Earnings Call: Q2 2013

Aug 7, 2013

ladies and gentlemen, welcome to the Blendtec AG Results Call Q2 2013. At our customer's 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 Mr. Steve Holland, who will lead you through this conference. Please go ahead, sir. Thank you. Good morning and good afternoon everybody and thank you very much for dialing in for our review of the Q2 twenty thirteen earnings. In this call, we will provide you with all relevant details on our Q2 results. I'm on the phone together with Georg Muller, our CFO In the Q2 of 2013, growth of Global economies continued to slow in all regions. Europe remains in recession. Nevertheless, we were able to grow of the Brenntag Group compared to prior year period. Gross profit grew by 4.6% on a constant FX basis or 3.1% as reported. In Q2, we absorbed a €16,800,000 non recurring expense relating to an old French competition law case. I'll provide the full picture a little later. The operating EBITDA adjusted for this provision amounts Particularly in view of the challenging global economy, the business continued to prove its resilience in the Q2 of 2013. On Page 5, we can see on this slide, we show you how this translates into a full set of numbers. Gross profit totaled €502,200,000 4.6% above previous year's Q2 on an FX adjusted basis, and this corresponds to 3.1% on an as reported basis. Adjusted EBITDA totaled €185,900,000 a 2.4% growth above previous year on FX adjusted. If you include the mentioned provision, increased operating EBITDA was €169,100,000 a negative 6.9% against previous year. The adjusted EBITDA gross profit conversion ratio was 37% compared to 37.9% in Q2 twenty twelve. Our cash flow for Q2 2013 was €102,000,000 almost from last year, which was €101,300,000 On Page 6, I'll just take you through the French Competition Authority ruling. Investigations by the French Competition Authority took place, and the authority has been investigating for several years compliance with competition law in the chemical distribution industry. Bentac joined a leniency program in 2006 and fully cooperated with the authorities. The investigation resulted in a ruling at the end of May where the authority imposed fines against several chemical distributors From fragments in the period of 1998 to 2,005, the fine of €47,800,000 was imposed jointly on Blendtec and a further We have increased the existing provision by €16,800,000 in Q2 and are now fully provisioned for this ruling. However, we do not agree with the determination of the fine and we appealed against the ruling. For the sake of completeness, I would like The authority kept one part of their investigations open. And this refers to a case which was first heard in 2,002 They've already been dismissed by the authority years ago, but one market participant appealed and that is still outstanding. I'd now like to hand you over to Kjell. Good morning, good afternoon, everybody, Steve. Thank you. As usually, I'll walk You through the details of our financials and I'll start on Page 8. We see income statement. Our key top line measure gross profit totaled as Steve already mentioned, EUR 502,200,000 And that actually represents a 4.6% FX adjusted increase over previous year. Important to point out that all regions contributed to the growth of gross profit. Walking down the P and L to EBITDA, the adjusted I think EBITDA totaled €185,900,000 and that represents in increased terms an FX adjusted increase of 2.4 We made here is the already discussed provision increase for the sake of completeness including the provision increase EBITDA actually declined through the provision increase by 6.9% on a constant currency basis Or a decline of 8.3 percent at respective FX rates. The adjusted EBITDA to gross profit conversion ratio came in at 37% flat to be compared to 37.9% that we realized in the quarter a year ago. I walk further down the income statement on Page 9. You'll see that depreciation for the quarter amounted to €26,900,000 focusing on amortization mainly due to an increase in acquired Our amortization increased to €9,600,000 for the quarter. The financial results totaled net expense of €23,200,000 and that's an expense that is below last year's level where we recorded 27 point This quarter includes a €1,200,000 negative effect and expense for the revaluation of the Song Jong related liability for all the mechanics we already discussed on earlier calls. Adjusting the provision increase, overall earnings before taxes amounted to 100 and EUR 26,200,000 and that's slightly ahead of last year by 1.5%. Including the provision increase, Income remained 12% below previous year's quarter. We report a higher tax rate for this quarter. We report tax rate of 30 7%. And that is above the level of 34% to 35% that we usually indicate. And that's mainly because the