Brenntag Se

Ladies and gentlemen, thank you for standing by. Welcome to the Brentag SEQ1 2026 results call and live webcast. Please note that this call will be recorded. During today's call, webcast participants are in a listen-only mode until we conduct the question and answer session. If you wish to ask a question, we ask that you please use the raised hand function at the bottom of your Zoom screen. Instructions will also follow at the time of the Q&A. I would now like to turn the call over to Andre Simon, Senior Vice President, Corporate Investor Relations. Please go ahead.

Thank you, Donny. Good afternoon, ladies and gentlemen, and welcome to our earnings call for the first quarter 26 from my end as well. On the call with me are our CEO, James Pilgerson, and our CFO, Thomas Weissman. They will walk you through the presentation, which is followed by the Q&A session. All relevant documents have been published this morning on our website in the inventory relations section, where the replay of today's call will be also available. Allow me also to point out our safe harbor statement, which can be found at the end of the slide deck. With that, I now hand over to our DOEN. Please go ahead.

Hello, everyone. Let's get to go to the first slide. To sum up, I will start by summing up the whole quarter, basically, and then I have a little bit more detail on Iran. Overall, I'm satisfied with this quarter. If we look at November, December, we had quite low market activity. We anticipated that we would step into 2026 against difficult comparables. Last year Q1 was very strong, our strongest quarter. And the year started in that spirit. We had volumes down some 5% January, February. Very slow moving. Some winter effects in the U.S. in construction. A little bit of uptick due to our antifreeze business on airports. generally a slow start. And then, 28 February, crisis in Iran or the war started. We observed that for about a week. Towards the end of the second week, we concluded this will impact the market. And I will come back to all the things going through the Stratum Hormos a little bit later. And with our now new flatter structure, where all the business units and the radios report directly to me without the divisions in between, from the mid-mark of the month, we started actions to say, okay, we need to secure supplies for our customers. We need to price up. We need to pass through surcharges. We need to do a whole lot of things. But top priority, basically, not get caught between a rock and a hard place. And also to keep our customers whole. And it took us about three days to ramp that up. So the results you see reflect maybe one and a half weeks. the wrong crisis in terms of market activity maximum two weeks so we're very very quickly up and running and then also had due to that on the customer side many customers are used to falling prices and that means you go minimum on your inventory as a customer and you saw a certain shift also there of people it wasn't a huge pre-buying, but a little bit of pre-buying to just have a bit of safety stock. And then we entered into growth territory. March landed on a growth and we increased prices immediately and we managed to secure deliveries to everyone. And that was well done. And it's a good proof point to the new Flutter organization and Here we are using really quick communication tools and exchanging between the regions and shipments, and it just works really, really nice. I should say, though, that you can discuss how quickly we will be able to do this. Agility is key in today's world, and here we were extremely quick to get going, but the inherent capability of our business model to deal with this, our site, often you are supply of material, connections everywhere in the industry. We proved again that kind of we thrive in times of volatility. And we knew that already. I think some of that was seen during the COVID happening. It has been shown time after time. But This was the first time I could see it. And I'm very happy how we dealt with it in essentials and specialties and also in the ingredients and additives and what have you. But the big happening was, of course, on the special side. We knew that already. While we were doing that, we also kept reminding ourselves, and we still keep reminding ourselves that this is a good windfall. and we see a good progression of this going forward into 2022. But our real job remains, and that is to get organic growth on the commercial machine going in Brandtag, leveraging the whole portfolio to get structured cost-bound productivity up and demonstrate leverage of scale and generally improve competitiveness, and then in the front end of the company to be able to use all the products we have, now that we are not at all going for a split, but we want to offer the full portfolio with different margin profiles without losing focus on the vertical business, the specialty business that requires the main competence to play both of those roles. So we kept working on that, and Thomas will come to some of the cost reduction progress we made. But, you know, we have more than 200 million gold for next year, and when we look at our internal plan to get to some 150 million savings this year, we are tracking on that plan, and I'm happy with that, because if we look at previous years, there's been plan made, but we haven't executed to him. And here I see that we are actually tracking to the plan we have put in place. We have a good structure to follow it up. And I tell you, in the whole company, we are below three management consultants, two or three consultants in the company. We don't use consultants. We do it ourselves. And it's progressing. And I think that's a very important skill, because if we structurally want to correct some of these cost developments and underutilization developments, we need to know this. It needs to be a core process. I'm happy that we could keep our eyes on that. If I look at the outlook, I think we... I think we can confirm the outlook with a higher degree of certainty. Thomas will talk more about that. But I should also say that what we see now at the beginning of this crisis, or this is the beginning we don't know, into Q2, that is the volatility. We thrive in that type of environment. We still... or we are not able to foresee what happens to end-user demand in H2 of the year. I'm sure there's going to be someone that got the forecast right, but we don't know who that person is. So we have taken some height for that in our forecast and feel comfortable, but we don't know what the