Good morning and a warm welcome to the Earnings Call of Alzchem Group AG. I would like to introduce the company CEO, Andreas Niedermaier, and CFO, Andreas Lösler, who will guide us through the presentation in a moment, followed by a Q&A session via audio line and chat. With that, I hand over to you, Mr. Niedermaier.
Yes, thank you. Good morning, everyone, and thank you for joining us. It's great to have you with us for our Q3 analyst call today. We will begin with the key highlights and developments of the quarter and then, as always, leave plenty of time, hopefully, for your interesting questions. Let's get straight into the business and turn the slide to page five here. Let me start with the key highlights in the first nine months. We continued on our profitable growth path here, with revenue increasing by 4% to almost EUR 444 million. Even more importantly, EBITDA grew by 8% to more than EUR 93 million, lifting our EBITDA margin up to 21%. This performance was once again driven by our specialty chemicals business, with continued strong demand, particularly in human nutrition and defense.
This more[inaudible] At the same time, we continued to make good progress with our strategic growth project. In Germany, our expanded nitroguanidine capacities have now entered into the commissioning phase, bringing us another important step closer to full operation. For our U.S. project, we have completed basic engineering here and are now focusing on optimizing the concept. Initial cost estimates came in significantly above our original expectations. We are carefully reviewing the design and the overall investment required. At the same time, discussions with our customer, the U.S. Army, are ongoing. The future implementation of the project will also be dependent on securing on appropriate funding framework, and this is therefore an important part of the discussion currently under a positive way. Our creatine expansion, meanwhile, remains well on track.
We expect to start commissioning the new capacities in the second half of 2027, providing us with significant additional capacity and opening up further growth potential from there as well. The carbide furnace is back in operation after the complete renovation. From that point of view, thank you to all our employees. They did a great job here. We have also successfully completed our previous share buyback program and decided to launch a new program of up to EUR 20 million, as already communicated a few days ago. Overall, we are pleased with our development in the first nine months. Our operation performance remains strong. Our key growth projects are moving forward. On this basis, we confirm our outlook for 2026.
While the revenue target will require a really strong finish in the year, we remain confident about our earnings outlook and expect to deliver within our guidance. Later on, Andreas will give you a good overview and a good feeling about that. Let's take a closer look at what is driving the performance and how our business development over the first nine months within the segments. Let's turn to page Basics & Intermediates, and let's start with them. As expected, the segment showed a weaker development in the first nine months of the year. Revenue declined by around, let's say, 10% to EUR 109.5 million, mainly due to lower volumes. Demand in agriculture remained subdued, while our pharmaceutical-related business continued to face strong competition and price pressure from Asian suppliers.
On the positive side, our metallurgical business continued to develop well, supported by the improved situation in the European steel industry. EBITDA for the first nine months came in at EUR 2 million, compared with EUR 5.1 million in the previous year. In addition to the lower volumes, higher electricity and raw material prices had a negative impact on profitability. If you look at quarter three separately, however, we see a clear improvement compared with the second quarter. Following the completion of the carbide furnace refurbishment, EBITDA returned to a + EUR 2 million in quarter three after a slight negative result in quarter two. We also continued to reduce inventories following the planned stock build-up ahead of the furnace refurbishment. Overall, the development in Basics & Intermediates is in line with what we expected. There are still some weaker areas, particularly agriculture and pharmaceuticals, while metallurgical is developing quite positively.
With that, let us move to the specialty chemicals, where we see a very different and much stronger development. Turning to the specialty chemicals, we continue to see a very solid development across our key growth areas. In the first nine months Revenue increased by 11% to EUR 312.7 million, driven by both higher volumes and positive pricing effects. The main contributions came, as expected, from human nutrition and defense, complemented by a continued positive development in our custom manufacturing business. Human nutrition continued to perform very well. Demand for our premium creatine products, Creapure and Creavitalis, remained quite high, and we benefited from the additional capacity that became available in the third quarter of last year. Beyond sports nutrition, we continue to see additional market potential for creatine in other applications. Defense was another important contributor to growth, supported by continued strong demand for nitroguanidine.
