Imcd Group Nv U/Adr

Hello and welcome to the IMCD NV full year 2022 results. My name is Caroline and I'll be your coordinator for today's event. Please note this call has been recorded and for the duration of the call, your lines will be on listen only mode. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star one on your telephone keypad to register your questions. If you require assistance at any point, please press star zero and you'll be connected to an operator. I will now hand over the call to your host Mr. Pete Wendersenke, the CEO, to begin today's conference. Thank you.

Thank you very much, Caroline. Good morning, everyone. As usual, I'm here with Hans Koyman, CFO, who will lead us through the results after my preliminary remarks, and then we are open to questions. The year 2022 has been very successful for IMCD. We added more than $1.1 billion to our revenue portfolio, and more than 180 million to our EBITDA compared to 2021 with a strong organic growth. This resulted in an EBITDA for the year of 555 million, a growth of 48%, most of it organic. To arrive at this result, we faced many challenges. Strong demand from customers, in particular in the first period of the year, price inflation, supply chain issues, product shortages, and allocations from suppliers. It forced us to take more stock than usual. Despite all this, we were able to maintain and even improve our margins. In certain countries, of course, we were not able to enter. In China, we were faced with severe lockdowns, in particular also in Q4. Nevertheless, we kept our momentum in growth, but also regarding acquisitions, and strengthened our position in all three regions. Our pipeline for the current year is quite promising. We expect to close the acquisition of Sunrise in China, which we announced late last year in Q1, which will give us a very nice position in the personal care market in China. In Q4, we saw customers destocking and we ourselves took the opportunity, in particular in Asia, to correct some too high stock levels which resulted in a temporary lower margin in this region. This is not structural and we see healthy growth already in Q1. All in all, we are satisfied with our performance and although we continue to think it is wise not to make predictions of future results. We remain quite positive about the current year. And with that, I will hand over to Hans for leading you through the 2022 results.

