Lanxess Ag Ord

Hello and welcome to the Lanxess Q2 2024 Results Investor Relations Call. Throughout the call, all participants will be in a listen-only mode. And afterwards, there will be a question and answer session. Please note, this call is being recorded. Today, I am pleased to present Mr. Andre Simon, Head of Investor Relations. Please begin your meeting.

Thank you very much, Lara, and a warm welcome to everybody to our Q2 conference call from my end as well. As always, we begin by asking you to take notice of our safe harbor statements. And with me today is our CEO, Matthias Sachert, and our CFO, Oliver Stratmann. Matthias will start with a short presentation, and then we will open the floor for your questions. With that, I'm happy to hand over to Matthias.

Please go ahead. Thank you, André, and a warm welcome from my side to all of you participating to our Q2 results call. I will start the presentation on page four on the slide deck that we have distributed this morning. Here, comments on sales. You see that overall the market remains soft, but we have seen a slight sequential improvement versus first quarter. On the profitability side, we went out with a pre-announcement and confirmed the numbers today. A steep increase, 69 percentage points, 69% vis-à-vis last year's quarter, but clearly this is not sufficient, but it's a strong sequential improvement. Please take note of the fact that We are nicely advancing on our forward restructuring program. But last year, we have sweated out, despite a soft market, around about 400 million of inventories. So that was driving utilization exceptionally low last year. And in Q2, we basically produced according to demand. And these two factors have been the primary drivers for a strong EBITDA improvement vis-a-vis last year and also versus Q1. We clearly conveyed to you that we focus on cash flow in order to further reduce leverage, and this is driving, therefore, the free cash flow upwards and forwards. I would like to be more explicit here, and I move to page five. When we communicated to you last November the direction we take, we clearly said EBITDA will move upwards, and we are working on this as we speak. So 24 should be just the first step in this direction. 181 definitely is not... where we would like to stay. We have to clearly come back to the 200, 250 million going forward in the next few years, and we are doing everything to make that happen. As far as exceptionals are concerned, we stated very clearly that we will move down year on year. We go double digit this year, and then we should further decrease and make a bigger step further into that direction of our target and 26 capex we are still having a high amount of underutilized assets therefore we can hear for 24 lower our capex guidance further to 330 and most likely we will remain in the 300 range also for 2025 and then gradually move into an area of 350 to 400. On working capital, it remains definitely something that we will pursue further. The assumption is, I think, a reasonable one to assume that working capital to sales will go down further in Q3 and Q4. And as far as interest is concerned, for the next year and this year, definitely you can assume that we will also go into the direction of the guided number that we show on the slides. So cash flow, if all areas run according to plan, you should not be surprised that our cash flow goes strong northwards in the forthcoming years. Page number six and seven show you the sequential improvement. It's some transparency that we've started to give you in the last two quarters, so also today we would like to shed more light on where we have improved vis-a-vis Q1. And here you see on the first slide that consumer protection despite a really soft agro industry, made good improvements. For Q3, Q4, please be a little bit softer in your absolute expectation because we see difference to our statement in May that the agro industry is not going to come back in course of 24. So we expect here that also Zaltigo in Q3 and q4 will have a very soft momentum as a matter of fact in q3 we will further reduce capacities in our arc space because we see that simply the demand by the arc players is being reduced the stocking has been a theme that will continue additives comes also comes back In two of the three business units, construction remains soft, hurting our big business units' polymer additives. And advanced intermediates has been hit hard last year. It's rebounding, but definitely not back to levels that you can expect from this business. When we move to slide number seven, we show all other segments, and I know that this is an area that is being followed by... our analysts, so we try to give you as much as possible transparency here as well. Please take note of the fact that this segment is composed of our overhead costs, where we have massively advanced, of course, but a key driver for the improvement is our urethane business that is reported in the segments. Margins are strong, above 20%, and will improve further. And as far as Our operational business is concerned. It's a project-driven business where our pipeline is filling up further and further. And there has been some events or one event that we have been waiting for over the last two years, but now it has been decided. In March, the European Commission has taken a firm action, a firm decision on a directive which is going to ramp up from 26 onwards and puts the hurdles high to change here certain applications that are being used where we have market leading positions and the technology is the best in town. So this is a game changer. We are looking at it. We are assessing it because we see that customers are now moving. And therefore, this is a clear positive. If we move to page number eight, you see how we look at the markets going forward or at our segments going forward. Consumer protection this year would be at best at the level of 2023. This segment was the most stable in 23. It should grow further 25 onwards, but the arc softness in 2024 holds this business or this division back from growing this year but our view is that 2025 the stocking in agro will finish and then the segment will strive back to further growth. Additives here despite construction has all reasons to improve versus previous year and of course advanced intermediates is not returning to the normal profitability level, but strongly rebound based on higher utilization and quite strong cost-cutting improvements. So with this, I move to page number nine to our guidance. So despite a softer view on the agro industry, we maintain our guidance given in May, so 10 to 20%. EBITDA improvement versus previous year. As far as Q3 and Q4 is concerned, we consider Q3 to be at best at Q2 levels. We have done reasonably well. All indicators convey that Q3 momentum in the industry is softening. The summer quarter with quite a number of shutdowns, planned shutdowns in August, which has been always the pattern in the industry. We don't consider that this would be different. And as far as Q4 is concerned, it has been always the weakest quarter in chemicals. And for us, in light of the fact that Q1 was, for reasons that we have explained, clear outlier to the low ends. This year will be different. I clearly think and assume that Q4 will be better than Q1, but we'll go back to a softer seasonal ending of the year. This is everything that we would like to convey to you and I open up the call for your questions.