Lanxess Ag Ord

Good day and thank you for standing by. Welcome to the Lanxess Q3 2025 results. 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'll need to press star 1 and 1 on your telephone and you will then hear an automated message advising your hand is raised. To withdraw your question please press star 1 and 1 again. And please be advised, today's conference is being recorded. I'd now like to hand the conference over to your first speaker today, Eva Husman, Head of Investor Relations. Please go ahead.

Thank you very much. And also from our end, welcome to our Q3 earnings call. As always, we have our CEO, Matthias Sachert, and our CFO, Matthias Strattmann, here today. Please take notice of our safe harbor statement, and 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, sir.

Thank you, Eva, and welcome, everybody, to Q3 25, Lenx's conference call. I start the presentation on page number five, where we give the key updates on financials, EBITDA being the first to be addressed. We have a decline 225 million euros compared to last year. Partly driven by portfolio effect, we've divested the Eurofins business beginning of the year, but predominantly due to volume decline in the third quarter, stemming from low demand and end industries, competitive pressure from Asia, and also due to respective uncertainties also in the United States from tariff situation, volumes declined by 6.5%, leading to utilization, which is now around 67 percentage points, clearly too low to achieve good underlying profitability. As far as net debt is concerned, we managed that tightly, so we kept it stable compared to second quarter, as you can see, and one driver behind that is also the working capital management, which has here a positive contribution, but mainly stemming from better collection of receivables, but also lower sales driving receivables down. Noteworthy, of course, what we've communicated end of September just for the fact that this was completed in third quarter was the right to exercise our put option in value. Now, let's turn our attention to page number five. Overall, the economic situation in the chemical sector and the world has not changed, but Europe is under heavy pressure. And for that very reason, we have now started a further costs reduction program, which is yet in the negotiation with workers' council and unions. The overall amount we are targeting is 100 million, also coming from further streamlining of our admin functions. And in order to support our target here, we've globally gone for a hiring freeze until further notice. And due to the sluggish performance in group profitability, we have, of course, also released our provisions and third quarter for variable K as far as managerial grades are concerned. Page number six shows you what we have done in order to counteract the current weak economic environment. As you recall, 23 was a tough year for the chemical sector already. At that point in time, we started the forward program. This is largely implemented as we speak. So by end of 25, the headcount reduction and costs reduction will be in place. Summer this year in Q2, we gave reference towards production efficiencies that we will go for, especially through the site closure at BITNESS UK. closure of the hexane oxidation in Erdingen and product optimization, production optimization in our Eldorado site. So this is something we are implementing and working on. Hexane oxidation has gone off stream. A witness is being prepared and the same holds true for Eldorado plants. What we are now working on is the 100 million restructuring program basically coming from reduction on personal and related costs. This will be done through the ongoing demographic change we have in Europe, but also focused redundancy packages. So, we will use both tools as we have done in the past. And we will also adjust processes going forward in order to get further agility. and also assuming an underlying operational level where you simply need to be more competitive in order to regain power once momentum and volumes return. On page number seven, this is how we look into next year. I wouldn't say that the tariff situation will improve 2026. but there will definitely be, or that definitely is a too strong word in current times, but our assumption is that the high uncertainty on tariffs will somewhat soften. In many cases, there is some kind of agreement that's being found, so we are not anymore in the full escalation phase process, but somewhat on the direction, at least this is our view, that people find bilateral or regional agreements that should give a little bit more planning certainty for all of us and, of course, for all of our business units. Our assumption clearly is that the government stimulus that has been decided by the German government, and we see that they are working on it should be visible in 2026, potentially more in the second half than in the first half, but we see now that the respective regions and states within Germany are already working on it, and therefore it will still take some time. But our assumption clearly is that this is going to ramp up in 26 for the German economy being clearly positive. Business units that definitely should benefit because all of them are having business in a visible way in construction, for instance, is advanced industrial intermediates, pigments, obviously, but also polymer editors where construction plays a major role. And the same holds true with our biocides business. And therefore, these four business units are the most obvious candidates for benefiting from infrastructure stimulus. But now we also have anti-dumping, which should be mentioned. In many of our business units, we are working on specific cases, value chain by value chain. By now, however, I can fortunately confirm that two cases have been positively decided. One happened recently in October for European adipic assets. Sorry, for adipic assets, not assets. So here the European Union has decided on a European protection of the respective value chains. as we are playing in this with an advanced industrial intermediates, we definitely have here a better position, even though it needs to be mentioned that notably from China, substantial capacities have been sent to Europe pre the decision-making process. So we currently, I think in the next three months, we'll have to absorb the landed capital goods from China and then from 26 onwards we will start seeing that this anti-dumping case plays in the right direction. Also on the phosphochloride ester products we have a positive case decided for the European industry and let's see what further decisions are going to follow. What we also take note of is market consolidation so at the end of the day competitors also in our value chains, step out. That's beneficial because we clearly see that our business units have a strong footprint where we play. We've always alluded to the fact that most of our business have very strong leadership positions, also through good technology and good plans. So they have everything. to be the last man standing. This definitely holds true for advanced industrial intermediates, where we've seen that competitors have stepped out, like on hydrofluoric assets. We are clearly here the strongest in the markets, and therefore my assumption is this plant will make it to the end and then take a good time afterwards, but right now we are fighting and make sure that we are here in the markets to stay for good. The same can be said on Reinfimi with a more modest tonality, but also here we are in the end consolidation in the Western Hemisphere with our accelerators and antioxidants, but also in neighboring value chains. Of course, we know from our former business unit, polyamides, which is now part of the Invalior. Also here for the Invalior business, there have been notifications by competitors of Invalior that they are closing capacity, like Vibrance recently went out and communicated in October that they will close their Capolactam capacity. And we know that Invalior has a very, very strong capacity in Antwerp and being world-scale. So at the end of the day, that will be positive for the ones that will be running in a more consolidated market. So we see that in crisis times, markets consolidate. And at the end of the day, the ones that stay in the markets take the benefits. Ladies and gentlemen, let me now come to outlook described on page eight. As far as the macroeconomic environment is concerned, I think you all take note of the fact that economic environment is volatile. High uncertainties persist, and for that very reason, let's focus now on lenses. are now adjusting our guidance to the lower end of the previously mentioned 520 to 580. So that's what we are seeing at this point in time. I would like to mention, of course, versus previous year, urethane is out. Q4 is normally seasonally weaker than Q3. What you should take into account Of course, we look into our business when we make our guidance. We are now beginning of November, so we look into the books of October, November. Based on this, we provide our guidance to you, so this is not out of the blue, but with respective analysis and feedback. business judgments, and based on this, we are guiding around the lower ends of 520. Ladies and gentlemen, this is what we would like to communicate to you. Now we are open to your questions. Please go ahead.