Solvay SA (EBR:SOLB)

Earnings Call: Q3 2020

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Nov 5, 2020

Ladies and gentlemen, welcome to Solvay's First Nine Month twenty twenty Results Conference Call for Analysts and Investors. Jody, the floor is yours. Good afternoon, and welcome to our Third Quarter twenty twenty Earnings Call. My name is Jody Allen, Head of Investor Relations, and I'm joined virtually by our CEO, Ilham Qadri and our CFO, Kareem Hajar. Today's call is being recorded and will be made available for replay on the Investor Relations section of our website. I would like to remind all participants that the presentation includes forward looking statements, which are subject to risks and uncertainties. You may refer to the slides related to today's broadcast, which are available on our website. With that, I'll turn the call over to Elam. Thank you, Jody, and hello, everyone. I hope you and your families are staying healthy during these continuing challenging times. At Solvay, health, safety, and security of employees remain our number one priority. As you know, the number of COVID cases, particularly in Europe, has been increasing in recent weeks. At Solvay today, we have ninety colleagues who are infected with COVID nineteen and one hundred eighteen employees in quarantine, and we continue to take a disciplined approach to protect our employees. We also maintained our disciplined approach across the business, prioritizing cash management and cost control again in the third quarter as we have done all over the year, and I'm very pleased with the results of these efforts. We delivered again a strong free cash flow of €801,000,000 across nine months in 2020, a new record, and the sixth consecutive quarter of robust free cash flow. We have more than mitigated the effect of reduced profit in large part due to effective working capital practices and also due to deleveraging pension liabilities. Many of the improvements are structural in nature and will build fruits in the years to come. In addition, we continued our focus on our self help measures and have made significant progress executing on our cost saving programs. As you know, we accelerated these efforts this year in light of the crisis. This enabled us to deliver €260,000,000 in savings in nine months of this year. Half of this amount or €130,000,000 is permanent structural savings. Moving to the top line, sales in the third quarter were down 14% on an organic basis versus the third quarter twenty nineteen. Demand remained low throughout July and August, and we saw improvement in September in a few select areas, which I will highlight when I comment on some key markets. Originally, we continue to see modest growth in China up about 2% year to date. Other regions are still declining. Moving to the market, I will comment on a few key area areas specific to third quarter trends. I'll begin with aero. You are all aware of the significant reduction in built rates for civil aircraft, which represents 7% of the group sales. We experienced a step down in our sales in the third quarter aligned with the lower build rate. Sales to composites were down by 44%, reflecting the drop in civil production as the defense sector remains stable. And we are pleased with our contract extensions with Lockheed Martin and with Boeing that we recently announced. The business is doing a good job managing the situation, and by the way, still making profits. Moving to auto, as you know, multiple businesses supply products in the auto market, and our technologies are used in many different applications. Overall, sales to auto across the group were down by 20% in quarter three year on year, but improved by 28% versus the second quarter. However, the dynamics across product lines differed from one end use to another. For example, our specialty polymers that replace various metal parts in under the hood applications remained in low demand in July and August. And in September, however, orders increased from the summer lows. Q three sales to these applications were 15% lower year on year, so slightly better than the global market in that end use, we believe, is around minus 17. Yes. Our solutions used especially for EV batteries showed significant improvement with sales up 35% sequentially versus the second quarter. In special chem, sales to auto also increased in September following very low July and August, but still 20% below last year. And sequentially, sales improved by 17% versus quarter two. Whereas demand for silica used in tires has consistently increased throughout the third quarter with sales up 48% versus quarter two. So the pace of recovery in auto is quite different depending on the product line and application, though the pickup in momentum in September is encouraging. Moving to our more resilient markets, starting with health care, we have seen mid single digit growth through the first nine months of the year, slightly better than the overall market. We sell, as you know, many different polymers into various medical applications, each showing stable demand. One product that I would like to highlight here is PEEK or polyether ketone, which, of course, is used in health care among other markets, And it's down only modestly year to date versus twenty nineteen single digit numbers. And this is a large part due to extending our leadership positions in the various markets we serve. In fact, when you look at our sales of peak since January 2019 to quarter three twenty twenty, our sales are up 40% in the eighteen month period just in this product line, thanks to the great value proposition and commercial efforts. Moving to home and personal care, here sales have been growing at a modest pace since last year, consistent with the overall market. I want to point out that September has been a record sales month. Our team has been focused on introducing more bio friendly solutions to our customers in this space. And I mentioned to you last quarter that we had just launched a new blockbuster innovation, which we call Actizone, a disinfectant technology that can protect surfaces from viruses and can kill up to ninety nine point nine percent germs for up to twenty four hours, much longer than any product on the market today. Our customers are thrilled and are taking a great interest in the solution, the product with multiple qualification underway. Another resilient market I want to highlight today is electronics. This market is supported through various businesses, including specialty polymers and special can. We continue to show modest growth into electronics in both businesses driven by semiconductor. Growth in China, in particularly, strong, Thanks to our recent capacity increases in electronic grade h two zero two for semiconductors. We also see good demand in other electronic components, including smart devices and displays. To wrap up, we delivered an EBITDA of €473,000,000 in the quarter, which is up 7.7% versus quarter two and on a lower sales. And although we cannot defy the gravity of the lower demand, we have improved the quality of our earnings, demonstrating that our cost mitigation efforts are having a real impact. This together with sustained pricing has enabled us to preserve our industry leading EBITDA margin of 22.5% in the quarter. I'll now turn it over to Karim to review the business results and financials. Karim? Thank you, Ilham. Good morning. Good afternoon, everybody. I will start with an overview of the three business segments. And as usual, I will refer to figures on an organic basis, meaning at constant scope and currency. Starting with materials, which you can see on slide number six, net sales in the nine months were down 15% driven by volume declines in civil aero and auto markets. In the third quarter specifically, sales were down 23%. In composites, sales were down 44% in the third quarter reflecting the significant reduction in aircraft build rates in the civil sector. As you know, we were very quick to adapt to market developments and we acted on reducing our manufacturing footprint. These actions are mitigating a good portion of the volume decline. In fact, and as you know, we don't, report EBITDA for individual businesses. I'm pleased to confirm that the timely, the decisive cost reduction measures we took ensure that the business remains profitable. We remain on track to complete the shutdown of the second site by the first or in the first quarter of twenty twenty one. In specialty polymers, Ilham gave you an overview of market performance. Now although July and August demand levels were low, they did improve in September, most notably related to electric vehicle batteries. Our broad product offering and the diverse markets that we serve in this business underpinned our resilience during the quarter. Despite the reduced top line of 13.6%, fixed cost reduction, pricing helped to preserve EBITDA at a level slightly below that of q three twenty nineteen. Overall, materials delivered 131,000,000 of EBITDA in the third quarter, twenty nine percent lower than the prior year due to the volume decline. The fixed cost takeout, however, helped to preserve EBITDA margins in the third quarter at 26.6% compared to 28.4% last year. Moving to the chemical segment shown on slide number seven, sales in nine months declined 10% year on year, but in the third quarter increased 10% sequentially against q two twenty twenty. This was driven by the rebound in silica and COTIS following the low points in q two. Starting with soda ash, demand in the quarter remained stable in line with q two with a slight recovery in volumes in September, but this really differed by region and by application. The seaborne market was the most impacted by volumes as competitive pressures intensified. Solvay chose to preserve pricing at the expense of some volumes, a strategy that has proven itself time and time and again to generate value over time. Looking at end markets, flat glass glass used in construction showed some improvements in the quarter, but the growth was offset by declining container glass used in restaurants and in hospitality as many countries again faced new lockdown measures. The business continues to deliver on its cost and on its cash targets. Peroxide sales were down 8% in the quarter as the demand for HPPO increased following a weak q two whereas demand in the pulp and paper industry remains pretty soft. Pricing discipline supported by cost control led led to solid profits in the quarter. Our silica business showed clear signs of recovery since the end of the second quarter and demand for tires remained steady throughout q three with silica sales increasing by 48% in the quarter. A similar trend occurred in Qatis with 29% sales increase in the third quarter compared to second quarter as demand for solvents used in coatings and in other industrial applications rebounded. EBITDA for the chemical segment was down 10.4% in q three versus last year, but up almost 10 sequentially against the second quarter due to the demand improvements I referenced in silica and COTUS as well as the accelerated cost measures across our businesses in that segment. This supported