Pete, thanks for the introduction, and good morning, ladies and gentlemen. Earlier today, we published our annual report, an informative, colorful document about various aspects of IMCD's business model and a lot of details about our financial performance. Key financial figures from this annual report are summarized in the press release that we issued this morning, and in this call, I will quickly take you through these numbers before we move to Q&A. And I will start on page 10 of the presentation where you will see a Forex adjusted revenue increase of 28% and the growth profit increase of 31%. The increase in growth profit was a combination of 24% organic growth and 7% as a result of the first time inclusion of acquisitions. The acquisition growth is the balance of the four year impact of acquisitions done in 2021 and more recent acquisitions signed and closed in 2022. And for an overview of the 2022 acquisitions, I would like to refer to page seven and eight of this presentation. Gross profit in percentage of revenue increased with 0.6% to 24.9% in 2022. The segment Americas was the biggest contributor to both the absolute margin growth and the improved course margin percentage. The increase in average course margin percentage is the result of margin improvement initiatives, the usual changes in local market circumstances, product mix, currency fluctuations, and the impact of newly acquired businesses. Then for your convenience, we included a line on this slide with an operating EBITDA comparison. However, in a people organization like IMCD, with an asset-light business model, with outsourced logistics, a low fixed asset base, the development of EBITDA, shown in the next line, seems more relevant for us. Operating EBITDA increased 42% on the constant currency basis to 555 million. And this increase was a combination of 34% organic growth and 8% growth as a result of the first time inclusion of acquisitions. Operating EBITDA in percentage of revenue increased by 1.1% points from 10.9% in 2021 to 12% in 2022. Then the conversion margin calculated as operating EBITDA in percentage of gross profit increased from 44.7% last year to 48.3% in 2022. This 3.6% increase in conversion margin is the result of substantial organic EBITDA growth, whereby gross profit growth more than compensated own cost growth. Then on the next slide, slide 11, a few key figures from the P&Ls per operating segment. with a focus on gross margin and EBITDA development. Gross profit of EMEA in the first column increased 30% Forex adjusted, which is a combination of 28% organic growth and 2% acquisition growth. And this gross profit increase is the main driver of the 39% EBITDA increase in EMEA. And most of this gross margin and EBITDA growth, again, is organic. EBITDA margin increased with 1% to 12.3%, and the conversion margin increased with 2.7%. Both in absolute numbers and percentage-wise, we saw the biggest increase in gross profit and operating EBITDA in the Americas. Gross profit increased 35%, which is a combination of 27% organic growth and 8% as the result of the first-time inclusion of inclusion of the acquired companies. And this gross profit growth, combined with disciplined cost control, resulted in 52% growth of operating EBITDA and an increase of conversion margin with 5.8%. Then Asia Pacific, who had another growth year, whereby they realized 29% Forex-adjusted gross profit growth. This was a combination of 14% organic growth and 15% as a result of acquisitions. Operating EBITDA increased to 145 million, whereby the EBITDA margin and conversion margin both slightly decreased. And despite this small decrease, both ratios are still by far best in class and group. And then in the last column, you will find in the holding companies or non-operating companies, including the head office in Rotterdam and regional support offices in Singapore and the US. And the absolute amount of holding costs increased from 29 to 32 million. Holding costs as a percentage of total revenue decreased from 0.9% last year to 0.7% of revenue in 2022. Then on the next page, you will find the summary of the P&L lines from EBITDA to the net result for the period. A few general remarks, and I would like to start on the bottom half of this slide with amortization of intangible assets and related tax credits. These are non-cash cost items that relate to the amortization of supplier relations, distribution rights, and other intangibles. And the increase is mainly the result of the acquisitions done. Then the 11 million of non-recurring expenses. This includes, amongst others, the 6.5 million euro to cover the estimated financial impact of winding down the IMCD operations in Russia. Further, it includes costs related to successful and unsuccessful acquisition projects, some severance costs, related to one-off adjustments of organizations. And on this line, we also report a one-off income of about 3 million as a result of the sale of a warehouse building in Indonesia. A line lower, the 2 million non-recurring tax expenses in 2022 as the tax on the non-recurring income and expenses. Then the net finance cost and income I created a separate slide for that. On slide 13, a breakdown of the net finance cost adding up to $26 million, which is about $4 million more than previous year. And as you can see, this $4 million increase is a combination of $8 million higher interest cost related to our financing structure, and we have positive changes in the deferred considerations of $8 million and $4 million more negative currency exchange results. Higher interest costs on the financing structure is mainly the result of increasing interest rates during 2022, combined with, on average, a higher debt amount. And when looking at our today's net debt position, it's fair to say that our future exposure to interest rate fluctuations further reduced during 2022. At the moment, we have about 600 million of our actual