French antitrust provision increase is not tax deductible. Earnings per share is at €1.33 13. €3 for the quarter or €1.48 with our usual adjustments excluding And excluding changes in the Song Jong liability. Please note that both figures I mentioned for earnings per share Then we show you the details for our operating cash flow. In total, the reported cash flow provided by operating activities amounts to €29,000,000 changes in working capital as part of the cash flow. We had a lower outflow for current assets and liabilities in Q2 2013 compared to 2012. The French antitrust fine has been provisioned for. It has not been paid yet, so it has not Expected cash flow so far. Further down the cash flow statement on the next page with respect to the investment cash flow. Spending for CapEx in the quarter amounted to €18,200,000 We show a €33,000,000 spend for purchases of Contour's consolidated subsidiaries and other business units and this relates mainly to the acquisition of Lubrication Services, LLC, The LSI, the acquisition we undertook earlier this year. And to a smaller degree, the acquisition In the financing cash flow, The largest element is a dividend payment, which we affected in Q2. We paid 123,600,000 I would actually skip the balance sheet slide Page 12 And move directly to 13, which is leverage. In the quarter, net debt increased by €83,000,000 to €1,578,000,000 at the end of the second quarter. The increase is mainly driven by the dividend payment in Q2 and it's a very typical seasonal movement that we see in any second quarter. The group's leverage stands at 2.3 times net debt to EBITDA and that's equal to the level we had as a company a year ago. I would skip the leverage time line on Page 14. I would also skip the maturities profile of our indebtedness, which is unchanged And talk about the working capital slide, Page 16. Trade working capital at the end of the quarter to €1,151,000,000 On a year to date basis, working capital turnover remained 13. And on a last 12 months basis, working capital term amounted to 8.9 times. Our usual free cash flow calculation you can see on Page 17. You can Porter delivered a free cash flow of €100,000,000 almost exactly on the level of previous year's 2nd quarter, A somewhat lower EBITDA for the purpose of cash flow was compensated by less outflow into working capital. I would hand back to Steve for a discussion of the segments. Thank you, Jorg. Now let me walk you through the developments of the segments for the Q2 2013. Business in all segments continued to demonstrate resilience and still challenging market conditions during the quarter. In our largest regions of North America and Europe, organic cost development is almost flat as the business adapts to more modest business environments. In Europe, operating gross profit increased by 0.9% on an FX adjusted basis. And the adjusted operating EBITDA likewise increased by 0 2 percent. When taking into account the one time costs related to the provision increase in France, EBITDA decreased by 18.7%. Please note that European Development is fully organic. In North America, operating gross profit in Brengthen North America grew by an FX adjusted amount of 7.9 percent and operating EBITDA increased by 6%. Both Operating gross profit as well as the increase of operating expenses include a strong contribution from our acquisitions carried out in 20122013. In Latin America, we delivered an FX adjusted of a growth of 4.6% of gross profit. In Q1, EBITDA officially fell by 6.4% on a constant FX basis due to higher costs hitting the EBITDA performance. You may have seen recently we have announced appointments with a new Chief Operating Officer for the region. It was a strong track record of operational success in the region. We are confident that the appropriate corrective action is now being put in place to correct this position. In Asia Pacific, we showed 24 point I beg your pardon, 21.4 percent gross profit growth and the operating EBITDA increased by 17.3%. This was driven by a mix of strong organic growth in most of the regions and the contribution of our acquisition of the ISM Sarkar Group. Probably not surprising for those who follow economic developments in China, we saw some drop in demand in our Chinese business. As As you know, we're not a full line distributor in the country and therefore more dependent on the development of individual industries than we are in other countries. Let me reiterate. Our group's operating gross profit growth for the Q2 of 2013 amounted to 4.9% And operating EBITDA grew by 2.4% when adjusting for the provision increase in Europe. Now let me take you to the outlook. After a somewhat difficult first quarter and stabilization observed in the second quarter, We remain fully convinced of the business model and the structural growth opportunities