Earnings Call: Q1 2021

May 11, 2021

Ladies and gentlemen, welcome to the Q1 2021 Results Call of Rentok SE. At our customers' request, this conference will be recorded. As a reminder, all participants will be in a listen only mode. After the presentation, there will be an opportunity to ask questions. May I now hand you over to Rentag's CEO, Mr. Christian Kolbeinberg. Please go ahead. Yes, Thank you very much. Good afternoon, ladies and gentlemen, and welcome to our conference call on the Q1 2021 results For Rentec SE. My name is Christian Kruppelpaintner, and I'm here together with our CFO, Georg Muller. Together, we will walk you through our business development in the 1st month of this year. I would like to start with the highlights, And Georg will provide further details on the financials as always. Afterwards, Georg and I are available for your questions after Ladies and gentlemen, Brandtach started very well into 2021 And achieved very strong results in the Q1. The group generated an operating gross profit of euros 764,500,000 which is on a constant currency basis an increase of 7.4% Compared to the Q1 of 2020, operating EBITDA reached €300,300,000 On a constant currency basis, this is an increase of 20.7% compared To the already strong Q1 2020, free cash flow was solid with €75,600,000 and our earnings per share stood at €0.63 in the first quarter. Regarding our non financial performance, we continued to achieve the best safety performance ever also in the Q1 of this year. We are very satisfied with these strong results, And I underline once again the strength of our business model as well as the important part Brantag plays In global distribution markets, particularly in difficult macroeconomic conditions. In January this year, we went live with our operating model and our 2 new global divisions, Brandtach Essentials And Brandtach Specialties. We will walk you through the details of the financial performance of our divisions later. Also in the Q1, we continued to consequently work on Project Brantag and on the step by step implementation of the various initiatives, and we continued to make very good progress here. Finally, We confirm our operating EBITDA full year guidance for 2021 instated in March. We expect a positive earnings development in 2021 and confirm that operating EBITDA will be in a range of 1 point 0 €8,000,000,000 to €1,180,000,000 Ladies and gentlemen, in course of last quarter, we closed 3 acquisitions: Comelt in Italy, ICL Tech in the United Kingdom and Alpha Chemical in Canada with a total enterprise value of €59,200,000 Regarding our M and A activity in 2021 and beyond, We stick to our proven approach. We intend to spend €200,000,000 to €250,000,000 on M and A per year, And we'll focus on specific geographies in emerging markets and in particular in China. Also, We look for targets operating in specific industry and targets delivering a more meaningful operating EBITDA contribution. Our acquisition of Songbai Xinya in Mainland China was a first important step in this direction as it meets all three requirements that our M and A approach is focusing on. Zhongbai Xinye distributes a variety of specialty food ingredients, including dairy products and proteins. With the first stake, we acquired 2 thirds of the company for an enterprise value of €90,000,000 The second tranche to gain 100 percent ownership is intended for 2024. Ladies and gentlemen, let me now provide some color on the overall market conditions in the Q1 of this year. The trends and the overall business dynamics we saw towards the end of 2020 also continued into the 1st month of 2021. The COVID-nineteen pandemic is still with us. But with our global crisis management in place, we successfully limited the impacts of the pandemic and protected the health and safety of our employees and our business partners. In the Q1, supply chains came under severe pressure all over the globe Due to a number of cumulative incidents, amongst others, the ice storm in the United States, The blockage of the Suez Canal and the ongoing container shortages heavily impacted market conditions And Global Supply Chains in the past quarter. Moreover, a multitude of suppliers suffered from production outages, Leading to product shortages and allocations. In that respect, we had to deal with significant supply chain challenges, but navigated through them prudently. And with this, I hand over to Georg, who will talk in more detail about our financial performance in the past months. Thanks, Christian, and good afternoon to all participants. I would speak about the Key financial figures for the Q1 2021, and let me start with the development of operating EBITDA. On Slide 7, you see the bridge of operating EBITDA from the Q1 2020 to the Q1 2021. We structured the bridge in a different way than the bridge you have seen on prior result releases. We went live with the 2 global divisions, Randag Essentials and Randag Specialties, and we structured the bridge now around these