debt position consist of corporate rated corporate bonds loans with an average fixed coupon just below 2.5%. Then the changes in deferred considerations. As you might remember, another $275 million of our net debt refers to deferred purchase price considerations, like the 30% for SIGNET. And the nominal values of these deferred considerations are discounted with a relatively low interest rate, triggering limited interest costs. And further on this line, we need to reflect changes of the expected value of the deferred considerations as a result of changes in expected financial performance, these targets. Then a summary of our tax expenses, always a bit more complicated in an international environment, and the reported increase of our regular tax expenses is 45 million. And you might remember as a guidance for our tax cost, we indicated to you to expect a blended tax rate in the range of somewhere between 24 and 28% of our result before tax, calculated as EBITDA minus finance and non-recurring cost. As you will notice in the summary on the bottom of this page, indicates that IMCD's blended tax rate in 2022 was 25.2%, which is slightly above 2021 level, but still at the low end of the guidance that we gave to you. 2022 tax cash out was 130 million compared to 84 million in 2021. And I think I would like to refer to the annual report for further details on tax and tax calculations. Then a slide about the calculation of our cash earnings per share and our dividend proposal. And as you can see on this slide, we report €6.78 cash earnings per share in 2022, which is a 46% increase compared to 2021. At the upcoming AGM in April, we will propose a dividend of €2.37 in cash per share, which means an increase of 46% compared to last year. As you might remember, the company has a dividend policy with a target annual dividend in the range of 25 to 35% of adjusted net income. And this dividend proposal leads to a payout ratio of 35%, which is at the top of the range that we set ourselves as a policy. Since our listing in 2014, we increased our dividend from 20 cents in 2014 to the proposed 2 euro 37 in 2022, which means a growth kegger of 36% during the period that we are listed on the stock market. Then a few words about the balance sheet. Property, plant and equipment slightly increased indicated before, as a result of the asset-light business model still relatively low compared to the size of our business. Then right-of-use assets is the result of the application of IFRS 16, and so this $83 million reflects capitalized operational leases. And the big amount of intangible assets and related deferred tax liabilities. These are mainly a result of the acquisitions made and our history as private equity owned company. Then there is a growing equity position of close to 1.7 billion, covering 62% of capital employed. And the increase in 2022 is amongst others the result of the addition of the net profit for the year of 330 million. Other comprehensive income added six million and there was a minus for dividend payments in cash of 92 million last year then the other two balance sheet lines working capital on the next slide a summary of the absolute amount of the various working capital components and these amounts translated in days of revenue and as you can see the absolute amount of working capital increased 158 million. And this increase is a combination of 48 million additional working capital related to acquisitions in 2021. 21 million as a result of exchange rate differences when calculated this on year and balance sheet positions. And further we reported an operational increase of around about 88 million. Towards the end of 2022, working capital days came back to more normal levels, also as indicated by this, whereby especially stock and debt-to-days normalized. And you might remember that we finished 2021 with strong sales in December and relatively high stock positions due to customers at that moment in time anticipating supply changes, disruptions resulting in relatively high working capital days at the end of last year. Then a summary of our net debt position. At the end of 2022, we report a bit more than a billion net debt, which means an increase of 87 billion compared to the end of 2021. Apart from the usual bond loan, shield shine and bank loans, net debts includes 86 million of operational lease liabilities, Further in the net depth, we reported what I mentioned before, the $275 million of deferred considerations, and most of these deferred considerations relate to the remaining 30% of significant that we will buy and pay in respectively 2024 and 2025. On the same page, an overview of the maturity profile of our debt structure as per December 2022. The 200 million bridge facility and the 600 million revolver facility columns reflect the maximum amount that we can use as per, and not the amount that we draw, which is much lower, of course. Reported leverage at the end of 2022 was 1.7 times EBITDA, and the leverage ratio calculated based on the definitions used in the IMCD loan documentation was 1.2 times EBITDA, which was well below the required maximum, as said in the loan documentation. Then I would like to finish with a summary of the cash flow overview on page 19. And as you can see, the absolute amount of free cash flow in 2022 was 435 million. by the cash conversion ratio increased to 77% and this increase in conversion ratio is a combination of substantially higher operating EBITDA combined with a lower investment in working capital compared to last year. And then last but not least, On the last slide, you will find the outlook in which we, amongst others, indicate that IMCD sees interesting opportunities to increase its global footprint, expand its product portfolio both organically and by acquisitions in 2023. So far, a summary of our 2022 figures, and Pieter and myself are happy to answer any questions you may have. So back to the operator.