At the same time, the new production facilities in Germany have now been commissioned and are currently being ramped up. Our custom manufacturing business also continued its positive development with high and stable utilization of our multipurpose production facilities there. This positive sales development also translated well into earnings. EBITDA increased by 17% to EUR 91.5 million, with the EBITDA margin improving from 27.7% to 29.3% here. Importantly, this momentum was also visible in the third quarter itself. Q3 sales increased by 13% year-on-year to EUR 98.5 million, while EBITDA rose by 14% to EUR 27.5 million. The EBITDA margin remained a strong level of 27.9% here. Overall, specialty chemicals continues to develop very well and remains the main driver of our growth and of our earnings performance. With that, let us briefly complete the segment view over with Other & Holding here on the next slide.
Revenue for the first nine months remained broadly stable, with EUR 21.6 million almost unchanged from the previous year. A slight decline mainly reflects lower electricity grid fee pass-throughs to our chemical parks customer. Looking at the third quarter, revenue increased slightly year-on-year to EUR 7.3 million. This was mainly driven by catch-up effects from electricity grid fees, as well as higher demand from customers at our chemical parks. On the earnings side, EBITDA for the nine-month period amounted to EUR 0.1 million, while Q3 contributed around EUR 0.5 million. Compared with the previous year, earnings were affected by higher expenses related to the modernization and further development of our infrastructure at the Trostberg site. Overall, revenue remains stable while we continue to invest in the infrastructure of our chemical park. With that, we have completed the segment view and can now move on to the group financials.
Therefore, I hand over to my colleague, Andreas Lösler. Andreas.
Also good morning from my side, and thank you, Andreas, for the insights in our segment development over the first three quarters in 2026. As always, I start my analysis by looking at our P&L. First of all, I would like to highlight that our financial performance has developed largely in line with our expectations. Our group sales within the first nine months of 2026 reached EUR 444 million. This represents an increase of EUR 19 million, or 4%, compared to last year. As anticipated and communicated, the third quarter came in a bit lower in terms of sales as Q1 and Q2 of 2026, but with a growth compared to last year's Q3. The main reason was revenue brought forward to the first half of the year. My colleague Andreas has already mentioned and discussed that both operating segments developed again differently.
On a regional basis, the major sales increases could be achieved in Europe and the U.S. once again and can be allocated to the specialty chemicals segment. The sales portion of our segment specialty chemicals could be increased again and contributed 70% to our group sales, after 66% within the comparative period. The continued shift in the revenue mix towards specialty chemical ingredients, combined with our ongoing focus on cost discipline, enabled us to further increase EBITDA. While we were also affected by higher electricity and raw material costs, we have so far been able to partly offset these increases, either by price increases or the usage of hedging contracts. Accordingly, we continued our positive earnings performance in the first nine months of fiscal 2026, increasing EBITDA by 8%, or EUR 7 million, to more than EUR 93 million.
At the same time, our EBITDA margin on the group improved from 20.3% to 21%. Our continued investment in future growth is resulting in a corresponding increase in depreciation. In this quarter, the impact of the commissioning of the new plant is reflected in the depreciation for the first time. We started depreciation after successful commissioning, and this is the main reason for the increase in our depreciation by EUR 4 million. As we entered into new loan agreements in Q2 2026 to finance our growth, we have to report higher interest charges as an impact on our finance result, which came in EUR 1.3 million lower than last year. All put together, we could increase our net result up to EUR 48 million. This represents a growth of 3% compared to last year, and the same applies to our earnings per share. That was the big picture of our P&L.