for our business. We currently do not expect improvement on the macroeconomic environment for the remainder of the year. We continue to see the biggest macroeconomic headwind in Europe with the expectation of a continued recession, although it appears the situation eased slightly during the Q2. Assuming a continuation of this trend And strict cost control, we expect it to be able to achieve EBITDA on or above last year's level. In North America, with this more positive environment, we expect With the mix of tank cost controls and consequent capturing of growth opportunities from outsourcing as well as our market position, we In Latin America, we have carried out a change in regional management and are currently reorganizing certain While this is likely to result in additional expenses in the coming quarters, we are confident these measures will bring Martin and Martin Walker Back on to its earnings growth track soon. For Asia Pacific, we continue to be generally positive, and we remain cautious regarding the development of China At this stage, well, we have seen a clear softening in the demand of the industries that we are covering. Our EBITDA guidance for 2013 is an EBITDA operating of between €710,000,000 735,000,000 This range is based on the following assumptions. It is adjusted for the effect of the €16,800,000 provision increase in Europe or any other extraordinary effects. This means that the as reported figure you will find in our statements will be €16,800,000 lower. We assume the U. S. Dollar euro Change rates stay in line with the levels observed in the first half of the year. No further deterioration of the world's economic climate compared to the situation we currently see today. As to working capital, this is to a large extent a function of sales and chemical pricing, and we expect it will continue to grow and the course of 2013. CapEx should be slightly above depreciation and will be sufficient to support the organic growth of our group. Finally, the free cash flow is expected to remain strong based on the different elements mentioned above. The acquisition pipeline is progressing as always. We are working on a number of transactions. I am confident that we will see further deals later this year. Now let me address the current trading environment. Gross profit per working day grew by 0.7% in April, 4.3% in May, 6.2% in June and 4.9% in July. For those that would like an organic view of this growth I can give you May was a negative 0.1 percent June positive 1.8 percent July positive 2.4%. In closing, we continue to be confident the group will grow all relevant earnings parameters in 2013 on a full year basis. Despite ongoing difficult macroeconomic conditions, Bentac remains very well positioned to capture new growth in both established And emerging markets. This is why we feel confident to provide an outlook of further growth leading to a range between €710,000,000 €735,000,000 of EBITDA. We're now happy to answer any of your questions. 13. 13. Thank you. The first question comes from Mr. Rob Plant from JPMorgan. Please go ahead, sir. Good afternoon, everyone. Steve, you helpfully just gave the organic growth Per working day, just to compare to what you said on the call at Q1, I think you said April in Q1 had seen a 2% decline. So it looks as though we've seen a steady improvement across the quarter. Can you just confirm that? And related to that as well, Q1 had The benefit sorry, a hit of about 3.6% from working days within the 4.9% gross profit growth, Was there any equal swing back in working days benefit? Thanks. Yes. Well, I I confirm that the obviously, the organic growth rates, which we have just mentioned, are clearly correct. And we do see from the Bentac AG improving organic growth situation. And as far as working days is concerned, in this quarter, we would see the benefit of one extra working day as opposed to The 3 negative working days we had in the Q1. So it probably helped by about 1%? About what's Georg, Rob, about White, I would say, Generally speaking, for the individual quarters, we wouldn't overemphasize working days. We did so in Q1 because the effect was extreme. Great. Thank you, both. Thank you. The next question comes from Mr. Andy Chu from Deutsche Bank. Please go ahead, sir. Good afternoon, guys. A few questions, if I may. Steve, just to if I understood it correctly in terms of Your comments on Europe. Did I understand correctly that you said that Europe would be on or above last year's level And if so, I guess that means that you will have given that you were down I think €4,000,000 in terms of EBITDA In the first half and that assumes even if you're going to be flat some improvement in the second half. Secondly, in In terms of the U. S, the EBITDA to gross profit conversion ratio was down 80 basis disappoints