Caroline?

Yes, sure. Thank you. As a reminder, if you would like to ask a question, please signal by pressing star 1 on your telephone keypad. We will take the first question from . The line is open now. Please go ahead.

Hi, good morning. Thank you for taking my questions, please. A couple from me. Please, can you give us some color on how do you see gross margins evolving in 2023 versus 2022? Historically, it's been quite stable, and that's been the track record for you generally in specialty ingredients distribution. Is there any reason why that shouldn't be the case for 2023 as well? And how do you think about wage inflation, I suppose, in 2023, given the inflation that we're seeing in Europe at this point in time? And just a quick one. I think you mentioned in APAC that you had seen some stock correction that you took. Was that in Q4? Any color on the magnitude of it and how the underlying trends were?

Thank you. Yeah, thank you very much for your questions. Gross margin developments. It's always, of course, a little bit difficult to predict, but we feel that we, as you saw in 2022, of course, our gross margin percentage increased. We will do everything, of course, to keep that level. And we see positive signs that we will be able to do that as well in 2023. Wage inflation. Yes, we have been, of course, confronted throughout the world with strong inflation generally, and that has of course also translated in us supporting our staff with increased wages. So certainly our cost base, and I think that goes for everybody, will go up. I want to emphasize again, of course, that our people who did a tremendous job in 2022, despite all the difficulties, are key for us, belong to us, also benefit, of course, from the growth significant growth that we made, and that translates, of course, also increased wages. But that, of course, all within the boundaries of our growth goals, and so we remain optimistic that we remained in these bounds. Then about the stock accrual, I'm not sure if we're going to totally disclose.

No, but perhaps it's good to say that if you, that's one of the beauties of an annual report, that you need to disclose a lot of additional information. So I can freely talk about the fact that during 2022, and mainly in the last quarter, we added in total during the year an amount of $14 million to our stock provision. and it's fair to say that a substantial amount of that $14 million has been booked in the last quarter. And that is an amount that is higher than what we typically did in the years before, where we always moved around the number somewhere between roughly $2 and $6 million.

I understand. Thank you.

Thank you. We will take the next question from Matthew Yates from Bank of America. The line is open now. Please go ahead.

Hey, good morning, gentlemen. I know you never want to give specific guidance, which is understandable given the short term nature of the order book. But you did say in your remarks that you saw healthy growth in Q1. I guess I'm a bit surprised at that, given the inventory stats you're showing on slide 17 about having six fewer days. But was your comment a reference with regards to growth about revenue volumes or profits? And are you talking here organically or also including acquisitions that you've made? So if I put it really bluntly, last year you did 140 million a day in Q1. Are you saying that your expectation is to be able to grow that number? Thank you.

Well, Matthew, thank you for your question. Of course, we do not give, let's say, predictions. I said, though, healthy growth. If I talk about growth, I always talk about profit because there's nothing else that matters in the end and cash flow. But it is important to understand that we look at our business, let's say, always on a longer term and not on a quarter-by-quarter basis. And if you look at the underlying trends, then the underlying trends remain very, very strong. So prices remain high. so generally I would say we see for Q1 a bit early but we see in Q1 as I said healthy growth and healthy growth means what it means okay thank you and Hans maybe for you apologies if it's just me not understanding the deferred consideration essentially being taken down by 7 million is that because one of the assets

is not developing in the way you expected, or was that a function of changing the discount rate on the provision?

Matthew, it is a combination, as you could see in the annual report, is that it proved better than expected performance on one of the earn-out obligations that we had. And then the funny thing on the IFRS, if the target is doing better than what we expected, And then you need to book a loss to increase the deferred consideration. And on one of the other assets, we saw the opposite. So then we had to reduce the forecast for the cost price of the remaining 30%. And that's exactly the reason that we have this protection mechanism in it. And because you reduce then the forecast, you need to book a profit because you release part of the earn-out obligation that you estimated at the start of the process.

And that asset that is perhaps not doing as well, can you explain some of the reasons as to why that is? Is that the way that the business is performing or the market environment? What's changed in your expectation?

Yeah, it is.

It is a combination of basically, well, when we buy these businesses and we need to estimate the future profitability, basically we do that on the basis of the guidance that sellers give to us for the future profitability. And if that is a very aggressive guidance, we follow that aggressive guidance in calculating the earn-out obligation. And then, yeah, if they don't make their own guidance, then it automatically reduces the price that we need to pay for the remaining, in this case, 30%. Or the opposite, if they outperform what they indicated themselves, and then you need to further add to your deferred consideration. And these changes, unfortunately, flow through the P&L.

Okay. Next question. Hello.

Thank you. We will take the next question from line Mattias Manhout from CarePlay Showy. The line is open now. Please go ahead.