Now let's move on to the balance sheet and cash flow figures. Our balance sheet and cash flows are still very healthy and developed as expected. Our balance sheet total has increased by EUR 56 million since our last reporting date. On the asset side of the balance sheet, the main impact is still coming from our ongoing investment activity, followed by an increase in our fixed assets. On the other hand, we largely reduced our stock level during the period of our furnace refurbishment. Based on our precise planning, we were always able to deliver and had enough carbide stock available. Our equity increased by EUR 22 million since December 2025, and our equity ratio has been almost stable since then. The increase in equity was primarily driven by our strong net income and reduced by our dividend payment and the impact of our share buyback program.
For our last share buyback program, we spent EUR 10 million in cash and bought approximately 62,000 shares back, which we will now use partly for our very successful employee share ownership program, with an increase in impact on equity and cash. The current interest rate development also had a decrease in impact on our pension obligations by approximately EUR 6 million, which on the other hand, also increased our equity. Within the second quarter, we have strengthened our financing structure, which can be seen in increased bank loans, high cash positions and within our financing cash flow. We discussed this new financing structure in our Q2 results and call already, which I am referring to. A closer look at our cash flow also reveals a very solid foundation for future growth. Operating cash flow amounted to EUR 97 million in the first months of fiscal year 2026.
On the first view, this is a decrease compared to last year. However, a closer look reveals that customer contributions were significantly lower than in the prior year period. Excluding this effect, operating cash flow showed a strong improvement year on year. Alzchem continues to invest substantially in future growth. Capital expenditures increased to almost EUR 118 million in the reporting period, EUR 50 million above the previous year's level. This increase primarily reflects our growth in defense and human nutrition, as well as the modernization of the carbide furnace. Reflecting this significant investment in future growth, free cash flow amounted to -EUR 20 million, significantly lower than last year. It is worth noting again, however, that the prior year free cash flow benefited from approximately EUR 44 million higher customer contributions. As you can see, Alzchem is in a very healthy capital and cash position and ready for future growth.
Future is a good keyword. Let's now discuss our outlook for the remaining few months of financial year 2026. As already mentioned by my colleague, we confirm our guidance as set out at the beginning of the year, and we still see further growth for the remaining period of the year. The expected temporary slowdown in sales and earnings in Q3 2026 materialized as anticipated and was fully in line with our full year guidance. Sales are still expected to grow to approximately EUR 600 million, and EBITDA is still expected to grow to approximately EUR 126 million. This represents a sales increase of approximately 7%, while EBITDA is expected to grow by approximately 8%. From today's point of view, and considering the short working period in December, reaching EUR 600 million sales might be challenging, but we will end up within our expected range.
However, we are strongly confident for our EBITDA guidance. The planned sales growth shall continue to be achieved organically. The fundamental growth drivers are expected to be volume effects within the segment specialty chemicals. As already outlined, we do expect such volume growth in the area of human nutrition and defense. Based on the current development within the agriculture and pharmaceutical industry, we do not expect growth in our segment Basics & Intermediates. For these segments, we do expect overall sales to be slightly lower than previous year's level. We continue to operate in a volatile geopolitical environment. Based on the current assessment, however, recent geopolitical developments, particularly the conflict in Iran, are not expected to materially affect the group's guidance for fiscal year 2026.
Our outlook is based on the assumption that further increase in raw material and energy costs [inaudible]developments in our segment specialty chemicals, and this also applies to our EBITDA margin. The industrial
expected to have only a minor positive impact on Alzchem's cost structure from 2027 onwards, and has therefore not been included in the 2026 guidance. As you can see, we have interesting times ahead of us. At this point, we would like to thank you for your appreciated attention, and we are now at your disposal for possible questions.
Thank you very much for the presentation. Ladies and gentlemen, now it's your turn. We are opening the Q&A session. For a dynamic conversation, click on the raise hand button for your questions via audio line. If you're dialed in per phone, please use the combination star key nine to raise your hand and star key six to unmute yourself. You are also very welcome to ask your questions in our chat. We already do have some risen hands. Mr. Christian Faitz, you should be able to unmute yourself and ask your question.
Yes. Good morning. I hope you can hear me.
Yes. Perfect.
