Hello. Thank you. Good morning together. Thank you for joining us today, and welcome to our Year-End Analyst Call. As usual, we will open with an executive summary and then move on to the figures after some strategic topics as well. At the end of the presentation, as we have already heard, we will be available for questions. Let's skip the disclaimer and go directly to page five. I hope you can see the slide already. We do see the slide here already. Let's start with the very positive conclusion. AlzChem has performed very successfully in this extremely challenging environment in 2021. Sales and earnings are in an all-time high level, and we have met our forecast. Starting in quarter two, but much more noticeable from quarter four onwards, we had to manage major challenges on the raw material side.
The biggest challenge is the very strong increase in raw material and electricity costs, but the disruption of logistics was also a challenge for us. This raises the question of what we did to still achieve our performance. First, within the AlzChem Group, a number of optimization projects are underway, summarized in AlzFit 2025, which will bring significant cost reductions and greater efficiency. These projects are designed to at least compensate for all standard cost increases, for example, for the personnel costs. Second, our integrated product or production Verbund leads to stabilization in turbulent times of price volatility and difficult raw material availability, as many raw materials can be produced in-house and within the group. Third, we have also used the disrupted logistics chains to increase our capacity utilization.
This is not immediately obvious, but we were able to deliver, especially in Europe, and thus significantly increase our contribution margins here. This was very much appreciated by the pharmaceutical industry in particular, but also by other sectors there. Fourth, especially in the fourth quarter, we were able to bring significant momentum to the price increases for our products. We will see that later when we analyze the figures. Fifth, we have top motivated employees who have endured during the pandemic and have been very committed to production, sales, and management. In addition to the turbulence and pandemic management, we have been very successful in bringing the EUR 12 million Nitriles CapEx on stream in quarter two. This investment has already contributed positively to the result and will be able to contribute even more to the result in 2022.
At the same time, we also made an investment of approximately EUR 6 million in an additional regenerative thermal exhaust air purification plant to address the issue of sustainability and the improvement of environmental standards. That would be a long year in a nutshell here. Let us now talk, or take a look at the figures on the next page, which is page six. In the fourth quarter of 2021, sales jumped by 10.4% year-on-year to EUR 111 million. In absolute terms, again, the two segments, Specialty Chemicals and Basics and Intermediates, contributed to the sales growth. Q4 EBITDA stabilized at EUR 12.5 million, close to the previous year's level, despite the high cost increase in quarter four.
For the entire year, this means an increase in turnover of 11.3% to EUR 422 million and an EBITDA growth of 15.3% to EUR 62 million. Earnings per share rose from EUR 1.94 to EUR 2.72, which represents a sizable increase of 40%. The increase is mainly caused by the very good earnings situation and an improved financial result. The overall growth is volume-based with a growth rate of almost 9.7% and altogether, we were able to adjust our prices upwards by about 2.4%, in line with the volume increases, which amounts to EUR 10 million in absolute terms. What cost us profitability compared to the previous year, however, were unfavorable exchange rates, especially the US dollar.
This single effect amounted to about -0.7% or EUR 3 million compared to the previous year. Again, all in all, we have completed a very successful year despite the turbulent market environment. Much for the big picture and the overview. Let us now analyze our target achievement. You see this on slide seven, and I hope the slide has already changed, that you can follow my presentation. All targets are either achieved or firmly in sight. With the general development towards sustainability, we have also included this topic at the top of our target list. Here, all analyses are running at full speed. We have set up a team and are working on the roadmap for transformation. The first analyses are already available, such as the CO2 footprint, et cetera.
The next step is to define and to plan the transformation, which will be an essential exercise for 2022. Next, a few comments on the other targets on the list, starting with the commissioning of the next capacity step of Nitriles product group. The Nitriles plant started up on time and on budget. In May, capacity utilization is at high level and already supported the growth of Basics in the second half of the year. Second or the next topic is increasing our involvement and sales in the pharmaceutical market. As we have already heard, we have been delivering here since quarter one. Our ability to deliver has enabled us to score points with our pharmaceutical customers in particular, but not only. Working on the topic of creatine for health and nutrition is a very interesting topic.