Yeah, hello. Good morning. Thank you for taking my questions, too, if I may. Maybe on the M&A pipeline, Pete, you've commented you see healthy opportunities. I also noted that you installed a bridge financing facility, so could you maybe elaborate a little bit on these targets? Are these just add-on targets, or are you also contemplating somewhat larger scale deals and could you maybe elaborate in what kind of regions you're looking for and then second question is actually on your people as you already rightly said people it remains a people business you now have had two years of very strong performance which probably has above average variable pay Also looking at competition, which is still allocating a lot of capital and probably also allocating a lot of capital to people. Do you think there is a risk of accelerated turnover given that growth prospects are maybe slightly less rosy than they have been in the last two years? And what can you do to offset this risk?

Yeah, thank you. On the M&A pipeline, of course, it's always difficult to specify too much because you never know in the end whether you succeed because these negotiations in the end are only finished with the signature. But yes, there are some larger ones, there are some add-on ones, and also different regions whereby emphasis is on Asia, on Latin, the Americas, so good opportunities that we see. That, of course, remains part of the business model, and we work very hard to land a few successful ones. The second question I didn't get, is that something you want to address? I didn't totally understand what you were asking. Could you repeat that?

Yeah, sure. As you said, human capital is quite important, so your people are quite important. But, of course, you have had two years of of very high performance and probably also high variable pay. On the other hand, I think competition is still investing a lot in people. So do you think that with less rosy growth prospects and probably less pay prospects in terms of variable pay, is there an increased risk of heightened turnover among your people? And what can you do to offset such a risk?

That's a good question. Of course, we live also in a competitive world. I think people are tied to the company in various ways. One is culture. Do they really like to work? in an environment that gives them a lot of freedom to operate, gives them a lot of international opportunities. That's one. Of course, we always have emphasized that. And second is, of course, that we pay competitively, and we will ensure that we do that. But the competition for talent has been going on for a very long time, so we're confident that we can keep our talent in-house.

All right. Thank you.

Thank you. We will take the next question from line Chetan Udhasi from JPMorgan. The line is open now. Please go ahead.

Yeah, hi. Can you hear me?

Yes.

Yeah, hi. Pete, you were talking, just stepping back a little bit and maybe just wanting to check my math. If I calculated in Q4, at least based on the numbers you guys gave in first half and fully organic EBITDA growth, I calculated Q4 something like 4%, which does seem like a sharp slowdown from what we saw in the first three quarters of last year. And I'm just trying to tie this back to the comments you made in the last conference call that you saw the demand increase was still very healthy and you're still saying the same thing for Q1. So I'm just trying to tie those numbers together. If trends are still very strong, why did we see that sharp deceleration in fourth quarter growth? And just a second question related to that is we've seen this time around not only are industrial suppliers of yourself are are seeing a slowdown, but also more the life sciences suppliers, more on the consumer side, are seeing slowdown. So is that something you don't see in your sort of customer patterns, even though your suppliers might be seeing quite a bit of destocking? Thank you.

Yeah, also Q4, I think part of the reason we explained has something to do with the provisions and accruals that we took on stock.

And the other part, let's face it, that Q4 last year was a very strong quarter with a very strong December month. And if you then still grow our gross margin organically double digits in Q4, I think should still consider this as a pretty strong quarter. So it's also the fact that we grew organically during the year more than, what is it, 26% on the gross margin line is not the new normal going forward. I think that is something that we have indicated a couple of times during the previous call. But growing double digits compared to a very strong last quarter, last year, I think is still quite a good outcome. And even if you then take into account one of the items that we mentioned before is that we also took the opportunity to clean up here and there some stock positions and take some additional provisions there.

On the second question, I would say that we see on the life science part very strong growth continued in all three segments. And on the industrial supply part, we see that prices remain very stable. And of course, a little bit of softening of demand, but that is already something that took place in the, and it differs also per region, but took already place in the course of 2022. But by and large, we still see in both segments, with an emphasis on the life science, we see good growth.

So can I check the inventory write-off was included in the adjusted EBITDA number? So it's not sort of taken off below that line.

It's part of gross profit.

Okay. And, you know, usually, like you said, you know, the inventory adjustments are not so materials. So what prompted this somewhat bigger write-off than usual? I guess, you know, it's just a reflection of how the prices are moving these days up and down. But just curious if there was anything particular that prompted that change.

