Earnings Call: Q1 2018

May 9, 2018

Yes, ladies and gentlemen. Welcome to the Brantac AG results call for the first quarter of 2018. This conference will be recorded. As a reminder, all participants will be in a listen only mode. After the presentation, there will be questions. May I now hand you over to Mr. Steve Holland will lead you for this conference. Please go ahead, sir. Thank you very much. Well, welcome ladies and gentlemen and thank you everybody for dialing in for our review of our results for the first quarter. As you as you as you was under here with Bigger Rula, our CFO, and as always, we're happy to answer your question after the presentation. Let me start with a highlight for the quarter. Had a good start to the year with strong results about operating gross profit and operating EBITDA. Group generated operating gross profit of 1,000,000 which represents an increase of 6.6% FX adjusted. Operating media increased by an encouraging 10.2% to 1000000 on the, again, on an FX adjusted basis. It was also predominantly driven by organic growth in our business and Q1 2018 marks 3rd consecutive quarter with organic EBITDA growth for the group as a whole. In the first quarter, we clearly benefited from operating written leverage, which was not in a year over year improvement on our conversion ratio. The growth was broad based, our largest region, Bexeli growing, our smaller region, Latin America, reported a clashes with package results in an environment that remains on the title. In addition to this, we are pleased with the development of our most recent acquisitions, which are operating on or above plan and as per share amounted to the following last year's at €0.61. I come to the operating bridge. I'll take you through the overview of the wholesale business, in Q1. Could you provide more details on the operating business units, business units in a few moments. In Q, we opened Q1, we had a strong headwind for the U. S. Dollar euro translation of around 1,000,000 U. S. Oh, that was clearly weaker than it was in Q1 2017. Our acquisitions contributed 1,000,000 for the first quarter. Please note that 2 of the acquisitions we announced at the end of 2079 are not yet closed. At the beginning of May, we closed the acquisition of Raj Petroleum Specialty in India we are working with the closing of it as possible. In EMEA, we saw a good organic growth performance in the region. We are particularly pleased with North America And Asia Pacific. We both shows strong organic growth. Again, the results in Latin America were flat last quarter, which were due to be a solid performance in a volatile environment. And Chris and take note, and I'll say it's coming to EMEA First, the region showed not closing gross profit grew up 5% and not closing EBITDA growth of 0.8% both FX adjusted EBITDA, the EBITDA contribution organic growth was 4%. In terms of the efficiency program, are you in the region large part are completed and we're seeing expected positive effects on the results. Kim to North America was particularly pleased with the results of North American regions, the segment continues to continue this positive trend. The strong growth in operating gross profit of 8.7 percent of the very encouraging EBITDA growth 13.1% but that is adjusted. The organic EBITDA growth was 13% in North America, which is broad based across all customer industry. In Latin America, we continue to see an overall volatile environment. In this environment, Latin America reported flat results in terms of operating gross profit operating EBITDA. In Q1, we saw a good performance in Brazil, response from the weaknesses in other countries. We'll take some steps to move away from a high volume mode GP the region over the 4th coming quarters and reduce operating costs. Come to Asia Pacific, we're very pleased with the performance of Asia Pacific. We continue to see a positive development. The region once again reported a double digit growth of operation GP and operating EBITDA in the first quarter organic EBITDA growth was 8% in the quarter. These positive results were merely driven by Thailand, Vietnam and China. Continue to see this region with the highest court potential going forward. Now, I'd like to pass across the deal. Thank you, Steve. Good afternoon, everybody. I would like to walk you through our income statement, for the first quarter, and I would start with the upper parts income statement on, this slide 10. On a constant, currency basis, sales increased by around 8% in the quarter. And the increase is also seen the higher chemical price environment. Cost profit showed a healthy growth of 6.6% on an FX adjusted basis and we saw particularly strong performance in the region, North America and also Asia Pacific. Operating EBITDA for the group grew even stronger than gross profit and amounted to 206 point 1,000,000 in the first quarter, an encouraging increase of 10.2% compared to first quarter last year. As a consequence, conversion ratio improved, that it improved by 120 basis points to 32.4% for the quarter. I'll move to slide 11 and come to the part of the income statement with the lines below EBITDA. There are no major changes for depreciation and