in Q2 year on year, if I'm correctly calculating that conversion ratio. And I wondered what the impact Of Ultivya was on that conversion ratio and how quickly you think you can move the Ultivya Conversion ratio to the sort of above 40% U. S. Conversion ratio. And then if I could just clarify your comments in terms of French antitrust. I think you made some Comment that 2000 some investigation in 2,002 was still open. I wasn't sure whether that was Apologies or negative comment, maybe you could clarify that for us please. Thank you. Sure. Sure. Well, as far as Europe is concerned, You're quite correct that the implication is that Europe will to achieve year on year the same level of EBITDA or slightly Or higher will require extra growth in the second half, and we do expect to see that. That's What we do expect to see? As far as Altiva is concerned, it's a difficult question to answer specifically, but I would point out that Altiva is a business that's very much focused on water treatment. And to some large extent, that also is a business that would be more active during the summer periods In the winter periods. So there may well be a different contribution from that business during the Q3. And I think the as far as the antitrust is concerned, yes, I think for completeness, the it's all We're out of that. At the end of the day, we're fully provisioned for the fine that's been levied regarding the 1998, 2005 Antitrust event which we are clearly still appealing for because we don't believe that that's been dealt with in a way which we consider fair. But there was another case concurrent in 2002, which actually was judged on by the authorities and dismissed. The person involved in that particular dispute appealed. And as at this stage, we're not clear what the Success or otherwise of such appeal would be, but clearly, we've already had one judgment in our favor and we would defend ourselves appropriately in such circumstances. Could I just ask one more? And just in terms of your view please, If you could give us a view on conversion ratio. And clearly because the organic growth rates have been sort of Low single digit or slightly the wrong side of 0 over the last few quarters. You've kind of struggled to Improve or hold your conversion ratios. And I just wondered what would be your view in terms of, I guess tipping points in terms of level of organic growth that is required at the gross level to see meaningful improvements in the conversion ratios. Is it above 3%, 4% or is it more or less Then a sort of in terms of a slide, I wonder if you could just help us on that please. Well, clearly, you've seen certainly in Europe and North America, we've Hold very strongly on cost base and we continue to look at our cost base in a relatively low growth market. 2%, 3% organic Growth is really the sole place where we need to be to see that conversion ratio improving. But we are clearly not resting on our Laurel's here. We are actually taking some actions within the businesses to improve efficiency and accelerate those where necessary. It's also worth saying that in particularly North America, we have taken some additional costs on during the course of this year to expand our caustic soda distribution market, which has included some additional bulk storage facilities, which are to position this business for future growth. And we now actually see the benefits of that coming through in terms of additional gross margin in North America, which I'd expect to see develop further in the course of the year. Thanks very much. The next question comes from Mr. Simon Mazzamati from Berenberg. Please go ahead sir. Yes, good afternoon. Simon Metternati from Berenberg. You say, I think in your presentation that CapEx spending should be ahead Depreciation due to an increase in business activities. I wonder if you can elaborate on that. Do you actually expect growth to pick up in the second half? Secondly, I was wondering if the calendar issues that you were talking about in Q2 also had an impact on your conversion ratio. And finally, am I right to think that on an organic basis volumes in Q2 have picked up while prices have fallen? This is chemical prices as opposed to your tariffs? Sure. Yes, we've actually we have seen volumes improve in Q2. Chemical prices have formed, but not so particularly relevant to our business model, but we do see volumes increasing. I think as far as CapEx is concerned, we are generally just investing Just slightly above depreciation at the moment. Which means in quantitative terms, Simon, should be €95,000,000 or €100,000,000 for the year In terms of CapEx, and yes CapEx is a seasonal thing that typically picks up in the second half of the year. Not sure we got your question on the Q2 impact on conversion ratio. Yes. I think in Q1 you were Talking about the