Yeah, portion, I would say. And also... You know, supply lines have been very, very long. So in certain regions, before goods arrive, it takes months. And sometimes then circumstances change. So we have been cautioned and took the opportunity to also adapt to the new situation with shorter supply lines.

Understood. Thank you.

Thank you. We will take the next question from line Rikin Patil from BNPP.

Yeah, hi. Thanks for taking my questions. I just had one left. There's been more consolidation within the ingredient space over the past six months. I'm just curious to hear what impact that could have on supplier agreements within the chemical distribution market, and whether you see this as a positive or a negative for IMCD.

Yeah, that's a good question. It's, of course, a question that's a part of our business model, which we, how would I say, cope with. throughout our history, namely to align with those suppliers, those manufacturers that we feel are the winners in the industry. I think that is, if you look at the different competitors, but also business models, this has always been a very, very strong feature of IMCD. I think our supplier base is extremely strong. Yes, consolidation going on in the industry, that continues, but we feel that not always, but often we are on the right side of that. Part of the strategy is to to align with the strong ones to regionalize, if possible, with these winners or even to globalize with them. And that is what the strategy is, the purpose is, and we feel that we are on a very, very good track there. Thank you.

We will take the next question from line from ING.

Yeah, good morning, everyone. A couple of questions, maybe on the Far East. So as I understand, the pressure on the growth margin was related to what? Is it also related to the inventory? Is it possible to give some more idea about the size of that effect in the Far East in terms of, I would say, in terms of growth margin, what's exactly happening there? And then the destocking, how large was that effect in the fourth quarter in your view? Have you a good view of that? And my final question is about the situation in Turkey, because I think it's, yeah, I do not believe that, yeah, in terms of size, it's not very big, but still, the devastating earthquake could have an impact on your operations there.

Yeah. Yes, thank you very much. To start with the last question, of course, first of all, it's a very, very sad situation because it also affected relatives of our employees in Istanbul. Turkey is an important country for us. It's a very successful part of our European business and not small. Yeah, we have to see, of course, we have customers also in that region that will be affected. Nevertheless, let's say the economic activity in Turkey of course concentrates mainly around Istanbul and certain pockets elsewhere, not so much in the eastern part of the country. Then the first question I think concerned again, I think we gave the number.

Yeah, but I think your question is about do we specify that per segment and region? The answer is no. On the other hand, the fact that we mention it specifically also indicates that if you would normalize for the addition in this provision, that margins would have been at least stable compared to last year.

And that is also why I specifically said it in my opening remarks that Asia has been an important region for this particular element. All this talking generally That is extremely difficult to say because of the, let's say, the very, very diverse nature of our customer base, both in business segments but also in regions. I must say, I need to emphasize again that if you look back at the first six months of 2022 and maybe even longer, many customers were desperate to get material and also sometimes then overstocked. So I guess that normalized in the course of the second half of 2022. How much that has been, nobody can know that exactly.

Okay, thanks.

Thank you. I'll take the next question from the line. Hen Korman from One Land Short Campaign. The line is open now, please go.

Hi, good morning, Pete and Hans. Thank you for the presentation. Thank you for taking my questions. I do still have a couple, a couple of follow-ups on what has already been discussed. Yeah, on the destocking trend, you already commented on this, that you've seen it throughout the fourth quarter. But at the same time, you sound quite a bit quite positive about the developments here today across your end market. So should we conclude that the stocking trends, which has been sort of a big fear in the market, in the distribution market for analysts and investors, should we conclude that that did not have the profound effect, negative effect that some people expected? That's my first question. I'll take them one by one.

Yeah. First of all, I mean, macroeconomically, I mean, I think the situation looks a little bit more positive, as we all know, than maybe a couple of months ago when central banks predicted recessions. So that seems to become more optimistic. And yeah, at a certain stage, of course, destocking is complete, so to say, and people need stock again. So again, I cannot totally And perhaps the levels remain a little bit lower than last year, but nevertheless, we see good demand and also stable prices. So that is caused by optimism that I started with.