impact will be and we don't know how long the crisis in the Middle East will go on. On the negative, Maybe it doesn't belong in an analyst call, but until the end of April, we have sadly had two fatalities in the business. Both of them happened on customer sites. And for me as a CEO, that's a very important one because this is not an Amazon business. This is a business that has inherent dangers. And we need to deal with that. And I think we have made good progress of safety. We have good statistics. But these two incidents that have happened are something we look at really closely and see if there are actions we need to take to improve. We have improved. But here, two independent incidents happened. in the quarter and into April, and I'm not at all happy with that, and I think it's very serious. And our new CEO is going to look into it. At the same time, it's also a reminder to, you know, this is not just any mail-order business we are running. It's serious chemicals, some of it, that we are getting and working with. Okay. We move on to the three priorities. You know, we set three priorities now, and we have now agreed, we have set a date for the Capital Markets Day on the 12th of November, where we will go into more detail, share with you a bit more about how we work, and also demonstrate, you know, by that time have more proof for us that we can move things in the company. But until then, We have put some very simple focus areas and we have had these in the two previous calls. Sales, what are we doing with sales? Are we making some progress? Yes, we are having feeds on the ground a lot more at the moment. We have shifted from internal to external focus. I'm happy with the step up in terms of time spent in front of the customer. And we have a fantastic capture at the front end of the company. We have done now several drives with getting dormant customers back, placing orders, sustained customers that have stopped ordering. And that has been quite successful. And then we are also launching a couple of experiments on cross-selling. And to best illustrate the strength of the one Brentog model is that we have the domain competence business, we say pharma, we count the people in pharma a number of hundreds, but you have customers for pharma that are thousands. And it says itself that if you can't leverage the wider Brentog for account management and maybe the tail end for 5,000 customers, it's very hard. to cover in depth thousands of customers beside three, four hundred people. So, our domain competence businesses, our specialty, they need to be really, really good at spending time in front of the customers of all their big accounts, and then we are now starting to leverage that specialty customers, we are moving it with essential products, specialty customers of one type of specialty, we move in with another specialty business, product portfolio, and helping each other. So we're starting to work on some incentives, pricing. We are starting to work with pricing, and that came at a very good time. We just kicked off a project on how we price and how pricing is done in this company. But, for example, Latin America grew 8% to 9% in Q1. And there we have, compared to last year, we have made quite good progress on how we address the market, and it was very nice to see. Then on the clarity and simplification, we have done an experience with the supply chain. It was split, and to bring it together and serve all the businesses of the world supply chain in APAC, that's going really well. The executive committee is operational now, getting comfortable with each other and tremendously helpful now in the time where we needed to be really agile on price and shipments and working between regions to have the executive committee around the table communicating very fast and working together. So, happy with that. New CEO is on board, starting to look into the whole productivity and the network of our supply chain. And in terms of starting at the top, the CEO functions, relations with the Works Council, also, and this is not only Germany, but starting to reduce headcount, job reductions. I start to feel we are a little bit more time than we expected, but we are coming through on that, that we start to work towards the same goal, and I feel that per CEO piece of it is done, we are working out in the region, Thomas is addressing his part of the organization, and so that's also moving forward, so I think that's good, and we haven't had any industrial action or anything of that. Then on the execution, Thomas will come back to that. We acquired it close to Airdate. That integration goes fine. A nice addition in the UK. And proven again in terms of execution when it's getting really turbulent. We can manage that. Cost reduction program. Well structured. Well followed up. Accountability. Very clear for the different pieces and I feel pretty confident that we now have learned how to deliver on our actions, and I think around 150 million this year should be doable, and Thomas again can go more into that. If we move to Iran, I guess this is the novelty of the court here. I mean, there will always be something nowadays, but this situation is new to us. It has not been so problematic, full of action, but just to give you a feeling, we have only about 150 people individually, so it's not a big impact on sales and gross profit, even though we are doing well there. But sourcing into the chemical industry is, of course, very substantial, and some of you might not know, but if you look at, you know, we all know that the oil, seaborne oil, passing through the hormones is maybe 25 or 30% of the world, and 20% of the LNG is passing through. Everyone knows that, but if you look into some of our core essential chemicals, I'll give some examples, you know, the Monoethylene glycol, 56% of the global trade is going to the hormone sulfur, which is, you know, in one or the other way going a lot into fertilizers and agro, almost 50%. Methanol, more than 40%. Urea, more than 30%. Ammonia, more than 23%. Phosphoric rock, more than 20. Then again, that goes into fertilizer and other things. And then different phosphates. So it's a very, very critical region in our field. So how did this really impact us? And this slide sums it up, what happens. And you could read. But if we instead include the regions, what's happening in the different regions from an energy price shock perspective, supply constraints, supply shock price of the product and the demand, starting in the U.S., the energy price shock, yes, gas prices are up, and the supply