fewer calendar days having an impact on the conversion ratio, I was wondering if you had a similar impact In Q2 a beneficial Okay. I would say not really. Coming back to Rob had a little bit earlier. We had one business day more this quarter compared to previous year's quarter. That's a relatively small difference, which I could not quantify a conversion ratio impact. Okay. Thank you. Thank you. The next question comes from Mr. Markus Maja from Kepler Cheuvreux. Please go ahead, sir. Good afternoon, gentlemen. Three questions for me. First of all, your selling Expense but also your administration costs, but in particular the selling expenses, say, rose over proportionally year on year and quarter over quarter. Can you give us the reasons for this? And what is a good run Great then going into second half. Then secondly, what is your gross assumption for Asia going forward? Is it This kind of growth you saw in Q2 a good run rate then looking forward? Or do you think that from this base there, Sequentially, the growth could come down further in Q3. And then lastly, sorry for this, but I think it was too slow To write it up, could you again repeat organic growth per month for April, May June? That would be very helpful. It's Georg. The answer on the selling expenses, it's mainly driven by the provision increase, the EUR 16.8 million or roughly EUR 18 Sorry, EUR 16,800,000 roughly EUR 17,000,000 provision increased antitrust are in selling expenses, And that's a major driver for the increase in selling expenses. Growth in Asia, you will see an acquisition impact. We nominal growth rates Q1 and Q2 this year. But from here forward, growth in Asia this year in the Further acquisitions will be pure organic growth. And therefore, you should see a decline in growth rates relative to what we have seen earlier. For this technical effect, We haven't put out a guidance on organic growth in Asia. Okay. Just as far as the organic growth rates you were wanting, is that correct? Yes. For May, it was negative 0.1 percent June, plus 1.8 percent July, plus 2.4 percent. Okay, perfect. Thank you. The next question comes from Will McKenzie from UBS. Please go ahead, sir. Good afternoon. It's Rory McKenzie from UBS. Firstly, just following up on the North American margin. You mentioned some ramp up costs affecting OpEx. What's the outlook there for H2 on the cost side? And will the extra start up costs drop away in H2 on your current plans? Yes. I think it's fair to We invested in the we're still investing in the first half of this year. We are actually working quite hard on cost control within North America make sure that we get conversion ratio to levels that we expect to see. So I would expect to see a reduction in operating Costs relative to business volumes during the course of the second half of twenty thirteen and the conversion ratio to be even positively effective accordingly. Okay, great. And then LatAm, that also seems to be struggling a bit with its cost base. Does that reflect the high cost inflation in that region? Or are you confident that with these management Changes you can now start to take costs out once that all becomes stabilized? Generally speaking Rory, it's Georg. I would say The region does not have an undue inflationary cost pressure. It probably has a little bit more than the mature markets, But that's something which historically we were always able to manage. We are confident that We can get the cost development well under control in Latin America, post the management changes. It might take a couple of quarters. So be a little bit patient with us, but it's about the setup of the business organization across the region. It's something we can manage. Okay. Just on detail, when were the management changes actually completed? The Your Chief Operating Officer was appointed in course of June. Okay. I would Steve is hesitating. I know. You may maybe. I would not say that our reorganization in the region actually has been affected by now. Okay. And then just one more if I may. I think the acquisition pipeline conversion has been slightly slower in H1 than maybe we saw last year. Is this your choice on focusing on existing acquisitions or just reflecting the lumpiness of getting the deals over the line? I think it's the lumpiness, I'm afraid. We have a number of transactions which we're looking at, at the moment. And As always, we're very diligent and it's never over until it's over. But we are I'm confident that we expect to spend the sort of indicated amounts for the full year. Okay, great. Thank you. Thank you. The next question comes from Mr. Alexander Daniel from Berenberg. Please go ahead, sir. Good afternoon, gentlemen. Just Short question on the maturity slide, Georg skipped earlier. I think nearly €180,000,000 of the €230,000,000 securitization facility