divisions. Operating EBITDA in the Q1 last year amounted to EUR 263,000,000. The translational foreign exchange effect amounted to a negative €14,000,000 Our acquisitions contributed €3,000,000 to the EBITDA growth. Our division, Rentag Essentials, reported outstanding results With an organic growth rate of 29% and a contribution of €44,000,000 to the growth of the quarter. Brandtach Specialties also performed strongly with an organic growth rate of 7%, equaling additional €7,000,000 of EBITDA. Similar to the past, all other segments comprise central functions of the group and the operations of Brantak International Chemical. All this adds up to €300,000,000 of operating EBITDA in the Q1 this year. On group levels, we reported operating EBITDA growth of 19% organically, which represents very strong performance. Product availability and the ability to deliver promptly and reliably were key for our success and were highly valued by our customers. We continue to benefit from good margin management and were able to overcompensate effects from supply chain challenges Before I talk about the financial performance of the division, Let me remind you of the setup and the characteristics of our new operating model. Since the beginning of this year, We steer the company in 2 global divisions, Brandtach Essentials and Brandtach Specialties. The new operating model This distinct market approach enables us to better service our business partners and best meet their changing needs. Both divisions address attractive and growing markets. VanDag Essentials is the agile, lean and efficient distribution For our customers and suppliers in local geographies and markets a broad portfolio of processed chemicals across a wide range of industries. The division stands for local market expertise and customer proximity, And it ensures smooth and cost efficient supply chain. Plant HUG Specialties builds on our position As the largest specialty chemical distributor worldwide and focuses on 6 selected customer industries, These are nutrition, pharma, personal care, HI and I, material science, water treatment and also lubricants. The portfolio of Pentax Specialties consists of ingredients and value added services that are directly applied in the production I'm coming to the divisional results. Brandtach Essentials achieved outstanding results this quarter. The division reached an operating gross profit of EUR 472,000,000 And reported very strong operating EBITDA of €194,000,000 This is an increase of almost 30% To prior year's Q1. Due to the extraordinary conditions regarding the pandemic and pressure on global supply chains, Our ability to maintain customer supply clearly paid off. All geographic Segments contributed to this positive performance with Brandtag Essentials in EMEA and Brandtag Essentials in North America, In particular, making a significant contribution to the division's growth. Operating gross profit The unit developed above previous year's level and supported the strong conversion ratio of 41%. In North America, the stabilization of the oil and gas industry is ongoing, but it is still on low levels. Rentag Specialties also reported very positive results in the Q1. This division reached Operating gross profit of €284,000,000 and reported an operating EBITDA of almost €120,000,000 In Brandtach Specialties, product availability and the ability to service our customers were key in Q1. EMEA and Asia Pacific showed a particularly strong performance across all industries. Randark Specialties reported And EBITDA conversion of around 42%. In summary, we are very satisfied with the performance Brandtach Essentials and Brandtach Specialties. Both divisions contributed to these very strong results and proved their strength in a challenging On the following Slides, 1112, we provide the full set of figures Brandtach Essentials and Brandtach Specialties as well as figures for the regional segments in each division. This is mostly for your reference, but let me point out one thing. On Page 11, Besides operating gross profit and operating EBITDA, we also show operating EBITA for the divisions for the first time. But Brandtag Essentials has certain CapEx needs and therefore, does carry some level of depreciation. So business model of Brandtach Specialties is particularly asset light. For Brandtach Specialties, operating EBITDA for the quarter totaled EUR 120,000,000 €20,000,000 and operating EBITA is very close to that number at €112,000,000 This demonstrates the high cash conversion for this business. I'm moving forward to pages to Slide 13. I will particularly focus on the lines below operating EBITDA. We report special items amounting to an expense of €71,000,000 so quite substantial, Which are on the one hand related to our ongoing activities for Project Bratak. On the other hand, special items include a provision For likely alcohol tax payments. This risk has consistently been reported in our risk report. We now received a tax assessment in the amount of €64,000,000 The German authorities claim documentation mistakes Regarding the selling of denaturated alcohol. That is alcohol that is used outside food and drinking applications. Let me be clear. There are no concerns raised about the proper use of these alcohol products. The case is about documentation. The selling of denaturated alcohol has comprehensive documentation requirements. The authorities claim mistakes In handling the documentation, we disagree with the assessment by the authorities. We are currently analyzing the final reasoning Presented by them, very, very likely, we will file an appeal. Let me get back to the other P and L lines. Depreciation amounted to €61,000,000 slightly below the Q1 last year. Financial results amounted to a net expense of EUR 18,000,000. Finally, profit after tax came in at around EUR 100,000,000 in Q1, Earnings per share at €0.63 and that compares to €0.74 a year ago. The reduction is driven by these special items. The cash flow has again developed solidly in the Q1. We reported a free cash flow of €75,000,000 Compared to the extremely strong free cash flow in Q1 last year, the reduction is driven by the outflow for working capital Resulting from higher chemical prices, and I'll come back to that when I speak about working capital. Our net financial liabilities amount to about €1,500,000,000 at the end of the 3rd quarter, About stable compared to the end of 2020. Our leverage, that is net debt to operating EBITDA, also remained stable at 1.3x. Working capital amounted to €1,540,000,000 at the end of the quarter, And that compares to €1,300,000,000 at the end of last year. This is an increase of slightly more than €200,000,000 And it is mainly driven by higher spend for working capital due to higher chemical prices. When we look at working capital management quality, we do note that we turned the working capital 8.7 times, Which is very strong compared to the 7.3 times that we had in average over last year. In summary, we are very satisfied with the financial results for the Q1. We delivered very strong earnings growth and a solid free cash flow, which provides financial flexibility for the group. I hand the presentation back to Christian. Thank you, Georg. As mentioned already at the beginning of this call, we continue to work on implementing the various And made very good progress in the implementation also in the Q1 of this year. We already talked about the successful go live of our 2 divisions and we have seen our new external reporting structure. Above and beyond, we have started to roll out measures of our new more efficient and differentiated go to market approach, Leading to an even closer alignment with our customers' and suppliers' needs. We also reduced complexity And increased customer proximity by further optimizing our site network. In total, we have identified, Detailed and rolled out almost 1,000 different measures in connection with Project Brintag and implemented a global monitoring and tracking with tools. Strong line management involvement ensures The appropriate focus on the execution of these measures. The last quarter, We were again able to increase our working capital churn. As Georg mentioned, we turned working capital 8.7 times, Which is a strong improvement compared to 7.3 times at the end of 2020. Since the initiation of our program, We reduced around 3 50 jobs out of our workforce. Also, we have already closed more than 50 sites Globally since the implementation started. Currently, We are in Phase 3 of the implementation of Project Braintag. As announced during our full year 2020 results call, We will provide detailed information on the operating EBITDA contribution from Project Brentac when entering into the next phase of the implementation after the Q2. Ladies and gentlemen, besides operational and financial topics, We have some other important aspects playing a crucial role within Brainsac. First, I want to talk about our efforts with regards to digitalization. In 2016 sorry, no, I'm on the wrong page, sorry. Just a moment. In 2016, Brandtach was one of the pioneers in our industry On digital across the globe, launching 1 of the first e commerce platforms. Since then, we have developed multiple digital solutions With Brantac Connect, our global one stop shop for our customers, we offer thousands of products now in 16 countries, And we see a significant increase in number of active customers and number of orders on the platform. We are continuously expanding the functionalities of Brandtac Connect. You recognize the increasing speed at which the market is moving and is developing. In addition, our new operating model brings changed requirements for our future digital business architecture. With Project Brandtag, we have embarked on a significant transformation journey, which also includes digital and IT. Next to them, we deem data and analytics as the 3rd core element of our digital transformation journey. We are in the process of detailing out our digital