solid EBITDA margins of 27.7% despite the lower volumes. The solutions segment results are shown on slide number eight. Nine month sales in the segment were down 10.7% with third quarter sales down 11% again due to volumes. Nofcare sales to the home and personal care markets, agro, coating markets continued to show their resilience with solid growth across the third quarter. Oil and gas remains under significant pressure but has stabilized, and the business continues to deliver strongly on its cost actions. Special chem sales began to see improvements in September across several markets, yet sales are down 16.5% versus last year in the quarter. Auto showed some signs of recovery late in the quarter, but was still down 20%, whereas electronics remained resilient with growth driven mainly by semiconductors semiconductors. In technology solutions, some of our key customers have been impacted by COVID and this has impacted demand in mining. Sales in the business was down 16 and a half percent versus last year across copper and alumina customers. Aroma remained resilient with a slight decline in sales in the third quarter, otherwise very much robust demand with natural vanillin absolutely continued. Overall, the solutions segment EBITDA was down 15.3% in the third quarter, but up 7% sequentially. EBITDA margin for the segment was maintained at 18.4% despite the strong fall in sales that I referred to and that reflects quite simply continued cost control across our businesses. I will now turn to cash on slide nine. As Ilham remarked, our strong free cash flow performance continued into the third quarter resulting in nine month delivery of 801,000,000, the record more than double that of the nine months of 2019. The improvement in performance can be summarized as follows. First and foremost, we took decisive steps to mitigate declining sales by adapting our investments, accelerating our cost reductions, strengthening our working capital discipline whilst also, and you've seen that now, improving, really working hard to improve the phasing of our cash generation. Indeed, as we take a step back, you can see that our working capital to sales ratio has continued to improve and now stands at 15.4% compared to 16.7% a year ago. The structural improvement in working capital generated around €140,000,000 of one time cash benefit this year, principally in relation to receivables and to payables. You remember also that we had one time benefits of around 90,000,000 mainly from tax effects related to pension contributions which we referred to in the first quarter of the year. More importantly, we now have substantially reduced our financial and pension cash costs, which already contributed an 85,000,000 improvement this year. In all, we have now made exceptional contributions of naught €600,000,000 to a pension scheme since December, and we have plans to do more. We've got plans to invest a further 350,000,000 in the next eighteen months. The combination of our plan of our the combination of our actions and of our plans reduce our pension cash cost by a 100,000,000 per year. These are highly highly value accretive, structural, and sustainable into the midterm. Also, totals continue to fall as we continue to delever and and reduce the average cost of our debt. The combination of record cash generation proceeds from the divestment of our polyamide business early in the year, And despite our pension contributions, we managed to reduce our net debt of one by 1,100,000,000.0 in the first nine months of this year. The last topic that I will cover today is the progress in our cost savings, now total €260,000,000 year to date, which more than offset inflation of 54,000,000 in the first nine months. Of this amount, about half or a 130,000,000 are structural savings which fall into the following three categories. One, restructuring, 62,000,000 of savings by far very a very significant contributor to our cost reduction and as you can expect, this essentially comprises labor costs. We also saved 51,000,000 in relation to indirect spend as we drive relentlessly our improvement programs. These savings result from many actions and often have standardization at their core. For example, we are standardizing our bulk packaging. We are recycling and reusing intermediate bulk containers or IBCs for short. We're standardizing the management of spare parts and the list continues. We've also, and that's the third key driver, continued to drive productivity efficiencies across our industrial sites, and this includes things like yield improvements. And here we've saved $17.01 €7,000,000 in the nine months. In parallel, we've continued to drive our temporary cost measures and we've delivered 40,000,000 in the quarter, 130,000,000 year to date. These savings comprise actions such as furloughs and discretionary spending as we continue to work in a virtual capacity and of course business travel costs have been dramatically cut as you'd expect. It is important to note that the structural cost savings in the quarter at 50,000,000 were higher than the 40,000,000 of temporary measures. And with that, I'll hand you back to Ilham for closing remarks. Thank you, Karim. And I wrap up with a few remarks about ESG, a brief portfolio update and our outlook for the remainder of the year. First on ESG, some of you may have participated in our webinar back in October 2, where we shared a bit more information on our Solvay one planet sustainability objectives launched earlier in the year. I'll share just two takeaways. We are taking our climate ambition one step further by committing to align our greenhouse gas emissions objectives with the science based target initiative. We shared some recent innovations that not only align with sustainability, but also with our growth objectives. Since I discussed Axizone earlier, I will briefly mention two others. In response to a market need for the replacement of PFAS surfactants, we have developed a non fluorosurfactant technology, which we introduced to our customers in January, and they are in the process of qualifying the technology. As you may know, we placed priority on the resources needed for this type of solution, and it's an excellent example of how the right combination of innovation, industrial expertise, and collaboration with our customers can unlock solutions. We have also been working for many years on solutions for green hydrogen production and usage. We now see a significant market opportunity as part of the larger trend towards sustainable mobility and energy solutions with a very ambitious hydrogen roadmap being adopted in many regions. Production of green hydrogen via water electrolysis is expected to reach more than 100 gigawatts of global capacity by 2030, While the global fleet of fuel cell electric vehicles ranging from large passenger cars to heavy duty commercial vehicles, trucks, and buses is forecasted to reach several million vehicles by 02/1930. Our Equivion ion conducting polymers are at the heart of key hydrogen technologies such as proton exchange membrane electrolyzer and fuel cells, serving both as functional materials in the membrane itself and in the electrodes. Our technology has demonstrated its value proposition with potential customers. We have multiple qualifications underway with sizable sales potential in the next few years. In fact, Solvay has a range of technologies within our material segment to address the needs of these markets. Our objective is to be a leading material solutions provider for the emerging needs of the hydrogen economy, contributing together with our battery solutions to achieve the Paris Agreement climate targets. Therefore, we will create a hydrogen platform at the group level in order to share resources and expertise to better serve customers in this market. As you can see, we are very excited about our innovations, and hopefully, you can see that our sustainability initiatives are already a key part of our business strategy. In fact, future ESG updates will be integrated in into our annual reporting and our strategic reviews. Moving to the portfolio, as you know, improving businesses takes time, and we spent the past year optimizing many assets before we considered any divestments. We also indicated in July that we began the process of exploring options to sell certain business lines. Since then, we have signed agreement to sell our interest in a few business lines, including certain fluorine chemicals and our site in Korea, part of Special Chem, the process materials product line, part of composites, and the sodium chlorate business line and related assets in Portugal, part of peroxides. You will understand that the completion of transactions would be subject to prior consultation with employee representatives and or approval by the relevant regulatory authorities in each jurisdiction. The enterprise value of these divestments would be about a €100,000,000 equivalent to an average high single digit EBITDA multiple. We have also entered into a sales process for our barium and strontium commodity business line within specialty special chem and our European sodium per carbonate business within peroxides. Altogether, these five business lines represent total sales of around €250,000,000. Looking ahead, we are exploring strategic options in relation to other businesses, including the commodity on photonic surfactants and the oil and gas business line, both part of the solutions segment, which represents a combined total sales of around €400,000,000. These develop these developments are in line with the growth strategy to simplify the portfolio and to maximize value creation. Further, we are also exploring the merits of organizing certain activities into separate and fully controlled legal structures in order to increase strategic portfolio flexibility. And this is the beginning of the journey, and we will share more with you along the way. Moving to our outlook for the year 2020. On EBITDA, please be aware, it's still an uncertain an uncertain environment, especially with the rise in COVID cases in many parts of the world, and we have not taken into account a second wave. Let me share our assumptions. First, October sales are similar to September, indicate indicating the improving trend in certain markets. We estimate a slower December as customers are likely to lower their own inventory levels at year end, not too unlike normal year end periods, by the way. Second, our composites business will remain challenged in the fourth quarter before we see the full benefits of their cost actions in 2021, and we still expect earnings in quarter four in positive territory. Third, as a reminder, we expect to fully deliver on our previous cost guidance of €300,000,000 for the year with a particular focus on the structural actions. These assumptions lead us to an estimated full year underlying EBITDA in a range between EUR $1,890,000,000 and EUR $1,970,000,000 or down between 1613% on an organic basis for the full year. Finally, on cash, we expect full year free cash flow to be around €900,000,000, which represents a 50% improvement versus 2019. To conclude, we have managed