Ladies and gentlemen, thank you for standing by. Welcome today's Q4 twenty nineteen Earnings Conference Call. You. I must advise you that this conference is being recorded today, Wednesday 4th March 2020. I would now like to hand the conference over to Tim Lange, Head of Investor Relations.
Please go ahead, sir.
Thank you very much and good afternoon from our side. This is Evonik. And with me, as usual, our CEO, Christian Coleman and our CFO, Devolf and with that, I will hand over directly to Christian.
Thanks, Dan. And welcome also, from my side. Thanks a lot for being with us today. Today, we are reporting a successful finish of a challenging year 2019, and we will give you our perspective on 2020. Another year in which we'll aim extend our track record of promise and deliver.
So ladies and gentlemen, let's start right away. For the start, maybe a quick look on what we achieved last year. It was not an easy year with a cope with some challenges, with quite some challenges. Nevertheless, We delivered on our outlook and further improved our cash generation. Despite some macro and unexpected operational headwinds, We post the levers, which are in our hands.
Especially on the cost side, we are leaving no stone unturned. Another proof that there are no sacred cows is the decision to adapt our sponsoring with Rosier DuPontment Our new sponsor ring focus will now mainly be on the champions league to better leverage our global business exposure. This will cut our sponsoring costs by half and generate tangible savings from mid 2020 onwards. So Below the line, we delivered on our promises for the 3rd year in a row and continue to work hard to extend this track record. Also on the strategic level, we made good progress in our portfolio transformation.
We successfully closed the MMA divestment in March and finally, succeeded with the PeroxyChem acquisition. Which was close a month ago. Unnecessary to remind you that the March bill we achieved for the site MMA business was higher than the 1 we paid for the clearly more resilient PeroxyChem business, including Synergy. To be fair, The PeroxyChem deal took us longer than we had anticipated. But finally, the court ruling confirmed our investment case for the businesses with a clear specialty character in attractive and high growth niches.
This was also proven by the numbers. PeroxyChem has grown earnings and expanded margins in 2019. In for a sure challenging environment. So we are excited to finally integrate the business and can confirm an unchanged 20,000,000 synergy level. The deal is the next logical step in our portfolio transformation.
It will support our cash generation and deliver a tangible earnings contribution already in this year. With Spiroxichem just behind us, the next step is already ahead of us. The implementation of our new divisional entry parties track today, I just want to give you a sneak preview on our new structure, a deep dive will follow on our Capital Market stay at the beginning of April. We already introduced our growth engines back in 2017. At the way how we look at our portfolio from a strategic perspective.
Now with the ongoing portfolio transformation, We think it is time to mirror this strategic view also in our organizational setup. In the future, We will have 4 operational divisions with clearly defined roles and objectives: specialty Additives, Nutrition And Care, smart materials and performance materials. This will increase transparency. It will make the high quality of the underlying businesses more visible. It will be easier to model and for us internally, it will be easier to manage.
All else, at the Capital Markets Day in 4 weeks from here. And even then, there is still enough time until the new structure will become effective We'll start reporting in the divisional setup from Q1 onwards. Reporting, ladies and gentlemen, just the right keyword to hand over to Ute for the Q4 financials and segment details.
Thank you, Christian, and welcome from me as well. In a challenging 2019, we successfully kept our EBITDA stable at 1,000,000,000. Again, we delivered on what we promised. This strict cost awareness on all levels clearly helped to reach our targets. This is also visible in a slight margin uptick to 16.4%.
On the back of these results, we are happy to propose a stable and attractive dividend of 1.1 per share to our AGM in May. On the cash flow side, we were able to grow free cash flow significantly in absolute terms. Finally, we came out slightly ahead of the guided EUR 700,000,000. Also, our cash conversion rate improved now 33%. The measures implemented in recent year, clearly bear fruit.
The discipline contributed to this improvement. Another important step was the reimbursement of pension payments which we announced a year ago. We adjusted the asset management approach to provide the necessary liquidity in our pension assets to keep the reimbursement levels stable going forward. Let me now give you a brief overview of the performance of our operating segments in the fourth quarter. Starting with Resource Efficiency.