value creation roadmap and our digital operating model To implement our digital business architecture, we have critically evaluated our existing assets and IT programs As well as initiatives against the future needs of our customers and suppliers as well as the requirements for our new operating model. Based on this evaluation, we made necessary amendments across our whole IT portfolio. These changes lead to a one time write off of intangible assets of around EUR 52,000,000 based on current estimates in the Q2. This is a one off and noncash relevant impact. We will provide an update on our digital transformation journey later this year. Ladies and gentlemen, Braintic is highly committed to continuously improve its sustainability performance and is currently developing a new strategic framework. Sustainability is part of our corporate strategy and corporate culture. Just 2 weeks ago, We published our 2020 Sustainability Report. It presents our performance on the field of sustainability and documents Our global activities and achievements in the areas of safety, environmental protection, supply chain responsibility, employees And social involvement. In 2021, we are reevaluating our sustainability approach with the aim to develop a comprehensive strategic framework for sustainability in line with our corporate strategy. We consider sustainability aspects as drivers of our business and important contributors to our growth and the enhanced value creation. Developing new ambitious long term goals will be part of this comprehensive framework to prioritize our resources, To drive the implementation and to monitor our performance. As for our digital journey, we will provide a further update on this important Now ladies and gentlemen, let's come to the outlook for 2021. Against the background of current business development, we confirm our guidance for operating EBITDA to be in a range between €1,080,000,000 €1,180,000,000 for the full year 2021. This guidance includes the uplift from the Project Brandtag initiatives as well as M and A contributions. It is based on the assumption at the date of the forecast publication that exchange rates will remain stable. The COVID-nineteen pandemic will stay with us the coming months. Particularly, India and Brazil face difficult conditions currently, And we do see a continued uncertainty in that respect. However, we also expect the recovery of macroeconomic conditions to gain traction in the course of the year. While we assume that supply chains maintain under stress The coming months, we feel well positioned to deal with this environment. Ladies gentlemen, 2021 will be a year of transformation for BramTech. We focus on the implementation of the measures of our transformation program And stick to our M and A approach with an increased focus on more sizable targets, dedicated geographies and industries. And with this, I would like to conclude the presentation. And now Georg and I are more than happy to answer your questions. Thank you very much. Thank you. We will now begin our question and answer session. Now to enter the queue. Once your name has been announced, you can ask a question. If you find your question is answered before it's your turn to speak, you can dial Our first question comes from Simona Surly, Bank of America. Your line is now open. Yes, good afternoon and thank you very much gentlemen for the presentation. I have one question. You reported very solid growth in conversion ratio in North America in Essentials. While if I look at the financials for Specialty and the conversion ratio, it was not that positive, it was actually Declining year over year. So it seems to me that you benefited from supply chain constraints in Essentials, while in Specialty Probably were impacted. Could you maybe explain the reasons for the different trends in this region for Specialty and Essentials? Thank you. Yes. I think I'll start and then maybe Georg is adding to it. I mean, the Q1 has been a very Special quarter when it comes to managing the supply chains. I mentioned before, we had the ice storm, particularly in the United States. We had all the other effects I've mentioned, also the increased shortages in containers. And managing that supply chain, of course, It was done extremely well by our Essentials people, and we were harvesting on our capability to deliver to our customers. In North America, the specialties business had also some specialties debt in the Q1, which Sure. Our impacting the growth rate you have been seeing, in particular also the conversion ratio, but these are one time special effects we saw in the Q1. Yes. Nothing more material to add. Maybe I should point out that the Segment, Simona, you are having under scrutiny. So Specialties Americas is a relatively limited segment in the overall So out of the, say, close to €800,000,000 GP that the book generates per quarter, 10%, a little bit more than 10% is in that specific segment. The gross profit is Stable, almost stable. So many