Thank you very much and good morning and as usual, welcome to our quarterly earnings call. With me are Christian, our CEO and Ute, our CFO, with that, I hand over directly to Christian for the short presentation.
Thanks, Tim, and also a very warm welcome from my slides. And thanks for being with us today. Let's start right away with our short presentation. Genjai will guide you through the first four slides of our quarterly presentation. In quarter 3, the difficult macro environment continues on a similar level as seen in quarter 2, So there was no support from the microsite.
Against that backdrop, our growth segments are holding up quite well. Nutrition and care as well as resource efficiency have delivered sequentially more or less stable earnings. On top of the challenging macro situation, we have to deal with another burden. Ongoing production constraints and performance materials We are in quarter 3 as well as in quarter 4 earnings. Both situations, an ongoing challenging macro situation as well as own production constraints for us to react quickly.
And so we did. On further accelerated and intensified our cost saving measures. That is why we can confirm our EBITDA guidance for 2019. Delivery on our promises is important for us to expand our track record that we have started to build over the last 2 years. More details on our progress in our SG and A program, additional, the tangency measures will provide 1,000,000 support in the second half.
This is already visible in quarter 3, mainly in the corporate segment where the number could actually lower compared to quarter 2. Transsequently, we also lowered our full year guidance for the corporate segment, which is now expected and will be below the prior year level. Where does this come from? Our SG and A program is progressing well. The measures and headcount reduction are actually ahead of schedule.
This results in 1,000,000 higher savings already for this year. On top, we have implemented additional contingency measures since the middle of this year. Let's go across the board. Incorporates and general operating segments and travel expenses, maintenance costs and personnel expenses. The high in China cost awareness and strict cost discipline on all levels is another proof of the cultural change at Giovanni.
With this a short introduction, let me hand over to Ute for the next two slides.
Thank you, Christian, and welcome from me as well. Chart 5 shows you a more detailed earnings pitch for. I'm sure you have done the modeling already this morning with our IR team. So let me just give you the main messages. Our usual Q4 seasonality is structurally improved rapidly at a later attempt.
Additionally, this year's learning seasonality will be mitigated by the following effects. First, Performance Materials should have resolved production constraints in the course of Q4. Then we expect the license fees in our active optical business in Q4. Animal Nutrition, Q4 traditionally is a seasonally strong quarter. And last but not least, the management cost savings are further ramping up.
This will bring Q4 to a level of around 1,000,000 and with this full year earnings to be confirmed stable guidance level. So overall, Q4 will be well supported by the just mentioned effects as our intensified cost discipline And I want to stress that this is not a one time effort, but rather the implementation of a new mindset as questions are described. So you can expect more to come in 2020. Let me also spend some more on the current trading in our segments. In Nutrition And Care, we see the back end loaded earnings development in Healthcare to materialize as expected.
Care solutions continue to benefit from efficiency measures and the portfolio shift to more specialty products. In animal nutrition, the picture is rather unchanged. On the one hand, strong volume growth, even above average, supported by the African swine fever, On the other hand, it's still negative, but easing price effect. It was 1,000,000 in Q3 year on year, after 40,000,000 in Q2. In Resource Efficiency, the challenging environment in auto and coatings end markets continues.
This is visible, especially in industry leading silica applications and undercoating businesses, but the majority of our businesses is holding quite well, like unchanged, strong PA12 businesses, industrial and consumer goods and strong demand for crosslinkers from the wind industry. And Performance Materials stable or even slightly improving spreads for MTBE and ENA are currently not enough to compensate for year on year lower Buenciences. Additionally, the production constraints are leaving traces. But with that effect easing in Q4, earnings should be on a comparable level like seen in Q3. Finally, free cash flow on Chart 6.
We do confirm not only our earnings, but also our free cash flow guidance. We guided for a significantly higher free cash flow and further specify that today to a level of around 1,000,000. Despite the challenging market environment, we have made good structural progress this year. The pension reimbursement gives us around 1,000,000 support with a high discipline on net working capital and CapEx results and combined more than 1,000,000 less cash out. For CapEx, we have already revised our guidance from $950,000,000 to $900,000,000 with our Q2 reporting.
And we will manage our CapEx budget very tightly until year end. Let's see how it finally turns out, but from today's point of view, we might even come out slightly below the 900,000,000. So we are confident to reach the €700,000,000 for free cash flow which is good progress and covers our dividend, also in this more challenging environment. This is what we have promised at the beginning of the year on what we will deliver. In 2020, tight network index management will continue and we will have a significantly lower cash out from bonus payments.
Based on that, we see further room for improvement and institutional upside in cash generation and cash conversion. That closes our brief presentation. Thank you for your attention so far. And we are now happy to
you. And the first question comes from the line of Andreas Hale from MainFirst. Please ask your question.