constraints, There the impact is quite low, but with the way the U.S. market works, where U.S. have started to export oil, export chemicals, Exxon, Dow, the big companies doing really, really well with windfall, it's not that it protects the U.S. from seeing a lot of price increases on the on the chemicals, where we have participated in that, of course. And I will also say, from a market activity level, in our segments, we don't see a market slowdown. If you then move over to Asia, there, the energy price shock element and the supply shock element with constraints, a lot of Chinese suppliers that didn't call for smasher, they just stopped the trip at the price, or said they won't supply, very high impact, prices went very high, and you also had some drop in demand. But we somehow managed to navigate there. I think we reached almost ceiling prices in APAC on chemicals, and our customers are a bit cautious, I would say. Should they be stark? Should they not? It's... quite dynamic, and it's coming down a bit, but the question is how we go forward. But again, not our biggest region, and we got through with, you know, we are getting through that, and we are managing, delivering, and passing on crisis. Then we get to Latin America. There we had pretty low effect in every respect, and the big difference, Latin America get products from Asia, they get it from also in some respect to Europe and also from the US. And what we have seen is very hawkish buying behaviors and pricing up. Some of it helped that Chinese imports have disappeared or been reduced in some places. So we have done really, really well so far in Latin America. And then in EMEA, we have the energy price Impacts medium to high. Also some constraints because some of the Chinese imports didn't arrive or they got delayed. Middle Eastern imports got delayed. We saw very quick movement on solvents. And there the pricing went up very quickly. Customers, not pre-buying, just taking up a bit of safety stock. Providing some growth, but again, cautious. You know, the big question out there, what will happen to demand in Europe? So that's a little bit of an overview on the Middle East. And then, if you look at our business's essentials, starting on the solvent side, that has been obviously in the middle of the action immediately. And that's where you see that our deliveries in that business are essential. for our customers. They are not commodities. They are super needed. And therefore, there is a pricing element to that and also worth. Some customers have run out. They haven't been our customers and we are helping them and it's almost at any cost to get the product if it's not an ongoing relation. And we step in on all of that if we can. And then on the specialty side, you see that their contracts are in place, smaller volumes, not a quick impact. You see a slight uptick, and I think more will happen, but not that drama, not that action to the same extent, but it will come. Transport costs, all the materials will come up, but it's more gradual. And then I think on nutrition, our nutrition business, if you look at that business, fertilizers, etc., for example, for Europe, they are already in place before the Iran crisis in most of the agricultural areas. So our prediction is that we will see food price inflation and that thing picking up. But the first planting now already had the fertilizers and the rest in place. But I think the impact can be quite substantial, but it's just later in the cycle and And when it happens, we are ready for it. Okay. Go to the next slide on the numbers. If you look at the top line, sales minus 5%, and that was supported. This is against a very good quarter last year. So I'm happy with this number. It was held over the two weeks of March. In that business, We have some businesses growing. Most businesses are not growing at the beginning of the quarter, but Latin America, we had high single-digit growth. Also, our materials science business, you know, 6-7% growth, slightly different dynamics, and that is already 2-4. Very happy about that. So, clearly, the top line, and also the gross profit held by the last one and a half, two weeks of the quarter. Gross profit, minus 1.3% of minus 5% top line, happy about that. And then also quite happy with that on sales, minus 5%, but we only lost 10%. operating EBITDA 8%. So that's a smaller gap there than we've seen, say, two quarters back. That's not only because of cost reduction, obviously, because some transport costs and other things went up very quickly. But to some extent, it's pricing elements and some volume elements that help with that. Mathematics will then improve the gross profit margin. I think another aspect about the gross profit, I'm happy about this, that we are moving away from, you know, we like to have price quality on the business, but we are moving away with, we kind of accept that we have different businesses with different gross margin criteria. I think Brent, I guess, some corners of the business have been way too minimum gross profit for Tom and Shed business. We have capacity and as long as taking a low margin product and it doesn't reduce the price of the profitability of the mid and the high margin product, we have no problem with it. So looking at our total offering to customers with our whole portfolio and accepting a margin profile. And we are at the beginning of that. We will get better at that when we move on. And as I said on the forecast, Q2, it's progressing. We know how to deal with it. And we are not worried about Q2. What we look for is now what happens in the second half of the year on the demand side. Finally, the capital market stay, 12th November. We will mix that up. The people that will attend, obviously, medium, long-term, what we're going to work on the levers and then to meet several of the team members because we start to have a seriously good team here. And I think they're very much part of this executive committee to deliver on our strategy that we are working. We are not done on every piece, obviously. We're going to use the time. but we have the core all the elements and we are working on them and we are also making some real full scale real pile of testing in the business and that's one of the reasons why I like to do this in the second half of the year so that we have tested can we cope with this can we do this obviously not every strategic initiative will be that way but Some of the core elements I'd like to know what we have the capability to move things in the area we want to use as a lever. Over to Thomas.