Okay, perfect. Thanks. Congrats on the results in a challenging environment. I have three questions, if I may. First of all, when do you believe will the German nitroguanidine expansion move from technical startup to a meaningful earnings contribution? The second question would be regarding your U.S. nitroguanidine plant. Your cost and planning optimization and the cost overruns you mentioned. Can you in some way quantify, and if not quantify, at least qualify what is happening there? Then the third question, how strong is the demand visibility behind the next creatine capacity expansion? Thanks very much.
Let me take the first question, nitroguanidine, when will you see meaningful earnings? The first earnings we will see already in Q4. The new plant is contributing already additional quantities. But from my point of view, we will see the real main point in the second half of 2027. We will have additional quantities for the first quarters as well. But the main growth is today seen as in the second half of 2027 then. And you will see that in the full guidance of the next year then. U.S. plant cost optimization, yes, that was really surprisingly for us as well, that the costs in the U.S. are quite a lot higher, and the inefficiency of projects are quite higher than here in Germany. At least all the registration and authorization process is very tough, let's say.
From that point of view, we are really in the optimization phase. And we have to have a profitable project there. And from that point of view, we are in deep discussion with the DoD there, that they take over, on the one hand, the costs, or they give us some contracts where we can do our calculation on. But from today's point of view, we are really optimistic that we can solve that problem. We can reduce the costs a little bit. And the DoD is probably prepared to take over the costs here as well. From that point of view, we see us in a proper time schedule. Our time schedule showed that we want to start up the production in 2029.
And from today's point of view, that's enough time to do that on the one hand, and demand will come in the same way from today's point of view. Yeah, strong creatine demand. You mentioned that. As we always say that we can deliver every kilo which comes out of our production. We see that quite healthy, that demand, and are really glad when we have added the additional capacities next year, because we have many customers out there who will be proud to take Creapure or Creavitalis. From that point of view, growth trend is quite positive. And we think that it's very important to have that capacity there.
There is an additional topic, we are thinking about the next step of capacities strategically, but this decision can be made in the first half or by the end of the first half 2027, from my point of view, actually. Yeah, that has been the answers for you.
Thanks very much.
Yeah.
Very helpful.
Thank you very much. There are further raised hands from two people dialed in by phone. Sadly, I cannot see your name, but I will allow you to speak, so you should be able to ask your question now.
Yeah. Okay.
Yeah. Hello. It's Peter. Thanks for. I think I have some questions. I am sorry for being on the phone with that, with all the noise in the background. I wonder.
Peter, from our point of view, please, can you speak very slow, because the line is.
Okay
is really bad, and we have some noise in the line. Yeah. Go on. I think we have lost him.
Yes, it seems like it. In the meantime, I will allow Patrick Speck. You should be able to ask your question now.
Yes. Good morning, gentlemen, and thank you for taking my question. My first question is again on the U.S. project. I have to admit that I did not fully get what cost and planning optimization means here. Maybe you could elaborate a bit more on that. Do you ask for higher subsidies or what is in discussions now?
It is both of them, yes. Our first idea was to have a one-to-one copy from the already German built-up production plant to the U.S., but that seems not to be really efficient because the standards are different in the U.S., and from that point of view, we had to overwork the design. We have to redesign the plant, and we have to take time. So at the end of the day, the process is the same, but the plant will not look like the same. We have optimized all the piping and all the connections on, let us say, U.S. standards, and for that, we will receive lower costs at the end of the day. Yes, we ask for higher subsidies, because if we have higher costs, then we need to finance that, and that is the ongoing discussion.
Okay. Understood. My second question is on the new creatine project. No, sorry. On the nitroguanidine project in Germany.
You mentioned that you expect first revenues coming from that in Q4 already. When do you expect the new plant to contribute positively to the earnings as well?
So, with the additional quantities, we will see the positive earnings as well. So, if you do the calculation for the complete outlook, you can see that we will have a quite good, or we will see a quite good quarter four. And for the next year, we will see quite better earnings than this year, because next year, we will add additional capacities for creatine upwards after the second half of the year, and nitroguanidine will contribute a lot already from the first day in the next year. But the main growth I expect really for the second half as well. Yeah.
