government. And as I cannot disclose the price, let me at least guide you a little bit by saying the book value of Viga Transport is at $1.5 billion. and we would certainly rather say higher than lower than the book value.

Thank you both.

Okay, so now we have Jaideep Pandya on field research.

Thanks a lot. The first question really on nutrition and care. Could you just tell us like what are the main moving parts here in terms of, you know, sort of volume dynamic, pricing dynamic that you see in both the subsectors and, you know, what is the BASF-driven cost realignments that you have done maybe on the capacity or on the product mix? And then the second question slash comment is, first of all, thank you to Martin for all the, you know, good times and all the comments and also well done on being so bold as a CEO of the largest industrial slash chemical company in Germany. And the question to you really is what is the one thing that you would tell Marcus as he comes in? To replace you.

Thanks a lot So the first of all we are happy with the result in the first quarter of poor nutrition in care, which turns very positive the biggest ABDA improvement contributor in Q1. This is carried, I have to say, by a volume increase in all sections, so it is aroma, it's pharma, and it's also the nutrition part. results very much carried by the highly improved aroma business. What we are still seeing in the nutrition part is low price levels, but as you know, we have addressed those, particularly in regard of vitamin A now with a new highly scaled plant that moves quality-wise, but also in terms of cost competition to the right point here. And so, in a nutshell, aroma, high contributor, pharma, very much okay. Nutrition, still suffering from prices, but we're getting our eggs in the row here.

Thanks for your words. First of all, let me really say that BASF is at the very best end with Markus and the board team. Markus was 25 years with the company. He exactly knows all the details of the company. So my one recommendation to him would be don't get distracted from the outside by politics and media, but go along with what needs to be done to develop the group and to stay firm because I think there's very clear path forward what needs to be done and really do what needs to be done and not get distracted. That would be my advice.

Great. Thanks a lot and good luck for everything in the future.

Thanks, Shailen.

So now we have Chris Cunningham, Jeff Rees. We will then have Tita Nodeshi and then Tony Jones. But now first, Chris Cunningham, Jeff Rees. Please go ahead.

Thanks so much, guys. And Martin, I also pass on my thanks and best wishes for the future. I only have one question. Thanks for providing the segment cash flow now. I'm looking forward to this going forward. I just had a longer-term question on this one, Martin, given you spearheaded the discussion ramp-up of the China-Verbund project over the next five years. Obviously, you have staged ramp-up of production. What year would you expect that project to become free cash flow positive for the ASF?

Maybe I'll start on that. Normally, cash flow is interesting, but this is a little bit of expectation about China. I mean, let me first of all say, if you start a project like that, you have to have the long-term development in the focus. that you really hit the right timing when you start up such a plant, that this is the best market moment. I think you cannot plan for this. We saw this also when we opened Nanjing. So I think the fundamentals are more important than really focusing on the team. So I would say we expect that we load the plants very quickly. Nevertheless, there's one or the other area over capacities, but not so much on our lines. So I would expect that in 2026 we will be positive and have a good contribution from that already because the products are really products broadly used in the industry. A lot of that stuff is imported today and we substitute this with local production. That's why we are really positive and I think we will have a good contribution already in 2026.

Thanks very much.

Hi, thanks.

Just wanted to follow up on previous question on second quarter. I think, Dirk, last time you were, to some extent, happy to confirm Q1 consensus. Just looking at the consensus today for second quarter, would you say you're still happy with the consensus? Because to some extent you need that level of earnings to come to the full year guidance, one would say. But just looking for that confirmation if you can. And second, just a related topic, we've seen a lot of volatility in Chinese pricing throughout Q1, slight increase and then big collapse, if you will, in second half of Q1, especially in March and early April. Can you just confirm what you see in China? Is it still a recovery mode, or are you starting to see the trends actually start to worsen? Because that would be the implications based on what we see from the pricing side. Thank you.