Yeah, thanks a lot Jens and good afternoon from my side as well. So we now look at slide number 7 and review there the financial performance of the first quarter in 2026 a little bit more in detail. So as outlined earlier, first quarter results have proved The resilience of our business model is after an expected muted start to the year. So March shows improved performance, especially when benchmarked against the high comparable base in the first quarter of 2025. Operating gross profit amounts to €950 million, which is down 1.3% year-on-year. At the same time, we achieved a gross margin of 25.9%. That's increased by 0.9 percentage points, which is reflecting strong pricing discipline and supply reliability. Also, this demonstrates our ability to protect and expand margins despite slightly weaker volumes in the first quarter. Operating EBITDA came in at €306 million, which is down 8.3% year-on-year, while operating EBIT A reached €217 million, which is down 12.6%. Decline in earnings is primarily volume driven, with positive pricing trends in March, as Jens has outlined already, and strongly contributing yet these positive pricing trends. but not fully offsetting the week's demand earlier in the quarter in January, February and up until mid-March. Operating expenses then remained a very much key focus area for us. On the first quarter, higher bonus provisions weighed on this cost base and also higher energy and transportation costs due to the crisis in the Middle East had an impact. However, keep in mind we are able to pass on these costs increases driven by higher oil prices within the gross profit. So via, as Jens mentioned, actually fuel surcharges or other means actually as well. Overall, we've successfully executed on our cost-out program offsetting the before-mentioned increases, and I'll talk a little bit more about that in a moment as well. Of an after-tax, amounted to 98 million euros, and that's broadly in line with the overall development and operating performance. In cash flow, it came in at 91 million euros, and it's impacted by higher working capital requirements, and that's obviously particularly driven by rising oil prices and increased inventory, and in that context as well. In summary, what I highlight is Brentac's margin resilience and the commercial agility, while also underlining The continued need for strict cost discipline in the current environment. On the next page, we're now going to talk about the divisional performance a bit more. Operating gross profit in essentials amounts to €666 million. It's down 1.1% here and there. This development continues to reflect a sub-team demand environment across most regions, particularly on North America and APEC. in the third quarter. Regional performance was a bit mixed, and we are showing modest growth, and Latin America supports our underlying momentum, while APAC remains under pressure. Since mid-March, we've seen solid improving trends driven by oil-linked pricing dynamics and increased market volatility. It's also reflected in gross margin expansion of 1.2 percentage points 27%, supported by our pricing discipline and the ability to supply in these environments. In addition, we've seen some signs of customers rebuilding slightly higher stocks alongside selective product allocations and tighter markets. Then, turning to specialties, operating gross profit amounts to 284 million euros, which is down 1.9% here on the Performance continues to reflect weaker demand than live signs, partly offset by positive momentum in material signs. Despite these muted volumes, we deliver a gross margin expansion of 0.4 percentage points to 23.7%. That's again underlining our continued pricing discipline and some mixed effects in this context. In material signs, we have seen improving volume across global trends, Life science remains more subdued overall. We also see some demand for forward effects in response to heightened geopolitical uncertainty. And if I summarize, both divisions demonstrate margin resilience, with essentials showing earlier signs of recovery, and specialties saw a softer demand environment during the early months of the quarter, with signs of healthy improvement towards quarter end. So now, I'll turn to page number 9 and provide there an update on our cost-out program. Just as a reminder, the program builds on the progress that we have achieved since its launch in 2023. Against the 2023 baseline, we had delivered €165 million of gross savings in fiscal year 2025. It was demonstrating consistent execution and tangible results. Nevertheless, following the reset of the baseline to fiscal year 2025, we are now targeting additional savings of 200 to 250 million euros by 2027. These savings will be driven by further efficiency improvements across the organization, including the simplification of structures and the reduction of organizational layers, the optimization of personnel cost base, and continued discipline on non-personal expenses, actually, as well. In the first quarter of 2026, we delivered 27 million euros in cost-out savings, which is reflecting a strong start into the year, obviously accelerating to the 150-ish million that we are planning to see this year. The program is designed to offset