very well through this crisis delivering consistently strong free cash flow and improving our operating leverage through our decisions and accelerated cost actions. This demonstrates our ability to mobilize our organization. And I'd like to thank all of our employees for this delivery and for their continuous engagement throughout this crisis of a lifetime. It is truly a global collaboration across all teams that has enabled this achievement. I also want to take a moment to thank our shareholders that have generously contributed to the Solvay Solidarity Fund, which has reached €12,000,000. We sincerely appreciate your contributions on behalf of our employees and consider this to be a concrete example of a truly responsible capitalism. Thank you very much, and we'll now take your questions. Thank you. Ladies and gentlemen, if you wish to ask a question, you have to press o one We have a first question from Mubasher Chandra from Citi. Please go ahead. Hi. Thank you for taking my questions. Hi, Ilham. Hi, Karim. Just two, please. Can you provide some time lines around the execution of this disposal that you're talking about today? And and linked to the proceeds and given a strong cash generation of the business, are you looking to invest this back into into the business through CapEx given the low level of CapEx in 2020? Or or do you expect to put it towards further deleveraging of the business? Just some thoughts around capital allocation would be helpful. And then secondly, you made good headway on the cost cutting plan. I think only GBP 40,000,000 is left over for fourth quarter. And similarly, on free cash flow guidance, it leaves only GBP 100,000,000 to be achieved in the fourth quarter. Can you just provide some comments around the conservatism around these guidance levels? And if there are more chances to the upside on both of these metrics? Thank you. Yes. Thank you, Mubasher. I may start with the portfolio, and Karim, you pick The finance. Yeah. While it's in Mubasher, I think, since I joined the company, I told you, and and and we, you know, explicitly say this during the growth strategy, publication that we plan to simplify our portfolio. And not only we look at our industrial footprint, we focus on the low low returns asset with the desire to improve our cash and returns. We obviously now align also with our SOBY ONE planet environmental goals. And, you know, much progress has been made operationally in relation to free cash flow generation. I mean, was a bit, a nail in the shoe of Solvay when I joined the company, and, you know, I listened to many of you that all wanted a better free cash flow generation and better phasing and quality phasing of it. We are getting there. And while it's getting stronger and it's more consistent across our businesses, this enable us to to be less reliant on some laggards, you know, lower return businesses or even cash cow. So what we announced, Mubasher, is that we we are now reaching an agreement today on three areas, and and the multiples are are really good. They are high single digit. They are small businesses, and we are completing it. It's a matter of weeks, with respect to consultations, obviously. And we are entering into, sales process for two other businesses, namely the barium and strontium commodity business in special chem and the sodium per carbonate business part of peroxide. And all of those five businesses, they represent more or less €250,000,000 of sales. And further, we are also announcing that we are exploring strategic options in relate in relation to commodities, amphoteric surfactants. That's the product line which is part of NorthCare. And, obviously, the oil and gas, which as you know, has been really depressed, market since I joined the company. We've done the the the rights of last year. We have been restructuring this business. In q one, actually, we we we completed the turnaround. The market is the market, and we are now exploring strategic options, and we'll share with you the progress in in in in the coming, you know, quarters. And the amount of those two last businesses represents more or less €450,000,000. So listen, you know, we we take our time. I mean, we want to create value. There is no rush. We improve the assets when we can while being, you know, more or less a bit patient. And when we believe we are not the right owners, we enter into a strategic conversations. And the good news is that during this crisis, there are also opportunities in the m and a sector as well. Karim, you would like to take up Let me take take up maybe, Mubashi, some of your other questions, and they're very important, obviously. Let me start with maybe you you talked about cost. We gave an indication that we expected to deliver 300,000,000 this year. Clearly, you've seen we delivered two sixty. So, yes, mechanically, it doesn't take much to be confident we will deliver more than the 300 and we factored that into our outlook. That's one. So far as proceeds are concerned, a couple of questions. What will we do with the cash? Are we gonna all of a sudden start to invest more? What I can say is this, we'll give you more clarity for next year but at this point in time, we will maintain our discipline in terms of CapEx and working capital, but CapEx management. But we do expect to continue to invest to enable us to support the needs of our customers as a rebound. In fact, we already started it started to do that. Strategically, we gave an indication that to maintain our growth trajectory requires a reinvestment of the order of one to one versus depreciation. I'm not gonna say we'll get there next year, but you can expect us to continue to evolve in that direction over time. Specifically, the proceeds we'll get, we talked about a 100,000,000 of enterprise values of operation cash flow is very strong. You will have noticed, I've mentioned that we're gonna put 350,000,000 more cash towards our pension schemes, which will generate a lot of value. So it's fair to assume that whilst we won't be shy to invest for growth, well, we're very clear the value is there, but deleveraging is part of the agenda. That's really the the key point there. Now you also said something around the fourth quarter only being a 100,000,000. So I'll give you a bit of color on that. First and foremost, I'll remind you what I said which is within the 800,000,000 we've delivered so far this year, there's a couple 100,000,000, just over, 12,000,000 of more of a one off in nature related to the tax deductions or to the structural improvements in working capital, which you can't repeat year in year out. Nevertheless, they're high quality. We've improved the phasing. We generate more cash now consistently every quarter, and if you've seen that throughout the last six quarters now. One of the impacts of the COVID pandemic is that the normal seasonal variations we've been accustomed to are becoming less pronounced, and we also expect to build some inventories in the fourth quarter to support the resumption of activity certain customers in very targeted markets, for example, mainly specialty polymers. And finally, I wanna highlight restructuring cash costs. Our restructuring cash costs so far this year is about €67,000,000. Historically, that's in the first nine months. In the last two years, were 62 or 63,000,000. So we've already spent more in the first nine months than we have done annually and I expect that run rate to continue to grow. Last businesses represents more or less €450,000,000. So listen, you know, we we take our time. I mean, we want to create value. There is no rush. We improve the assets when we can while being, you know, more or less a bit patient. And when we believe we are not the right owners, we enter into a strategic conversations. And the good news is that during this crisis, there are also opportunities in the m and a sector as well. Karim, you would like to take up Let me take up Mubasher, some of your other questions, and they're very important, obviously. Let me start with maybe you you talked about costs. We gave an indication that we expected to deliver 300,000,000 this year. Clearly, you've seen we delivered two sixty. So, mechanically, it doesn't take much to be confident we will deliver more than the 300 and we factored that into our outlook. That's one. So far as proceeds are concerned, a couple of questions. What will we do with the cash? Are we gonna all of a sudden start to invest more? What I can say is this, we'll give you more clarity for next year but at this point in time, we will maintain our discipline in terms of CapEx and working capital, but CapEx management. But we do expect to continue to invest to enable us to support the needs of our customers as a rebound. In fact, we already started it started to do that. Strategically, we gave an indication that to maintain our growth trajectory requires a reinvestment of the order of one to one versus depreciation. I'm not gonna say we'll get there next year, but you can expect us to continue to evolve in that direction over time. Specifically, the proceeds we'll get, we talked about a 100,000,000 of enterprise value, the operation cash flow is very strong. You will have noticed, I've mentioned that we're gonna put 350,000,000 more cash towards our pension schemes, will generate a lot of value. So it's fair to assume that whilst we won't be shy to invest for growth, well, we're very clear the value is there, but deleveraging is part of the agenda. That's really the the key point there. Now you also said something around the fourth quarter only being a 100,000,000, so I'll give you a bit of color on that. First and foremost, I'll remind you what I said which is within the 800,000,000 we've delivered so far this year, there's a couple 100,000,000, just over, 200,000,000 of over one off in nature related to the tax deductions or to the structural improvements in working capital, which you can't repeat year in, year out. Nevertheless, they're high quality. We've improved the phasing. We generate more cash now consistently every quarter, and you've you've seen that throughout the last six quarters now. One of the impacts of the COVID pandemic is that the normal seasonal variations we've been accustomed to are becoming less pronounced, and we also expect to build some inventories in the fourth quarter to support the resumption of activity certain customers in very targeted markets, for example, mainly specialty polymers. And finally, I wanna highlight restructuring cash costs. Our restructuring cash costs so far this year is about €67,000,000. Historically, that's in the first nine months. In the last two years, were 62 or 63,000,000. So we've already spent more in the first nine months than we have done annually, and I expect that run rate to continue to grow. I can expect this to be around about a 100,000,000 for the full year. So q four will see more cash. So this is really the main dynamic. So I will I'm gonna say it's cautious. It's a strong performance if you deliver that 100,000,000, which is very much what we're targeting and indicating to you. Thank you very much. Very clear. Thank you. Thank you. Next question