For the market development of creatine, a target extension for a significant capacity increase of our Creapure products has risen here. Commissioning is already planned in stages from quarter two of 2022, and the project is on schedule. Only the project costs have already increased by about 10%, but this is due to the overall turbulent environment. We were able to achieve slight volume increases in Creamino despite the adverse market environment. New customer acquisition is going well. Also, there has certainly been compensation so far. Nevertheless, we expect a good growth rate in the coming months. However, we have to implement significant price increases here in order to remain profitable. The management of COVID-19 effect has been joined by other issues.
We need to pay more attention to the security of raw material supplies and see that we manage the logistics in all directions to facilitate all plant transactions and sales. So far, we see neither price relief or a normalization of logistics here. In summary, however, we can safely conclude, as we stated at the beginning, that all targets have been achieved or are firmly in sight. Now I may hand over to Dr. Georg Weichselbaumer to analyze a few more interesting topics, which is beginning on page eight.
Yeah. Thank you, Andreas. I would like to start with an update on the restriction process for calcium cyanamide. As you can see on the slide, this has been a long story which might come to a conclusion this year. Based on a request to prepare a restriction dossier, the European Chemicals Agency published a preliminary opinion in 2019, which proposes the ban for the use of calcium cyanamide as a fertilizer following a three-year transition period. In two consultation processes on this restriction proposal, a total of 122 comments were submitted by stakeholders from numerous EU member states, as well as some non-EU countries. Without exceptions, all submissions rejected a ban on calcium cyanamide. Still, in April 2021, ECHA submitted the final restriction proposal to the EU Commission together with the opinions of two of the technical committees involved.
The SEAC committee, responsible for the socioeconomic evaluation of the restriction proposal, strongly questions the benefit and adequacy of a ban. A decision on the proposal is on the agenda of the EU Commission for 2022, albeit with low priority. Due to the doubts expressed by the SEAC committee, it is reasonable to assume that the proposal will not be adopted in its current form. In parallel, we have with Eminex, a growing product potential which is based also on calcium cyanamide and has large growth potential. Here, a development towards even more sustainability in agriculture, and especially in animal farming, would be possible specifically with calcium cyanamide because with Eminex, harmful methane production during slurry storage can be almost completely suppressed, and methane liberation will not occur during the subsequent manual application. This brings me straight to the next topic, which is sustainability.
The topic of sustainability has picked up momentum worldwide. We are proud to say that it has traditionally been very high on the priority list of AlzChem. In harmony with people and the environment, we want to be a company that cares about our neighborhood and takes people's interests and concerns seriously, in particular with respect to climate protection. As part of our corporate strategy, sustainability serves as a guideline for a successful future. Environmental protection, and especially our CO2 footprint, are a permanent topic for AlzChem, not just as of today, because we have been active in this area for many years and already closed product loops to take out around 50,000 tons of CO2 of the system. The logical next step is to build on this expertise and make our company CO2 neutral in the midterm.
As you can see with Eminex, even on the product side, we are specifically developing sustainable topics. There are a few more topics that we understand as sustainability. We are part of many sustainability initiatives, and this year we even won the Responsible Care Award of the VCI Landesverband Bayern with our product Eminex. Needless to add that we comply with the Responsible Care guidelines. Last year, in an ongoing effort, we again spent around EUR 20 million on protecting the environment. You can find this and much more in our annual report, to which I would like to refer you in the interest of time. Now, I would like to hand back to Andreas to analyze the financial figures.
Yeah. Thank you, George. I will go directly to page 12, which is the segment, Basics and Intermediates. This segment comprises the production of basic and intermediate products that are either required for the manufacture of specialty chemicals or marketed as standalone products. The sales growth across all profit centers of nearly 20%, the Basics and Intermediates business performed very well in quarter four. For the full year, we achieved a sales increase of 20.4%, both in quarter four and for the full year, volume increases with the additional contribution margins played the key role here. Delivery capability and delivery reliability for our metallurgical products, our fertilizer, and our pharmaceutical raw materials are the criteria that count in this space.
We see a significant increase in the implementation of price increases in the fourth quarter, with 8.8%, and for the full year with 5.6%, we were able to pass on further cost increases to our customers. This is also clearly reflected in EBITDA, and especially in the EBITDA margin. Volumes increased significantly year-on-year by 15.3%, and the economies of scale were realized. Furthermore, a significant part of the increased raw material and electricity cost could be passed on to the market. At the same time, various Six Sigma projects along the entire NCN chain are having a noticeable effect, which is clearly reflected in favorable cost items.