inflationary pressures on the one hand, and to deliver structural cost improvements. That's quite important. So looking a bit deeper on the next page into the operating expense development in the first quarter, the reported RPEX decreased by around 20 million Euro year-on-year. On the one hand, it was supported by RPEX tailwinds of 34 million Euro, and that's because we have been partially offset by M&A effects and higher one-time effects such as bonus accruals and other cost categories. We delivered €27 million in cost-out savings in the quarter. These were partly offset by higher transportation, logistics and energy costs linked to recent market disruptions in the Middle East. I think that's quite important to reflect on. Overall, the savings would have been higher without that. Substantial wage inflation and prior year run rate effects, particularly in North America, play a role as well, alongside with some other inflationary effects. Now, we were able to pass on the higher energy costs, for example via fuel surcharges being reflected in gross profit. On an underlying basis, ROPEX declined by approximately €6 million, reflecting continued and consistent execution of our cost program. That does not include the costs that we are incurring for energy that would come on top. Remember, this is after indeed actually then absorbing those. So overall, the development confirms that our cost part program is delivering while we continue to actively manage inflation pressures across the whole of the cost base. Reducing structural costs remains for us the key priority in this, and we continue to drive efficiency and simplify the organization. So, in summary, OpEx trends in the first quarter underline both improving business momentum and sustained cost discipline. Let me turn now to the development of operating EBITDA year-on-year. As we expected, operating EBITDA reflects a softer start into the year from January to mid-March, with a clear improvement towards quarter-end. Also note that high prior-year comparables prevail in the first quarter of 2026 still, as prior-year figures do not reflect the impacts following Liberation Day and the effects from U.S. tariffs and trade policy. Compared to the first quarter of 2025, FX translation had a negative impact of around €21 million, while M&A contributions were broadly neutral. Within the M&A contributions, acquisitions contributed around €2 million to operating EBITDA in the quarter, of which Erdell and MC Varma are the largest impacts. And then, effects from divestitures decreased operating EBITDA by around €2 million in the first quarter, largely reflecting the sale of the Raj business and some other country assets. On the organic development, we reduced WTA by approximately €28 million. That primarily reflects the weaker volume trends in January and February, as I said earlier. The underlying demand environment remains slightly subdued in early Q1, with limited customer activity and continued pressures on volumes. We saw a noticeable improvement in March driven by pricing momentum and stronger commercial execution. From a divisional perspective, specialties delivered a more resilient organic EBITDA trend while essentials benefited from improving pricing dynamics towards the quarter end already. As highlighted earlier, cost-out measures continue to mitigate part of the volume impact while we remain very disciplined on the cost base. Summary, first quarter reflects the mixed picture with expected weak underlying demand early in the quarter, but encouraging signs of improvement towards the end, supported by pricing and execution. So, with this, let me close with our guidance slide. We confirm our guidance for fiscal year 2026, expecting operating EBITDA in the range of €1,150,000,000 to €1,350,000,000. If we move forward, our trajectory for the remainder of the year will depend on the, at this stage, difficult to predict impact of the crisis in the Middle East on demand across our key global markets. Disruptions in supply chains may create further selective opportunities, while saturation and magnitude remain unsolved. We focus on managing volatility for our customers and, for sure, securing supply. Even in the scenario of sustained de-escalation in the Middle East, the timeframe needed to normalize supply chains is expected to be more than six months. It's important to notice that the current economic situation with high inflation is could weigh on demand over time. So our full year outlook is based on the solid performance year to date, supported by most recent positive pricing dynamics, while we continue to monitor macroeconomic and demand developments. Irrespective of these, we believe in the resilience of our business model, and we remain fully focused on the areas within our control. These are further advancing our cost-out program, continuing to simplify and streamline the organization, maintaining cash discipline, and strengthening customer and supplier proximity. At the same time, as Jens already said, we are working on our strategic review, which we will present at our Capital Market Day on 12 November. And with this, I would like to close the presentation, and we are now very much looking forward to your questions.

