Evonik Inds Ag Unsp/Adr

Ladies and gentlemen, thank you for standing by. Welcome to the Evonik Industries AGE second quarter 2024 earnings conference call. I am Vassilios, the course call operator. I would like to remind you that all participants will be in a listen-only mode and the conference is being recorded. The presentation will be followed by question and answer session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Christian Kuhlmann, CEO. Please go ahead.

Thanks a lot and welcome to our quarterly earnings call also from my side. To sum it up, it was another quarter in which we have pre-released our numbers. It was another quarter where we have again delivered on the quite elevated expectations. Another quarter of sector-leading earnings growth and, ladies and gentlemen, another quarter of very strong free cash flow generation. So, ladies and gentlemen, let's go right into the topics of today. Second quarter has once again more proven that our strategy or agenda is paying off. And our own numbers are more and more reflecting exactly that. What is driving our growth? It is a combination. It is a combination of, first of all, self-helping measures and, at the same time, our positioning in the right pockets of growth. The right pockets of growth, that is, for example, our specialty additives business which has had an unusually tough last year and is now on the path of recovery back to old strengths or our resilient and steadily growing care solutions business. We continue with its targeted investments into these pockets of growth, like the first world scale biosafactance plant, which we inaugurated in May. bias affections will be an additional growth contributor over the next years in an attractive market with strong sustainability trends and already contracted volumes. In respect of self-helping measures, these are our shorter-term contingency measures which continue to support our earnings this year, going at This will be accomplished by the ramp up of the structural cost savings under our Evonik tailor-made program. And by our business optimization programs, like the one in animal nutrition you are well familiar with. We'll continue, ladies and gentlemen, with this strategic approach. Currently, in the still sluggish environment, our full focus is on executing our internal measures and programs, like Evonik TaylorMate, like the organization of technology and infrastructure, or like our business optimization programs. So let me be very clear. I dare even say crystal clear. This means also that any kind of M&A is currently not three letters, one message, not on our agenda, not for this year and also not for the next year. Michael, why don't we go into more detail on one of these internal programs, for example, Evonik Taylor-Mate?

Sure, Christian. This is really a topic very high on our daily agenda these days. We are progressing well, have booked the full provision of 240 million euros this quarter, and are just about to start the third and last phase of the program. The implementation of the target organizations all across our teams and units. We will have the first savings already this year and then ramping up over the next three years. At the end of 2025, we will have realized quite significant accumulated savings of 200 million euros already. And from a cash perspective, the net savings of tailor-made coming through in the bottom line will be higher than the annual cash out in this and each of the upcoming three years. This means that the program will be net positive for our free cash flow year by year. This is a perfect transition of our free cash flow development. Just like in Q1, We have significantly exceeded our prior year's free cash flow in Q2 as well. In total, this is a swing of 500 million in free cash flow in the first six months. However, let me add one little caveat. Our cash generation this year will be more evenly distributed over the individual quarters. Last year, we had a weaker first, and a very strong second half of free cash flow. The weak environment and demand situation allowed us to reduce our networking capital quite drastically towards the end of the year. Luckily, the demand in our business has improved, which on the flip side also means less strong networking capital inflow in the second half of this year. Nevertheless, On a full year basis, we will again deliver a year-on-year higher free cash flow with hopefully less stress for the entire organization, leaving us more room to focus on the next optimization and efficiency topics. Jumping to our outlook, first on Q3 with me and then on the full year with Christian. The start in Q3 has been quite good. Very similar to the trends we have seen across Q2. Autobooks and volumes are still looking healthy in smart materials and specialty additives. Let's see if the latter one can deliver another strong quarter like Q2. Typically, there is a bit of seasonality in specialty additives over the summer months. What is for sure? Nutrition and care will be up sequentially, driven by higher volumes in animal nutrition after our shutdown and the typical H2 weighted seasonality in healthcare. Performance materials will be down sequentially. The other line should reflect our ongoing cost savings with the effect of bonus provisions as typically difficult predict at this stage. All in all, Q3 EBTA is expected to be on the pretty strong Q2 level.