amortize depreciation for quarter 1 amounted to 1,000,000 and amortization to 1,000,000. Financial results amounted to a net expense of 1,000,000 and that was an improvement against last year. In the first quarter, we recorded a tax rate of 28 percent. This is almost 4 percentage points lower than last year, and it is mainly attributable to changes of the U. S. Tax rate. Earnings per share are at $0.68, following $0.61 a year ago. On the cash flow statement on page 12, Q1 reported an operating cash outflow of 1,000,000 and that compares to an inflow of 1,000,000 a year ago. Both quarters, the first quarter 2018 as well as the first quarter 2017 were characterized by pretty strong increases in chemical prices which in both quarters led to an increase in working capital beyond the usual seasonality. The main difference in cash flow, in this compared to last year's quarter, results from an extraordinary payment, which we received last year, but in the first quarter, we received 48,000,000 that were returned to us by the French authority. On page 13, you will see the investment cash flow and the financing cash flow in line with our expectations. CapEx for the first quarter was about last year's level. There were no major payments for a dividend of 1st, the dividend will be paid only in the second quarter of this year. In difference to previous presentations, we have put the balance sheet into the backup at the end of the slide deck and either move on page 14 directly to the net debt, and leverage information net debt amounted to 1,000,000,000 and that's on the same level at the end of 2017. The group's leverage stands at 1.9 times. We also put the information on the maturity profile of our indebtedness into the backup. So I'll move directly to page 15 to the trade working capital information. Trade working capital slightly exceeded 1,000,000,000 at the end of the first quarter. The increases to a fair degree attributable to continue S. Price increases of chemicals. In addition, working capital turnover was at 7.5 times in the first quarter And this is below the level we are targeting for this year, but we do expect some improvement in course of this year. Coming to my last slide on page 16, in Q1 2018, we reported a free cash flow of 1,000,000 about the same level, we achieved Q1 last year. Now I'll hand it back to Steve for an outlook. Thank you, York. I'd like to start with the current trading and then address the outlook for the year going forward. So let me walk you through the gross profit for working day growth on a monthly basis. In January, growth was 8.6 percent, 7 percent organic, and February growth was 7.3 percent, 6.4 percent organic, In March, growth was 8.5%, 7.2% organically, and April, the growth was 3.8% and 2.7% on an organic basis. Just for clarity, generally profit per working day as a percentage, it's longer in months of April. And for information, the anthropic gross profit growth for April was above 10%. Can you see outlook? We have a good start in the year 2018 and to confirm the outlook which we gave you in the middle of March when we announced 20 and 17 results. The global economy is expected to show further signs of improvement in the course of the year. In this environment, we expect our key proposed indicators of operation gross profit not putting EBITDA to grow at a group level. We continue to work on improving our profitability, reaching to me and North America will drive the growth of our business. Weakness of the U. S. Has already caused strong translation headwinds for the group in the first quarter. This should likely to continue going forward. Still see the Asia Pacific region as a segment with ice closed potential as the distributed sector develops further in the region. In Latin America, we expect some improvement in the overall economic environment. In terms of M and A, we continue to pursue our strategy. Currently, we are working on closing and integration targets we signed at the end of last year. Overall recent acquisitions remain on or above plan. And now we're happy to take your questions. You. The first question is from Sylvia Barker of Deutsche Bank. A couple of questions, please. Firstly, on the numbers that you've just read out. So in terms of the April rates, could you just talk a little bit about the trend there based on the previous 3 months then secondly, on the working capital and kind of general cash flow movements, So could you just go back to explain to what was the one off last year, first of all? Then secondly, we can see there it's the receivables that have really increased sequentially. So could you talk a little bit about that? And then finally on this provisions move of 30,000,000, could you just, just tell us what that is, please? Thank you. Afternoon. Maybe I take, take the questions in turn. So one of last year in cash flow, you do, I am sure you will remember we are in an appeal procedure, since many, many years in, in the French antitrust case that goes many years back. We won the 1st round of appeal last year. And because we won the 1st round of appeal, we had the authority returned 1,000,000 for 1,000,000 to us. Into provisions. Not exactly the same thing, but in