Good morning. I'll start with the Q2 question. Indeed, I think... The confirmation for Q1 that we had provided was quite accurate. So now, obviously, the question about Q2. So what do we see? We see that also Q2 follows the trend in Q1, talking to all our business. There is not the feeling that there is anything now falling off the cliff, but it's rather a continuation. Is it a further recovery? That is, I'd say, too early to say, because whenever we are talking about demand patterns, we still are in the face of saying this is mainly restocking, still cautious buying behavior. Yes, there is some demand, but it is not really completely changing now to the positive. So I would rather say it's a continuation of what we see in Q1. So it's solid. And this is also the reason why, in terms of our guidance, we completely stick to it. We see for Q2 exactly this continuation, and this is fully in line with our guidance. So not worsening, not improving dramatically, but holding the line.

Peter, about China, I mean, I think if you look on Q1, basically the worldwide growth or the global growth of chemicals has been carried by China again because about 10% grows over their world with 5.4, so it's basically pulled along from there. But we also said there's still relatively low pricing level. I mean, the plans are quite filled, I have to say, but there is not the pricing bar, which also shows you it's getting more dynamic, but it's also not booming. And I think if you look at the confidence level of people, they still are cautious in terms of their buying behavior. I have also to say it's not super happiness with the Chinese government overall. So people, like every human being, holds back a little bit money that you can see also in the retail area. You see that on the car production, which is not really growing dramatically over there. So it's coming back, but it's also there, not in the way that we say now the next quarter that is booming and China is pulling the world again. And I think this is one of the reasons adding to what Dirk just said, that we are a little bit cautious. But we are definitely out of the hole in China. That is very clear. and the load of our plan is on a relatively high level.

Thank you. Okay, now we have Tony Jones. We will then have Laurent Favre and then Sebastian Brey, but now Tony Jones, Redburn Atlantic.

Good morning, everybody, and thanks, Steffi, and all the best, Martin. Only a few months ago, Martin, you talked about the need to review your production network, particularly in Germany. given high costs and low growth. How are you thinking about this now with the strongest start of the year? And a quick one for Q2. Maybe you could give a little bit of color about how you see the divisional outlook as we go into the second quarter. Thank you.

I'll take the first one, Dirk, and then the second one. I mean, overall, let me say, I think our decisions that we have taken already to shut down plants and to trim the forbidden plants to basically competitiveness framework and also to the demand in Europe, I think, was all right decisions. But there will be more to come because I think we will have a fundamental topic in Europe because base chemicals will be for good because of structurally higher energy costs, less competitive. So we have to trim it more to the European demand, in our case in BASF, We will trim it more to our own internal consumption and sell less to the market because you have also to take into account that the base chemicals are the CO2-intensive products. That means we produce them, we sell them to the people, and then we have to reduce with high cost the CO2. That doesn't make sense anymore. That's why we will really use that to fuel basically our chains with the raw materials. And there's a little bit more to come, and this is what – new board will do when they talk about the target picture for Ludwigshafen, which is basically revised and renewed, I have to say, with the current framework. So I would expect that, particularly in the upstream area, the European chemical industry will be weaker and softer and with lower participation in global share than it has been in the past. So that will be our work, and there's still a little bit to be done, but I think we are very happy with the first step we took.

talking a little bit about the division and outlook going forward, so starting with the chemicals and materials. I said already that the first quarter was okay, was good. We also benefited here from the one or the other Special effects, Red Sea was already mentioned, one or the other turnaround or outage of a competitor, which we benefited from. Now, second quarter fundamentals, I would say more or less unchanged, but now also we will have some turnaround, so I'd rather see that flat. Then for industrial solutions, I think for a year we are forecasting here a considerable increase, have nice trends in both businesses. It's a volume play to a large extent right now. Life dispersion, for instance, benefiting from that. So a positive trend going forward. Surface technologies comprising of Catalyst, the batteries, but also then the coatings business here for the entire segment, we see us rather sideways on prior year level. Depends also a little bit on development of the precious metals prices, which are again at a very low level, as you appreciate. Nutrition and care, we see a positive trend also going forward with the measures that now gaining traction in agricultural solutions. We said early, after a record year, last year, this will be lower volumes, while certainly prices also are getting more under pressure, but as I said, we have a more favorable mix now with the higher portion of seeds in our sales, so I'd rather say slight decrease and nothing So that would be my short summary of the outcomes.