from Shetan Udeshi from JPMorgan. Please go ahead. Hello? Your microphone is open. Mister? Yes. Yeah. Hi. Hi, Chetan here. Hi. Sorry. I was on mute. Can you hear me? Yes. We can. Yeah. We can, Chetan. Hi. Yeah. Yeah. Hi. Thanks for taking questions. First, I just wanted to clarify because there was a lot of numbers thrown out on asset sales, and I'm not sure I got all of them. So can you maybe help us clarify what is the 100,000,000 EV associated with? Is it for the entire $250,000,000 sales that have been planned or agreed already? So that would be the first question. The second question was just looking on the sequential progression on on gross margin. I mean, you know, it feels like that the sales are slightly down quarter on quarter, but the gross margin has gone up significantly from, you know, like, 23% last quarter to 26%. So can you maybe help us understand what is driving that significant increase in gross margins sequentially? Last question would be, given the strong free cash flow performance this year, some of that may be temporary. Do you feel you can do more than 30% cash conversion now already from next year onwards rather than from 2024, which was the original target? Thank you. Thank you, Chetan. I may take question one and two, and Karim, I didn't get the the question on which portfolio or product line. You you you The first question is on the 100,000,000. No. No. I know. The second one on the product line? The the sequential progression in our gross margin is I'll I'll leave it to you. So here, Chetan, on the portfolio, the 100,000,000 EV is on the three agreements we are just closing, right? So that's on the three businesses, namely the sodium chlorate in Portugal, the Korean business with fluorine chemicals and the process materials in France part of composites. Right? And this is about, you know, high single digits. I hope it's clear now. And what I was saying is that there are two other businesses coming in, into we are entering into a sales process. Right? And that's our commodity business, the barium strontium business business and the percarbonate business. I hope it's clear. Yeah. That's clear now. Thank you. Karim? No. Fundamentally, what we're saying on the sequential progression gross margin, you're right. Essentially, what we're seeing is continuing strong pricing power. That's one of the main factors, and there's less destocking. These are the main drivers for that sequential improvement you're correct in highlighting. On the cash flow, we'll tell you a bit more early next year what we expect, but absolutely what I can confirm is that the 30%, we have a very clear line of sight towards getting there, much depends on the pace of the rebound we might anticipate for next year because as you know, in the same way on the way down to falling sales, our working capital shrinks. As it grows, we'll keep the discipline. No? Absolutely there, but we'll invest to support the growth. So I'm not gonna pronounce myself at this stage that 30% is achievable next year. What I can say is that we're gonna get to that 30% sooner than the five year road map we'd indicated a year ago because of all the actions we're taking. Thank you. Does that make sense? Yeah. Thank you. Okay. Next question next question from Alex Stewart from Barclays. Please go ahead. Hi there. Good afternoon. Hopefully, three quick questions. You talked about composites still being in positive earnings territory. I think that's what your comment was. Can you just confirm that you're talking about EBITDA there? And then secondly, the EUR $450,000,000 revenue chunk of disposals, so the other the last two businesses, can you give some sense of what the margin might be for those assets, whether it's making money or losing money would be really useful. And then finally, can I just check, Karim, that you said that there was a 140,000,000 structural net working capital inflow this year that won't recur next year? Did I get that right? Thank you for that. Yeah. Maybe start with the first question on composites. Composite. Yeah. Yeah. Indeed, we were talking about EBITDA. Right? Correct. Positive EBITDA and, obviously, positive cash. And I commend the work done by our teams. I mean, we have taken, as you know, decisive, you know, actions, since the beginning of the year. And, actually, last year, we we have been preparing with seven three seven max crisis and all of this, right, to really engage into this year. And, more than just restructuring, we have been actually restructuring on people on head accounts, but also restructuring our industrial footprint. As as you know, we have we we have already closed one site, Manchester in The UK in June. And the the second site, Tulsa, will be closed in quarter one in The US without losing any volumes. The qualifications of product is is is underway. And, yeah, with that, we are removing the lowest return on capital employed assets we have in the composite industrial footprint. So I really commend the work done. And the renewal of our contract with Lockheed Martin and Boeing is testimonial that, we are considered as a strong player in that segment, not to talk about, again, the defense business, which has been extremely resilient if not growing. Karim? Your second question, the 450,000,000, I wasn't too clear what you're looking to understand, Alex. Can you just maybe reframe it? Yes. Sorry. The the the last two businesses, the €450,000,000 revenue, can you give us some indication of what the profitability of that revenue is, whether it's making all of the earnings contribution useful? The portfolio. Right? It is. Is this the start if you like, because oil and gas clearly is not profitable because of situation going through, and that's the biggest part of it. What I can say is both those businesses, in fact, even the other three we are we've already signed agreements for, deliver results into the profits, cash, and returns that are significantly below the group average. Yeah. And that's the thing to note, maybe. And again, Alex, obviously, there are there are times where it's good to sell, and there are times where it's good to wait. Right? And we know that, Solvay is known in the market to have high quality assets. And when I say strategic options, doesn't mean automatically divesture. It can take different, you know, there are different options. Right? So we we'll we we are, you know, ready, and we'll see if we can get the type of valuation and multiple we deserve. We'll listen and we'll engage. If not, we'll be patient because, you know, we are improving those businesses as we speak. Your final question So just to check, you said that did you said it clearly not profitable? You said it clearly profitable, the oil and gas? We haven't commented specifically. What we're saying is they are less profitable than the group. Okay. Yeah. Alright. Yeah. Yeah. Yeah. Definitely. Definitely. Questions around the 140,000,000 of working capital one time. Let me give you some color as to what exactly do I mean by that. There are three components. One, our receivables. You know, we're serving over 11,000 customers. We manage our day sales outstanding, our credit risk profile very, very attentively. But most importantly, what teams have been focused is really making sure we hold on and hold hold people to the terms we've agreed. So really manage and reduce over dues and we've set a new internal record. Our overdues are two to 3% better than we've had, historically. That alone is worth 60,000,000 out of that $1.40, 65 to be more precise. We've been negotiating for the past we had a program to negotiate for the past fifteen months with our suppliers. Our DPOs, days table outstanding on average is four days better today than it was before. That's worth another 45,000,000. Our days of sales outstanding in stock, our inventory metric, let's say, is improved by two days compared to last year. That's another 30,000,000. These type of improvements, you can't continue to repeat. There's a limit, and these are already at very, very high performance levels. Doesn't mean we're not gonna continue to look, but the real goal now is to ensure that as we rebound, we hold on to that. But that's where the 140,000,000 comes from. I wish I could say we can repeat it every quarter every year, but that's obviously not, realistic. That's really helpful. Thank you. Thank you. Next question. Thank you. Next question from Andreas Heine from MainFirst. Yeah. Thank you for giving me the opportunity to ask questions. The first is on specialty polymers, which was sequentially down in sales. Maybe you can elucidate a little bit more to this. It might be that you are lagging in the automotive industry and that you see the rebound in the automotive industry in q four, but I would like to understand more this phasing, which is a little bit different to what we see from other players. Second question, yeah, you mentioned half of the cost savings are temporary, but maybe not all of them them are really coming back. Maybe you can elucidate what you expect of these savings to stay in 2021 even if you have classified them as temporary. Third, I appreciate that you that you would would like to substitute coal in the energy. As far as I know, that's mainly used in the energy you need for soda ash. Yeah. You obviously use coal because it's the cheapest way. Have you done any analysis how costly will be to change this and whether you have enough reserves at the different locations that you produce this? And lastly, on on on North Care, if oil and gas is taken out and we look on the business and it is around 1 to 1,100,000,000.0, if I did my calculation right, Is that still enough as critical mass for this surfactant business? Okay. So let me take, remind me with the questions. I will take the specialty polymer one. You've seen, specialty polymer sales were down, 13.6% in the third quarter, with growth in health care and electronics partly offset the demand in automotive and other industrial market. And, actually, the the automotive, you know, sales were down 20% versus quarter three, but flat, if you compare it to quarter two, thanks to the growth of, in in EV batteries, as I mentioned. So there we we see actually an improvement. Specialty polymer is over poor over performing its market year to date. We consider, minus 15% in its market. So we overperform. We we consider its market to be declining by minus 20% year to date. And why it's important to look at it year to date than just the quarter is because there is stock in the value chain and there may be things struggling between one quarter or another. And we are seeing a phase recovery per region as well, China and APAC leading. Right? So that's what for specialty polymer. I remind you, this is a business with a strong value proposition on, replacing metal, on light weighing, and electrification. So more we penetrate into a vehicle and automobile, cleaner resume mobility because it consumes less fuel and therefore emits less c o two. Also, the growth of EV is real. Right? And and this is gonna just go higher and higher, and we are preparing for further capacity extension in discussions with our