Maybe a quick follow-up on that, but I did not fully get what's roughly the ramp-up costs we see from the new projects in Q4, and maybe in Q1 next year still?
There are no real ramp-up costs in Q4 and the next year. So we had some minor below EUR 1 million ramp-up cost in the third quarter. And at the moment, as the plant is running better and better in each day, so we do not expect higher ramp-up costs. As you know, we have already hired the people to work in the plant one year ago and trained them, so the figures are basically already in the P&L.
Okay.
Yeah, they has been already in the P&L for the full year last year, and from that point of view, we don't see additional personal or employee costs. Probably, we will see some additional repair and maintenance costs, but we have planned that already, and from that point of view, no surprise is expected here.
Okay, good. My last question is on your free cash flow development. You mentioned that we saw positive development compared to previous year when we do not include the customer prepayments. The free cash flow in the third quarter was positive. Were there any customer prepayments included, or did you not receive any in the third quarter?
Yeah. In the third quarter, we received also some customer payments, a minor one, but the main customer payments for this year came in over the nine months period, approximately EUR 11 million. Last year, it was EUR 55 million. Basically, in Q3, these were only monthly payments and no milestone payments, but we expect, or I can tell you, we received the next bigger milestone payments already in October. You will see that in the total year figures.
Okay, which means the free cash flow in the fourth quarter should be positive as well. Is that right?
Should be positive, probably. We are also waiting for the final payments of the European Commission for our nitroguanidine expansion program. This is also scheduled to come in in the fourth quarter. Summing up all those payments, we do expect, as we mentioned at the beginning of the year, zero free cash flow on total by the end of the year.
Yeah. Okay. Understood. Very clear. That is it from my side. Thanks a lot, and all the best for Q4.
Yes. Thank you.
Thank you very much. We have further raised hands. Mr. Christian Cohrs , you should be able to ask your question now and unmute yourself.
Yes. Hello. Thanks for taking my questions. I have three actually. First, you flagged in the July call and also this time that sales were pulled forward from Q3 into H1. Maybe can you quantify the amount that was shifted? Second question relates to pricing. In the specialty business, pricing contributed nearly 6%, so I wonder to what extent this relates to the pass-through of cost items, and what part of that is genuine margin accretive. Lastly, when it comes to contract liabilities, the new nitroguanidine site now being commissioned, when can we expect that contract liabilities will be started to release? Thank you.
Okay. Thank you, Christian, for your questions. As outlined in the last call, the revenue brought forward from the second half to the first half of the year was approximately EUR 8 million -EUR 10 million and was completely dedicated to the specialty chemicals segment. Second question, I guess
Yeah, that was the pricing in specialties. That was mainly pass-over costs, because you may have seen the high electricity prices and the higher employee costs, and therefore we mainly increased prices for that. There is some smaller margin increases as well there, but it is mainly the cost pass-through or pass-through. For NQ contract liabilities, Andreas?
Yeah. Delivering the additional quantities out of the new plant contract liabilities. EUR 8 million and EUR 29 million. If you look at our financial statements of last year, of 2025, there is one note where we predicted the development of the contract liabilities over the years, and this assumption is still valid. No reductions this year, but starting next year.
Okay. That is clear. Thank you.
I will take the written question. What are the reasons for the EUR 2.7 million negative year-on-year swing in consolidation and other EBITDA in Q3? Andreas, that's a good question for you, I think.
Technical accounting issue, right?
Yeah.
In the third quarter, we delivered a lot of volumes, a lot of quantities to our U.S. company, and from a group level, this is not sold yet because it's on the ship or on the warehouse or in the warehouse in the United States. As long as it's not sold to external customers, we need to reduce the margin here. We need to reduce the gain between the companies. This is the main reason why we have increased this amount. On the other hand, this will turn out into profit as it's sold out of the U.S. plant.