In total, the segment EBITDA increased by EUR 2 million or around 22% year-on-year, and this segment can therefore be summarized as the sales are largely driven by volume, margins significantly improved, mainly by economies of scale, and initial price increases, approximately EUR 10 million, have been able to compensate for raw material cost increases. Much for the Basics and Intermediates segment. Let us now move on to the Specialty segment, which is on page 14. Just as a reminder, this segment produces and sells high-quality specialty chemicals such as Creamino, Creapure, BioSelect, DYHARD, Dormex, to name but a few here. The Specialty Chemicals segment was able to contribute significantly to the overall growth of the AlzChem Group in 2021, with a sales increase of 5.3% in quarter four and 6.3% year-on-year.
The recovery of the automotive sector had a significant impact on airbag application in addition to the DYHARD product area. The decline in PCR testing in general was reflected accordingly in demand. These changes had already been anticipated in the forecast for the 2021 business year. Continuing the positive trend of the previous year, the multipurpose facilities with the business of custom manufacturing were again very well utilized in 2021. Product sales in the area of plant growth regulators, including Dormex, again developed significantly better than in the previous year. In healthy and efficient animal nutrition, Creamino volume increased slightly despite the adverse market environment like pandemic-related disruptions in the market and within the value chains. With very significant volume growth in the mid double-digit percentage range, the market share of dietary supplements based around Creapure was also strongly expanded.
The CapEx of EUR 11 million that has been initiated will enable us to continue to develop this market position in the future. The Specialty Chemicals segment was not spared the turbulences on the raw materials and logistic markets. In some campaigns, for example, plants had to be changed at short notice due to delays in the delivery of raw materials or postponements of collection dates. Nevertheless, all orders were delivered, all plants operated at high to very high capacity utilization rates, and unplanned plant shutdowns have been avoided to date. All effects combined resulted in an EBITDA of EUR 50.7 million in the segment and an increase of 14.8% compared with the previous year.
Price increase rounds have also been started in this segment, which has already been noticeable in the fourth quarter by 1.8%, and should be able to absorb future raw material cost increases as well. Not to be neglected is the currency effect, mainly via the US dollar with -0.9% or just under EUR 2 million. Nevertheless, this segment was once again able to demonstrate its stable growth in both turnover and results. Let us now move on to the third segment, which is Other & Holding, and you see this on page 16. When we are talking about this segment, this segment comprises all activities not allocated to the other segments, and we are talking more about the services on the chemical parks.
In 2021, this segment was able to essentially repeat the development of the same period of the previous year. Chemical services at a similar level as before. There was no or also no significant change in the individual services. In the case of supply chain products, there was a certain shift from warehousing services to shipping, foreign trade, and logistics services, and increased demand for processes or process utilities. Overall, the business can be described more or less stable. All in all, sales of EUR 25.5 million were approximately at the previous year's level, and earnings of EUR 1.4 million were in line with expectations here. Let us talk about the balance sheet on page 17. In total, the balance sheet increased from EUR 354 to EUR 377. What were the main changes on the assets?
Tangible assets increased to EUR 199 million, which is mainly caused by gross CapEx. Inventories are EUR 19.3 million higher compared to the last balance sheet date. This reflects two effects. Firstly, increased raw material costs led to a higher valuation of inventories. On the other hand, products are currently being produced in stock to ensure supply to our customers, thus increasing the quantity held. In the area of receivables, in addition to reporting date related reasons, among other things, the considerable increase in quarterly sales led to a significant increase in trade receivables up to EUR 40.8 million. The payment terms could be kept stable at 54 days. What else is there to discuss about the liabilities? Due to the excellent business, equity increased by EUR 20.9 million to EUR 89.6 million.
This leads to an equity ratio of 23.7% compared to 19.4% in the previous year. Long-term valuation rates for pension changed from 0.5% to 1.0%, but this was more or less offset by pension trends, which had to be raised from 1.5% to 2.0%. This is the reason for the slight decrease in pension accrues here. Current liabilities mainly reflect the effect of the sharp rise in business volumes. The biggest increase was in trade accounts payable due to the increased purchasing volume and higher raw material prices here. Other non-current liabilities decreased to the scheduled repayments. That's it for the balance sheet. Now some words about the cash flow, which you can see on page 18. In principle, cash flow development continues to be very positive.