customer industries in that segment developed well. There is also some lubricants business in there that actually still prior to pandemic in January, February Last year, I had a pretty good one, which due to the pandemic this year, didn't really repeat. And then what Christian already mentioned, when you make the move from To EBITA, there is a little bit of income netted against expenses last year that didn't reoccur And some higher expenses this year, but in a small segment, this can easily lead to some volatile growth rates. Okay. Thank you. And can I ask you, how should we think about the conversion ratio through the year for Essential Sental Specialty? And you see us Simona, you see us Hesitating a little bit. This will, to a fair degree, depend on market circumstances On the gross profit per tonne side, so Q1 conversion ratios do benefit from market circumstances. So I would need to take a prognosis for how long these market circumstances continue. On the other hand, we will have savings from Project Blender kicking in. So If you permit the rough answer, I would say Q1 conversion ratios are probably good conversion ratios for the full year, maybe a little bit at the higher end on what Our next question comes from Jason Uteschi, JPMorgan. Your line is now open. Yes. Hi. Just A couple of questions from my side. The first question was on the contribution from Brochak Trendtag. Are you telling us there was Not material contribution in Q1, because the way I think about it is you talked about C2C Job cuts already happening, 50 sites have been closed. But then when I look at your OpEx, OpEx is still Flagged on a constant currency basis, it doesn't feel like we've seen any real benefit of Project Rentag in Q1, and I'm not sure why. So maybe can you help us understand that? And second question was just coming back to the guidance. I mean, I understand your point on GP per unit, probably not there's a bit of uncertainty on how long Last, at this level, given that you yourself mentioned previously that you also have the ramp up of Project Banc's Fintech contribution, why are you guys not a bit more confident in terms of 2021 outlook given the Q1 Run rate is already €300,000,000 per year, which should, in theory, suggest at least the top end of the guidance should be achievable even if one believes Yes. I'll take the first question and then Georg is taking The second one, I mean, there have been impacts of Project Brandtact. As you clearly can see from the numbers we are showing to you, I mean, we have We've successfully continuing our site network optimization. So when we spoke last time, we were talking about 30 sites being closed. Now it's already 50 out of this 100. So we're making excellent progress there. Also when it comes to the structural reductions in our headcount, We have now about 350 positions eliminated. And so from that perspective, you are actually exactly where we want to be as far as Project contributions is concerned. OpEx, there are many moving parts in OpEx. You have logistic costs. You have many other aspects going into that. So I would be cautioned to just look at this equation. OpEx is Project Rentag Savings or Reduction OpEx. And as we said in the full year result call, we want to stay away from giving you a quarterly Message about where we stand in Project Vanta quantitatively, we want to do this as we move from phase to phase because these are the, for us, the more relevant With few phases, then only, let's say, the quarterly impact, so we are looking at it. So I think overall, with Project Rentag, we are making very good progress. Actually, I know what we expected and within the schedule. And so from that perspective, I hope we can remove your concerns that there are no impacts of Project Brantac in this Rather strong performance we had in the Q1. Cheta, good afternoon. Thanks for your question also on the guidance. And we issued a guidance this year despite uncertain market circumstances pretty early in the year, already in March, deviating from past We issued a quantitative guidance for operating EBITDA. Yes, Q1 was strong, No question, but there is a little bit also a level of uncertainty. You do see, I think, very few companies changing guidance only based on Q1 results. So we would more appreciate to take a steady approach To rate for developments over the next month, the next quarter, and then take a more fundamental approach, it feels Too volatile to change guidance based on each quarter's results. Understood. Thank you. Thanks for the question. Our next question comes from Markus Mayer, Baader. Your line is now open. Good afternoon, gentlemen. And one question as well on the conversion rate. It was up 17 basis points in Brantek Essentials in the Q1 year over year, But only up slightly in the specialties. Please help me to understand this. Was this uplift due to the logistical issues and supply tightening and therefore Kind of pricing power you had or whether it's mainly due to the project