Lanxess Ag Ord

Thank you for joining our Lanx's full year IR conference call. The conference will be recorded. I will hand over to Eva Hussmann, Head of Investor Division, for opening remarks.

Thank you, Mandy, and welcome everybody to the call from our end as well. As always, I have our CEO, Matthias Sachat, and our CFO, Oliver Schradmann, with me. please take notice of our safe harbor statement. We will follow our usual procedure. Matthias will start with the short presentation, and afterwards we will open the floor for your questions. Matthias, please go ahead.

Thank you, Eva, and welcome all of you to our full year results Q4 conference call, and we will start directly on page number four on the document that has been distributed or dispatched on our internet. So here you see Q4 EBBA. Q4 was down as expected compared to Q4 2024. The previous year was, of course, also influenced by pre-buying, as we've indicated, and 2025, due to tariff escalation throughout the year, led to lower volumes. Noteworthy also, the negative FX I referenced to the dollar. and the portfolio effect as we have sold our Eurothanes business effective 1st of April. EBITDA for full year at 510, so we landed according to guidance, and I take pride on making reference to net financial debt, which another year in sequence, we lowered and have now come down to roundabouts 2 billion net debts. An area that should be looked at as well is networking capital. We've managed that nicely. Oliver keeps his hands tightly on that, and we will continue doing this going forward. Page number five, as we've communicated recently, Advent has declared not to be able to finance the acquisition of the Lanxess stake in Invalior. And for that very reason, the mechanism that we have highlighted September 25 is now going to be followed with reference to 27 and notably to the put optionality without any conditions at all of 50% of our participation. We have a very good and strong contract in our hands, and therefore it's not a question of if we sell, but rather when we sell. Page number six shows you the implication that the downgrade by Moody's is going to have on us. We would shed here simply light on this for clarification. We have put in place many, many, many years ago and this was always a strength of Lanxess to have a sound financial platform and financial structures. This becomes very obvious also right now. Our issued bonds that we have outstanding in the markets have all fixed coupons without any financial covenants at all, and therefore our external bond financing costs remain the same as far as credit commitments are concerned and we have ample of these for the revolver for instance for many many years duration here the incremental costs will be round about 1 million in total through the downgrades stemming from the commitment fees that we have in these embedded contracts. Neither bonds nor credit lines, as I stated, have financial covenants. And, of course, as I highlighted before, future monetization still is clear and will come, of course, from our value of put optionality. Slide number seven shows you the liquidity position that we have. If you look into the balance sheets that we've just published on full year numbers, we have roughly a half billion of liquidity on our balance sheets. Lanxess is known in the bond market pretty well. The market is liquid. We have a solid track record in the fixed income markets, and therefore, This is obviously a market we always will assess when we do liability management. On credit facilities, I've mentioned the Revolver, which has 800 million of liquidity undrawn. On top of that, Ulrike and Oliver have made sure that we have further committed be natural credit facility in order to have further opportunities in terms of financing diversification. So as far as the upcoming maturity on our fixed income bonds in October is concerned, we've already, through our instruments that we are showing here, ensured that refinancing is not a problem at all. Page number eight, I would like to address the current geopolitical issues and I refer to the situation in the Middle East. This is of course leading to a volatile situation for the geopolitical setting. I would however now be specific to how we look at this from the economic business standpoint. political scenery, I think you can assess all through the media pretty well. As far as Lennox's direct exposure to the Middle East is concerned, we have saved less than two percentage points, so this is not really relevant. What we have started instantly after the conflict escalated, like we've done in in 22 when the Ukraine war broke out. And whenever we had crises, we put specific teams together. We've done that here as well. We are daily coordinating on logistics, on raw materials, regional volatilities. So today we can clearly state to you that our supply chains are not disrupted. Of course, here and there, we see when problems occur, we go for second, third supply alternatives, and we've managed that reasonably well. So today, touch wood, there has been no disruption at all, and we see as far as the next weeks are concerned that our supply chains remain robust. Of course, we take note of the fact that gas energy prices are moving upwards. And of course, the precursors on oil and gas products are also moving upwards. And that is something that has instantly led on our end to price increases. And if you look into our internet, we did not start with this just this week. We've started this already last and the week before. So here, wherever we see that substantial precursor prices on the oil and gas derivatives move upwards, we see that this can be addressed in an instant, swift way. On the gas side in Europe, of course, here we monitor that very clearly as well, but we don't see here that due to the sourcing that Europe is not going to be confronted with a gas shortage. I alluded to the countermeasures we are doing on contractual clauses, on pass-through clauses that we have. Of course, I allude to the fact that Oliver and I have mentioned over the last six to 12 months that we have put strategic energy hedging also in place. And therefore, let me sum up. As of today, we don't see visible impacts, but of course, the volatility on geopolitics and the uncertainty worldwide are high. But let me allow to make a final comment on this and to put here things into perspective. While the Iran conflict is leading to energy uncertainty and cost increases, this is not comparable to the Ukraine war. Europe was heavily impacted through