Cash inflow from operating activities amounted to EUR 43 million and is thus behind the previous year, as we have significantly built our business, followed by higher net working capital in the amount of about EUR 16 million. If we were to exclude that special effect, this would result in a significant increase in cash flow. The cash outflow from investing activities was roughly at the level of the previous year, and thus on target. This year, the completion of the nitrile plant and the RTO, the regenerative thermal oxidation plant, are the main drivers, just like the start of the Creapure capacity increase. Payments for outflow financing activities amounted to EUR 23.6 million. The main topics here were repayment of loans amounting to EUR 14.6 million, dividend payments of EUR 7.8 million, and the share buyback program of EUR 1 million, and no new loans taken out.
After this short analysis of the cash flow, a few words to our main targets in 2022. This year, there is one target that will top them all, and this is price increases. Our main goal is to be able to pass on all cost increases to our customers in coordination with them. This will be a big challenge as our raw material base changes at short notice, and we want to give our customers fair and predictable prices. After that, the topic will be sustainability in all its facets. Here we will examine and define the roadmap to climate neutrality. In addition to our vision of zero accidents and zero waste, we will also be very busy with the introduction of the EU Taxonomy and thus achieving Taxonomy compliance.
In addition, we will be taking care of the implementation of the new CSRD reporting, which stands for Corporate Sustainability Reporting Directive. In purely operational terms, the realization and commissioning of the Creapure capacity expansion is naturally at the top of our priority list by the end of quarter three at the latest this year. That we can continue to drive our organic growth, we are taking care of filling spare capacities of nitriles and Creamino, at least that is our plan. From our point of view, the opportunity is good because we are able to deliver our customers value that strongly. All this against the background or the backdrop of the COVID-19 pandemic, which is still preoccupying us.
We need to pay more attention to the security of raw material supplies and see that we manage the logistics in all directions to facilitate all planned transactions and sales. We and our employees are motivated to realize these targets, and this is the reason for our outlook on the next page, which is page 20. In terms of turnover, we want to continue to grow strongly. Our goal is to grow strongly, to particularly strongly in turnover, so that we consider EUR 480 million as an upper limit to be quite achievable. The result depends on the parity of the price increases with the cost increases. Here we have cautiously deposited that, short-term volatilities on the cost side can be higher than can be tracked on the sales side.
This results in a spread in EBITDA from a noticeable decrease to a particularly strong increase, which we can then also imagine up to EUR 68 million. While we have so far grown primarily through volume growth and the product mix, we will see significant price effects in 2022. That's it, from our side, with the information for quarter four and the 12-month figures. At this point, we would like to thank you for your appreciated attention and are now at your disposal for possible questions.
Thank you. Now we'll begin our question and answer session. If you have a question for our speakers, please dial zero one on your telephone keypad now to enter the queue. Once your name has been announced, you can ask a question. If you find your question's answered before it is your turn to speak, you can dial zero two to cancel your question. If you're using speaker equipment today, please lift the handset before making your selection. One moment, please, for the first question. The first question is coming from Markus Mayer at Baader Bank. Your line is now open.
Yeah. Good morning, gentlemen. Congrats for this very strong fourth quarter. I have three questions, if I may. Maybe I ask them one by one, then it might be easier. Firstly, on this potential ban for calcium cyanamide-based fertilizers by 2026, what does this mean exactly for you? How do you want to change your production facilities, and what other products could you produce on these facilities? What kind of investments?
What does this mean? Calcium cyanamide stands for approximately 10%, actually, in turnover, and our strategy is to change this into Eminex. Eminex is already prepared to take over this sales. The production plant has to be adapted, not too much. It is much below EUR 10 million adaptation for Eminex or to say it this way around, much below EUR 5 million, from my point of view. Therefore, we try to bring Eminex to the market to replace, at the end of the day, some of the calcium cyanamide. We don't think that the ban of calcium cyanamide will come, which is already reported to the EU Commission.
Okay.
Yeah. I'd like to add that the ban will only be in Europe, and we will continue to export calcium cyanamide as a fertilizer to other countries. One other thing, when we look at our capacities, the capacity for calcium cyanamide is already fairly well utilized, and we actually can select already which downstream products of calcium cyanamide we want to bring into the market, and with this will allow us to optimize our product portfolio.