In 2019, for the 5th year in a row, the segment delivered higher earnings and proved margins to a now excellent level of 22.7%. This has been achieved despite the weakness in some important end markets, like auto and coatings. This led to lower volumes in Q4 again, with a similar year on year decline as in Q3. But thanks to our pricing power, savings and the envisaged license income, the segment had a strong finish. It was able to deliver the clear year on year earnings improvement we already indicated in our Q3 results in November.
2019 was not an easy year for Nutrition And Care, but clouds are starting to brighten up towards year end. Care solutions and Healthcare had a strong finish. These more resilient businesses delivered a Q4 performance in line with expectations. The thionine continued to show very strong volumes also in Q4, supported by ongoing tailwind from the African swine fever. On segment level, volume development continues to be diluted by the 10 portfolio shift to specialty products, like in Care Solutions or for Veramaris.
We still had a year on year negative price effect of a good 1,000,000 from methionine in Q4. We have seen a stabilization in our global average methionine price in the course of fourth quarter. We had anticipated slightly declining prices a couple of cents over the last quarters. This should now turn into slightly increasing prices over the next month. As much as these are modest moves, we definitely recognize a change in the market sentiment and price trend.
Concluding with Performance Materials, which had a challenging year behind it, with an unusually high number of 1 off impacting earnings. As already announced, the quarter was negatively impacted by a compressor failure in the C4 business. Nevertheless, volumes and earnings increased as prior year was even more burdened by the low Rhine water level and limited raw material availability. Pricing, however, was clearly negative, reflecting C4 business. That's it from my side.
Back to Christian for the outlook.
Thanks, Uto. For this year, we do expect the low growth environment to continue. We've seen stabilization in most of our markets and businesses, but the market environment remains challenging. While we see some challenges in our remaining commodity businesses like Performance Materials Or Baby Care, we expect broad based growth, broad based growth in our specialty businesses and ongoing positive contribution from our efficiency measures. However, On the macro side, visibility remains low and has even become lower with the outbreak of the coronavirus.
Considering these macro risks and not relying on a potential macro recovery, We decided for a broader guidance range of 1,000,000,000 to 1,000,000,000. This also includes the effects from Corona, at least as far as they are predictable as of today. Our assumption is an effect of around EUR 30,000,000 for the first quarter. There are for sure also some opportunities in our businesses and some of them are already starting to materialize. But for the time being, we'll stick to what we have established over the last years.
To give a solid and to give a reliable guidance. Maybe a little bit more on the conservative side, look ahead into the year 2020 with confidence and optimism and finally deliver on what we promised. On the free cash flow, we are already a bit more optimistic today. Here, we target another slight improvement. We'll continue our disciplined approach regarding CapEx And Working Capital.
A lower level of bonus payments in 2020 for 2019 will help as well. On the other side, The normalization of tax payments and our efficiency programs will result in year on year, higher cash out. Before, we're happy to take your questions. A quick word on what you expect from our Capital Markets Day on the 1st April. We will focus on our new divisional structure and provide a deep dive into the single divisions We'll give an update on our strategy as well as on our defined financial targets.
Additionally, we will highlight Sustainability And Innovation as 2 very important growth drivers for Evonik. But before that, let's now
And your first question comes from Zebastian Vats from Barclays. Please go ahead.
Thanks very much. Good afternoon. I've got two questions, please. The first one is on the outlook. The range is slightly wider than usual, which is probably not a big surprise.
But could you please help us in the then what would need to happen for you to get to the low and the high end of the range, respectively? And if you could specifically talk about, the assumption that you've made on Corona as well as methionine, that'd be very helpful. And secondly, could you please discuss the current market dynamics that you're seeing in methionine, please? And what your price expectations are both for the near term and for the midterm as well? Thanks
a lot. Thanks a lot Sebastian. I would the first one and then we will split up and Ute will take the second part to get it to give you a little bit more color in detail and then I will be back with methionine. So talking about the earnings bridge of this year, the one hand, we have seen stabilization in most of our markets and businesses, but on the other hand, the market environment will still remain, as I would describe it, let me say, difficult and challenging. And don't forget that the macro and the geopolitical situation, however, remains let me say highly uncertain, too.