Thank you very much. That's really helpful.

So now we have Laurent Fabre. Examen, please.

Yeah, thanks, Stéphane. Good morning, all. I guess first to echo the comments of Christian and the others. For Martin, it's certainly been a fun ride. My first question to you, Martin, is regarding what you told Jaydeep. You said that there's a clear path forward for BSS. And I guess for years, the path has been to go more downstream. And there was a lot of M&A, and I guess that was before 2018. And when we look back to 2018 and we think about your time as CEO, obviously, there's been a lot of mess to deal with. decarbonization, COVID, etc., and the investment in China. My question to you is, what is that clear path going forward in terms of upstream versus downstream? Because it's certainly not clear to me. And the second question for Dirk, as you're going through all the business lines. On the other line itself, I understand there was a higher provision for the LTIP mark-to-market in Q1. Is there also a provision for higher bonuses that we should assume will be sent back to the divisions later this year? Thank you.

First of all, let me say, I will not communicate the strategy of the new board team, and that will be happening in a couple of months when Marcus and his team will tell you basically what they have on their minds for the next years. I mean, it will be a kind of an evolutionary thing. This is very clear. That is, I think, what has always been PSF, but there's also some considerations they have which differ from what I had. I mean, I can only say when I started 2018, I had hoped for different six years than we actually had, that we had it from one crisis to the other was really not what I had in mind, also not presenting the numbers of 2023 as they are. I hope we have... A better result here, but life is as it is. I think what is important that my team, which is very much also to a large extent Marco's team, we have been working on trimming the structures of DSS. And I think this is the basis also for going forward, that we really have been looking how we get closer to the customers, how we get more efficient, how do we get cost out, how we differentiate between the businesses. And I think, and this is my pride, I have to say, that we got along with all these targets despite of the crisis. So we have not made compromises on that, and that includes also the decisions to close down plants. So I think that's a great basis, but have a little bit more excitement for what is coming then as the new strategy update for Markus and the team.

Laurent, your question to others, you summarized right, so provisions in due to bonus accrues, due to the approach to take them result proportional, but there's also the longer term element in it, the LTI And then there are some things like the captive insurance payments. There was one that is booked here in others. And then it's typically also to a minor extent some consolidation effects. So that would be the four buckets that you'll find in others.

But, Doug, is this bonus provision just in line with, I guess, the guidance that you provided externally, or have you added to the bonus provision based on the better start to the year in Q1?

In line with the guidance, Laurent.

Excellent. Thank you.

Okay, now it's Sébastien Braille, and we will then have two more analysts. That's Peter Clark and Andrea Treiner to conclude. But now, Sébastien Braille, Berenberg.

Hello, good morning, everyone, and thank you for taking my question. I have one on the equity shareholdings income in the chemical segment. This seems to have fared less well than this segment as a whole. What happened to the contribution from shareholdings accounted using the equity method in chemicals? And just as a follow-up to questions that have been made on April trading, I can see the composite freight rates have dropped substantially since the peak of the Red Sea crisis in early Q1. Are there any observable trends toward customer propensity to start resourcing material from China yet, or that hasn't been observed as we move into April and into Q2? Thank you.

Starting with the equity results, this is our joint venture in Nanjing, the so-called BYC, and this is bringing in lower results this year, a little bit also in line with the overall performance performance of the Chinese chemical market, so nothing outrageous, but in line a little bit with the development. Will the results get better? Again, definitely the case. On the Red Sea, I'm not sure whether I fully got your question. I understand incoming materials from China are still to be expected.

Sorry, just to clarify, my question was the freight rate, the cost of shipping from China has declined substantially since the height of the Red Sea crisis. Are there any changes in the buying behavior of European customers observed yet on this basis?