Yeah. Okay. Thank you. Let's assume there would be a full ban of all regions and you would be able to then ramp up this Eminex asset. Is it fair to assume that most likely you would lose volumes but would gain earnings on the other side and as such, the margins would have a positive effect?
Yeah. Overall, the business, you're right, because, you know, the fertilizer business is a very low-margin business. It stands only for contribution margin. That's the main reason why we drive this business already, because it stand for contribution margin, and it helps to have a higher production volume in the carbide case. This is the only one reason running this business.
Okay. Yeah. Okay. Thank you. The second question would be on the raw material costs, in particular, electricity, of course. Can you update us on how much of the electricity contracts you have secured for 2022 and also for 2023 and beyond?
Electricity is a very interesting thing. The market is fluctuating quite well. If you look today at the market and the price development, it's crazy. We have secured about 50% this year, and 10%-20% for the next and the year to come. That's actually what our experience is, that when we work together with our customers and argue that there is a big electricity price increase or cost increase, then we are in the position to hand over the costs to the customers, more or less. That's our experience. That we see already in the first months this year and in the results this year as well. Yeah.
The potential lag effect of passing on this raw material cost increases, is it then should we assume three to six months, or is it more a quarter? What is the best guess here?
I think you have already seen the lag last year. You saw that you have seen the effect only in quarter four. We had the raw material price increases already in the first or the second quarter. Therefore, we started discussion with customers in the second and third quarter and saw the first positive effects in the fourth quarter. Starting with this quarter this year, we will see much more price effects in the P&L.
Okay, understood. In relation to this, then on your guidance, what is the assumption for the upper and the lower end of the guidance range, in particular with the news of tonight and potential further coal and electricity price increases? What is basically the underlying assumption of you?
The underlying assumption is that if we look at the first forecast, the first internal forecast, we see us at the upper side of the EBITDA forecast quite well. Look out of the windows. There is a crisis, we have the pandemic there. We have the logistic crisis there. We have fluctuating raw material prices, which you can't secure at the end of the day. At least the coal prices, we are not able to secure this. From this point of view, we have been cautious in forecasting the business because we don't want to overestimate the chances.
Okay. I had a question on this. When you say with your internal forecast, you are at the upper end of the guidance, does this mean that the year started pretty well for you?
Yeah.
With that the Q4 trends continued?
Yeah.
Okay.
Yeah.
Perfect. Thank you so much.
At least at the turnover side and the sales side, we would see a very excellent February, but the logistics is quite difficult to fulfill. Here, we are talking about approximately, actually EUR 10 million we have to move over to the next month. Nevertheless, the February turnover will come at a very good level.
Perfect. Thank you so much.
Yeah.
The next question is coming from Peter Hauser at zCapital.
Hello, everybody. Thank you very much for having me asking some questions. Congratulations to the great figures last year. I may have some follow-up questions to what was asked before, especially on the cost increase in energy. As you mentioned, and what we can see is the EEX spot prices for electricity have been partially 10 times higher than they were last year. You have said that you fixed, like, 50% of the electricity prices for this year. The question is, will the remaining 50%, will this be the spot? Will you acquire them on spot prices, or, will spot prices play any role for AlzChem at all someday?
I'd like to answer your first part of your question, where you referred to the spot prices on the EEX market. For many of our, particularly for the basic products, we have price formulas which refer exactly to that index, as a price escalating factor. As much as the EEX prices increases, the prices for our customers increase. As Andreas said, we'll see that already in the first quarter of this year. Because in those contracts, we usually have a lag of one quarter because prices are updated on a quarterly basis.
Okay.
Okay, thank you. Mm-hmm.
To make a long story short, yes, we purchase at spot price levels.
Okay. Spot prices do play a role for you?
Yeah.
Another question on the raw material price pass-through to your clients. There was 8.8% in Basics and Intermediates, but only 0.1% in Specialty Chemicals. Could you elaborate a little bit on why it is so much easier to pass on in Basics and Intermediates, but only 0.1% in Specialty Chemicals? Maybe how often do price rounds take place with your clients? Is this on a quarterly or monthly basis or yearly?