There are some trade tensions between the U. S. And the Chinese, and they are only partially resolved and maybe Europe might be the next candidate. As you all know, Visibly will stay on a low level And, that has become even a little bit more. Let me say difficult because of the outbreak of the coronavirus.
So what you can check for granted is that we have included all these facts and also includes the coronavirus. As potential risks already in our guidance. That is why we have decided to give you a guidance range from 2,000,000,000 to 2,300,000,000. And I think it is fair. As of today, to assume that the midpoint of this range is a good starting point for this year.
And please don't forget, there are some opportunities in our businesses. And if they would materialize in this year, There might be some potential upside, which we could make use of. But most important for me, most important for me and most important for Ute and most important for the whole company is that we will stay, let me say it like this tapered up to what we have given to you, during the past that we will focus on to continue to execute our strategy consistently step by step and maybe of higher relevance for you and to be reliable in delivering on our financial targets. With this will take, the second part, a little bit more deep dive into our businesses.
Yes. It's a pleasure. Thank you, Christian. Yes, if we look at the segments, what does that mean? We already described the trends in our Q3 call, so I think that more or less a continuation of that.
In Nutrition And Care Health Care And Care Solutions, they are set for growth. Health Care had established a very strong pipeline and might even be a little bit of beneficiary of the recent developments with Corona Care Solutions. They are working on there. Product mix and their setups. So I think that is very much in our hands.
Baby Care, here we are now a bit more cautious as the competitive pressure on volumes and prices has clearly increased. And now, we expect Baby Care to have a lower earnings level in this year than in last year. In animal nutrition, prices have stabilized over the last month. In our outlook statement, we are assuming very healthy volumes for methionine and stable annual average methionine prices. I from today's point of view, it is fair to say that there is some upside potential as we see the price moving in the last weeks Overall, that leads us to the guidance.
Nutrition cares, likely above last year's earnings. Resorts Efficiency continues to benefit from its diversified end markets and customer specific solutions. The market environment will stay challenging, especially in the auto linked end markets. Beyond that, we see good growth opportunities for most of our businesses. On one hand, we will have little less license fees in our hydrogen perapside business.
The other side, we will have 1st contributions from Barroxichem. And also in Resource Efficiency, we are expecting to see the strongest impact from the coronavirus as, this segment is very much delivering to Asia and the related end markets like auto and coatings. So overall, for our Resource Efficiency, we expect at least stable earnings for 2020. In Performance Materials, spreads will most likely remain under pressure, And as of today, they are well below last year's level. On the positive side, of course, we will not have a repetition of limited raw material supply on outages that we have seen last year.
So overall, the segment is set to be slightly below year's level or on year. Last year's level Beyond that, there are some technical effects on the group level. If you look at pensions, the lower discount rates leads to higher service costs. That is a double digit euro amount. We will continue to acute our cost programs as we announced that already around 1,000,000 of SG and A to outstanding.
Of course, we have started already last year to define short term contingency measures to make sure we are prepared as best as topical for 2020. So for that, from that point of view, you can assume a similar positive effect from these measures. So to sum it up, as Christian said, the midpoint is a good starting point. We have to keep an eye on the macro risk and on the impact of the coronavirus. But we also have some opportunities in our business.
And I think the range mirrors us, mirrors that quite well. Corona, of course, it can only be have a limited specification, as of today. Our assumption is an EBITDA effect of 1,000,000 in the first quarter. As I said, the effect will be most pronounced in Resource Efficiency. It's the most global business with a sizable exposure to automotive and construction, in Nutrition And Care, there might be a little at effect, but to a much lower extent, animal nutrition seems to be much less affected and could even have additional tailwind from Q2 onwards, we see that especially in logistics, everything that is linked to food, safety and food delivery gets prioritized, so that helps, of course, for our animal nutrition business as well.
The NEI positive price momentum could also be supported from that trend. So overall, mainly driven by Corona, we think Q1 will stay below last year's level, some catch up opportunity in the following quarters.
So I'm back with methionine and maybe methionine is back. Let's keep it like this. If you would characterize me as a conservative guy, you would be on the safe side and you would be right. But in respect of the methionine business, I do think that there's good sense for optimism. And the question is why and here's the answer.