customers, be it in Asia Pacific or in Europe, who is, you know, claiming to localize the value chain in EV batteries. Karim? The second question was around, your temporary costs. I think it's a very good question that you asked. Now some measures like furloughs, etcetera, of course, they're not a normal sustainable part of doing business. So, no, those costs will come back. However, if you're trying to get a handle as what can you expect from us going forward, maybe a couple of points I'll make. One is we will not stop at looking at cost reductions. Secondly, all the structural cost reductions we've been delivering this year, we're gonna get the full year impacts next year as well. So expect us to continue to drive the cost agenda very hard next year. As Ilam, you recall, I start if you like? Oil and gas clearly is not profitable because of situation going through, and that's the biggest part of it. What I can say is both those businesses, in fact, even the other three we are we've already signed agreements for, deliver results into the profits, cash, and returns that are significantly below the group average. Yeah. And that's the thing to note, maybe. And again, Alex, obviously, there are there are times where it's good to sell, and there are times where it's good to wait. Right? And we know that, Solvay is known in the market to have high quality assets. And when I say strategic options, doesn't mean automatically divesture. It can take different, you know, there are different options. Right? So we we'll we we are, you know, ready, and we'll see if we can get the type of valuation and multiple we deserve. We'll listen and we'll engage. If not, we'll be patient because, you know, we are improving those businesses as we speak. Your final question So just to check, you said that did you said it clearly not profitable? You said it clearly profitable, the oil and gas? We haven't commented specifically. What we're saying is they are less profitable than the group. Okay. Yeah. Alright. Yeah. Yeah. Yeah. Definitely. Definitely. Questions around the 140,000,000 of working capital one time. Let me give you some color as to what exactly do I mean by that. There are three components. One, our receivables. You know, we're serving over 11,000 customers. We manage our day sales outstanding, our credit risk profile very, very attentively. But most importantly, what teams have been focused is really making sure we hold on and hold hold people to the terms we've agreed. So really manage and reduce over dues and we've set a new internal record. Our overdues are two to 3% better than we've had, historically. That alone is worth 60,000,000 out of that $1.40, 65 to be more precise. We've been negotiating for the past we had a program to negotiate for the past fifteen months with our suppliers. Our DPOs, days table outstanding on average is four days better today than it was before. That's worth another 45,000,000. Our days of sales outstanding in stock, our inventory metric, let's say, is improved by two days compared to last year. That's another 30,000,000. These type of improvements, you can't continue to repeat. There's a limit, and these are already at very, very high performance levels. Doesn't mean we're not gonna continue to look, but the real goal now is to ensure that as we rebound, we hold on to that. But that's where the 140,000,000 comes from. I wish I could say we can repeat it every quarter every year, but that's obviously not, realistic. That's really helpful. Thank you. Thank you. Next question. Thank you. Next question from Andreas Heine from MainFirst. Yeah. Thank you for giving me the opportunity to ask questions. The first is on specialty polymers, which was sequentially down in sales. Maybe you can elucidate a little bit more to this. It might be that you are lagging in the automotive industry and that you see the rebound in the automotive industry in q four, but I would like to understand more this phasing, which is a little bit different to what we see from other players. Second question, yeah, you mentioned half of the cost savings are temporary, but maybe not all of them. Last year, we talked early in q two, I think. We took we're putting in phase zero based budgeting. So Yeah. We we we're taking a number of steps to further Yeah. Reinforce maybe, say, definitely raise the bar because we're really off here. But maybe, Elam, can say more. Yeah. No. I mean, you you've seen that our cost saving and and and focus rigorous focus on cost and cash is is real in this company, and and we delivered €260,000,000 year to date half structural and half nonstructural. By the way, this is the first quarter where the structural savings are overtaking the nonstructural. And with our teams, we knew that, you know, the temporary cost savings are gonna decline at one point of time and that we need to make the temporary come to become structural. And that's why we have initiatives. We call it the the growth based budget. We are unveiling waste. We are looking at how to run leaner, do more with less, be it in our, you know, activities, be it in delayering, reorganizing, the company, be it in in smart spending and smart purchasing. And all of this, like we told you during the the growth strategy is, an important component is our long term, cost savings where we are already delivering, you know, a big part of our 410 of commitment, of of ten years oh, five years. Sorry. Maybe I'll take your question on North Care. I mean, if you just by separating out the oil and gas business, we're not really impacting the critical mass because we've adapted our business in any case to enable us to do this. So there's no real question for us in terms of sustainability, critical mass. We still have a very, very good surfactants business for home and personal care. Yeah. And and home and personal care, I mean, that that was my personal, you know, wow during this crisis. You know that during crisis, you unveil inefficiencies in any organization. And second, you really stress test the industries you serve and and the businesses. And here, what we've seen is that the home and personal care and the formulation business as part of NorthCare outside oil and gas are really resilient. Right? These formulations for home and personal care, for agro feed, and somewhat coating. In home and personal care, we are so excited that we have accelerated our innovation with Actizone, and that's the blockbuster we are launching. Skills 99.9% germs last twenty four hours. It's something the FMCG companies and big big brands you know are, as we speak, accelerating, qualification and the launch. So we're very excited with our position and the quality of this business. I think you talked about coal as well. Right? And I was not sure about the question. Sorry. The line was not good there. But Oh, sorry. I can Yeah. Please, if you can I think the coal is predominantly used in the energy content you need for the soda ash production? And you obviously have used it in that side because it's the cheapest source. So what is, how is the transition time wise, and what does it mean on the cost base for the soda ash operations? Yeah. It's it's a great question. Actually, is the first primary energy we use when really coming back. Maybe you can elucidate what you expect of these savings to stay in 2021 even if you have classified them as temporary. Third, I appreciate that you that you would would like to substitute coal in the energy. As far as I know, that's mainly used in the energy you need for soda ash. Yeah. You obviously use coal because it's the cheapest way. Have you done any analysis how costly it will be to change this and whether you have enough reserves at the different locations that you produce this? And lastly, on on on North Care, if oil and gas is taken out and we look on the business and it is around 1 to 1,100,000,000.0, if I did my calculation right, is is that still enough as critical mass for this surfactant business? Okay. So let me take, remind me with the question. I will take the specialty polymer one. Yep. You've seen, specialty polymer sales were down, 13.6% in the third quarter, with growth in health care and electronics partly offset the demand in automotive and other industrial market. And actually, the the automotive, you know, sales were down 20% versus quarter three, but flat, if you compare it to quarter two, thanks to the growth of in in EV batteries, as I mentioned. So there there, we we see actually an improvement. Specialty polymer is over performing its market year to date. We consider, minus 15%, in its market. So we over perform. We consider its market to be declining by minus 20% year to date. And why it's important to look at it year to date than just the quarter is because there is stock in the value chain and there may be things struggling between one quarter or another. And we are seeing a phase recovery per region as well, China and APAC leading. Right? So that's what for specialty polymer. I remind you, this is a business with a strong value proposition on replacing metal, on light weighing, and electrification. So more we penetrate into a vehicle and automobile, cleaner resume mobility because it consumes less fuel and therefore emits less c o two. Also, the growth of EV is real. Right? And and this is gonna just go higher and higher, and we're preparing for further capacity extension in discussions with our customers, be it in Asia Pacific or in Europe, who is, you know, claiming to localize the value chain in EV batteries. Karim? The second question was around, your temporary costs. I think it's a very good question that you asked. Now some measures like furloughs, etcetera, of course, they're not a normal sustainable part of doing business. So, no, those costs will come back. However, if you're trying to get a handle as what can you expect from us going forward, maybe a couple of points I'll make. One is we will not stop at looking at cost reductions. Secondly, all the structural cost reductions we've been delivering this year, we're gonna get the full year impacts next year as well. So expect us to continue to drive the cost agenda very hard next year. As Ilham, you recall fifty eight years ago when we started this company. So moving away from coal, as you can imagine, is a big deal, and we are doing it because Solvay is transforming and raising the bar in term of sustainability, and Solvay One Planet calls us as we we we we are aiming to to join the PACE agreements and follow the science based targets to actually abandon coal. So, obviously, we can do it whenever there is an alternative renewable energy in the country we we produce. That's number one. For your question number two, we're not starting from scratch. So last year just last year, when I joined the company, we had two plants actually migrating from coal to biomass, Bernberg and Rainberg in Germany, actually, where the economics are favorable, actually. So, we we are we we merge to renewable, recyclable actually is waste, is wood waste, etcetera. And we built an ecosystem around these plants, which makes it actually more profitable than with code. And as we speak, obviously, we