kind of the same context, asking for the movement and provision with respect to $30,000,000, the by the end of the quarter, we still had to pay the 1,000,000 amount to the French authorities, related to another part of that investigation that amounts set in provisions before But because we had the firm payment date, we had to, we had to take it out of provisions and put it into liabilities again. So it's just a line shift between provisions and liability. It does not include any net out or inflows. The actually outflow has, occur in meanwhile, but in April, so in, in Q2. Increase of receivables, I assume you are, you are, primarily focusing on trade receivables. That basically goes in line with an increase in chemical prices and with, higher business activities, speed up growth of useful, acquisitions, actually the days sales outstanding don't in any material way, deteriorate. The receivables increase you see as a direct consequence from us selling for higher amounts to our customers. April gross profit per working day trend, maybe I go ahead and I'm I'm sure Steve, can trace additional light on it. I think our main message is the 2.7 percent organic gross profit per working day increase in April don't take any significant conclusions out of that number. April has been a pretty long month relative to last year. Last year Easter was in April this year only the Monday it was in April, in April. And in a long month, cost profit per working, they actually typically see some pressure. If I move away from the pair rocking day figure to a month over previous year's month figure, we have had an accrual gross profit increase of more than percent. Okay. This is more around the adjustment method. I didn't call it an adjustment method. It's about if you had many trading days in a month, typically see a little bit of pressure on the pair rocking day 3. Okay. Great. Thank you. And then just to follow-up, sir, on the French antitrust and are there more cash outflows or inflows to come or is that closed now? You can see it in the risk report in the annual report, and the small update in the quarterly report. First of all, just to be very, very clear, it's about an investigation of the situation that goes many, many years back. That's basically, 1998, mainly to 2006 investigation, which is still continuing. From today's perspective, the appeal on the 47,800,000 is still open. So we won the 1st round of appeals, but the, the authority is still arguing the case in front of the court of appeal. We don't expect any more outflows at this stage otherwise we would have provisioned, but I also need to make need to say that the investigation is not formally closed by the authorities. So it can still take time. Great. Thank you. And just after the end of the quarter, again, it's the case that goes many, many years back. There's no substantial new development of any form or shame, and the risk situation has not changed at all. What you see in the balance sheet is basically just because the payment came became due now. Okay. No, that makes sense. And so just in terms of the growth rates then, so kind of to the end of the quarter by region, have you seen any change? Obviously, the PMIs in Europe are running pretty high kind of in the first quarter. Just could you comment by region if you've seen any difference? I would beg your pardon that for the month after the end of the reporting quarter, we don't want to give out an exact region, but the general statement is there has not been a particular trend in any region. It's going pretty much in the is from Rory McKenzie of UBS. Please go ahead. Good afternoon guys. It's Rory here. Two from me on the margin. Then I've got one more after that. So firstly on the good drop through rates you've delivered, in EMEA, how much of the benefits do you think are now flowing through your restructuring? And then in North America, drop the rate is also really strong. How are you managing the known headwinds there like transport costs and wage inflation? And what kind of cost pressures do you expect to see over the rest of the year in North America? Questions first, please? Hi, everyone. It's Steve here. I'll actually take over a little bit actually. On the restructuring program in EMEA, it's just about completed in May, actually. There's a larger part, which is actually related to our French operation, which Q2, various procedures to take a little longer. And so I I would say there was a contribution in the first quarter, but, it's more a little bit more lumpy the 1st part of the year, but mean, it puts such a small amount in real terms. I wouldn't get too focused on it. But coming to North America, You are, you are completely correct that there's, quite significant pressure on the transport, infrastructure in North America. We do actually have, a, a reasonably good position so far as, those that, I mean, on REMTek for quite some time will remember that we, actually increased the size of our own fleet, in North America. Therefore, the flexibility, of our organization to cope with transport costs increases it's, somewhat greater than it would have been without that action. So, so, whilst there is certainly a cost pressure, we