In the past, you know, there has been usually once a year the price rounds, usually. Situation completely changed. From my point of view, there are prices fixed only up to three to six months without price formulas. If we fix prices for more than three months, we have usually price formulas behind. In many times, we have only prices for one month actually. There was an additional question I haven't really got. Georg, do you have some answers?
When we look at the Specialty Chemicals segment, the product mix changed significantly. Ultimately it is a calculation which compares previous years' prices with this year's prices with volumes. Due to that product mix effect, we could not show the price increases, which we definitely also were able to pass on to customers in various products of the Specialty Chemicals segment.
Yeah. We tried last year to increase production volumes and to increase this via additional contribution margin and to fill the plants. Therefore, we took the crisis to take the chance, the logistic chance with this more or less a risk, to take it into a chance and to put it into a chance to deliver at least the pharma industry in Europe.
Okay. Thank you. One question to the production cost savings you mentioned in the annual report. Where did these take place?
In principle, you see this at every stage in the production. We try to do the Six Sigma projects in every production plant, but the most leverage lies in the Basics and Intermediates production, within the carbide, beginning with the carbide and then with the calcium cyanamide production. Because here the volumes are higher than in the other plants.
Right.
What is very, very interesting is AI and digitalization, because we are in the position to analyze all the data generated in the plant. Actually, we are in the position to manage and to analyze all this information and then to develop a better production basis and a better result and a better production efficiency at the end of the day.
I suppose the way you do business has changed significantly over the last two, three years with AI.
Yes.
Can you elaborate a little bit on how much you spent, you invested in this area?
It is quite interesting because the investment in that area is very little compared to the positive effects which we could gain. To give you an example, what we achieved in one of the bigger products based on AI brute force calculation, computing power, we are able now to forecast hours out what might happen in a production, what adverse effect might happen in that production, and already counteract before the negative event actually occurs. That increases, for example, in that production yield significantly. If it is a big volume, yield is in the magnitude of millions of Euros with one of those projects.
The digitalization in the chemical industry was already very high. To get together all the information into one database, this is the most important thing. This costs a few million Euros, but not 10 or 20 million Euros.
Okay. Understand. One final question, if I may. You mentioned shortages in the train traffic. Has this something to do with COVID? This really surprised me that there are shortages in train delivery.
Yeah.
train capacity.
Train delivery, I tell you, it's a difficult thing. To work together with Deutsche Bahn is a very interesting. You know, there is firstly the COVID-19 issue. I think that secondly, there are some thunderstorms or there has been some thunderstorms last year and the,
Main station.
The main station in Munich was down, and they have a maintenance shutdown, actually. I think it takes one and a half year to take this back into production there. There were thunderstorms over Germany, and this disrupted the main railroad, and therefore it was really difficult to route through the transportation over rail.
I mean, this refers to supply of raw materials in particular, and also delivery of, for example, carbide, to the customers, which is mainly done via railroad. There we see impacts, because we cannot turn around railway cars quick enough, and that impacts afterwards the overall sales volume because the shipping time doesn't allow us to utilize our capacity to the extent as required. Yeah, it's in both directions. Yeah, yeah.
Okay. Thank you very much for your answers, and bye-bye.
Thank you.
The next question is coming from Oliver Schwarz at Warburg Research. Your line is now open.
Thank you for taking my question. Congrats on the good numbers of Q4 and the financial year 2021. I've got some questions regarding the ban on calcium cyanamide. You stated that only the sales in Europe will be obviously affected once the ban is in place. It remains to be seen whether that will be the case anyway. Nonetheless, I'd like to ask how much of those 10% of group sales are currently generated outside Europe, and how much of that is actually inside Europe for the time being?
Yeah.
That's it.
We looked at each other, and we arrived at the same result, approximately 20% outside of Europe, 80% inside of Europe.
Okay, very good. Thank you.
Yeah.
If you want to, as you're planning to substitute the fertilizer with Eminex, and you stated that, let's say the investment required to tweak the production in that regard is rather limited. I think the synthesis of the final product might not differ that much from each other. If you compare the price points of the fertilizer with the product Eminex, do they come at, let's say, similar price points, or would Eminex be sold at a, let's say, a tangible premium versus the fertilizer product you're currently selling from that production?