Yes, good morning. 3, if I may. The first, you already outlined a little bit, what you see in Q4 trends. Maybe you can or I, at least, I try, it gives some indications what you expect at least at the beginning of 2020 and how you see that here progressing. Secondly, convert rate into 2020.
You outlined the networking capital and CapEx discipline is is that's the main driver, or do you see also room from the operating business, for improvement? So it's just more detachable issue of, CapEx between, strict and networking Captivine strict or, other factors driving this as well. Last but not least, on the balance sheet. So looking on the increased pensions and the proceeds you have, got that from the MMA deposit, Net debt to EBITDA is now including pension at three times, and therefore, the balance sheet is not overly strong. However, 1,500,000,000 cash are sitting on the balance sheet at negative interest rates.
Can you please outline in this context for the room for additional shareholder return? From the MMA proceeds might be? Thank you.
Good morning, Andreas. I think we should, share answering your questions, Ute and myself, and, I would start Of course, you know, everybody seems to be or is still interested in what kind of beef we are bringing to the table next year. So, let me start with this, you know, 2019 was, let me say, a year which is point by market environment, which is, let me say, difficult and challenging. And we do believe we do think we do expect as of today that this will stay put in 2022. It is that we do not see a high, let me say a high level of certainty instead of saying that there is low visibility So, nobody would be surprised that I cannot, give you a precise outlook for 2020.
But maybe, we could let me say, go through our assumptions, for the next year. And then, in the second step, keep the picture on a group level and saying this, maybe let's start with some less nutrition and care. Here, 4 out of our 6 businesses business lines, have really delivered year on year showing higher earnings in this year. And that is what we do believe that is what demonstrates a good and a more resilient end market on the one side. And on the other side, that is paying off by our own efficiency programs, we compensated that follow with health care.
We compensated in health care for the end, of a large contract and kept the earning stable. Next year, we do see that health care is really set for a good growth again based on the proper healthy project pipeline. I'm touching fitting from our efficiency measures. And by the way, the new business line had, Tom Vonovitz is really doing great here and curriculum in this respect and moreover the portfolio shift this year of 2 months more specialty products is really good paying off. So in 2020, this will continue.
And will you see here another Canada for good growth. Baby Care, as you know, we have seen some recovery of volumes this year And this is supported. This is supported by our restructuring measures. So we believe that we will hear see in 2020, even some let me say upside. Animal nutrition We will see in 2020, the 1st material earnings contributions from our joint venture with, FICO, FICO Zydesma, CEO of DSM.
You know, he will be joint venture called Viramaris. And this is quite well, developing and progressing and finishing the segment with another active and profitable product design. We cannot, as of today, predict and sign and try until the end of next year. But let me say it like this, the fact is the market will continue. And that is what we are sure about.
We'll continue to grow strongly in 2020. In respect of prices, they are on a 20 year low. And if you see, if you have a look on the market environment, you could see that, for example, some of our competitors have already canceled product projects and closing sites. Talking about Evonik, that means we'll continue. We'll continue to execute our efficiency program in animal nutrition and that is.
And either saying it is worth to mention that is really paying off it's paying off. And one thing is, let me underpin it. For Evonikis, given it's crystal clear, if the prices would even decline further, we are still prepared to intensify to intensify our efficiency measures and to optimize our global cost structure. And there is enough room for good improvement in this respect. Maybe that is in a nutshell an overview of our assumptions talking about next year now coming to resource efficiency.
Here, I would say that we have delivered year on year stable earnings level in this year. And in a challenging macroeconomical environment, especially in coatings, and in automotive. Despite this, that is demonstrating the strength and the resilience of the segment. For next year for 2020 from today's point of view, we are not We're not seeing further changes in any of our businesses. Of course, in respect of automotive and of coatings, 2020 will remain challenging.
But on the other side, but on the other side of the coin, the majority of the segments like for example, pH12 out of the very strong silica business. They will continue to benefit from our strong customer relationship and from our tailor made solutions in those businesses. Maybe one thing to add. You should take in mind that next year in the course of 2020, we would have the ramp up of our new silica plants in Antwerp and in Charleston. I'm taking a look to Performance Materials.
Yes. The current, in the current weaker environment, we would not assume a recovery of volumes and of spreads in the next year. But on the other side, in that always another side, with a negative impact from the limited raw material supply and altitude in this year. This segment should be in 2020 at least, on a stable level. So maybe this is our view in respect of what we do expect, what we assume and what we see for the next year And with this, I want to hand over to you.