First of all, we have seen during the last weeks months a positive dynamic in the methionine market globally. That is because of our global price initiatives since October last year, That is because of some, shortages because of, force majeures of ours and of Adiceo end of last year. And that is because of the high chicken meat demand due to the African swine fever, we do see, specifically in Asia, but it's now coming all around the world. And so therefore, Vanessa Line, we do see stabilization of the methionine prices. And there is a let me say a step by step slowly but steadily, increase of the contract price So it is trending upwards and that is what gives me a sense of optimism.
But would it be prudent for us to bank on this and, to reflect on this in a way that we would put it into our outlook, no. That is, because then here, the German is back on stage, it means, yes, there are good signs, which give us give me a good portion of optimism, but it is not, that we will reflect on this as of today because the year is just too young to reflect on this in our outlook we have given to you. So I guess that is my personal assumption of what we could spectrum in 2020 talking about methionine. And it is all underlied by very strong market growth and that I guess in a nutshell.
Very helpful. Thank you.
Thank you. And your next question comes from the line of Gunther Sechmann from Bernstein. Please go ahead.
Hi, good morning, Christian, Ute and Tim. Can you give us a similar one through for the cash flow bridge, please, just what they're moving parts around SG And E Program, pensions, MMA, bonus payments, other than now the integration of peroxychem as well and what do you see on working capital, please?
Free cash flow. So what are the main parts? Of course, it starts with a strict working capital management to really keep the cash effect from that as low as possible. We also have a strict control on CapEx at around 1,000,000, so more or less a little bit below the already modest level of 2019. We will have less cash out for bonus payments, you might remember that last year, we paid out the bonuses for the fiscal year 2018 and the the change in that payment is around EUR 100,000,000 for this year.
So that's a relief, a clear relief on the cash flow side. Additionally, we will have a 1st modest free cash flow contribution from PeroxyChem 10,000,001,000,000 we see. And of course, we had quite high payouts from restructuring in the last years So that will also go down step by step this year and next year. There are some higher cash out for taxes, but I think it's more normalized levels, so not too high effect, but of course, year on year, that is a small headwind. So that all ends up in a slightly higher free cash flow for 2020.
And as you see, many of these continued constituents are holding true, even if EBITDA was more towards the lower end of the range, of course, should we get to the upper end of the range that supports the cash flow as well.
On Baby Care, you're reclassifying that into the Performance Materials business. Should we read into that that divestment of that business is becoming more likely?
Gunja, just on this back. Let's give it like this. The new structure, we will present to you in detail during our Capital Markets Day means that we will be able to show you where we want to grow and where we want to invest in organic growth and in decent and disciplined M and A. And talking about this, we talk about smart materials. We talk about specialty additives and we talk about nutrition and care.
Then there is a 4th division named Performance Materials. And here we do assemble, here we do collect, here we do integrate our businesses, which are not those businesses where we want to invest in growth. Here, we want to concentrate on efficiency measures and we want to improve our positions in this respect, and we're going to provide those businesses like Baby Care and the C4 business with maintenance CapEx. But not with, growth CapEx. And that means, we have clearly differentiated between our growth businesses on the one side and the non growth businesses.
Maybe I could keep it like this on the other side. And your question, if it goes to, that we will sell it maybe this year, no, that is definitely wrong. And what we have learned by MMA process was, that it is of utmost relevance and high importance to create and to find and to identify the right moment, for maybe, selling something. That means in other words, it is all about timing. And if you look to the market, to the specific market, our business online baby care.
I do not think that it would be prudent for example, to sell this business this year because there's a the competitive pressure on volumes and on price. It says even decreased increase this year. So, in due course, we will be able to act, but that will definitely not be in 2020.
Thank you. And your next question comes from the line of Matthew Yates Bank of America. Please go ahead.
Hey, good afternoon, everyone. Just a couple of questions. The first one is just on the other line and the big reduction in expenses you had in 2019. I wonder if you could just elaborate a little bit more specifically on how that was achieved and maybe shed some context on, I think in 2020, you're guiding those expenses maybe go up a bit. So what part of the 2019 saving was maybe a temporary one.