So there is an element of a cost decrease in it. Is that also a matter of... Negotiations in procurement, yes, that's the case. Sometimes costs to be passed on. I would not say there's no clear pattern. This is a mixed picture, I have to say.

Helpful. Thank you for taking my questions, and all the best, Martin.

Thank you.

So now Peter Clark.

Yes, good morning. Congratulations, Martin. Yeah, and well done on a very tough job. But two follow-ups, really. The restocking question, obviously you've seen some restocking, that chemical production growth and what you've said in Europe. Just wondering how you feel about any risk of destocking going forward. I've heard all your comments about no real change in trends, but clearly inventory levels are still much lower than they would have been, I guess, a year ago in 23, when we had that phase of aggressive destocking. And then looking at the cost-cutting side, encouraging to see most segments you point to the lower fixed costs. Obviously, a lot of work being done there. And that momentum is continuing and should build from here. So just your confidence that we're going to keep reading about the lower fixed costs on the segment line as we go through 24 and into 25 as this momentum builds on the cost-cutting. Thank you.

Maybe the first one. If you look at the volume growth in Europe, which was in the first quarter quite solid, that does not fit to the overall industrial strength over there. We have said since about a half a year that we see a kind of flattening out, building a foundation in the bottom. We reached the bottom, I think it's very clear. If you look at the PMI in Europe, which increased a little bit from 46 to 46.5. It's still below 50. So that means the shrinking really comes to a halt, but we are not yet in the European territory into a positive mode. That's why we are cautious. That looks a little bit different in some of the other regions, I have to say. For example, particularly also in South America, you are positive. You are also positive in China. It's on 51.1 in March now, so it increases above the 50. So you see that the dynamics are coming back, but it's also not really fully dynamic and vital as it was before. And with that also goes the inventory policies. It has been extremely low over the recent months. And as I said, also with the supply chain constraints, people look that they are a little bit more in a healthy territory. But it's not that they fill their stocks because they need more materials for ramping up their production. So that's why we are still cautious. We are cautiously optimistic, I have to say, but we are cautious.

Yeah, and on your question on the cost savings, I mean, the estimate is completely right. Now we see the cost savings kicking in, and this will now – accelerate because at the beginning you always have the one-time cost offsetting the savings and now going forward we'll enjoy the run rate of the already achieved savings. As you have heard, we are adding more cost saving measures to it. To frame the numbers one more time, you know that from our Q3 call already, We expect an annual cost savings in non-production areas of 700 million by the end of 26 and then we have further 200 million coming extra from our global services and digital and business services and another 200 from the adaptation of the Fabun structures in Ludwigshafen. This is what we already have talked about and then comes the extra effort on the Verbund side, as we mentioned. And key takeaway, we are fully on track with the cost-saving measures. The one-time costs are, to a larger extent, realized already. So going forward, you will see that cost savings in our P&L.

Thank you. Encouraging.

So now we have Andreas Heine-Stiefel. That's the last participant asking a question.

Yeah, being the last, and I obviously also would like to thank you, Martin, for these decade-long discussions I had, and your very straightforward comments, which are always very helpful. Two questions. The first is on agro on the second quarter. So you were talking about the positive mix in the first quarter by the seed business growing. The seed business is most seasonal. Actually, most of the business is done in the first quarter. So I would assume that the picture looks in the second quarter much different before than the year-on-year comparison levels of in the second half. So is it right that this crop protection in the second half will come through in volume decline to a much more extent than what we have seen in the first question? The second is actually on the oil price, which is now in the 90s. That will obviously impact upstream first by getting through the value chain. Do you see with the utilization rate you have right now already enough pricing power to push the higher raw material costs from the higher oil price in the upstream business on a short notice?