Second question was, what depreciation level should we expect for Q4 and 2027? I think that's a good technical question for you as well, Andreas.
Yeah. It's again, technical thing, right?
Yeah.
For the whole year, we do expect to end up at approximately EUR 30 million depreciation, in total for 2026. For 2027, taking into account the ramp-up or the commissioning of the creatine plant in the second half, I don't have the final figures available at the moment, but I would add EUR 5 million -EUR 10 million for 2027.
Last question here, how do you deal with the current spike in energy costs? How much have you hedged at what level, and what is the expected cost hit in 2027? Yeah. That would be interesting for us as well, what the real cost hit would be. The spike surprised me personally a lot. Today, we have prices much above EUR 300, what I have seen. The last few days has been quite high as well. The highest prices from my point of view after the energy crisis in 2022. I'm really surprised why nobody's talking about that in the newspaper or in the television. Nobody's taking care about that, because that's really hurting the industry at all. How do we deal with that?
Actually, first positive thing is we have only one German carbide kiln in production, so that saves us a lot, on the first step. Second step, we reduce stock level because we have only one carbide kiln on or in production. Third level, we have some energy hedged, but not that much. From that point of view, we have the negative impact as well. There has been some negative impact already in the quarter three. But we will see how the last quarter will develop. I don't have a clear picture here, but we think that we can stabilize the outlook and we will not be hurt that much. The more important thing will be the next year, from my point of view, if that high spikes will go on, or if that's only a spike of a few days or a few weeks, let's say. Yeah.
Okay, that's the answer for that. Are there any questions around?
Yes. Thank you very much. There are still some risen hands. There is another person dialed in by phone whose name I cannot see, but they should be able to ask their question now and unmute themselves. Let's see. If not, we move on to the next person. Or has it worked?
Hi, can you hear me?
Yes, we can.
Hi, this is Julia from Bank of America. I wanted to ask about Q4. The current guidance implies around EUR 48 million step-up in EBITDA for Q4. Can you talk us through that improvement? Which division is driving this? Is it specialty chemicals or Basics & Intermediates? Also within those divisions, what is driving the improvement? For example, is it more cost rolling off or is it any specific products? Is it typical seasonality or maybe some incremental NQ EBITDA? Just to get a better understanding of what we can expect from here. My second question is also on the NQ contribution for next year. Sorry, my line was interrupted, so maybe I missed this. I wanted to ask, because initially when you announced the project, obviously that has been quite some time ago, you expected an upper double-digit million euro contribution in 2027 onwards.
I wanted to ask, can you give an update on the expected sales and maybe also EBITDA contribution for next year from that incremental NQ expansion in Germany?
Yeah. I will probably take the first question. Thank you, Julia. When it comes to EBITDA, you can clearly expect that the EBITDA grows in the fourth quarter stand-alone will mostly, not only, but mostly come from the specialty chemicals business. Here, as we mentioned, we are expecting higher volumes for our creatine products. We expect higher volumes for our nitroguanidine products and also a good revenue with our custom synthesis business. So, the increase will mainly be driven by higher volumes compared to Q3.
We do not expect additional costs out of the carbide renovations.
Right.
Carbide renovation is behind us, and that is a positive thing as well.
Yeah.
Nitroguanidine contribution for next year, interesting topic. We see that we will see a good ramp-up next year for the capacity, but not running the capacity at 100% level. We are working hard and really close with our customer to use every ton out of the production. From that point, it is not really clear what is the real level, how we can run the plant, but we try to ramp up very quick. From that point of view, 2028 should be in full operation. Next year we think that there are some, let us say, missing turnovers because of ramping up. That is the actual view, let us say.
Okay. Thank you.
Thank you very much. We have further risen hands. Ms. Manuela Stürzer, you should be able to ask your question now.