Right, that's very clear. Second question is on your gross margins. You state again in the call that you will do your utmost best to keep gross profit margin levels stable in 2023. But are we talking about the, like as a base rate, are we talking about the full year 22 in which your GP margins were about 25% or are we talking Q4 in which your GP margins were 24%? Just to get a little bit better feeling on that. Thank you.

We said, of course, that it's a difficult one for me to answer without giving you too much... of an indication also very difficult for me to predict for the whole year. But what I could say is that we not for nothing say that let's say what happened in Q4 and particularly in Asia is in our opinion an incident. So we look at the higher end of what you just mentioned.

Okay. And then also coming back to Asia, Can you give some more color on what you've seen in your business in Asia on the back of the reopening of the Chinese economy in Q1? Has there been a major tailwind for you?

Yeah, we have been affected, of course, in China, in particular also with the severe lockdowns also in the Shanghai region. We see now some positive developments. It also allows us, of course, to go back there. And so we expect positive development also in China. at large in the rest of Asia because of the relaxation of all these restrictions because of COVID. So let's see how the Chinese economy develops, but so far we see positive signs.

Okay, clear. Last question is on your balance sheet. Under your covenant calculation, net leverage now stands at 1.2 times. Of course, acquisitions have the highest priority on your strategic agenda, but at the same time, the balance sheet has delivered quite significantly over the last years. And now you also decide to increase your dividends by almost 50% in line with your payout policy. But at what leverage would you, let's say, consider raising the dividend payout ratio or maybe consider a share buyback if you, let's say, observe that you cannot purchase enough acquisitions to let's say avoid further delivering of your balance sheet

Yeah, well, I don't want to speculate about that. I hope that we do not reach that moment very quickly, in particular share buybacks. I'm very optimistic that we have enough opportunities to also use our balance sheet in the right way. And what I indicated also is that we have a healthy pipeline of acquisitions. And raising the payout percentage is something that is now not on the agenda. So I hope that answers your question.

Yeah, that's very clear. Thank you. And those were my questions.

Thank you. We will take the last question from line from Goldman Sachs. The line is open now. Please go ahead.

Hi, thank you. I just had a couple more questions, please. Just on the M&A policy, you've historically added maybe 9%, 10% growth from M&A, but that was in the era of low interest rates. Given the higher interest rate environment that we are in today, has that made you a bit more cautious on the amount of M&A that you plan to do or the multiples that you're willing to pay for these deals, please? And the second question is just a medium-term question. It feels as though the landscape is changing on chemical manufacturing generally since the war last year, which has changed the cost structure for chemical manufacturing. So how do you see distributors such as yourself having to adapt to this changing environment? Do you need to maybe source a bit more from U.S. and APAC? Do you see yourself playing a bigger role in the sourcing because the manufacturing has reduced maybe in Europe? Thank you.

I think we have never let our business model and our strategy determine whether interest rates are a bit lower or a bit higher. Of course, it could have an effect on multiples. Let's say multiples are also determined by the quality of the business, the competition around it, etc. So we remain vigilant in terms of not paying too much, but I don't think it will be affected a lot with the current interest rates. Your second question, basically on Europe and the chemical industry, is a very valid one. We have to see how that develops. As you know, we have suppliers from all over the world, but also, of course, a significant number from Germany, but the German chemical industry also produces outside of Germany, in the US and in Asia. I can only hope that Europe understands the importance of the chemical industry for Europe and that is facilitated in the right way. But it is clear that energy plays a big role in that and energy costs. So we have to see over time. It's too early to tell now what trend there is. But over time, yeah, it could very well be, of course, that the U.S. chemical industry and the Asian chemical industry will benefit from the weakness in Europe. But I think we have hatched our bets there by having a wide network of suppliers. So I hope that answers your question.

Yes, it does. Thank you. Thank you. It appears no further questions.

All right. Thank you very much, Caroline. And people.

Thank you for joining today's call. You may now disconnect.