Ladies and gentlemen, we will now begin our Q&A session. If you would like to ask a question, we ask that you please use the raised hand function at the bottom of your Zoom screen. You will receive a prompt to unmute. Once your name has been announced, please unmute and ask your question. If you want to withdraw your question, please lower your hand using the raised hand function. Thank you. Our first question today comes from Annalise Vermeulen at Morgan & Stanley. You may now unmute your line and ask your question. Thank you.

Thank you. Good afternoon, Jens and Thomas. I have two questions, please. So firstly, you mentioned emerging product shortages. So how significant was that in March? And do you expect to see more supply issues and product shortages through the second quarter? And if you could talk a little bit about the differences between essentials and specialty in that regard, sort of where you're seeing the most significant impact in terms of shortages. And then secondly, just on Asia, putting together everything that you've said, you know, you mentioned significant price increases from some of the Asian suppliers. So given that and given the geopolitical development, how has the level of competitive intensity with regard to Asia evolved since we last spoke in March? Have you seen an improvement of that? Or how would you characterize the market in terms of that competition today? Thank you.

Okay. I take that. So short of this, I think the initial shock is over. We have stock. We have built a suitable amount of stock in our business, and we feel confident that we can deliver. And then there could be other distributors that have short of this, but we have a solution to everything, actually, plus that we have our own stocks. And so I think we don't see any problems with deliveries. And then there are some shortages on some products still in APAC and selected areas, getting feedstock, expensive feedstock. There are some things around, but the worst of it is behind us. Between specialty and essential, I would say we have all of it. under control. On the price increases, we are moved on that, and there are some markets where we see further price increases, and there are some places where they're kind of ceiling out, and you might see it trickle down a little bit. So it's a mixed picture, but I think the ramp-up has been done, and then we need to see what progresses, because everything changes every week. in Iran, and there's also some expectations in the whole thing. So I think crisis has come up, and the question is, and it's not steep up anymore, but who knows what happens. And also, you're talking maybe, and we don't have specific data, but there's some 20 operations that have been hit by something in the Middle East, and that picture can, of course, change as we move forward. And then in Asia, I think the initial stage of the crisis was very much with the competitive pressure that the Chinese really stopped exports, and we felt that into several regions. That has started off again. It's not perfectly normalized, and I would say the competitive pressures have been, it has been a shortened situation in Asia, and now I think it's, getting a little bit better and people are starting to find a way of covering the holes. Again, we have been successful at delivering at all times. So I would say our view on Asia is that maybe we are at the ceiling of the pricing and then in some products now it's dropping off a bit, but again, it will depend on end-user demand. it would depend on how the crisis continues to unfold in the Middle East.

Okay, very clear. Thank you.

Thanks. Thank you. Our next question comes from David Simmons at BNP Paribas. David, you may now unmute your line and ask your question. David, if you're struggling there, try star six.

Thank you.

Is that better?

Yes, we can hear you. Thank you, David.

Cool. Thank you for that. Yes, there's two questions from me. So the first one, you talked about 2Q starting well and gave the detail that January and February were down 5% and then March was up by the last two weeks of the quarter. Are you able to give similar detail on April? Or is there anything else you can say to help us size in the second quarter versus the first quarter? And then secondly, I just wanted to come back on the comment that the worst of the scarcity might be behind us. Is that a comment because demand has dropped away, or are you seeing more flow of products from SBR releases than other sort of alternative sources of molecules?

Okay. So I don't want to comment the details of Q2, and we have different comparables, because Q1 was... strong last year, and Q2 less strong, and Q3 even less. So it's a little bit hard to compare quarter to quarter, but what I'm saying is that from the very low level of January, February, the business came up, and some of it was created demand because people wanted a little bit more sales to start. Not extreme stock build-up, but You rather want a bit more if your prices come up. And then I would say, at the moment, we see activity that is better than the very low year-end, beginning of the year. And that's as far as I can go at this stage, because we want to, you know, comment future on the whole quarter. But, you know, end of March and onward, there are no massive changes. A little bit up and down, maybe, in but the comparable is slightly different. So the percentage is nothing I'm going to go up on. Then on the scarcity, I think the initial two, three weeks, very dynamic, people worrying, you know, people closing to customers they don't normally have, which means you also take us off. I wouldn't say that we see anything on demand at this stage. And it varies a bit with the regions, with Latin America and the U.S. We don't see a problem with demand. So I would say it's moving sideways on demand. And then the market is finding their channel, so to say, now. The network, and we have the network in place, but I think it's settled in and people understand that there won't be many shifts of this type. coming through, so we better look for something else, and that starts to be priced in in the market. The people that have the product, they know that, okay, I'm the one with the product, and the price is up, and it balances out. So I think customer stock, like build-up, has probably flattened out also. Very good.

Thank you. Thanks.