are being able, we are able to mitigate that quite a lot of buyer on efficiencies. It will be fair to say that, in certain instances that there are an approved transport surcharges, which should come into play in North America to help overcome the, the price inflation aspect. As far as wages are concerned, we're not seeing anything major shift in our organization that's under proportion at this stage. In terms of that, those transport charges does that affect your own pricing for customers at all or how are you thinking about that side of it? Well, it's something which I think is pretty well known in the marketplace. And when there's been, for example, significant increase in price of fuel or what have you, there's been surcharges to cover, increased fuel charges. But, I think in this case, it's clear the whole market that the, cost of distribution are not reconciled significantly, and people recognize it it's generally speaking, a small additional charge to customers to cover the increased cost of delivery. Okay, great. Interesting. And then one more, if I can, on a bit more of a structural theme. In terms of the digital agenda in chemical distribution, what was the latest with Digiabia? How that, how is that progressing? And anything else that you'd flag as changing in the industry landscape? Some of the platforms in Asia, I think are seeing a bit more chemical offerings. So what's changing there? Yes, I think it's a very fast moving environment and clearly because there's a lot of activity in this area, a lot of small startups was not particularly critical mass to speak of. In terms of our own organization, we clearly have, we have, we are actually running trials of our, of our products at the moment with the key customer groups to, to determine exactly the functionality that they particularly wants to develop. Further before we launch any minor wider scale. So, but we're pretty happy where we are. I think one thing which is, it's certainly, ruled out at the moment is to, digital health in terms of sourcing and procurement, which is proving to be very successful. And it's actually part of the program which we talked about last year. That's naturally, we're using our digital platform to help control and maximize the benefits of cost reductions from certain product areas. So digital for us is, is moving forward. But I don't see any major structural changes in marketplace, all the major players in capital distribution are at some place in the digital journey, but no one is particularly ahead. Okay. And I mean, could you say how many customers or how many key customers you're with at the moment or is this still very very small scale? I think it's actually on a number of fronts. I can't really give you that information at the moment. The next question is from Peter Olofsen of Kepler Cheuvreux. Please go ahead. Yes, thank you. Two questions from my side. First on Latin America. Could you be a bit more precise on which countries in particular we're holding back to growth in the region? And could you also be more specific on the measures that you have started there? And then I have a follow-up on China. From the regions, the regions, did very well in front of you, if there's somebody, the concerns in terms of, resulting well We do see, pressure in Ecuador where we, we are really a move from a, excuse me, quite a large volume, agricultural services style distributor, too much, much smaller volumes. And this is a little bit in my comments. I mentioned earlier on, it says reducing the large volume low GP business and reducing operating costs in the same way. And that's part of the action that we're taking to improve the profitability of Ecuador. That's been some cost and profitability pressures in Mexico and, in Colombia, but we are pretty pleased that that's pretty much under control and, and it might be in the right direction, but nothing of any major significance. I think overall, you know, the economy in the Latin American region has been quite volatile in the last 18 months or so, but as we say in our outlook, we do see that the returns are more stable conditions in the general, in the area itself. So again, looking forward they're looking much more stable in the picture. Okay. Thank you. And then on China, since last year, you have 51% stake in a GV for Specialty Chemicals. So could you talk about your plans and ambitions in Specialty Chemicals in China, both in terms of organic and inorganic growth? And could you also shed some light on chemical producers' appetite to outsource distribution to companies like Brentac? Yes. Well, we have, we do, as George mentioned, the Wolfstadt, mentioned, which we signed last year, which is proven to be very successful. We do actually believe that in China, our approach has been to approach Chinese, Chinese, growth, in terms of acquisition, I mean, on a main joint venture basis, as we see, that has been beneficial to both parties in terms of getting traction in the markets that we choose to serve. And our acquisition was acquisition appetite and target is remains very positive for China. We do have a significant infrastructure in China, as you already know, and we are developing out