are also negotiating, for example, Dombele in France and other areas, around the world, and we give ourselves ten years right to complete our roadmap, by the way, which is already laid out as part of our Solvay One Planet strategy, by 2030 and even beyond. Thank you for the question. Thank you. Next question. Thank you. Next question from Mutlu Gulgogal from ABN AMRO. Please go ahead. Yes. Good afternoon, everyone. I have three and one small question, if I may. The first question is on cost savings. Clearly, you're ahead of schedule. You did in terms of structural savings, did EUR 130,000,000 in the first nine months. You're targeting EUR 150,000,000. I think you did EUR 50,000,000 in Q3. So that means you only got less EUR 20,000,000. I mean, is that realistic? Are you going to do 20,000,000 or should we expect a higher number? That's the first question. Then the second question is on the outlook. Your guidance has a wide range. If you solely look at Q4, it's somewhere between $410,000,000 and €419,000,000 as $490,000,000 Can you tell us in which scenario you meet the low or the high end of the range? Is that solely stopping in December? Third question is on divestments. Thank you for giving some numbers on potential divestments that will come. I mean, how should we think about your M and A or divestment strategy after these five businesses? Would you continue to shed businesses or perhaps look at larger businesses that don't fit into your portfolio? And then final question on green hydrogen. Can you put some numbers on that? So what kind sales or EBITDA could we could we think about in in, let's say, five years' time or so? Thank you. That's thank you. That's four questions. So let let let Karim start with one, and then I do two, three, four. So on cost savings, no. It's not gonna be 20,000,000 in the fourth quarter. We did 50 in the third quarter. That's a good better indication. And that's why I said earlier to an earlier question that I expect our cost savings to exceed the 300 we indicated. But we've been but we haven't given you a specific update, but we certainly have integrated that in our outlook guidance that we've given. Ilham, shall I do wanna talk about the outlook? Range? Second question was about the guidance. Right? And and I agree with you. This range is wider than usual, but we wanted to share with you our views, and it reflects the increased volatility in order books, levels. So you know us by now. I mean, we we wanna deliver against any promise, and and we've seen volatility in order book, right, including in quarter three. So the we we've seen improving trends in late quarter three. Actually, September was minus 10. And to give you an idea, September was the best month since the beginning of the crisis. And to give you perspective, without composite material, which has been hard you know, hit hard with more than fifth 40% decline top line in quarter three, without composite material and North Care oil and gas, the decline in September was 3%. So we really saw an improvement in September, and October sales are down around 10%, as October is almost closed. For November, it's too early to tell. And let's keep aside the second wave impact. We have factored in the same here in our, you know, range, the trend in December is consistent with the usual year and seasonal pattern in this company. Right? Nonetheless, we may face higher variation in stocking and destocking pattern in different end markets. Silica, for example, for tires, as soon as people start driving, they will change their tire because of seasonal requests, right, and demand versus auto OEM, which may actually have a challenge from, you know, sickness, absenteeism, presenteeism, and lockdown in in in in in in different nations. And the bigger question between you and me is how deep and long the second COVID wave will influence demand in markets such as auto, building, and construction, and we have not yet made any allowance on this eventuality yet. But this is why we have forecasted the range for the full year as uncertainties remain. Having said that, you've seen us delivering six quarters in a row, so free cash flow is gonna happen as guided. And second, you know, our cost savings, definitely, are trending into the upper level, and we'll continue converting our temporary cost saving into structural. There was a there was a question about divestiture. And the strategy, what what's next, I think, more than the specific Listen. I I say this since I joined the company, and I hope you see now that we are serious about that. There is no sacred cow in the company. We we evaluate any assets, you know, we have. We have, again, high quality assets, and much progress has been done operationally. First of all, I hope that you all noticed that the growth strategy, the GRNO are were very very simple ways into managing businesses according to their potential and their performances and resume so far. And, obviously, the solution pillar had to increase and improve its return, which we've been doing doing, including pruning the portfolio where needed. The r is about increasing cash and delivering more cash. That's our cash cow. And the g, although it's suffering these days because of the COVID nineteen Last year, we talked early in q two, I think. We took we're putting in phase zero based budgeting. So Yeah. We we're taking a number of steps to further Yeah. Reinforce, maybe, say, definitely raise the bar because we're really off here. But maybe, Elam, can say more. Yeah. No. I mean, you you've seen that our cost saving and and and focus rigorous focus on cost and cash is is real in this company. And and we delivered €260,000,000 year to date half structural and half nonstructural. By the way, this is the first quarter where the structural savings are overtaking the nonstructural. And with our teams, we knew that, you know, the temporary cost savings are gonna decline at one point of time and that we need to make the temporary come to become structural. And that's why we have initiatives. We call it the the growth based budget. We are unveiling waste. We are looking at how to run leaner, do more with less, be it in our, you know, activities, be it in delayering, reorganizing the company, be it in in in smart spending and smart purchasing. And all of this, like we told you during the the growth strategy, is an important component is our long term cost savings where we are already delivering, you know, a big part of our 410 of commitments of of ten years. Oh, sorry, dear. Sorry. Maybe I'll take your question on North Care. I mean, you just by separating out the oil and gas business, we're not really impacting the critical mass because we've adapted our business in any case to enable us to do this. So there's no real question for us in terms of sustainability, critical mass. We still have a very, very good surfactants business for home and personal care. Yeah. And and home and personal care, I mean, that that was my personal, you know, wow during this crisis. You know that during crisis, you unveil inefficiencies in any organization. And second, you really stress test the industries you serve and and the businesses. And here, what we've seen is that the home and personal care and the formulation business is part of NorthCare outside oil and gas are really resilient. Right? These formulation for home and personal care, for agro feed, and somewhat coating. In home and personal care, we are so excited that we have accelerated our innovation with Actizone, and that's a blockbuster we are launching. Skills 99.9% germs last twenty four hours. It's something the FMCG companies and big big brands you know are, as we speak, accelerating, qualification and the launch. So we're very excited with our position and the quality of this business. I think you talked about coal as well. Right? And I was not sure about the the question. Sorry. The line was not good there. But Oh, sorry. I can Yeah. Please, I if you can think the coal is predominantly used in the energy content you need for the soda ash production. And you obviously have used it in that side because it's the cheapest source. So what is how is the transition time wise, and what does it mean on the cost base for the soda ash operations? Yeah. It's it's a great question. Actually, it's the first primary energy we use when and this distress in transportation, we know that sooner or later, all the value proposition and the secular trend around light weighing, electrification, digitalization, healthcare are real, are big, and we can win. And as I said, as we we are making operationally improvements in free cash flow generation, right, which is getting stronger and stronger and more consistent across all businesses, this will enable us less reliance on some cash cows as well. So we will create more flexibility to prune our portfolio going forward. There was a question, I believe, on hydrogen. Right? Yes. Yes. So, to give you an idea, I think we believe at Solvay that the EV battery and green hydrogen technologies, will coexist to make vehicles truly sustainable in the future towards cleaner mobility. I'm very excited with this development. I mean, since I joined the company, we already launched the EV battery, the TPC. Both of them represent half a billion euro opportunity for our company, and we are best in class and the best position to deliver the best solution to the market on both EV and thermoplastic composites. But, you know, as as all you know, lithium ion batteries have emerged as the preferred solution to make the automotive sector more sustainable. We are embarking we even have now exciting EV battery consortium with Veolia in recycling, but it's not enough. And to to to to get into decarbonization to make transportation truly sustainable, and that's why hydrogen has its own, you know, chance and play, and this will be one of the most competitive low carbon solution for transportation. It goes from forklifts for long distances to buses, to cars, to track the regional trains, even airplanes. You may have seen the note, or or the news from, from Airbus on on hydrogen airplane by '20 by 2034. The market opportunity, we believe, is big. We we know that the global hydrogen generation market size is around a 117,000,000,000, you know, and and and today still from the gray origin. So without giving you the soup of of colors now, from gray to to green, not to talk about the blue in the middle, we know that there is, you know, an opportunity. The CAGR between 1927 is high single digit, and hydrogen in mobility will be even higher. And the EU is is invest in the green deal. A lot of money is gonna go, gigawatts are gonna go to each to to hydrogen. And we believe that 2030, our potential addressable potential, I'm not saying it's accessible, will be about €3,000,000,000 between green hydrogen and fuel sales. And and and it's exciting for us. We are launching today an ion conducting polymer technology, solution to support this green hydrogen economy. It's key, to win in photon exchange electrolyzers and fuel sales market. And and we have been relocated relocating resources in the past twelve months