Our next question comes from Shetan Udessi at J.P. Morgan. You may now unmute your line and ask your question. Thank you. Shetan, try star six for me to unmute. Perfect.

Can you hear me?

Yes, we can hear you. Thank you.

Okay, cool. I just wanted to go back to your comment previously that you're not worried about your second quarter, but much more about second half. I mean, that would suggest that you have a very good visibility on second quarter, if you're saying you're not so worried about second quarter. But yet, I see a bit of hesitation on your side to guide to second quarter. Yeah. Can you give us some color on how do you think we should be modeling second quarter? You did 305 with 350, 370 in the ballpark, thinking about the second quarter EBITDA?

Yeah. You know, this is back to the tradition of the company and how we guide. So I'm very hesitant to guide second quarter. I give an indication, you know, that the crisis is still there. We are handling it. We have pricing in control and delivery is in control. So I tried to give a qualitative flavor to you, but I don't want to guide on the quarter level. Then I'm saying that between now and going forward, if this continues, A, if it stops today, if I discuss the topic with the big... chemical companies, the big oil majors, the people that really understand the production footprint. Everyone, I mean, they say that, you know, 100 to 200 days, six months to 12 months, whatever. So we work with the assumption that oil pricing would stay pretty high the rest of the year. And if it's a bit below 100 or up at 120 during the summer, Depends who you speak with. But we work with the assumption the whole year we'd have high oil prices. And then we don't expect at this moment that pricing on the energy side of that would collapse and go south because you have the, as you know well, the U.S. oil reserve has been tapped into, et cetera. So there might be more damage to upstream assets also in the Middle East. So we work on the assumption that, you know, pricing might come down a bit, but that's not what I'm worried about. What I worry about is the end demand effect. And they are simply saying that I cannot assess if this will throw Europe into a different demand pattern or recession. We haven't seen anything of that in the U.S., But I'm simply not the right person to forecast it. And since I have no order book or anything for second half year, we are very short order delivery business. I don't know. I just point out normal macroeconomics would indicate that there could be a demand destruction effect out that. And then Almost in my approach with the forecast has been to say, okay, let's be a little bit careful of the run race in the second half. We could be right, we could be wrong, but we have taken some depth, some height for it.

Got it. The second question I had was you mentioned that prices or some of the prices in China are starting to fall. You know, from your perspective in the past, you know, I would typically see China as a sort of a leading indicator of what happens in the rest of the world in terms of directional price changes. Do you sort of agree with that view or do you think this is more isolated sort of declines in China? Maybe this time is different that you don't see the Chinese pressure spreading on to the rest of the world for whatever reasons.

Hard to say. You know, I'm only like seven, eight months into this particular industry, even though I've been in the essence of it. So I think China definitely has, they understand their own supply chain. And if they need whatever product for their own supply chain and production, they're going to make sure it stays. And that's what they have done. And I definitely see China as maintaining the same export ambition. And I think we will see that happening. But we also need to remember that China needs the feedstock. So the ambition is there. And there is a varying degree. Feedstock has probably improved a bit. But without the feedstock, and also with feedstock that is massively more expensive at the moment, I see China at this stage not out full blast on export and going everywhere. So it has an impact on competition in Latin America and Europe and other places at this stage, and it still has.

Understood. Thank you.

Next question.

Ladies and gentlemen, if you would like to ask a question, we ask that you please use the raised hand function at the bottom of your Zoom screen. You will receive a prompt to unmute, and once your name has been announced, please unmute your line and ask your question. Our next question comes from Suhasin Benati at Goldman & Sachs. You may now unmute your line and ask your question. Thank you.

Thank you for taking my questions. Two for me as well, please. Just on the quarter itself, I think it was interesting to see the operating EBITDA down actually a lot more in essentials versus specialties. Given that you actually saw more price increases in essentials, it was perhaps a little bit surprising. So could you help us understand what happened there and how should we think about the evolution in the next quarter? Secondly, I think you did have slightly higher bonus accruals in the quarter in 1Q. Do you anticipate further step-up in that bonus accruals number in second quarter as well?

Thank you. I will hand that over to Thomas. Just in general, when this is happening, more pricing actions happening on the essential side, that's normal for this stage. in turbulent times. And the specialty business, much slower, much more contracted, and also smaller volumes that are impacted. But it will percolate through, because at the end, they're impacted by roughly the same factors. But over to Thomas. Maybe, Thomas, you could take that question.