Brandtach? And if so, Is this conversion rate to stay or how sustainable is this conversion rate? Thank you. Yes. I mean, maybe I'll comment qualitatively and then maybe Geir can add on that one. So I think the conversion margin we saw in Essential is Remarkable good one. Again, a little bit reflecting the special situations we are currently seeing, and that does not mean that this is only in Q1. I think this circumstances of stress, supply chains, product availability more Important then pricing here and there and our people managing that volatility Extremely well. This has led to, I would say, a quite good conversion ratio. Also, of course, where Are we focusing, for instance, with our site network optimization and essentials hosting the asset base That clearly also shows that there are progress noticeable here as well. So I think you wrote it also in your report, and I think one also needs to be clear about it. Q1 had special circumstances, Which continue to last into the Q2. I frequently said also in other interviews that I even anticipate that We will still see stress in supply chains into the Q3. So I think it's now up to us to navigate this prudently And also utilize our position we have in some of the markets as the global leading chemical distributor. On the specialty side, I'm exactly there where we wanted to be in the starting. In the beginning, I think we gave you guidance in the Capital Market Update in November We anticipate this in the range to be 41% to 43%. So this is with the 42% we have accomplished in this quarter, Exactly where we see that specialties business. And here, we are maybe a little less vulnerable to swings in demand and stress And supply chains when it comes to that conversion margin. So I think this is how you should read this. But again, don't think that this is only a 1 quarter, Very high special effect. We still have a similar situation going now into the second quarter. Okay. Georg, anything to add? Thank you. I think you received the question was answered, Markus, right? Yes, absolutely. Thank you so much. Our next question comes from Ms. Hansi, Goldman Sachs. Please go ahead. Your line is now open. Hello. Good afternoon. Thank you for taking my questions. Just a few from me, please. Can you you commented that in 1Q, the volumes were down, pricing per unit was up. Maybe you can comment on the monthly trends and especially the trends into April. I think you indicated that it has continued into April, but has it become better or worse? Just to get some sequential color there. Secondly, understand the investment in working capital Has resulted in free cash flow reduction as expected. How should we think about the full year free cash flow development please compared to 2019 levels? And maybe just the last one. Understand that you haven't received much benefit from Project Printag in 1Q. How should we think about the benefits to accrue that can accrue from for this year given the target of EUR 6,000,000? Is it more from 2Q or should we expect this to be more second half loaded? Thank you. Yes, I'll take maybe the first and the third Question, and Gjo can talk about the working capital. The trends we see in the business, I think when you compare to the situation a year ago, And again, I want to remind you that we had already pretty strong quarters last year, proving again the resilience of The business model in the Q1, but particularly also in the Q2 last year. So since then, we saw a gradual recovery In volumes, we saw a gradual recovery in business activities. And these trends continued well towards the end of 2020, but also into the 1st quarter, so that trends also continue in the second quarter. We see clear, Again, increasing demand compared to previous year, but the baseline is extremely low. You should also recognize that the comparable in Q2, When you talk about volume, when you talk about demand, it's a different one than the pre COVID quarters. So overall, in summary, I would say those trends Continue. Supply chains are still under pressure. Still many outages, which are hampering Availability of product, allocations is in some product groups also daily business, So that you do not get all the materials you probably would need or customers would need and you see it, I mean, you only need to read the newspaper. You see shortages in the plastics area and polymers area. You see basically everywhere. So and I don't believe that this stress of those Supply chains will be ending with Q2. I firmly believe that we see this going well into Q3 continuing. On the project Rentzhak effect, I think we have always clearly communicated you can expect EUR 220,000,000 EBITDA uplift full year run rate 2023. So that's what we are confirming. As I said, we're making very good progress with the measures of Project Brentac. There will be a significant contribution, as we said, a front loaded effect In this year, of those €220,000,000 we already had and have an impact out of last year. I mentioned this in the full