Evonik Inds Ag Unsp/Adr

Thanks a lot and thanks everybody for joining our call today on such short notice. We've quite some news for you this afternoon and expect quite a few questions from you. So having said this, let's get right into it. To start, I would like to highlight three points. First, we've achieved our revised outlook for 2025. It was a tough finish in the last quarter, but we made it. Our EBITDA in the fourth quarter was solid enough to reach around 1.9 billion euros for the full year and our cash generation was more than just solid. We delivered almost 700 million euros of free cash flow, resulting in a 37 cash conversion rate, making the upper half of our guidance corridor. This demonstrates once more, no matter what the environment, we deliver on cash. Last year was not a great year, for sure. But given the environment, I would say we came away with a black eye. So, having said so, let's look ahead from there. And second, for 2026, we aim for broadly stable earnings at the midpoint of our guidance range, in an environment which remains tough. With normalizing the signing prices, delivering stable earnings, I guess, is a good thing. Klaus will elaborate further on this in a second. And third, the consistent execution of our strategy is, in this environment where challenges are everywhere, as crucial as never before. To be able to do this, we need more financial flexibility. This is why we present a new dividend policy today. which combines a still attractive dividend for investors with more financial flexibility for us. The support from IG Foundation on this change demonstrates their commitment to our success. More on this at the end of our prepared remarks. Before, ladies and gentlemen, I let Klaus dive into the more operational topics, I would like to make a case for Evonik. Some of you would ask, why invest in us? Why invest given all the headwinds for chemicals? It is true that right now we face structural challenges and weak demand at the same time. This is of course not a good combination, but already in these challenging times, we are strong industry-leading cash generator. That is why, despite investing and despite paying attractive dividend our leverage is moderate. This enables us to act from a position of strength. We, ladies and gentlemen, we do control our own destiny. From this relatively better starting point, we have significant potential to improve in the years to come. And we will realize this potential. We will reduce costs further. Our headcount will be another 1,000 lower at the end of this year, or better, the end of last year, with exciting applications and attractive growth niches, such as for our batteries or drones. We still have significant portfolio optimization potential that lies within Oxeno, that lies within Zenect, and more. And last but not least, as just mentioned, will adopt a more balanced capital allocation strategy. This means, in other words, in any kind of environment, we'll improve in the years to come and then we'll generate a ROSI of around 11%. I have no doubts about this. By the way, ROSI will become part of our board compensation with the approval at the upcoming AGM in June. This will help us to stay more disciplined and to align our interests and the interests of our investors. With that, I do hand over to Klaus.

Yeah, thank you, Christian, and to all the people listening to us online, a very warm welcome from my side as well. Before I go into the financial outlook, let's run through the puts and takes that are behind the numbers. On the side of the headwinds, we expect the demand environment to remain weak. We don't think, we don't bet on a recovery. I think that's the best thing to do at the current moment in time. So in absence of a major demand recovery, competitions, especially from Asia, will stay tough. Of course, these are not Evonik-specific headwinds. Evonik-specific is in fact that After two strong years, we now see a normalization in the methionine prices. I think this is well anticipated by the capital market. However, we will be partly offsetting these lower margins by our volumes, and after a series of intense maintenance shutdowns last year, we have more capacity. and a lower cost base in the US once our backward integration is up and running, and this is the case from the mid of this year. Increasing support will come for us from our self-help measures, with Evonik tailor-made and business optimization programs in full swing. On top, we will introduce short-term contingencies again, which we already had in the year 2023 and 2024. Also, we are expecting lower energy costs, mainly from regulation changes in Germany. That brings me to our guidance for the adjusted EBITDA in 2026, which we expect to be between 1.7 and 2 billion euros. The base assumption for outlook is the aforementioned positives and negatives should largely balance out, and leaving us at the midpoint of our guidance range with, I can say, broadly stable earnings versus last year. In custom solutions, we expect the year of slight growth, both in terms of volumes and earnings. In advanced technologies, we anticipate slightly lower earnings, mainly driven by the normalization of the methionine prices and less support from one-time heat takes, which we had last year. So the interesting question certainly is what are we seeing for quarter one, 2026? It's very early in the year, of course, and nevertheless, of course, we looked into this very, very intensively before we gave you this guidance range. So far, we see little change in Q1. So Q1 is more or less currently seen by us on the level of Q3 2025, in which we recorded an adjusted EBTA of around 450 million euros. So I guess this will be a good proxy for the start into the year, suggesting that our business in total is currently relatively stable. However, if all quarters continue on this level, and even accounting for Q4 seasonality, we will be able to meet our outlook. But to reach the midpoint of our guidance, we need a small burnings improvement. And we believe this is realistic, not because we are betting on any kind of support from the general environment, but because of specific elements in our business. So I'll give you some examples. Second half of healthcare is always stronger than the first half. And we have seen this last year in a very, very strong flow of healthcare that this is the case. Then we expect a stronger catalyst business in the second half. partly because it's a normal seasonality, but also mainly because of change in, let's call it regulations, because there's regulations out for the use of biodiesel in Europe as well as in the United States, which has not been put into reality yet, and we expect that this is going to happen certainly in the second half of this year. We have a business where we believe there will be an improvement compared to Q1. And we have the second half in the year supported, let's say, margin improvement in our Messianine business, because our backward integration in in the US is going online. Last but not least, also, we have a new hydrogen peroxide plant, which we are starting in the this year in China. So just give you a few examples. I could also even mention some more. So this gives us the confidence for the guidance level we gave to you.