maturing in 2014 is currently drawn. Did you already manage this upcoming maturity? Are Any thought if it's going to be a syndicated loan, new bond or given the current stock price convertible? Yes. Maybe for the larger groups, the question refers to the maturity schedule of our indebtedness, where Out of our net indebtedness of €1,500,000,000 a piece of €180,000,000 matures next year, a relatively small €180,000,000 in form of an AR securitization. We haven't decided yet If to roll the AR securitization or not, there is plenty of time to decide that. If we were to decide not to roll the AR securitization but To repay it, there is plenty of sources. We have cash on the balance sheet sufficiently. We have cash flow generation. We have significant borrowing 13. So that's from our perspective a technicality an important technicality, but nothing which has overwhelming importance for The IT management. Okay. Thank you for that. The next question comes from Mr. Andy Chu from Deutsche Bank. Please go ahead, sir. Steve, it's Andy Che again. Sorry to ask a few more. I had another 3 if I could On a regional basis, Steve could you actually just do a quick walk through please as to what's happening on some of the country trends within Europe So the first follow-up question please. Yes. I can do that for you. I think it's not changed significantly from the Q1 In terms of we see the U. K, Nordic regions, solid performance and indeed growing. Germany growing. France Relatively stabilizing. We had a weak position in France, and I think our view there is not quite as bearish as it was. And the changes which we put in So 2012 and this year are starting to bear fruit, so we're more positive about our French business. It would also be fair to say that we still The growth in the Central and Eastern European region, particularly Poland, actually continues to be a strong performer. As far as the southern part of Europe is concerned, Italy remains relatively weak. But Surprisingly, Spain continues to improve and has quarter over quarter become stronger. Okay. Thank you very much. And then maybe just moving To China, you mentioned a couple of times that China seems to be weak. So was the profitability down Year on year in China, what's the weakness across I guess both the Rodia and Zhongyang businesses or is it more in one than the other? And I guess does that then just push out your acquisition expectations for China So sort of more medium to long term? Andy, maybe I go ahead and Steve certainly will support me. Maybe for the Board of China is only part of our Asian business and the Asian business is about 10% of the group. So if we talk About the relevance of China today for the Brantag Group, you are talking I would have to look up the exact figure, but 1.5%, Maybe 2% of our overall earnings generation. So not overall relevant today. But yes, China is an area of significant development for us and China is an area where distribution markets are not well developed yet. The business that we have in China is not a full line distribution business yet. The business that we have is mainly a solvent distribution business where we work together with a partner and solvents are very much geared towards more macroeconomic macro Economically volatile industries. In that sense, we do see more volatility in our Chinese business upward as well as downward. And whatever you read in the press about macroeconomic Chinese development actually does more in our business. It's Too early from my perspective from our perspective to make any statement on being up year on year or potentially being down year on year. Yes, Nandir, we still are fundamentally positive about our Chinese business because as Georg has mentioned, We don't have a full line chemical distribution offering there at the moment. And clearly, there's significant opportunities for us to broaden the product And the services that have been offered by our Chinese joint venture. And this does take some time. We believe it's absolutely still the correct Place to be and we're optimistic for the future in China, but it is relatively small in the context of the group overall. Okay. And my last follow-up was just in terms of North America and maybe some comments over oil and gas as to how that's It's a developing place. I think certainly the Q1 was relatively slow in oil and gas. We saw improvements in the 2nd quarter over the Q1, and we have no reason to believe that, that is going to falter. So at this stage, oil and gas is More or less at levels which we were where we were last year. Great. Thanks very much. The next question comes from Mr. Markus Mayer from Kepler Cheuvreux. Please go ahead sir. Yes. Again, question on Asia. You said it's only 1% to 2%. But anyway, do you still see that this kind of outsourcing trend in Asia is now accelerating