to be ready for large commercial program with our customers. And as we speak, we are qualifying, you know, some of these innovations. And sooner, you will hear more from hundred fifty eight years ago when we started this company. So moving away from coal, as you can imagine, is a big deal. And we are doing it because Solvay is transforming and raising the bar in terms of sustainability, and Solvay One Planet calls us as we we we we are aiming to to join the PACE agreements and follow the science based targets to actually abandon coal. So, obviously, we can do it whenever there is an alternative renewable energy in the country we we produce. That's number one. For your question number two, we're not starting from scratch. So last year just last year, when I joined the company, we had two plants actually migrating from coal to biomass, Bernberg and Rainberg in Germany, actually, where the economics are favorable, actually. So, we we are we we merge to renewable, recyclable actually is waste, is wood waste, etcetera. And we built an ecosystem around these plants, which makes it actually more profitable than with code. And as we speak, obviously, we are also negotiating, for example, Dombey in France and other areas around the world, and we give ourselves ten years right to complete our roadmap, by the way, which is already laid out as part of our, Solvay One Planet strategy by 2030 and even beyond. Thank you for the question. Thank you. Next question. Thank you. Next question from Mutlu Gulgogal from ABN AMRO. Please go ahead. Yes. Good afternoon, everyone. I have three and one small question, if I may. The first question is on cost savings. Clearly, you're ahead of schedule. You did in terms of structural savings, did 130,000,000 in the first nine months. You're targeting EUR 150,000,000. I think you did EUR 50,000,000 in Q3. So that means you only got less EUR 20,000,000. I mean, is that realistic? Are you going to do EUR 20,000,000? Or should we expect a higher number? That's the first question. Then the second question is on the outlook. Your guidance has a wide range. If you solely look at Q4, it's somewhere between $410,000,000 and $4.19 for the €90,000,000 Can you tell us in which scenario you meet the low or the high end of the range? Is that solely stopping in December? Third question is on divestments. Thank you for giving some numbers on potential divestments that will come. I mean, how should we think about your M and A or divestment strategy after these five businesses? Would you continue to shed businesses or perhaps look at larger businesses that don't fit into your portfolio? And then final question on green hydrogen, can you put some numbers on that? So what kind of sales or EBITDA could we think about in, let's say, five years' time or so? Thank you. That's thank you. That's four questions. So let let let Karim start with one, and then I do two, three, four. So on cost savings, no. It's not gonna be 20,000,000 in the fourth quarter. We did 50 in the third quarter. That's a good better indication. And that's why I said earlier to an earlier question that I expect our cost savings to exceed the 300 we indicated. But we've but we haven't given you a specific update, but we certainly have integrated that in our outlook guidance that we've given. Ilham, shall I do wanna talk about the outlook? Rain? Second about our investment. Thank you. Thank you. Thanks, Emmanuel. You. Thank the time. We probably have time for one last question. And clearly, the investor relations team will remain at your disposal. Thank you. Last question from Wim Host from KBC Securities. Please go ahead. Yes. Good afternoon. I actually have three. I hope you excuse me for asking them all. The first question is on composites. Revenue was down 44%, and I was, yes, trying to get a feel to what extent that might have impacted by destocking and how you see the underlying trends kind of developing now that there seems to be also some progress with regards to the seven thirty seven MAX. So that's kind of the first question. The second one is on the outlook for soda ash. There has been some volatility in the Chinese market. I know you're pretty shielded from that. But with, yes, demand relatively weak at the moment, how confident are you entering into discussions for the 2021 pricing? Could you maybe comment on that? And then a third question, a bit more housekeeping, is on the corporate line. You posted, if you recall, the EBITDA level, minus EUR 31,000,000 in the quarter. And I was just trying to get a feel to what extent are your savings initiatives structurally lowering this line or improving this line, if you will? And can you kind of offer some guidance on that line going forward, either quarterly or on a full year basis? Thank you. Okay. I'll start with the composites, Karim, and maybe just so that Ash, and you can finish with the housekeeping. Listen on composite. Yeah. As you know, you know, we don't defy gravity. Yes. You know, Only 7%, you know, of our total sales the sales of the group is aviation. Obviously, this is depressed and more than 44% actually, of composite material sales were down in the third quarter. Having said that, you can probably benchmark our performance against peers. The team has done a fabulous job into quickly, and decisively act, and and this is the results of the past twelve months actions. Not only we had a good, value creation plan in this business, we knew which plans are the least efficient. That map was already part of the growth strategy. And when the crisis hit us, we were ready to really, you know, know where we need to restructure the footprint, the industrial one, and that's what we've done. On on on stocking, I think you you mentioned that indeed seven three seven is is is in the minds. It has been test flying, and the ESA, the EU regulator mentioned that it will grant back authorization as soon as The US, it say that. Keep in mind that there is a backlog, right, of airplanes in inventory more than 400 and and even more of his large, you know, in the value chain in which it will take time to deplete. That's that's the thing. Boeing has indicated, for example, that they plan to scale up to 31 per month by 2022. So, again, it will take some time for us to see that benefit. Having said that, you know, we are, you know, a leader there in in resin infusion. The variabilization of our cough and the variabilization of raw material like carbon fibers as we speak is really a strength of ours. And we are as we speak, and you've seen it, Lockheed Martin and Buerger renewal as a testimonial that these large clients, they see us as, you know, an important player in the future. Having said that, aeronautics will have an l shaped recovery as you know. On soda ash, you say this, I think, we we've experienced resilient plant pricing in The EU and The US this year. We have defended our pricing, I should say. Right? And that's what you can expect from leaders. There was a price pressure in Asia, beginning of the year even if the Chinese pricing were rising, since summertime, and and those prices, by the way, were unsustainable, right, economically and and put in danger some of, the exporters from The US. Right? But China remains, you know, small exporters. Right? They do it very opportunistically. And this will only slightly benefit the seaborne market short term because even if Chinese producers expose it less than 1,000,000 tons and usually the the not significantly impact the rest of the world. So however, I mean, having said that, we are, as we speak, negotiating, right, next year, volumes and pricing, it all depends on, I mean, supply demand, and we will see if the demand recovers in 2021, right, in building construction, in glazing, in bottling, right, glass containers. So as we are now facing a second confinement specifically in Europe and post the elections in The US, we are observing how those mature economy are gonna are gonna, you know, really develop in term of supply demand. But we've seen in Chinese glass production, for example, and consumption is doing well so far. Good sign of economy strength. So the ash inventories are moving up again since three weeks due to more production, in China. So let's see if there is some stabilization in the seaborne while Europe and and North America, we continue to close our our contract negotiation, yearly con negotiation with our customers, and we will tell you more, when we close the year in February. And there was another question, housekeeping. Yeah. Corporate costs. So, William, I think what it's a very good spot. We've got we spent a €140,000,000 in our corporate line in the first nine months. Your question is really, think, more looking forward. Now this year, we clearly have the benefits of some of the temporary cost measures as well as the structural, you know, things when you have closed offices, you're not traveling as much, etcetera. We've also had the benefit this year of no insurance claims on our self insurance policy. So that has had to flatter. Now as I look forward, you recall probably a couple years ago, I would have indicated that the corporate line is of the order of 200 to 225. You can expect us to be a good 10 to 15% below that level on a sustainable basis going forward because of the structural programs we're driving, which is hitting everywhere across Solvay, including the corporate. Okay. Very clear. Thank you. Thank you. Thank you. Thank you all. I think we've run out of time, but I want to thank you for your participation today. And certainly, if you have additional questions, the whole investor relations team is available to speak with you after this call. So thank you very much. Thank you, ladies and gentlemen. This concludes today's conference call. Thank you all for your participation. You may now disconnect your lines. Was about the guidance. Right? And and I agree with you. This range is wider than usual, but we wanted to share with you our views, and it reflects the increased volatility in order books, levels. So you know us by now. I mean, we we wanna deliver against any promise, and and we've seen volatility in order book, right, including in quarter three. So the we we've seen improving trends in late quarter three. Actually, September was minus 10. And to give you an idea, September was the best month since the beginning of the crisis. And to give you perspective, without composite material, which has been hard you know, hit hard with more than 40% decline top line in quarter three, without composite material and North Care oil and gas, the decline in September was 3%. So we really saw an improvement in September, and October sales are down around 10%, right, as October is almost closed. For November, it's too early to tell. And let's keep aside the second wave impact. We have factored in the same here in our, you know, range, the trend in December consistent with the usual year and seasonal pattern in this company. Right? Nonetheless, we may face higher variation in stocking and destocking pattern in different end markets. Silica, for example, for tires, as soon as people start driving, they will change their tire