for Chate Chemicals range in addition to the industrial chemical range that we have already. So it's a huge market. And the appetite for manufacture to outsource is barely, it's barely been touched in real terms. And, and so we do that's why we mentioned that we see Asia Pacific has been a long term, very significant growth opportunity for the group. But it's, we're talking about 1%, 1.5% market share the moment, it's a massive opportunity for us. And you will try to address that opportunity by both organic and organic growth. Yes, by organic growth and by acquisition. Okay, thank you. The next question is from Christian Kors of Warburg Research. Please go ahead. Yes, good afternoon. Thanks for taking my questions. First on cash flow, operating cash flow was down in the first quarter also in 2017, operating cash flow was down significantly versus the 2016 level. Do you expect for 20 team that you will at least, yes, catch up to the 2017 level in terms of cash flow from operations or should we pencil in figure below due to the before mentioned cash flows related to the Cartel fines and the higher chemical prices. Secondly, You stated already that the efficiency improvement in the EMEA region were rather lumpy in Q1, but all measures completed in May. So does that actually mean then as of H2, you will be at the quarterly run rate of 1,000,000. And asking regarding your second self help measures, the sourcing initiative, can you maybe shed some light on the rewards you've seen and materialized in the first quarter? And then orders to come. Thirdly, the oil and gas business, oil is oil is searching to long term highs currently. A couple of years ago, you faced tough headwinds in your U. S. Oil and gas business. Do you see here now that this business is picking up on considerably on the higher prices and what does that mean for your North American operations? And lastly, question on Latin America, just a technical one more or less. What is your exposure to Argentina Is my note here correct that this amount just to 1,000,000 annual cross profit is still at Right. There's quite a few things. I think the, I should remind you, the savings on the restructuring was about $80,000,000 a year. We know that we were talking about, but we aim to quite small numbers here. Absolutely, we expect to be up to $2,000,000, if you like, as a run rate for quarter to do. As far as the restructuring is concerned. In terms of our, our sorting project, that's on plan. And we see that we don't, what we call that separately, but you do see that, contribute to our overall GP development, And, as I mentioned earlier, and to another question, we are using our digital, products to, to actually execute that program, which is proving very successful, but from a supplier from our, our own perspective. Oil and gas, yes, clearly it actually feel like years ago, I should think it was like 2016, that we have the business difficulty with the oil and gas Yes, clearly our business now, I guess, has recovered, compared to, where we were in 2016. I think it's fair to say But, it's not at the same levels. It would have been, in 2014, 2015, because the overall structure market has changed somewhat during the downturn. So Martin, we're certainly pleased to see that that is no longer a drain on our organization. It's actually contributing clearly, but, it's not a good level as it was. Back in 2014 or 2015. I think you had a question out order of magnitude, importance of apologies Argentina in our organization. And you mentioned that you noted down an annual gross profit of about 1,000,000 that must be quite an old number. The annual gross profit in Argentina is a give or take 1,000,000 by now. So still small in the context of Latin America, but much more sizable than a note we took earlier. Okay. Okay. And the cash flow question? Yes. It's my cash flow in our business, most difficult to predict much, much more difficult to path than, earnings, for example, because cash flow heavily impacted by chemical prices. I would maybe point you initially to what we call the free cash flow to, so operating EBITDA, minus CapEx plus minus working capital change. We had Q1. This year, it's a little better than, Q1 last year. And we would, for sure, on a full year basis, expect this year to be at, if not above last year's level. But going back to the 16 numbers, it's, will depend on chemical crisis 16 was a year basically without chemical price increases and to go back to a 16 number would, would we try our chemical prices to come down a little from where they currently are. If you make the move from what we call the free cash flow, to the operating cash flow in the fall IFRS cash flow statement, then we cannot go back to the 17 numbers because the French situation has an inflow in 2017 and an will have an outflow in the second quarter 'eighteen and that is basically something you can't overcome in the other line items. The next question is from Karl Green of Credit Suisse. Please go ahead. Yes, thank you. Good afternoon, everybody. Three questions for me, please. Just firstly, on Latin America, you've guided for meaningful growth for the full year overall, just in terms of the moving parts