the aggression war in the Ukraine. Because of the gas and oil supply, being given, provided by Russia. The Iran conflict is different. Europe is not the prime dependent economic region of Iran. This is Asia. This is India and notably China. So whilst we take note of the fact that the Iran conflict is going to lead to pressure, pricing pressure on worldwide energy prices. On the supply side, we don't think that this is going to be the issue for Europe. This might lead to difficulties and precursor difficulties for supply chains, notably in Asia. And I think if you look into macroeconomic analysis, this is pretty much being stated very clearly there as well. So we monitor the situation and we see clearly that this is leading to uncertainty and therefore we have to be alerted and focused. But at the same point in time, this cannot only be a area where you talk about risks, you have to look at chances at the same point in time. Let's come to chances stemming from structural savings, page number nine. You know about the program Forward that we started in 2023. Forward has been by and large implemented by end of 25. In summer last year, Oliver and I communicated on optimizing the production network. And November we flagged that another 100 million will be taken out of the, notably out of the administration costs. And today, as promised, we give you the phasing, which is shown on page number nine. We show you the cash outs and the amount of headcount reduction that will be implemented over the next few years. So we are talking here about a headcount reduction of 550. Of course, this time we will also make use of the fact that many of the baby boomers are going to retire. And here we are making use of this as well. So we have the benefits this time to more use normal demographic change and that leads to lower cash off in cause of this year, next year. Ladies and gentlemen, I would now like to take the liberty on page 10 to talk about the segments. On consumer protection, let's start from left to right, we see the operational performance of the segments stable. However, you are aware about the fact that we last year had some one-timers, not only on take or pay, but some insurance payments, and that is, of course, not factored into the projection here for 26. Editors, slightly above 25. A game changer could be if construction comes faster and stronger than we currently have. Currently, we only assume that a modest improvement will come in the second half. But here you see that there are some indicators on the macro scene that already lead to positive momentum in the construction field. I reference here Europe. We see that the developers are starting to be more active, have more momentum, and we see that this could be continuation and also in the successive parts of the value chain. Of course, many of you watch the bromine pricing. It's strong, especially if you look into the spot market in Asia. So pricing is at a healthy level. If volume comes back, it would be a good financial equation. Good volume, higher volume, sitting high price normally is attractive. Intermediates, slightly above 25. That is... not great, but we see here that in some cases, in some products like diptych assets, we have obtained a positive ruling by antitrust. We see that peer consolidation is happening as we speak. So while all in all, we are still fighting hard here, we see some elements that should make this business stronger. Now I turn your attention to page number 11 on guidance. On the macroeconomic scenery, I think you know everything that is not worthy. I would here like to shed light on two elements. On the Lanxess outlook first, I know that normally with Q4, we give qualitative guidance. In light of the high volatility, we would like to start with a Range already now with Q4 numbers, the range we see between 450 and 550 as far as EBITDA is concerned. The consideration for Q1, we've started the year in a soft momentum like many other of our peers have also confirmed. Beginning of March, We clearly saw an uptick in volume. And this uptick in volume was happening throughout the month before the conflict in Iran broke out. But we've also not seen that afterwards there was a disconnect. So the current order momentum in March is positive. But I think in English you say one swallow. does not make a summer. So we look on Q1 with not really operational sequential improvement, but as far as the trading pattern is concerned, March gives some positive momentum, but clearly it's too early to make a call on this basis for the year in light of current geopolitical volatility. And with this, ladies and gentlemen, I would close the call with one slide, page 12. The overall economic environment remains tough. I think you see that for our chemical industry now for the last three years. Overall, very tough environments. But I would look at the positive elements. Our group, Lanxess, has restructured its portfolio. We left the polymer businesses, if it relates to rubber, if it relates to polyamide, if it relates to the urethane business, we left polymers behind us. Many of our peers have just started with this consideration last year. Therefore, as far as Overall portfolio is concerned. We have a good basis in all of our business units with very strong market positions. But we need volume. If volume comes, you will see the impact. Boom. In order to mitigate the current low volume environment, we address costs year on year. And of course, this is something we are now implementing also with the announcement we made last November on the 100 million euros. You all talked about the government stimuli. We see that this is being processed in Germany. And therefore, it's for me not a question of if it will come, but when it will be more visible in the order books. Anti-dumping, Chinese competition, this is being processed in the European Commission. More and more rulings are happening, and we also, whilst not counting on it, of course, are working on it. And I think you will see more rulings on anti-dumping in the course of 26 and 27. Now, if you look at market and supply chains, The consolidation has started already, and in some of our business units, we will see that this will be an area where we will come out stronger than before because our competitors will cease to play in our areas. And last but not least, in value, we have a strong contract. It's not a question of if, but when the monetization happens. will occur. So these are some food for thoughts. And with this, we open up the call for your questions.