Lanxess Ag Ord

Good day and thank you for standing by. Welcome to the Lanxess Aggie Fall Year 2024 Results Webcast and Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 and 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 and 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, André Simon, Head of Investor Relations. Please go ahead, sir.

Thank you very much, Sharon, and a warm welcome to everybody to our Q4 Fulia 24 conference call from my side 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 Serrat, and our CFO, Oliver Stratner. Matthias will start with a short presentation and then we will open the floor for your questions. And with that, I'm happy to hand over to Matthias. Please go ahead.

Thank you so much and welcome to all of you to our fourth quarter conference call. I start the presentation on page four and give a summary on how we look at 2024. All in all, it was a challenging year. Markets have not been benign. But due to our successful cost savings program called Forward, and due to the acceleration in the implementation process, we were able to get more savings implemented in course of the last 12 months. And this definitely supported the increase in profitability. Different to 2023, when we massively reduced working capital, despite having consequently negative impacts on the utilization. We were able in 2024 to again put more emphasis on cash flow, but profitability increased, so the higher utilization contributed to profitability improvement as well. Oliver and I stated very clearly at the outset of 24 that we will again deliver on cash flow and focus on further debt reduction. And I think we clearly can state we walked the talk. Solitary cash flow despite still modest profitability. By the way, we also secured long-term financing with a new sustainability linked revolving credit facility maturing in five years from now. What I'm delighted to confirm today that our portfolio transformation as far as focusing on chemicals and letting go of polymers is accelerating as well. We have now received all clearance from all global institutions and therefore can close the transaction in course of April this year. year. So here, we are also faster than originally communicated. The cash proceeds that we will get in April will be used to immediately be leveraging. Noteworthy, however, also that we had to fund our restructuring program forward. So we had cash outs in course of 24. And all in all, we have to state that macroeconomic weak demands is clearly visible in 24, and we only see a very modest improvement in course of 25. Noteworthy also, we were faced or confronted with a massive destocking in the agro industry in 24. Our assumption is that destocking is no longer a theme for our industries, including agro in 25, thus some modest volume improvement should become visible. Let's turn our attention to page number five here, the headline numbers. EBITDA is up 20%. We guided at the outset of 24 for an improvement of 10 to 20%. 12 months ago, this guidance was perceived as somewhat ambitious. And I think we can now clearly say that our guidance at that point in time was the right one. Free cash flow, I mean, we had through the entire year 24 ups and downs on a quarterly basis on free cash flow, which is pretty normal, but we clearly stated our focus will be on either improving cash flow or keeping the cash flow at the same level or improved level than 23 based on improvements on operational performance but if we can achieve a positive free cash flow we will do our utmost to get there. As far as safety performance is concerned we can clearly state that we are here top notch in the European industry with 0.6 as far as MAQ is concerned we achieve here a clear top ranking. And this is, by the way, the third time in a row. As far as financial debt is concerned, another decrease of roughly 100 million, so minus five percentage points. So you clearly see we walk the talk. If you look at 2025 with the cash proceeds coming in from the Eurothanes transaction, we enter back into good territories as far as financial leverage is concerned. Now I move to page number six. We know very clearly that 21-22 were not satisfactory at all as far as cash flow generation is concerned. We clearly stress here the reasons behind it. We would clearly, however, like to stress this company has over the years been a free cash flow delivery company. And in the last two years, 23 and 24, we generated roughly 700 million. 23, the P&L was impacted by that. 24, we were, by and large, net nets on the same level as far as working capital is concerned. And therefore, despite weak macroeconomic environments, I think we finished the year on a strong cash flow basis. Now, ladies and gentlemen, let's move to slide number seven. We clearly give here the indication that we are fully on track after the levering up in the acquisition phase. We are levering down. We have done that many times before. in our company history, so here we are executing as we speak. And once the urethane proceeds come in, I think you see that we are then entering again into territories which should be considered as more normalized. But three times net debt to EBITDA is not our target. We will go back to levels that we had before. And I think you all know that we have a 40% participation in one of the global polyamide leaders in the world and Valior. And I'm looking to your models. I'm quite frankly sometimes very surprised to see what I'm reading there. In majority cases, the the valuation on the invalue stake is taken from our balance sheet, the accounting methodology where the book value of invalue resides. Some even take further discounts in this regard. We always stress that invalue is being priced or is being evaluated at a multiple and EBITDA. And if you look into the standard and course publicized report of the 13th December 2024, you can take the EBITDA and the net debts and everything out of that and come to a better calculation than if you look at technical accounting valuation, which is not reflecting the guidance of our company. With this, I move into our segments. And here I reference page number eight. Full year 2024 has shown weakness in consumer protection solely driven by agrochemicals and here Zaltego. Zaltego reported a record year in 2023 when the agro industry was at its peak. Facing however in 24 severe destocking, so we were hard hit in Zaltego as well. The other three business units, despite difficult macroeconomic environment, all improved. Our assumption is that Zaltegro will improve in 25 versus 24, and therefore the segment will be better off in 25 compared to 24. As far as additives is concerned, an improvement to 23. We are still definitely not satisfied where we are, construction industry. was still a drag in 2024, and therefore, the biggest business unit, polymer additives, was hit hard, but could, through cost savings, make first steps in the right direction. Advances, medians, intermediates, I would not stress that this is back to normal profitability levels. We have seen clearly higher profitability by this segment in previous years. but compared to 23, which was toxic, and 24, intermediate business recovered, but still needs to improve further. So, ladies and gentlemen, with this, I move to page number nine, outlook for the three segments. A more pronounced improvement is expected from consumer protection. As far as editors is concerned, modest improvement like we convey for the intermediate space. So let's come to the guidance of the entire company, and here I start off with reported 24 numbers, 614. Please take out the profitability pro-rata of urethanes. All in all, urethane solution achieved an EBITDA of roughly 50 million and 24. If you take it out for three quarters, you have to deduct 40. And we communicated that in Q4, that was one of the reasons for the positive profit warning on 20th of January that we did better. In fourth quarter, we delivered more profitability than you had in your models and we had expected because we saw that in December, which normally is the weakest month in the fourth quarter, we saw a clear uptick in many of our business units. So we consider this as a kind of pre-buying. And therefore, if you adjust for around above 20 million, you come to an like-for-like improvements, 24 to 25, of roughly 10 percentage points. And that is the guidance operationally. The headline numbers are 600 to 650, with one-quarter of everything being included. So page number 11 summarizes everything. We don't consider macroeconomic noise a significant pickup in demand. only modest improvements. I think I don't need to stress that we are living in quite turbulent political and thus economic times. Making predictions today where from one week to the other fundamental changes can or could occur is always quite challenging. But nevertheless on what we see today we give a guidance of 600 to 650 reported EBITDA numbers. And as far as Q1 is concerned, we would like to be more specific. Here, we consider an improvement of 25 to 35 percent vis-à-vis our first quarter last year. Ladies and gentlemen, this is it. for the presentation and I'm delighted to open the floor now for all your questions, which Oliver and I will take.