This brings me back to Christian. Thanks a lot, Klaus. Ladies and gentlemen, in this tough environment and facing clearly weaker results than we would like to see, the execution of our long-term strategy is more important than ever. We need both growth and cost optimization to be successful in the long run. Realizing growth is obviously more difficult than we thought one year ago. We are ramping up new capacities, as Klaus has already mentioned, and attractive products and end markets. These are making a contribution, albeit a smaller one for now. We're complementing these with more focus on growth opportunities in attractive and markets. So we have interesting solutions, for example, for drones, for data centers, and for consumer electronics. I can hear you. I can hear your skeptical question, these businesses are too small, Kullmann, to make a difference. Yes, they are small today. But this is how innovation or new application always starts in chemicals. For example, think about our Veramaris businesses. So it takes time to build sales and earnings. But that does not mean we should not be doing it because the opportunities we could have and we could benefit from are really attractive. The second pillar for future success, obviously, are self-helping measures. ranking from Evonik TaylorMate to various business optimizations and our procurement optimization. Here we have a lot of things at hand. All of these are pretty well on track, visible in the clear headcount reduction of more than 850 in the last year. And another 1,000 as part of these programs are to be reduced in this year. Unfortunately, The benefits of our cost reduction programs are partly eaten up by fixed cost increases. On average, these are around 4% a year, or in other words, around 200 million euros. In 2025, especially due to strong wage inflation in Germany, the increase was higher than normal. We were able to offset this higher inflation and expect that In 2026, the increase will be definitely lower. We'll also bring back short-term contingency measures, such as travel restrictions or training and communication spending reductions. Here, I dare really say we are used to it, because we have proved to be successful in the years 2023 and 2024, and it is now urgent need again. In total, this means that more savings will come to the bottom line in 2026 compared to 2025. Before we jump into your question, let me please close the presentation with the details of our new proposed dividend policy. First of all, in principle, our priorities of cash allocation remain unchanged. We focus on capex, we focus on dividend, and deleveraging in that order. Note that we will still rule out M&A until 2027. In the past, we had a stable, very high dividend payout. This was favorable for and rewarded by mostly the REG Foundation. However, a rigid dividend is not adequate in this tough market environment and for a company in transformation. So we are switching to a dividend which is tied to the financial performance of the company. This enables us, first, the long-term sustainability of our dividend. Second, more financial flexibility for us to reach our strategic targets and goals. investors to participate in future growth. And we will roll out a new policy in two steps. At the upcoming AGM in early June, we will propose to pay one euro per share for last year. We offer this as a smooth transition from the previously fixed dividend to the performance-oriented dividend. This is still an outstanding dividend yield of around 7% today. From the AGM 2027 onwards, we will propose to pay out 40 to 60% of the adjusted net income. For this year, this would have resulted, sorry, for last year, excuse me, for last year, this would have resulted in a dividend between 54 and 82 cents per share. The range we provide for the payout ratio allows us to provide a good degree of dividend continuity and reliability in Euro terms. That means we aim at a higher payout ratio in years of weaker financial performance and vice versa. So obviously right now, payout would be rather 60%. At current share price levels, this would imply a yield of still around And let me stress again, the support from the REG Foundation on this change demonstrates the commitment to our success. Thanks a lot for your attention, and now we are happy to take your questions.