Maybe, Andreas, thanks also for your words. I maybe start with the oil price. I think what the major worry is is that this very cautious dynamics that's coming back in the worldwide economy is is actually hampered by high oil prices because that takes costs off and makes everything a little bit more tight. I said earlier we have not yet really fully pricing power back, so it is still a play on raw material prices also. The raw material prices are going down, and they have also been dragging down the prices. We could relatively well secure margins, but with the raw materials, this is bad. So we don't see that yet, but The logic consequence would be that raw material is going up, and instead we have oil to pull the prices up. Whether this is overproportionately the case that we can expand the margins, I don't know. It's not very probable. But let's see how sustainable that is. I think there is a component in that which is definitely from the Middle East crisis. Whether this is normalized, when the overall assumption that this is not ending in a war, I think it will also help to keep the oil price stable. at least at the level of it's not going further up and then giving more confidence. So a little bit early to say what this is, but there's the normal mechanisms, which you know very well, and how that goes into margins, we will see, has to do with the demand.

On your egg question, first of all, you know that the typical pattern of our egg business, it is front-loaded. Q1 is typically the strongest, and indeed for Q2, due to the seasonality, I would not expect now a big contribution from the egg business in Q2. We certainly see some buying behavior also from the distributors a little bit closer to their actual demand. So in this regard, there is certainly still something also to come in the second quarter, but this is not, if you compare to last year, this is not compensating, by far not what we have not achieved in the first quarter compared to the first quarter 2023. What we believe though is that there is business to come also in the second half of the year, so the southern hemisphere for which the team is already preparing. So all in all, business development in the second quarter should not surprise us also for the ag business yet.

Andrea, it's fine. Okay. Ladies and gentlemen, before we close, I would briefly like to hand back to Dirk.

Yeah, and finally, I would like to pick on what many of you have already said and expressed, and I express my warmest thank you to you, Martin, as our chairman of the executive board of BSS. After 36 years of BSS, Martin, you will retire from the board of directors at the end of today's annual shareholder meeting. You joined the board in 2006 and became our CEO in 2018. Since becoming CEO, you have presented BSS results over 24 quarters. I think it is fair to say that you have enjoyed the open and sometimes tough exchange with panelists and investors. And vice versa, they valued, I think we can say that, your insights into the chemical industry and the macroeconomic picture. Martin, I know you personally for 15 years, and I would like to thank you wholeheartedly for your support in particular since I took over as CFO last year. It has been both an honor and a pleasure to work with you and to serve with you on the board. Yeah, thanks, Dirk. And maybe one more. You will continue to remain active in the business world following today, for example, as designated chair of the Supervisory Board of Mercedes. But I hope, however, that you find also a little bit more time, extra time for yourself, for your private life, for your family, and with that, all the very best, Martin.

Yeah, thank you very much, Dirk. Really rewarding words. Always difficult to keep emotions under control at the very end. I would like to take that opportunity, first of all, to thank you all. I have always found that these exchanges have been very, very interesting. They have been effective. They have been also fair. And I have to say also to a certain extent amicable. You have to do your job and we have to do our jobs. But I enjoyed very much the physical meetings we had where we got all the glows into a dialogue and we had some wine testing next to it. So I really like that. I have to say I have to learn to live without BASF. It will take me a little bit of time, but it's definitely also a life outside of chemical markets, and I'm looking forward to this. I would like to also take this opportunity to thank my team, particularly Steffi Redberg and all the guys which you cannot see sitting here, also in the room, who have actually always helped to prepare and to give you the best possible information where you can do your job. A great and big thank you to all of you, and certainly also with you, Dirk, it was fun to do the last meetings over the last year together with you. So all the very best. Thank you very much. All the very best to you personally, and certainly also to your careers, and wish that stay healthy, and maybe we meet somewhere else again. Thank you very much.

We are now at the end of today's conference call. Should you have any further questions, please do not hesitate to contact a member of the BRZ-IR leadership team today, ideally Lance Budde or Alex Köhler because others will work on now also the annual shareholders meeting that will be held starting at 10 o'clock today. We are again hosting the meeting in person at the Congress Center Rosengarten in Mannheim. We will present our second photo results on July 26th. Thank you for joining us this morning and goodbye for now.