because of seasonal request, right, and demand versus auto OEM, which may actually have a challenge, from, you know, sickness, absenteeism, presenteeism, and lockdown in in in in in in different nations. And a bigger question between you and me is how deep and long the second COVID wave will influence demand in markets such as auto, building, and construction, and we have not yet made any allowance on this eventuality yet. But this is why we have forecasted the range for the full year as uncertainties remain. Having said that, you've seen us delivering six quarters in a row, so free cash flow is gonna happen as guided. And second, you know, our cost savings, definitely, are trending into the upper level, and we'll continue converting our temporary cost saving into structural. There was a there was a question about divestiture. And the strategy, what what's next, I think, more than the specific Listen. I I say this since I joined the company, and I hope you see now that we are serious about that. There is no sacred cow in the company. We we evaluate any assets, you know, we have. We have, again, high quality assets, and much progress has been done operationally. First of all, I hope that you all noticed that the growth strategy, the GRNO are were very very simple ways into managing businesses according to their potential and their performances and resume so far. And, obviously, the solution pillar has to increase and improve its return, which we've been doing doing, including pruning the portfolio where needed. The r is about increasing cash and delivering more cash. That's our cash cow. And the g, although it's suffering these days because of the COVID nineteen and this distress in transportation, we know that sooner or later, all the value proposition and the secular trend around light weighing, electrification, digitalization, healthcare are real, are big, and we can win. And as I said, as we we are making operationally improvement in free cash flow generation, right, which is getting stronger and stronger and more consistent across all businesses, this will enable us less reliance on some cash cows as well. So we will create more flexibility to prune our portfolio going forward. There was a question, I believe, on hydrogen. Right? Yes. Yes. So, to give you an idea, I think we believe at Solvay that the EV battery and green hydrogen technologies, will coexist to make vehicles truly sustainable in the future towards cleaner mobility. I'm very excited with this development. I mean, since I joined the company, we already launched the EV battery, the TPC. Both of them represent half a billion euro opportunity for our company, and we are best in class and the best position to deliver the best solution to the market on both EV and thermoplastic composites. But, you know, as as all you know, lithium ion batteries have emerged as the preferred solution to make the automotive sector more sustainable. We are embarking. We even have now exciting EV battery consortium with Veolia, in recycling, but it's not enough. And to to to to get into decarbonization to make transportation truly sustainable, and that's why hydrogen has its own, you know, chance and play. And this will be one of the most competitive low carbon solution for transportation. It goes from forklifts for long distances to buses, to cars, to tracks, to regional trains, and even airplanes. You may have seen the note or or the news from from Airbus on on hydrogen airplane by '20 by 2034. The market opportunity, we believe, is big. We we know that the global hydrogen generation market size is around a 117,000,000,000, you know, and and and today still from the gray origin. So without giving you the soup of of colors now, from gray to to green, not to talk about the blue in the middle, we know that there is, you know, an opportunity. The CAGR between 1927 is high single digit, and hydrogen in mobility will be even higher. And the EU is is investing, the green deal. A lot of money is gonna go, gigawatts is are gonna go to each to to hydrogen. And we believe that 2030, our potential addressable potential, I'm not saying it's accessible, will be about €3,000,000,000 between green hydrogen and fuel sales. And and and it's exciting for us. We are launching today an ion conducting polymer technology solution to support this green hydrogen economy. It's key to win in photon exchange electrolyzers and fuel sales market. And and we have been relocated relocating resources in the past twelve months to be ready for large commercial program with our customers. And as we speak, we are qualifying, you know, some of these innovations, and sooner you will hear more from us about our investment. Thank you. Thank you. Thanks, Emmanuel. I say I'm lost with the time. We probably have time for one last question, and clearly, investor relations team will remain at your disposal. Thank you. Last question from Wim Host from KBC Securities. Please go ahead. Yes, good afternoon. I actually have three. I hope you excuse me for asking them all. The first question is on composites. Revenue was down 44%. And I was, yes, trying to get a feel to what extent that might have impacted by destocking and how you see the underlying trends kind of developing now that there seems to be also some progress with regards to the seven thirty seven MAX? So that's kind of the first question. The second one is on the outlook for soda ash. There has been some volatility in the Chinese market. I know you're pretty shielded from that. But with, yes, demand relatively weak at the moment, how confident are you entering into discussions for the 2021 pricing? Could you maybe comment on that? And then a third question, a bit more housekeeping, is on the corporate line. You posted, if you recall, the EBITDA level minus €31,000,000 in the quarter. And I was just trying to get a feel to what extent are your savings initiatives structurally lowering this line or improving this line, if you will? And can you kind of offer some guidance on that line going forward, either quarterly or on a full year basis? Okay. I'll start with the composites, Karim, and maybe just so that Ash, and you can finish with the housekeeping. Listen on composite. Yeah. As you know, you know, we don't defy gravity. Yes. You know, Only 7%, you know, of our total sales the sales of the group is aviation. Obviously, this is depressed and more than 44% actually, of composite material sales were down in the third quarter. Having said that, you can probably benchmark our performance against peers. The team has done a fabulous job into quickly, and decisively act, and and this is a result of the past twelve months actions. Not only we had a good value creation plan in this business, we knew which plans are the least efficient. That map was already part of the growth strategy. And when the crisis hit us, we were ready to really, you know, know where we need to restructure the footprint, the industrial one, and that's what we've done. On on on stocking, I think you you mentioned that indeed seven three seven is is is in the minds. It has been test flying, and the ESA, the EU regulator mentioned that it will grant back authorization as soon as the USFFA does. Keep in mind that there is a backlog, right, of airplanes in inventory more than 400 and and even more of this large, you know, in the value chain, and we it will take time to deplete. That's that's the thing. Boeing has indicated, for example, that they plan to scale up to 31 per month by 2022. So, again, it will take some time for us to see that benefit. Having said that, you know, we are, you know, a leader there in in resin infusion, the variabilization of our cost and the variabilization of raw material like carbon fibers as we speak is really a strength of ours. And we are as we speak, and you've seen it, Lockheed Martin and Buerger renewal as a testimonial that these large clients, they see us as, you know, an important player in the future. Having said that, aeronautics will have an l shaped recovery as you know. On soda ash, you say this, I think we we've experienced resilient plan pricing in EU and The US this year. We have defended our pricing, I should say. Right? And that's what you can expect from leaders. There was a price pressure in Asia beginning of the year even if the Chinese pricing were rising, since summertime, and and those prices, by the way, were unsustainable, right, economically and and put in danger some of the exporters from The US. Right? But China remains, you know, small exporters. Right? They do it very opportunistically. And this will only slightly benefit the seaborne market short term because even if Chinese producers export, it's less than 1,000,000 ton and usually the the not significantly impact the rest of the world. So, however, I mean, having said that, we are, as we speak, negotiating, right, next year, volumes and pricing, it all depends on supply demand, and we will see if the demand recovers in 2021, right, in building construction, in glazing, in bottling, right, glass containers. So as we are now facing a second confinement specifically in Europe and post the elections in The US, we are observing how those mature economy are gonna are gonna, you know, really develop in term of supply demand. But we've seen in Chinese glass production, for example, and consumption is doing well so far. Good sign of economy strength. So the ash inventories are moving up again since three weeks due to more production in China. So let's see if there is some stabilization in the seaborne while Europe and and North America, continue to close our our contract negotiation, yearly con negotiation with our customers. And we will tell you more, when we close the year in February. And there was another question, housekeeping. Yeah. Corporate costs. So, William, I think it's a very good spot. We've got we spent a €140,000,000 in our corporate line in first nine months. Your question is really, I think, more looking forward. Now this year, we clearly have the benefit of some of the temporary cost measures as well as the structural, you know, things when you have closed offices, you're not traveling as much, etcetera. We've also had the benefit this year of, no insurance claims on our self insurance policy, policy. So that has had to flatter. And as I look forward, you recall probably a couple years ago, I would have indicated that the corporate line is of the order of 200 to 225. You can expect us to be a good 10 to 15% below that level on a sustainable basis going forward because of the structural programs we're driving, which is hitting everywhere across Solvay, including the corporate. Okay. Very clear. Thank you. Thank you. Thank you. Thank you all. I think we've run out of time, but I want to thank you for your participation today. And certainly, if you have additional questions, the whole investor relations team is available to speak with you after this call. So thank you very much. Thank you, ladies and gentlemen. This concludes today's conference call. Thank you all for your participation. You may now disconnect your lines.

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