I mean, this is not a secret because with both products we are on the market for the calcium cyanamide in the fertilizer market, we are at a price level in the market of EUR 700-EUR 800 , significantly up from what we had last year. For Eminex, through the whole distribution chain, the prices are currently in the magnitude of EUR 1,500-EUR 1,800 . In short, currently the price of Eminex is twice as much as we had it for.
Okay. Basically, if you were able to translate or substitute the volumes of the fertilizer with Eminex volumes, that would lead to a substantial increase both in sales and most likely also in profitability. Is that a correct assessment?
It would not be at least only a game changer for the environment.
Yeah. No. That's another fair point, I give you that. That would require, I guess, when we're talking about volumes of that size, let's say, regulation to change to promote Eminex.
Yeah.
It's unlikely that a substitution would, let's say, work that way without support from regulation. Is that true?
Yeah. Definitely, we need that support to get into the high figures, but we have quite some farmers and also retailers interested who have a focus on environmental protection to purchase material. The market is already developing even without the boost from the regulation, but it will never go into the order of magnitude which we expect when we get the tailwind from regulation. Yeah.
Okay, another hot topic today, obviously electricity costs, input costs, and I heard what you said about, depending on contract length, you have price opening clauses. If I compare that, what you said in that regard, to the development throughout 2021, obviously, the largest increase in prices only happened in Q4, or predominantly happened in the Basics and Intermediates segment, where prices were up in Q4 by almost 9%, while we saw a price increase in the Specialty Chemicals segment only short of 2%.
My question here is, why did it take, let's say, three to six months for, let's say, tangible price increases to materialize in the Basics and Intermediates segment, when, let's say, the longer contracts already have price opening clauses included, so that's kind of an automatism. As new contracts seem to be negotiated on a monthly basis, I would, let's say, have expected price increases to take hold earlier, if that's really the case.
Oliver, and sorry to say that, so we worked really hard on this topic to reduce the price period to a one or to a monthly negotiation and to introduce price formulas within more or less all contracts. This situation was not before the situation before one year.
Okay.
There was quite a hard work to change this completely.
Okay.
Yeah.
If you were to look at where you are with price negotiations with customers, let's say the past price increases in your raw material costs, have they already been translated into higher product prices, let's say, to the full extent? Or is there still more to come even without additional negotiations? That would be the first part of my question. When you're looking at, let's say, price movements like today, where we saw a spike in the natural gas price in Germany versus yesterday of more than 30%, which would translate, let's say, in electricity prices if generated by gas up to EUR 176 per MWh. What was my calculation here?
That's obviously a spike that you might have to live with for the foreseeable future if the situation in the Ukraine stays the same or even worsens from today's perspective. That's obviously something that will have to be tackled by higher product prices. Are we likely to see demand destruction as a result of those quickly increasing prices? Does that imply that your products become less attractive when compared with, let's say, the products by your competitors?
Lastly, if price increases, which are basically out of this world, probably like today and probably also in the next weeks materialize, is there any, let's say, chance for you to go early to your customers and say, "Look, this is not sustainable. We can't wait a month or six or eight weeks for price increases to take hold because the price increase in raw materials of 30% that basically wipes out more than all of our margins plus an additional is likely to add an additional loss on things. And that's obviously not sustainable." Is there something you can do to, let's say, accelerate that process?
I would like to, well, I have one request. This was such an eloquent description of what is required as the customer. Could you come along with me?
Yeah, sure. I will gladly. If that helps. Feel free.
To be more on the serious side, I mean, it was a question with many ifs and whens.
I'm sorry.
This was also the reason why our guidance on the EBITDA development is so broad. When we look at facts, and that's what we can definitely say currently, the current price levels, which you just mentioned, were the basis of our assumptions and the basis for the price increases. When we look at the customer reactions, it's a mixed picture. We have had customers in which we were able to pass on not just the price increases, but get the value which we think our product has also in the prices.
We definitely also had cases in which we decided not to fully apply and convert all the cost increases into price increases, because if we did it, we would lose market share, we would lose turnover, and we have to balance the necessity to increase prices with the requirement to keep our capacities utilized. However, we have significantly changed our approach to pricing. In the past, we made contracts which were long-term, where customers could get better prices if they took more, if they gave us longer forecasts. This was actually a change in mindset also on the sales side.
