Lanxess Ag Ord

Thank you for joining our LENX's Q1 results 2026 conference call. If you would like to ask a question, you will need to press star nine and the pound key on your telephone and wait for your name to be announced later. First, we will hand over to Ifa Hussmann, Head of Investor Relations for opening remarks.

Yeah, thank you and welcome to our Q1 call. Before we start, please take note of our safe harbour statements. And as always, we have our CEO, Matthias Sachardt here, as well as Oliver Stratmann, our CFO. Matthias, we'll start with a quick presentation before we answer your questions.

Matthias, go ahead. Thank you, Eva, and welcome all of you to our conference call on first quarter 26. I start the presentation straight on page four, where we comment on the key financial indicators. So as far as Q1 is concerned, we guided in March already that it will be a soft start to the year. We've seen lower volumes, especially in January, February, a positive tone on March where business started to improve from the volume side and was clearly a difference compared to the previous months and also towards the fourth quarter. Please take note of the fact that In the comparison base last year, we have a relatively strong dollar and still the contribution from our urethane business units both has changed. In first quarter this year, urethane is no longer consolidated and the dollar has visibly weakened. We put a lot of attention on cash flow and financial balance sheet strength is something reinforced over the last few quarters, and you can clearly see that also in Q1. Cash flows still negative, but that's the normal seasonality. We start off with negative cash normally in first and second quarter and then improve afterwards. And as far as net working capital is concerned, we clearly manage that pretty tightly. So compared to previous year, it's lower. I do expect a gradual increase now in Q2. also driven by the fact that the precursors and energy will move up, but nevertheless, we will continue running it tightly. Net debt, beginning of the year, normally sees an increase of 1 to 200 million, and in light of the good cash management, you see that we, by and large, keep net debt at comparable levels. Now let's turn the attention to Middle East. escalation or conflicts has swiftly changed market conditions we clearly see that value chains are under pressure we clearly see that customers have concern on delivery security and therefore let me give you the following color on what we would like to shed light on And here I clearly would like to stress that the conflict that we have seen, the war that we have seen in the Ukraine area, in the Ukraine situation, massively impacted Europe and definitely led to a disadvantage as far as the European chemical industry is concerned. The Iran conflict is different. Whilst through Ukraine, Russian gas and oil was reduced in Europe, the Iranian gas and oil is primarily being a supply source to Asia. So while we were suffering in Europe through the Ukraine war implications, in the current Middle East conflicts, We clearly stress it will put pressure on the worldwide economy, definitely, as far as energy price inflation is concerned. But the region that suffers most is going to be Asia, according to our analysis. Now, logistical chains are definitely under pressure as well, but here I can give you comfort. We have agreed contracts in place on ocean freight, on other logistical chains that are needed and for that very reason we had until now no negative impacts through supply that was being shipped to us or to our customers. Of course, we took note of the fact that prices were on the rise as far as chemical precursors and energy costs are concerned. So we saw the reaction on the oil markets, gas markets beginning of March. And that was the reason why we swiftly analyzed our market situation. And I think we were one of the first chemical companies that went out with a series of price increases in order to at least mitigate the current input cost inflation. On working capital, I alluded to the fact that we expect an increase in Q2, but it will be tightly managed. You can bet on this. Now let's turn the attention to page six. What we try to do here is simply to give you some effects on hand so that you can better understand how we look into our segments. into current trading vis-a-vis Q1 and the last two quarters of 2025. When we look at the current conflicts in Middle East, our assumption is that the consumer protection segment will by and large not be really affected. There will be some precursors on the rise, but the consumer protection segment is not so much impacted through oil derivatives. Here, basically, consumer demand is central, and we do have some precursors coming here from China, so that is a watch out. But all in all, don't expect that this will change the current trading vis-a-vis the past two to three quarters. On additives, we see a moderate upside potential. Of course, you need to take into consideration that flame retardants or bromine, for instance, is also coming and is shipped from Middle East. We don't depend on that primarily. We have sources in El Dorado, which is not affected at all. So here we do see upside potential in trading. But the strongest momentum we clearly see in advanced intermediates. This segment and here notably the business unit AII was suffering through competition coming from China and of course we had a substantial amount of pressure on some of the value chains here. This should change. Here customers are clearly looking for delivery security one and seconds We've seen over the last four to six weeks that even the chemical pricing on these products in China have been on the rise. And guess what? They are on the rise in our business as well. So this should give you some qualitative color on how you should look at the segments compared to the last three quarters. So let's see if you can then better model second quarter and it's up to you how you look into 26 in total. What we would like to give you comfort for or comfort on is our full year guidance. The world is in quite a turmoil for various reasons that are all known to you. We clearly see positive momentum for Q2 so we try to here give you a quantitative corridor of 130, 150, which would be a strong sequential improvement versus Q1, which we clearly see, either driven through volume or through pricing, in some cases driven by both in respective business units. But we don't change our yearly guidance in light of the turmoil that we see in the world. Due to momentum continues, of course, that could give further comforts to potentially go into the upper range of the guidance, but please take note of the fact that escalation in the Middle East could accelerate again, and then we potentially look at demand crush, and then we look into the lower ends of the guidance. We give you a broad range where you slot in yourself is in your hands, but we want to give you comfort on the full year guidance and definite comfort that second quarter will come out sequentially clearly stronger than the first one. And here we see that the business is moving accordingly. This is what we would like to give you as entry presentation on Q1. And we now open up the floor for your questions.