year Numbers as well. So once we are going from Phase III into Phase IV, we give you another transparency And what the EBITDA contribution will be with the announcement of the Q2 results, and then you will clearly see that there is already a benefit in the first half, And the largest portion will, of course, then come in the second half. When it comes to free cash flow this year, when we do have A strong basis for free cash flow generation also this year, anchored in our strong EBITDA generation and the trajectory we have in EBITDA. The one part of free cash flow, which is subject to material external influences is Working capital or working capital change, we do control and will control working capital management in terms of working capital turnover, And we fully expect the working capital turnover to remain above 8x this year, which is a substantial improvement from last year. So That's a positive trajectory we achieved second half of last year, and we now expect to at least maintain and slightly improve these levels further. But chemical prices play a significant role when it comes to absolute working capital cash flow, and it's very difficult to forecast. From today's perspective, you would have to expect by this influence factor, by factor of chemical prices, So free cash flow this year to be a couple of €100,000,000 lower than last year's number. Thank you. Our next question comes from Isha Sharma, Stifel. Please go ahead. Your line is now open. Hi, good afternoon. Thank you for taking my questions. Thank you for the transparency on the segment level as well. Maybe based on the discussion so far, probably just a little bit color on What a normalized level would look like at Brandtag? I think that the question is, we have a special situation now as you pointed out and Continues in Q2 and Q3. But then what is the conversion ratio, which you would say you are confident to deliver When this is over? I think it is indeed A very specific year this year, and we don't know about even next year. I think we have most economies On a path of recovery once they go out of the lockdowns, I mean, you can read this and follow this personally day by day. So that means we are trying to navigate all of those volatilities we have, shortages we have, the stress in the supply chain As much as we can, and I believe we as the global market leader are in an excellent position to draw on those special effects to the maximum. So Normalized conditions, this is also a question, what is the new normal? Is it or is it a never normal? We have to expect after the pandemic, There will be fundamental changes, so it's hard to predict what the new normal will look like. Nevertheless, currently, we feel very comfortable with the guidance we have been giving to you In our capital market update, on the long term conversion ratios we see, I think we have disclosed this to you with Specialties, as I said before, 41% to 43% in Essentials. Now I forgot the number, so slightly lower than that. And then you will have over the cycle, over this kind of special events, movements in one way or the other. But I think we are on a very good trajectory. And what you can see, I think, in this number, in the special circumstances that what I've said also in the past, We have, I would say, a very, very strong Essentials business, which is currently underestimated in its capability. And we also have specialties business, which is very solid, and we are managing it and developing it In a proper way because we have now the full transparency and the focus on this as well. So overall, In a nutshell, hard to predict what the new normal will look like. It's almost unpredictable. But we believe that those situations we have right now We'll not go away from 1 month to the other. Thank you. Is your question answered, madam? Yes. Thank you very much. Thank you. Our next question comes from Mr. Noah, Exane BNP. Please go ahead. Your line is now open. Yes. Hi, Laurent Favre. I have two questions, please. The first one is going back to the comments you made around sustainability and I was wondering, were you referring to what you need to do on your own impact in terms of emissions of trucks, etcetera? Or are you more thinking along the lines of realigning the product portfolio to better cater into An industry where clearly there's more trends around sustainability, more focus. And if it's the latter, how much work do you think is required? So that's the first question. And then the second question, I'm sorry, going back to the guidance. Going back about 10 years, I think Q1 has never been less than the quarter of the full year. So I'm just wondering there's, of course, a lot of pluses But is the message that based on the trends of so far this quarter, if no big catastrophe happens later this year, This year should be again a year when Q1 is the quarter of the full year. Thank you. Yes. Let me take the sustainability question First and then Georg. As I mentioned, we will take this year to