Sufficiency should come more in focus also chemical companies? Yes, absolutely. And one of the things that we're doing In the global accounts elements of our business where these are accounts which customers We're focusing even more and more on this area because we see a bit of global accounts Participating even more in Asia Pacific, and they want brentag to support them in their growth and the development of their businesses as They want to consolidate their purchases across the world. And so what we see very much has been the outsourcing to larger chemical distributors like Blendtec to be a key feature Has your question been answered, sir? Yes. That's right. Thanks. We have a further question from Mr. Will McKenzie from UBS. Please go ahead sir. Hi, yes. So I'll add a follow-up as well. With weak or mid to market for some time now, have you seen any, I guess, notable changes in customer order patterns or customer mix for that matter? I think if I could just take that one. I think what we've seen and I think we saw this in the Q1, that there There's quite an increase in volume from customers who perhaps may normally have purchased sterility from manufacturer but switched It will be also fair to say that during the course of the quarter, we have seen increased volumes within the group. And this would suggest that if you take macroeconomic data, which would suggest But volumes shouldn't particularly increase in that regard. It would seem there's been a shift in customer buying behavior to move some of their volumes Through the distribution channel as opposed to through directly with chemical manufacturers. So this trend is continuing. Has that been maybe the slightly large customers? Or still your kind of average size It is unchanged really. Yes. We don't really differentiate between large and small customers because their buying behavior can be very different. For example, If you were buying if it was a large company like Exxon or Shell, they still may well choose to purchase their product through distribution For a certain product line, but clearly not all of their product lines would be appropriate for distribution. So it can be large and small or medium sized customers that make this choice. Okay. Thank you. We have a further question from Mr. Christian Kort from MainFirst Bank. Please go ahead, sir. Yes. Thank you very much. Good afternoon, gentlemen. I have three questions. The first of all is, I understood during your Q1 conference call that you said you expect Conversion ratio for the full year 2013 to be close to the one that you presented in the full year 2012. I just want To ask if that is still valid? Yes. Generally speaking, Yes, that would be adjusted for the French antitrust provision increase. Yes, of course. Okay. Thanks. The second thing is, did I understand from your reporting that you recorded some cost saving effects in the first half of the year. My question would be, can you quantify this effect? And Is there a number that you expect to come in the second half of the year? I didn't get I'm sorry, I didn't get the beginning of the question. Was that referring to a specific No. Just to the cost savings. Yes, basically, I would expect those to happen in Europe. I understood from On an organic basis, the European and basically also the North American cost base are organically flat, Which is we think a testimony of the strict cost management we are undertaking in our business. Okay. Thank you. And the question we just dealt with, is it possible to quantify the effect you are perceiving from the large new customers That are coming to you, I don't know, on the gross profit or EBITDA or conversion rate, any of these? I think it's a little difficult to do that really. I mean, because you've got to bear in mind this is a business mix. It's Highly diversified across all regions. I think the general trend is that With Brenntag, we are seeing increased volumes, which are volumes which are increasing at probably a higher rate than macroeconomically Would be suggested for straightforward growth. So the trend is that we are taking more volume Into our business. And this is not a price driven initiative. This is a buying behavior change. It's very difficult to sub analyze that to the level that you're wanting. Okay. But if you talk about regions, it's possibly the developed markets? Absolutely. Developed markets are the principal drivers for that. Okay. Thank you very much. Thank you. The next question comes from Mr. Max Meyer from Kepler Cheuvreux. Please go ahead sir. Yes, only one question Remaining, can you give us M and A effect you had for growth in Q2? Yes. I need a moment to pull that For the quarter, you were looking For half year, whatever you want or both. It's a quarter. Let me get off the hook with the quarter. The EBITDA from acquisitions in Q2 It was about €8,000,000 Okay, cool. The next question comes from Mr. Jorg Rems Hagen from Commerzbank. Please go ahead, sir. Yes. Hi. Thanks for taking my questions. 