as to how you get from that relatively flattish position in Q1. To a meaningful position. Is that mainly due to the impacts of the Ecuadorian situation watching out? Is there something else going on there? You'd like to flag. That's the first question. The second question was just possibly getting an update on the situation in France. It's something he talks about at the full year stage, just saying that there was some challenges there and what you've done to resolve that. And then finally, just a bit more of a technical one I think there was an indication at the Q4 stage that you'd seen some accelerated site depreciation at a particular country in Europe in fourth quarter with an expectation that that was going to repeat or that charge was going to repeat in Q1 of this year. It doesn't appear to have repeated should we expect another accelerated depreciation charge in Q2 or Q3 please? Well, I'll take the, Latin American and France. Look, in terms of Latin American, we bear in mind, Latin America is about percent of the group. So, you know, we're still delving into really quite small corner here in terms of the overall tax in the group. But we expect during the course of this year, but it's also continued its improvement in profitability. Color mid to become stronger, Mexico to become stronger, as far as Ecuador is concerned, that's a small part of a small part. And therefore, we expect it was, that will certainly improve it as a profitable as during the course of the year, but that will, that will probably require us to restructure that particular business unit, but we are really talking about really small numbers now. So at launch, they're not really meaningful to the group. Latin America provides more of a macroeconomic stability if the region is stable and I think both politician and economics is stable and we will do absolutely fine during the course of the year and meaningful improvements in that business is you know, 5 or 10%, but it's not going to move the needle very far from the group perspective. So I'd like to put that into context. As far as France is concerned, and I must confess a little. I can't recall exactly what may have said, been said at the year end in terms of specifics on France, other than to say in the reorganization, restructuring with European business, clearly, anyone that's been anyone that knows anything about, French, employment model might have you realize it does take a little bit of time to execute restructuring and, announcing with the case in our French business, that is not now all complete And effectively, the French business will be in its new configuration by the end of May. Was there anything else? Yes, the question today, I'll just about the accelerated site depreciation, which caused the depreciation charge to spike up in the fourth quarter. Yes, of course, the I don't remember the tax payment in Q4 true. That part of our, European efficiency program also means we sharpen some of the French sites. And in that context, we had to a pretty small amount of, additional depreciation in Q4. It's done and over with, if at all, there's a very small amount to come this year, if at all. Okay, that's helpful. And just one more, quick question if I can, just in terms of Gay organ, your comments about expecting working capital improvement over the course of the year. Just in terms of understanding that fall in the working capital turns, how much of that was due to the very strong specialty chemical growth that you did and how much of it was just chemical prices timing mismatches, etcetera, which are likely to reverse. I'm just trying to get a sense as to how we might see that working capital turn improve over the balance of the year? Well, there are 2 elements on ARPU of the 3rd element. I mean, and clearly, as we grow our specialty chemical portfolio, that there is, and characteristically is a lower turn business. And that is certainly, it's certainly the case where growing our life sciences business is our life sciences business. Probably faster than other parts of the business at the moment. So you can't see an effect of that. I'd also point out that we are really looking at inventory time at the moment because you may or may not be aware that there's been quite a number of shortage in the marketplace. So as some products where we may be slightly longer on the inventory that we might normally have carried because to overcome some of the, interruptions in supply from suppliers. So some of that will be unwinding during the course of the year, which Yeah. I think that's the essence of the answer, Carl. It mostly comes out of inventory turn and we will move through the inventory. We have regions moves with inventories basically product by product to produce a specific situation. Okay, that's very helpful. Thank you. The next question is from Daniel Buser of MainFirst Bank. Please go ahead. Yes, thank you very much. I actually have three questions remaining. The first one would be on your EMEA restructuring? I mean, and the cost aspect has been tackled already, but as far as I know, it also involved hiring new sales people in several countries. Can you share a bit of light on where we are here