develop our strategic framework around sustainability. And here, it is absolutely clear that we need to look on the various dimensions with the ESG thinking And driving our sustainability efforts forward, I'm a firm believer that sustainability needs to become a driver of our strategy. So emissions is one aspect. And here we talk about Scope 1 and Scope 2 emissions. But for us, as a member of this value chain, chemical value chain, The Scope 3 emissions also in line with our key suppliers and then our key customers is will also be in focus because I believe we need to look Sustainability across the value chain is also comes to responsible sourcing of material. So here it actually already starts. Can you guarantee that you source material accordingly to sustainability standards? And then of course, it continues thinking about what is the proper product portfolio for Brantac going forward. Are we focusing more on products which are giving higher growth rates and also higher profitability because they are Also highly sustainable. All of that framework will be developed in the course of the year. And as discussed it for digital, We will give you insights later this year of where we stand in our considerations. On the guidance, I refer to Georg. Yes. Thanks for the confidence you're having in us delivering a strong number this year. When as I said earlier, It's just too early to readdress the guidance question. We need to see how the market develops. We need to see how earnings develop. On your observation that Q1 typically was never more than a quarter of the year. And don't forget, Q4 is typically seasonally a little bit weaker and partly end of Q2, beginning of Q3 is seasonally a little weaker. So it's not that straightforward and simple. And then you have the question of how FX develops in course of And the question how the market develops. Be a little patient with us and then we will either over time reaffirm guidance Or make an adjustment if you deem it necessary. Thank you, Gael. Thank you. Thank you. We have received one more question. The next question comes from Jason Nudeshi, JPMorgan. Your line is now open. Yes. Hi. Just a follow-up on the previous question, if you can, which is again coming back to not necessarily full year guidance, but just looking at Q2 trends and again going back to the history, typically Q2 tends to be better than Q1 In terms of earnings at least, is that something you see today? Or do you believe there's a reason to see that differently In Q2 this year versus what we've seen in the past? Yes. As I said, we see the trends Due to continuing in the overall market, that means the efforts of increasing demand, which is hampered by Constraints in product availability and also logistic constraints. So that trend, we believe, will continue for a period of time. That means at the end of the day that even being the world leader in chemical distribution, you cannot maybe do all the business you could do Because you're just not receiving the material you need to have. That's what I meant is also product allocations. We currently see in some product groups. So it's hard to predict how that is going away or how long it will stick or it will get even worse. So that's not so easy to say. So we see a good volume recovery as far as this is possible. We are harvesting the volatility. We see massive, massive price volatility in both directions actually now, up And somewhere down. And we're not going to manage that very carefully. And then you, of course, see regional differences, India, for instance, currently for us is really challenging and some other regions like China are running quite well. So you see an overall very, very mixed picture. And please don't forget also in the last Q2 last year, we also had some special effects Contributing to our profitability then, namely isopropanol sales we had for disinfectants at that point of time, Which are also not repeating 1 on 1 in the coming quarter. So I think it's a mixed bag. Seeing the trajectory out of Q1 and Q2, I think we are on a good track for delivering also a solid performance in the second quarter. How It will be, let's see, once we have more than just 4, 5 weeks in this quarter under our belt. Thank you. We haven't received further questions at this point. And we haven't received further questions. I will hand back to the speakers. Well, thank you very much for dialing in and taking the time. Appreciate the discussion. Insightful questions and looking forward for the further interaction. We are very Satisfied with this quarter, the best quarter Brandtach has ever shown. Good progress in safety, good progress in executing Project Brandtach. So overall, also our team and I want to thank our team here for delivering in this very volatile and uncertain market conditions such a respectful result. So thank you very much again and talk to you soon. Bye bye. Ladies and gentlemen, thank you for your attendance. This conference has been concluded. You may disconnect.