The second question is around the dividend of the group, which I think has been flat since 2015. Obviously, you've made a lot of progress on transforming the portfolio. You're giving quite a confident message in terms of cash generation for 2020. Can you just give me more sense of what exactly the dividend policy of the group is and what the circumstances would be for reviewing that. Thank you.
Yes. Matthew, good afternoon. Thank you very much for the two questions. I'll start with your first question. On the other line, the main driver, of course, in the reduction was the strict cost discipline, both structurally.
That's our SG and A program, but also from short term contingency measures. There were also some smaller one offs coming from the deconsolidation of our methacrylates business in certain provisions on other positions in the balance sheet, but that's not a big amount. So that's why if we look ahead, there is no doubt that we will continue with our strict cost management. But on the other side, we also have factor cost increases. We have higher pension service costs in 2020.
We also will have a more normalized bonus level, at least as what we assume at the beginning of the year. We had a below average bonus level last year. So from that point of view, the corporate lines in 2020 would stay below 2018 very clearly, but it will be most likely more negative than in 2019.
I take the dividend question. And first to mention this and to underpin it very well, that our dividend policy is a stable one. That means that is our 1st priority. Dividend policy is 1st priority policy and stable dividend means therefore it is of utmost priority. And if you look to Evonik, if we do see a growth of the EPS on the one side and the free cash flow on the other side that would definitely lead to potential for a higher dividend in the future.
But as today, I think it is fair to give you this, as an, let me say, outlook for the future.
And then sorry, Ute, just a quick one on the pension, given where rates have gone in Q1, is it fair to assume that when you mark that the end of March that we'll see a deficit similar to how it was at the end of Q3?
That is the provisioning side that you talked about what I talked about was the service cost and the level of the service cost depends on the rate at year end. So that is fixed for the full year. Yes, if rates decline, we'll see higher deficits in the balance sheet. The P and L expense will not change by that.
And your next question comes from the line of Andreas Heine, MainFirst. Please go ahead. Hello Andreas. Your line is open. Hello, Andreas?
No response from Andreas. I'll go to the next question Your next question comes from the line of Chekan Udeshi from JP Morgan. Please go ahead.
Yes, hi. Thanks. I just wanted to just talk about resource efficiency. And one thing which was the trend we saw in 2019 was lower volumes, but higher prices to start within first half and then prices started to moderate through second half. So how do you see the pricing trend in Resource Efficiency, across all the key businesses into into 2020 so far.
That is a first question. Second question is now with petroxychem, acquisition having gone through, like what is the next step on M And A or is the focus now to essentially integrate with OxyChem, keep doing tweaks on strategy updates, etcetera, rather than focus on M and A? Thank you.
Yes. Thank you, Cheetan, for your questions. I'll start with the first one. RE resource efficiency, pricing trends, we have seen a very good pricing resilience last year, even in very challenging market environment. If you look at it business by business, of course, there are businesses where we have increased prices and can increase price or change the product mix so that overall price are better.
That for instance, in oral additives, partially in the cross linkers and, partially also in high performance, very much in high performance polymers. So I think these trends in these businesses are very resilient, very intact. So that overall, We do not see that the underlying pricing story or the underlying pricing dynamics will change. So we expect also resilient pricing to continue in 2020.
I take a second question, Tieteran Tristan speaking, about the M and A strategy going forward. Let's keep it simple and bring it straight to the point. First of all, M and A is and still will be part of our growth strategy. Having said this, we will focus on bolt on acquisitions and those bolt on acquisitions, you will see in the future in our 3 core growth divisions, nutrition care, Specialty Additives Smart Materials. Why?
In this businesses, we do have already tip of the top positions and these positions we want to extend in a decent and disciplined way. And we and we want to grow here because we know what we're talking about. We know the markets. We know the competitors. We know the products.
We know their tech to learn position. That means in other words, there won't be no surprise for us doing M and A in a decent and disciplined way, as I've mentioned here. And second, Knowing what we're talking about means that the risks of the integration would be definitely very, very little And, on the other side of this coin, we that is what would deliver really attractive synergy potential. So we will move on with our well proved M and A strategy as we have shown it in the past. Speetures.