3 actually. The first is, the deterioration in working capital turnover we have seen, I just want to go over the better grip. I mean, is this temporary due to acquisitions? Or Is this a more structural development? That's number 1. Then I know the number is small, but if I read it correctly, I had a EUR 1 €1,000,000 impairment in depreciation, could you just enlighten me on what that was for? And then the last One regarding the still open antitrust case in France. At this point in time, would you be in a position To share with us a potential impact on earnings, just So also rough guidance would be appreciated. So would it be more in the region of, I don't know, EUR 5,000,000 or more in the region of EUR 20,000,000? So whatever you Share with us. Thank you. Yes. Maybe I'll take the depreciation question first. I take it you have noticed from the financial statements that there has been an unscheduled depreciation of €1,200,000 That's for The closure of a smaller site in CE, we closed a smaller site, which we don't need any longer for operational reasons and we basically With North Sea technical equipment, which was still on the site and which we don't use any longer. Okay, got it. The antitrust investigation, the piece of the antitrust investigation that's not closed yet, I would like to reiterate what Steve explained in the general context. It's a case that is investigated since 2002. It It was dismissed by the authorities once. It's now still open because one market participant complained. It's So uncertain at this stage and we feel so remote that it would be inappropriate from our perspective to quantify. Okay, understood. Working capital? Yes, the working capital turn What you see in our business, as we discussed on different occasions, working capital turns In emerging markets are somewhat lower than in mature markets. And in specialties, working capital turns are a little bit lower than in industrials. So with Above average growth in emerging markets and with above average growth in specialties, you will see some pressure on working capital terms. On the other hand, we have a number of initiatives ongoing to wipe out inefficiencies in working capital in inventory That counteract these structural burdening effects I just mentioned. By and large, I would say working capital turns should be stable going forward. But actually below the surface, there are different movements. Understood. Thank you. Thank you. The final question comes from Mr. Andy Chu from Deutsche Bank. Please go ahead sir. Can I just ask a couple of numbers questions? Maybe Gail, could you just confirm that in terms of you've given the M and A effect of €8,000,000 and I guess we can calculate that the FX effect was minus 3. So just building the year on year bridge, could you just confirm that the organic movement was about minus €4,000,000 For Q2 year on year at the EBITDA level. And then secondly, could I just confirm or would are you able to confirm The July number that you gave in terms of plus 4.9 percent on a total basis and 2.4% On an organic basis, has ISM CellCap fallen out from the June number? So July in effect is just Alpevia Lubrication Services and Delanta Group as a sort of main Acquisition effect in July? Thank you. Yes. Andy, before I take a little, I would Perm, your figure for organic EBITDA development Q2 over Q2. So organic Q2 over Q2 is about minus 2% or close To minus €4,000,000 which is what you mentioned. With respect to the second question, yes, ISM Stylecart has It's fallen out of being an acquisition because we acquired beginning of July last year. It's organic from today's perspective. The main acquisition effect that remain in July are Altavia and LSI and to a smaller degree Delenta. The end of the year, LSI until February or March next year and Delenta also until the end of this year. Okay. But far but at least for the next 6 months you've got that 2.5% uplift from okay. Thank you very much. We do have a further question from Mr. Christian Clot from MainFirst Bank. Please go ahead, sir. Yes. Thank you very much. Sorry, I forgot to ask one thing. I just want to ask If you took any write downs on inventories during the quarter? No. Nothing that I'm aware of. There might be tiny ones in individual subsidiaries, but generally speaking, no. Okay. Thank you very much. Thank you. There are no further questions. Okay. In that case, thank you very much everybody for joining us on our Q2 And very much appreciate your questions. And we'll close the call at that point. Thank you. Thank you. Bye bye. Ladies and gentlemen, thank you for your attendance. This call is being concluded. You may now disconnect.