in that phase and when we can expect and yeah, I would say a top line acceleration from this factor? The second one on outsourcing, I remember at the latest CND in London last year, you said that the consolidation in the chemical producers space could help with outsourcing, for example, Dow DuPont or Bayer and Monsanto. Is there already something you can see in the discussions that might materialize. And the third one on digitization again, I mean, on the chemical news portal, is this one can see that Covestro and F have launched their own pages at the Chinese online portal Alibaba and do you see these discussions becoming more stronger with your chemical suppliers and that they do these decisions and what does that mean for Brentech? Thank you very much. And with just in relation to the configuration of our sales, sales of product management, resources in my view clearly, I mean, that's an ongoing task at the moment. It's, I can't really give you a very detailed answer to how many sales positions being sold and which ones are remained vacant. With the 5 day, you'll look at the performance of the business and you can see that we're in the right direction. And, I don't, at all three of the businesses, currently out of shape relative to its performance on sales. But we are pretty pleased with the, the recruitments that we new people brought us in. And so, and the, positions that we thought were, needed for the firepower if you like. In terms of digitization, yes, of course, we see, you like everybody else, manufacturers, looking at various channels market And we actually, you may or may not be surprised that we have, on the stream of manufacturers wanted to visit us to look at our own digib business and see what we can do together and how we can work together. Now, indeed, they can use some of our tools to run their own operations. So I don't, yeah, I don't think there's an exclusive one way or left or right as far as digitization is concerned. I think it's a very, very likely that that there will be some, some sales which will go to a digital platform, which are, which were previously traded. And I think if anyone that looks at the Chinese example, a lot of product which was traded is now on digital platforms, but there hasn't been major shift in market share. It's just a case of just just changing the way they do business. At this stage, there's no significant change that we that we would track. As far as outsourcing is concerned in the market, it's obviously buoyant from the point of view chemical manufacturers. And as, you know, I probably said to you in the past, quite often when you get the more extremes, I either either a downturn or an upturn, then the, appetite to effect change is, is, is even higher. And, it says the case that we are, it puts and increasing conversations. We manage your manufacturers to see how we can help them cope with the tail end spend that they currently have. Okay. Thank you very much. That's helpful. The next question is from Kurt Hengel of Equinix. Please go ahead. Thank you. Thank you for taking my questions. Good afternoon, gentlemen. You mentioned in your report that the prices for chemicals are up and so several times also during the call. As you don't offer any split between volumes and prices, is it fair to assume that it's easier for chemical dispute here to lift prices in such an environment. So is there also a strong price component within your growth numbers And secondly, your competitor MCD also reported numbers probably aware of. And they posted even stronger growth rate is it fair to assume that the specialties are on average growing at a higher rate than about chemicals? Thank you. I would say that's our Life Sciences business, which is probably more akin to the capacity you referred to. It's, it's pretty buoyant and growing than the complete range of that we offer. So, I mean, that's probably, I think, a fair assessment. I think as far as chemical pricing is concerned, I think we have to be pretty careful here because at the end of the day, the business is operating with 10,000 plus products across the range and there's price movement at all times both going up and going down. And we don't at the end of the day customers expect value from us and there isn't a never ending opportunity for us to continue to increase our GP in the rise of environment, it has to be fair, and we are fair in our respect. So, I think it's price volatility does allow us to, to retrieve operating costs, including operating costs, etcetera, etcetera. So in that case, you know, when we welcome price movement, but at this stage, I don't see any change to our business model. Okay, thank you. The next question is from Rajesh Kumar of HSBC. Please go ahead. Hi. Good afternoon, gents. Just to confirm, there have been no meaningful accounting changes since IFRS 15 has come into force. And the second one is on the inventory turn side noticed that there's been a slowdown. I appreciate you pointing out there have been some, supply crunches Have you seen any pickup in inventory obsolescence or do you see any risk of staff I'm assuming quite catch the last the last bit. What did you say, sorry? Any risk of inventory