Yeah, so, I mean, obviously, when we talk about the... what we have seen is in January and February still the lucid demand coming through and that has actually as well been on the pricing environment, so it's not only actually on the overall volume. So you see an effect of that, whilst this obviously has changed then in March in the essential space relatively quickly. And that trend, as Jens has pointed out, continues into the future. That's actually what you have seen in that space very much coming through, albeit, and that's what we have been talking about, some of the cost increases on the essential side happened as well already because of transport and energy costs actually going up in the first quarter, in basically March. And on that note, though, please remember that we are able to pass on these costs via fuel surcharges or actually on the pricing itself. Nevertheless, that has a technical effect on our cost base in the essential space. On the specialty side then, as Jens pointed out, the effect on prices always takes a little bit longer to come through. There are some industry areas in which it does actually come through earlier and some others where, like with the nutrition space, where this actually takes even longer actually to come through. Nevertheless, we are seeing those effects coming through, albeit they are slower and not to the same extent that on the ascension side, pricing increases actually came through already within March. On the bonus accrual side, then we're not giving explicit guidance what we're going to do in the second quarter on that one, but obviously here I think what is important to note is that compared to a scenario of the previous year where the likelihood of fulfilling actually the targets was reduced because of the trends that we have been very much discussing over the whole course of the last year, we are now facing a situation in which the achievement of targets, and you see that obviously with us confirming the guidance as well, is much more likely. And that's the consequence we have to then take into the cost base as well. We have to obviously run those accruals then as well on the bonus accrual.

Thank you. Thank you. Our final question today comes from Eric Wilmer at Kenton. Eric, you may now unmute your line and ask your question. Thank you.

Hi, good afternoon. Can you hear me?

Yes, we can hear you.

Thank you. Thanks for taking my questions. I've got two as well. I was wondering, are you seeing a meaningful amount of your customers seeing the Middle East conflict as temporary and as such not ordering at current elevated prices? And if so, could this support volumes in the next couple of months or weeks when they just simply have to go back when they've completed stock or maybe went past temporary shutdowns? And also a question on Latin America. I believe one of your bigger competitors has recently been under investigation due to a potential business with criminal organizations. To what extent could this be a tailwind for Brenta, perhaps also beyond methanol, which I believe is in scope? And then actually, finally, if I may actually squeeze this one in as well, and I believe you alluded to it briefly, but to what extent are you seeing arbitrage opportunity for polyethylene and polypropylene with global demand moving into your European and US strongholds, perhaps away from Asia and Middle East, where you are under-indexed in the latter. So, moving over to your over-indexed regions. Thank you.

Okay. So, we have seen a cautious attitude. I mean, we don't see any signs that this is stopping tomorrow. And if it does stop tomorrow, we believe that the effects are, you know, it's not over the month after. And we see a certain caution, and it varies. For example, in APAC, customers are cautious and they buy minimum amounts. And in other places, we see people buy a little bit extra because it's simply not worth the risk. So you have some betting going on where the prices will go up and down. and some portion, and it's scattered, and it differs. In Latin America, we've seen people buy. In Africa, we've seen people cautious. In Europe, you see mixed pictures, depending on how much is dependent on the product, but they are buying. And then in the U.S., kind of more of a normal behavior, the demand is there. So that's what I see. On the arbitrage, they are certainly, and I'm not talking about those two particular products you mentioned, because I don't have the insight into the interregional flows like that, because we haven't done any arbitrage, new arbitrage business. We are focused on making sure we have supplies, and there might be and doing some of that, but it's not the big thing, the way we are set up at the moment, because we have a couple of, say, two or three suppliers for some of these big commodities, and we picked the best one, but the availability has steered. But I'm sure there are some arbitrage opportunities, but I don't have specifics on that.

Romain, I mean, your last question on compliance. in terms of other players appearing to get into investigations. I mean, first of all, we have none. That's the first thing. And we obviously continue to focus on compliance in general as well. We do have the right methodology in place. So we'll do our utmost best not to get in such issues. I'm...

You know, I'm really not a friend. There has been a lot of work in Brampton to clean that up. And I haven't found any tenants since I came. And if we find it, we are brutal on it. But we haven't found anything. So I don't have any red flags or yellow flags in that area anywhere in the business. But I saw the article, the press clipping, and I don't see any tendencies in our company, and that's not how it will work.

That's very helpful. Thanks, Jens and Thomas.

Thank you. This concludes the Q&A session. I will now hand back to management for closing remarks. Thank you.

Thank you, Danny. And this brings us to the end of the conference call. In case of further questions, please do not hesitate to contact us in the IR department. Our results for the second quarter of 26 will be published on August 12th. And now, ladies and gentlemen, thank you very much for joining us today. Have a good day and goodbye.