Hi. Good morning. This is Manuela from Deutsche Bank. I have two questions regarding the nitroguanidine facility in Germany and one to the U.S. one. First on the German one. What do you see here as any potential challenges? Do you see customer downstream expansions now as the main constraint on the German ramp-up? You just mentioned that you see full utilization in 2028, right? Maybe you could elaborate more here. My second question would be, when do you expect to have a decision from the agreements with the DoD regarding the U.S. CapEx program? Thank you.
For potential challenges on NQ Germany, to be honest, no major ones. That is a normal commissioning process. Here and there, we have to adapt the plant. Here and there, we have to screw and to maintain and to repair. But that is normal, let us say. The main challenge is that the production plant is available, and we are ready to use all the capacity, and we want to motivate all the customers to take material already in advance for next year, because for next year, we will have spare capacity available. For the year to come, 2028, actual plan do not show spare capacities. From that point of view, if you are talking about challenges, a challenge in that environment is to store the product, because storage is not that much available for that product, at least for the dried product.
But we are working quite hard on that, and we try to solve that. For the U.S. plant, we or I expect the decision that year, because we need to have that decision that year. Hopefully within short notice, that we are ready to go on because we are really ready for that project. We have to purchase the long running items, and we have that information all available, and we are ready to hand in that purchase orders. Differently to Germany and the U.S., you have to hand in the purchase order to your supplier to get all the design information back that you can all do the detailed designing of the plant. In Germany it is a little different. You can do more parallel. In the U.S., not. From that point of view, we are taking much pressure on that decision.
We think that it is hopefully received that year.
Thank you.
Otherwise, let me add that point. Otherwise, if the DoD would not be in the position to finance the whole project, then we could overthink the U.S. project, and we have plenty of time to add the capacity in Germany. From that point of view, we will add the capacity. It's not decided in the U.S. or in Germany. But profitability-wise and turnover-wise, we will see that additional quantities at the end in the P&L.
Thanks.
Thank you very much. We have further risen hands. Mr. Constantin Hesse, you should be able to unmute yourself and ask your question.
Good morning. Thank you very much for taking my questions as well. Quick one on the U.S. I'm a little bit surprised about all these recent developments. I would have thought that this project would have been planned fairly into detail with the decision being made this year. I guess the question is there any risk that this project becomes unfeasible completely? And obviously with the Democrats potentially taking over the House or the Senate next week, potentially cutting defense spending. I'm just trying to understand what the risk is here that this project doesn't go on in the U.S.
Constantin, are you still here?
I'm here. Can you hear me?
No. Can you repeat the question again? Sorry, we haven't got it.
Sorry. Can you hear me now? Is it working?
Yeah.
Cool. I was just wondering in the U.S., what is the risk that the project is unfeasible in the U.S.? Clearly this is a big part of the investment case here. You are gaining, this is a fully funded project. Obviously there is a very big difference between building this capacity in the U.S. and building this capacity in Germany, given that you would have to probably finance it yourself in Germany. What is the risk here that this project is unfeasible? Just to understand, you said you expect-
Constantin, are you there?
Hi. I am not sure what is going on. Is it really bad? Hello?
It might be a problem on the board's connection because on my side I can hear you perfectly.
Okay. We are very sorry about that.
Try again?
Please try again.
Okay
I will elaborate a little bit. I hope you can hear us. What we have seen is that in the U.S. project, we will receive higher costs. We are in the middle of the negotiation phase with the DoD that they will take over that cost. We feel quite confident, and they will take that, and we feel confident that we will make the project. If not, that would be the communication from me. If not for a very small percentage case, then we are really prepared to do the investment here in Germany. We have plenty of time. We can do that much cheaper. From the profitability-wise, we will have more or less the same situation then.
Yeah, but you would have to obviously do CapEx on your own, right? You would have to basically It's a big difference between getting EUR 150 million in your hand and having to spend that on your own, right? That clearly changes the investment case a little bit there.
Not from my view, because if the project is much more expensive, and you have to add additional costing, you can do the project quite cheaper on a different place, then profitability is more or less the same at the end of the day.
The profitability. Okay.
From my point.