We are in a situation where we, and I think it has to be mentioned also, are short on capacity on many of our products, and we have reverted to, in some of the cases, kind of auctioned our products, where we gave allocations and gave them along with prices. So far, and that's what I said at the beginning, I can only tell you what has happened. So far, when we look at the first quarter, and Andreas alluded to that already, and I think I can say that January was a very good month. February is a very good month. If we were to multiply January and February with six, we would be very happy also in terms of the guidance and the upper end of what we have.
In summary, we were able to pass on a significant amount of the cost increases into the market, and we did not try to jump short, but to anticipate what could come in addition. However, the visibility which we have in the market is first quarter, maybe second quarter, and all the uncertainties which you see on the horizon. I mean, I saw this morning, a guidance or information from banks who said, "I will not give you any information how the stock market develops today because the war has just begun." I think you need to understand also that in such an environment, we not only look at the positive side, but are honest and need to say there are developments beyond our influence, and we need to take account of those also. Understandable.
To make a long story short, we reversed the price discussion rounds and we shortened the price discussion rounds down to one month. Usually we are in the position to talk to customers to adjust the prices. Sometimes we do that, sometimes we decide not to do because we are interested to keep the quantities. From this point of view, we try to do our work this year like last year, and we think that we are on a good path here.
Very clear. Thank you so much for that information. Mm-hmm. Lastly, perhaps if I may, just a short one.
When you're looking on working capital development, in 2022, would you agree that we'll see a further increase in working capital or are there some, let's say, factors that I didn't take into account?
No, we try to keep that stable and we are just working on reducing a stock as well as accounts receivables.
Understood. Thank you so much for your answers.
Okay.
As a reminder, if you have a question for our speakers, please press zero one now to enter the queue. We have one more question coming from Peter Hauser again at z Capital.
Yes. Thank you. I will make it very quick. You mentioned that in 2021, it was also the product mix that contributed to growth. Will there be changes in 2022 regarding the product mix, too?
As you have seen that we have had a quite good year in Basics and Intermediates, we will see more growth in Specialty Chemicals this year. I mean, we see quite good growth potential in some of our products. For example, and I can allude to that when we look at something like TCCA, which is an intermediate for pharmaceuticals. There, we will definitely see both price and volume growth, and that will help us overall. We have announced that we invested into creatine. That will come on stream in the third quarter and will increase significantly our turnover in creatine. We see quite some good volume and price growth in metallurgy, so that also will change a little bit our product mix.
Those are examples which support what Andreas said. Yes, we will see those changes in product mix again.
Mm-hmm. You mentioned that you invested EUR 11 million in the production capacity of creatine and that you will see them to start to work in the second quarter, I think. Is there-
Third quarter, yeah.
Will the full production capacity be reached this year or will this only take place in 2023?
When we look at the creatine market, we see currently two developments, which both support our investment decision. The market is currently undersupplied, as there is some shortage of material, and all the material is the competition located in China. There are shortage of material coming out of China. We cannot even supply the market to the extent which it is required, on one side. On the other side, we see that creatine takes mainstay also in other markets than we traditionally had. We had it in the sports market. Now it goes out to the lifestyle market. It goes into the food market. We see also a market growth. Market growth on one side. On the other side, the shortage of supply.
Our planning currently shows that the equipment, as we have planned it so far, will be fully utilized right from the beginning. As we have those drivers, we actually took another look if it is not even possible to stretch our capacities a little bit further because we have not only seen positive development in the market, we have also been able to sign significant contracts with customers, which makes us very confident that that growth will actually happen.
Very interesting. Thank you. Finally, could you tell us something about the sales volume in Ukraine and in Russia last year?
Yeah. Yeah, that's a very short answer. It's minimum. I mean, I can actually tell you where we have it. We have just started to sell some fertilizer, Perlka, into Ukraine. We do that in Russia also. In order to expand outside of Europe, we have some Creamino sales and that's it, period. It's below half a million Euro.
Very good. Very good. Thank you very much. Have a nice day.
There are no more questions at the moment. For closing remarks, I give back to the speakers.
Yeah. Thank you very much for the questions. We can offer you the opportunity to visit us again virtually or in person at the conferences. We will see that on page 21. We are pleased to invite you to this event, and we will be back latest with quarter one figures on 28 April . Should we not see each other by then, stay safe and sound, stay in our good graces, and goodbye [bis dann]. Thank you. Bye-bye.