Thank you. I will go to the next question. And your next question comes from the line of Geoff Hair UBS. Please go ahead.
The opportunity to ask some questions. Most of mine have actually been asked already, but I've just got one other. When you think about acquisitions and you think about your balance sheet, how much focus do you put on leverage including pensions or is that something you don't look at because it's just the cost you have to service in the future and you're really focusing on the financial debt and what the capacity is of the group to take that up or or die independent of what you're thinking on M And A?
Yes, Geoff. Thank you very much for the question. We look very much on the overall debt level. So that means including pensions because this is how the rating agencies and the creditors look at us So it would not make sense for us to isolate financial debt alone and manage that regardless of the pension debt. We have at our, for our, yes, how to say credit profile, we say we want to have a solid investment grade rating.
I think there is some room to move from where we are now. We also would have, of course, then ways of financing, which would be, a beneficiary for the rating. So that's how we look at it. But very clearly solid investment grade rating. And of course, pension deficit is part of the debt.
This is how we look at it.
Okay. Thank you.
Thank you. And your next question comes from the line of Martin Rudiger from Kepler. Please go ahead.
Yes, thanks for taking my question. I have 3, please. You talked about a strong finishing in Resource Efficiency in Q4. I guess it's obviously restocking. Can you mention which products benefited the most from that?
Secondly, on your business line Bioproducts, which is part of your nutrition business. And here I refer to in particular to your lysine business. I guess at this point in time, still earnings are extremely small, but with the recent recovery in selling prices in lysine, is there a good chance that we will see some meaningful earnings in that business line this year? And finally, this is a follow-up question to Matthew's question already. You say that the net financial results in your P and L will shrink this year from $185,000,000 last year to $100,000,000 this year, partly because of lower interest rates for pension.
I understand this lowers the service costs. On the other hand, you say pension provisions in your balance sheet decreased sequentially in Q4 by 700,000,000 because of higher discount rates in Germany. Can you help me to understand this contradiction? Thanks.
Yes, Martin. I'll start with interest results, we had some extraordinary effects in the interest rates results, interest results, last year. We had a ruling on a squeeze out process, which was, I don't know, like 15 or 20 years old. So of course, there was a lot of interest accrued on that. That was, resolved.
So that helped the interest line if the pension interest rate is lower now than it was at yearendof'eighteen, that is what is then important for the interest rate or the interest expense on pensions. And the service cost is in the personal expenses lines or has nothing to do with the interest, results. So I hope that helps you a little bit building the bridge. I could then continue with your first question on Resource efficiency. On our side, we had no restocking, no, we just managed our inventories very diligently, towards year end.
And also, we have seen quite a challenging macro environment also in the Q4. Somewhat slower demand for silica applications for automotive sealants and silicones and also lower volumes for ink and industry related coatings, additives, who all have seen that. But we have, the red the portfolio and resource efficiency benefited from a better product mix. So that is also important. If you look at the earnings that we have, better product mix here and there.
And this is also a program that our businesses run. So they bear fruits already hydroactive oxygen went very well. Crosslinkers had a good finish. So that was the mix more or less in Q4?
Martin, Kristi, I take the last question about disease. Yes. For sure, there's a positive effect because of the coronavirus and the prices are up recently. That is what we have seen, but the business is just too small. It won't turn the needle, on group level.
But to answer your question once a month straightaway, yes. Positive pride effects, yes, because of the coronavirus go not in such a way that it would turn the needle of the group.
Thank you. And your next question comes from the line of Mudasha Chowdhri from Citi. Please go ahead.
Hi, thank you for taking my questions. Just two please. Return on capital employed, it's been trending down steadily since 2015. And I was wondering if you could provide some thoughts around the long term targets for this and where you kind of aim for this to get to? And then the second question is around the anti dumping case in China.
For miscellaneous. Could you provide any update on that? Is there any developments that you can make us aware?
Okay. I take the second question about the anti dumping case. First of all, the Chinese authorities have postponed their decision and we do expect, that they presented that there are good reasons that they will not judge upon it as it is planned on April. So we do believe it could be that they will postpone it into the autumn of the year. But nevertheless, we are the only, assigning player, which has sites on each and every continent.