Just to understand, I think you said, you expect the decision in that year. Which year exactly is that?
Sorry, in?
Which year exactly is that year?
That year, 2026.
It's not this year. Okay.
Yeah, this year, 2026. We have to start up all the detailed engineering, and we have to purchase all the long running items. If that would not be the case, then time schedule is in danger. Time schedule for a German project is easy to do because, as we have already proven, we can do German projects within 15 - 18 months. From that point of view, capacities will be there, even in the U.S. or in Germany.
Understood. Then last two questions. Just remind us again very quickly how these nitroguanidine contracts work. When you say that you're going to be fully ramped by 2028, is that because you have full visibility of that? Are these contracts signed long-term with fixed pricing? Just remind us again how these work.
Yeah. In principle, we have agreed on prepayments to take the risk away. From that point of view, we don't have take or pay contracts, but you may know. If somebody is prepared to pay prepayments for the capacity, they will use the capacity at the end of the day. We see already in our forecast from our customers that their projects are latest available in 2028. From that point of view, we are in deep contact with every customer and we have a good view about the offtake in 2028, which takes us to the announcement that we will see a full load of capacity in the new plant there.
Perfect. Thanks. Then just last question. You mentioned potential new projects being announced in the first half of 2027. Is there any color that you could potentially give where you could potentially see further demand for additional capacity expansion?
Creatine.
Okay.
For creatine and Creapure, we have to think about the next step. We want to have the visibility what the new plant is in the position to deliver on capacities. When we have that overview and market view and done all our homework in discussion with our customers, then we can decide the next step, what to do.
Understood. Thank you so much.
Yes.
Thank you very much. We do have one last risen hand, also from somebody dialed in by phone. I sent you the invitation to unmute yourself. You should be able to ask your question.
Hi, everybody. Peter Hasler again.
Hello, Peter.
Sorry for the fuck up before. I have a question on the own work capitalized. You mentioned that your other operating income went up by EUR 5.5 million and primarily due to own work capitalized. Could you tell us what you expect here in this position as a normalized level in 2027? And second question would Okay.
Yeah. Maybe I take the first question.
Yeah.
Basically, I would think our own work and our own project will be the same in the next year. You know, we started the creatine expansion program using our own employees, and the last year it was a comparative. For this year, that was the same situation. We had a lot of people working on the expansion program, so I would expect the same amount for next year as well.
Okay. Right. Thank you. Another question on PERLKA, which you mentioned that there is an obligation that only professional users can use PERLKA, and this surprised me a little bit because I thought that the private user cannot use that. If so, what would be the revenues that could be at risk if this REACH agreement would be as it is like today that only for professional users it will be sold in the future?
Peter, in principle, that's the very best development what we have seen in the last, let's say eight years, for authorization topics. Professional use is that what PERLKA was always or has always been used for. Private use was very minor. We agreed with the EU Commission to minimize all the risks about using fertilizers or fertilizer with side effects that you have to have, or you have to do that with professional uses. From that point of view, that we perceive that the okay for professional use is really a good topic and a good thing for us.
Yeah. That's what I thought.
Yeah.
Thank you very much.
Thank you very much. To all the participants, this is your reminder to ask your questions now should you have any, by raising your hand or placing them in the chat box.
I have nothing in the chat box, nothing additional here.
Right. With no further risen hands either, we are now coming to the end of today's earnings call. Thank you very much, everybody, for your interest in the Alzchem Group AG. A big thank you also to Mr. Niedermaier and Mr. Lösler for your presentation and your time. Should questions arise at a later time, please feel free to contact investor relations. I wish you all a successful day, and hand over to you, Mr. Niedermaier, once again for your final remarks.
Yes. Thank you for all the questions and for your continued engagement with Alzchem. I look forward to meeting many of you over the coming months, either virtually or on the conferences. I have brought with me, you can see here where we are again. Otherwise, we will be back with our full year 2026 results in February, on the 25th next year. Stay safe and sound. Stay in our good graces, and goodbye. Thank you