obsolescence or write down Oh, right. Well, let me say that after that. I mean, well, the answer is no. What I'm saying, we extended maybe a number of product lines to cover essentially, shortages or outages and what have you, we're not carrying very long lead time, very long stockpiling levels, in terms of our expected, sales. So, No, that was not the case, actually, in fact, but I would say actually in terms of stock turnover inventory management, we are we can be more and more sophisticated using our various digital tools to make sure that we are now moving to talking a far more effective than where, where, than where, than we happened before. So I think that's not going to be a problem. Understood. Thank you. That's very helpful. On the IFRS 15, one, you have to help me, what exactly you're looking for? The one that came in force now is basically the IFRS 15 on revenue with customers. And that has a completely marginal impact of basically because we don't operate a contract, isn't it? Okay. So the big impact will be from the 16 1, next one, next year, isn't it? But that's still under a very 16, I'm not sure if everybody is aware on the call. It's basically about the recognition of leases in the balance sheet. And the P and L, that's still under evaluation, but from today's perspective, you have to assume that for each and every distributor, including Penta you will have impacts on that one. Thank you very much. That's very helpful. If I may just ask a last one on, on the 3 points, just following up from what you said, clearly there is supply crunches and there are, you are stacking up inventory order to keep the service level up. Do you accrue greater level of supplier rebates on back of that? It's a service you're providing to the suppliers? No, not at all. It's a service provided to the customer. At the end of the day, It's a choice. And then we, we maintain, we, we maintain stocks to, to, to provide adequate service levels and, and if we choose to extend level, because we're not sure about underlying, is service reliability or supplier liability, then that's a choice we make to firearms service requirements. So I'm not, we don't necessarily, I mean, you hear, occasionally, someone buying a large quantity to try and attract a rebate, but that is not the case now in our case. The next question is a follow-up of Sylvia Barker of Deutsche Bank. Please go ahead. Hi again. Just three quick ones, please, as follow ups. So firstly, on the inventory point, so you were holding more. Would you say the customers were actually stocking up them ahead of time. So are you seeing any kind of not destocking necessarily, but did you see any excess demand maybe in the first quarter from people actually stocking up. Secondly, just on your point of the acquisitions actually having contributed a little bit more than you expect it. Is that mainly the UK acquisition? And then how much would have that actually helped the conversion ratio given that's a higher conversion ratio business, if I'm not mistaken. And then finally, just on the benefits from refinancing, obviously the roundtable, you are line what those might be, but would you just be more specific about what to expect on the interest line this year and next year, please? Thank you. And what personal customer stocking up, I think it's extremely unlike, unlike in sort of marginal, clearly customers can see the market like we can see the market. And if they're unsure, then they may take a view like we, as we do, if we, we feel there's some uncertainty in the supply chain. But, I think the, the action emphasis has been one of protecting the customer as opposed to the customer, we see, worry too much about the products to pay by from us. In bearing in mind, they buy generally small quantities from us. It's not like the, the by and large quantities that make reach a different dynamic altogether. Yeah, the, the UK acquisition, the, announced the UK acquisition clued and bought it towards the end of last year, closed end of last year. And that's a major part of the 4,000,000, acquisition contribution you have seen in the earnings gap. But in the earnings bridge, apologies. And yes, glumina ball and border is a little bit ahead of plan, but not materially in the group context. It is completely negligible in the terms of conversion ratio impact because in the European context and particularly in the group context it's just too small to happen in fact. I think you also had a question of how to think about financial results this year. So the net financial I think, in Q1 was an expense of $19,000,000. It's probably a reasonable run rate also for Q2, Q3 and Q4 should be a little bit cheaper because we have this 5.5% bonds that runs out. We love this year. So Q2 used another 19,000,000 and maybe 15,000,000 for Q3 and Q4 each. Maybe pencil in another couple of millions because we are just moving into the Indian market and Indian India is still a little bit high, in financial So to cut a long story short, any number between 70 75 on a full year basis is a good number. There are no further questions. I hand back to the speakers. You. Bye. Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect now.