So in the U. S, in Asia and in Europe. So what will be touched by a decision of the Chinese authorities maybe to put some, check is on the input of methionine. No. But as of today, no new informations and we do assume that they will own this into the autumn of the year?
Yes, maybe a short answer on capital employed. I think what is really influencing that is the capital we acquired with our acquisitions in the goodwill. The organic CapEx that we did working capital, of course, in influenza set, but this will be a focus point as well on our Capital Markets Day So if you have some patients to wait for that, we can give you a much deeper dive by then.
Sure. I can wait. Thank you.
Thank you. And your next question comes from Thomas Swoboda, Societe Generale. Please go ahead.
Yes, good afternoon. Thank you for taking my questions. I have 2. The first one is on VIVAS, that could be actually an interesting asset. And my question is, what are your plans with it?
Could you eventually keep it keep it for longer? The second question, it's just a follow-up on this pension service cost. We talked about them in Q3. What is the exact increase So what is the exact number you have baked into your guidance for 2020, please?
Thomas, thank you very much for the questions. I'll start with the pension service costs. It's a million, higher service costs. Which is effect as of today because this service cost is calculated on the basis of rates by year end and then stay the same over the full year. Yes, we were best, we were best, was an asset or is an asset which we had, brought into our CTA, some 7 years ago, it had a very good development, good cash flow, and of course, a very nice asset appreciation.
As we changed the asset management strategy for the CTA to more liquid assets, we took out that portion out of the CTA into our own balance sheet there is a number of other shareholders so that we then can see over the next years how to arrange that and what to do with the stake in the best way for all of our shareholders. For the time being, it delivers a good return and of course, a better return than our bank deposits might have. So I think for the time being, a very good asset. It fits into our overall asset structure, but the main reason was really the rearrangement of the asset management from our CTA.
This is helpful. Thank you.
Comes from the line of Laura Lopez Baader Bank. Please go ahead.
Your volumes in Nutrition have been impacted by your shift into higher quality products. And was this process already completed in 2019 or should we continue to see the volumes of Nutrition impacted in 2020? And maybe can you also give us an update? How far are you with the ramp up of your new methionine plant? And in the past, you have mentioned that you could take your European plant into maintenance modes once the Singapore plant came online.
Is there still a possibility in 2020?
Okay.
Laura, thank you very much. I'll start with the volumes and then first we'll talk about the asset strategy in our methining business. I think most of the change in the products mix is done already. We will have some effects still in our care solutions as they are upgrading the portfolio step by step. But in animal nutrition, the main shift was really to rededicate parts of our lysine capacity into veverimer capacity that has happened by middle of last year.
So there is even a more positive contribution in the next 12 months from that. But there might still be some influence from the Care Solutions.
Hello, Laura. Christian speaking about methionine once again. What I'd really appreciate, our methionine strategy is as clear as it could be. And that means we want to improve our positions as cost leader and therefore, hence, to this safeguard our attractive margin level. Second, that means we have to work on all levers, you know, the general asset setup, logistics, leveraging best practices in our production and so on.
And this is an ongoing process. So you can take us for granted that we will in you to do what we've already started in summer of 2017 with the adjust 2020 program. To do so in the future.
Okay. Thank you very much. And maybe just very shortly, you have also my several times in the presentation that you see several opportunities that could create some upside for your guidance or for your earnings during the year? Can you maybe give some specific examples of which opportunities can drive higher growth during the year?
Yes. I think, 1st of all, the macro environment is maybe the most relevant influencing factor. We described in our segment discussion that the binding prices our clear chance as of this year. We are not over excited about that, but I think we've given you some insight drives this and what could even further drive this. So from that point of view, the question is also how will China react on the situation of the coronavirus, they could really also start an impressive economic program not to counterbalance that.
So these are all things that can happen or maybe not unlikely and would clearly represent upside for us.
Thank you. I will now hand the call back over for closing remarks.
Ladies and gentlemen, that closes our today's call, which we have really appreciated. We are really looking forward, seeing and meeting you on our road shows are on the 1st April in London and so far, take care.
Thank you. That does conclude our conference for today. Thank you for participating. You may all disconnect.