Yes, thank you, Christian. Yes, some more technical comments from my side pension service costs will be higher as the pension interest rate is low. So that could be another 30 to 50,000,000 negative effect. On the other hand, FX rates are, strong or better, so more or less It could be then compensated by that. We will not have one offs like ramp up costs for ME6 or for Veramaris and other plants that we also wait on the profitability of this year.
And Andreas, as you were asking, is there also operational improvement. That's clearly a qualitative improvement, startup of Veramaris, much better profitability also, like before. So I think there is also step by step qualitative improvement in our earnings also in next year. Then we have the license fees and excess oxygen this year. We might not reappear at the same level, but it is part of the strategy license out the HTTP process instead of investing ourselves.
So that was a clear strategic decisions, decision we took some 3 years ago. So there also will be license income next year, maybe not exactly at the level of this year. And I think in relation to the overall EBITDA level for resource efficiency, that should be not the biggest effect. We will also continue to execute our cost programs like we did in this year. Our SG and A program will deliver additional 80,000,000 euros in gross savings with a high retention rate plus we have the running programs in the different business lines like Animal Nutrition Baby Care Core Care Solutions, but beyond that, it still remains, of course, some level of uncertainty and low visibility.
So we have started early to prepare different scenarios for next year and defined measures, which are necessary also in a more two scenarios so that we really are prepared on the cost side. So if the macro environment stays difficult, we have to cut costs further and we will do that and this is what we prepare since a couple of weeks already here internally. The measures are defined and ready to implement Some are already have been started to be implemented and they will come on top our SG and A savings. So overall, in 2020, we can expect a stabilizing effect from the contingencies and cost saving initiatives like you have seen that in this year as well. For the free cash flow, I think that was the second question.
Of course, that depends a little bit also on the precise EBITDA outlook, which we do not have today. But I can give you some structural improvement that we expect for 2020. We will have the unchanged benefit from the pension reimbursement. So that's more or less no change year over year. We will have substantially lower bonus payments in 2020.
The positive effect can be roughly 100,000,000 as the cash out this year was extraordinarily high. And next year, we will not have a 100% payout ratio as of course, the year was a challenging We will implement further network in capital discipline. So no big outflow expected for next year. That helps also in a qualitative structure of the cash flow. And of course, we'll have a tight CapEx regime, on the other hand, if macro environment is somewhat in a slower growth scenario than we do not need.
Maybe so much growth CapEx size we thought we needed. So that overall, I think supports the cash flow for next year, it is not clear intention to improve the cash conversion ratio as well. So we were at 25% last year, This year, we will be above 30%, which is more or less in line with the average. And for 2020, we try for further improvement in our cash conversion rate, both the structural things also with a higher quality and earnings step by step. Via things Christian and I described.
The third question was on balance sheet. Leverage. Yes, we have a negative interest on the cash we received for the Innovative Postal. The other slide, we will have a conflict payment next year. So that is a rather short term view.
The priority for the employment of the funds is more or less unchanged. It's 1st of all, reinvestment, be it in organic or also M and A projects, but also share buybacks are on the list, have been on the list the whole time. But keep in mind that we need certain conditions to really having me a reasonable process here, but it is on the list as it has been all the time.
Andreas, maybe one more sentence to sum it up. It would start raining bricks next year. We would be prepared. We would be prepared because of our sustainable cost cutting measures and there is more to come. And, may Time story.
When I, have taken harm in summer 2017, I've asked my management team, and the representatives of code elimination, to start to create a cost cutting program. And a lot of guys have asked me, oh, question, what are they up to? And is it really useful The wheat is standing high and the sun is shining. Nobody is asking those questions anymore. Or in other words, the transformation program we have started, in summer 2017, there was some slight let me say headwind because of this now.
Don't get me wrong. Of the macroeconomical situation, I guess, there's something like a booster for the cultural change and for the transformation program. Of Evonik. And therefore, it is a chance, which is really helping us to accelerate even some more painful measures to make sure that we will see the year in in 2020 a year where we were able to set the pace and to deliver once again what we will announce to you.
Alright. Thank you very much. With with more detail than I expected. Thanks a lot for that.
Thank you. The next question comes from the line of Alexander Raslam from Morgan Stanley. Please ask your question.
Hi. Thank you for that. Very detailed response. So, just two clarifications on on next year. Do you still expect to see some synergies in 2020 from previous acquisitions?
And if you could help quantify the one off that we've had this year as well. The negative one off that is. My second question was just on CapEx. Obviously, you been quite disciplined and reduced your CapEx for this year. How much of that is just deferring CapEx into next year?
And could we actually see an uplift? In that scenario. And then as despite the question as it relates to your Singapore Punch within methionine, if we see chicken prices continue as they have and forecast, and see double digit production growth next year, Could you actually ramp up that Singapore plant quick quicker and, do that without pressuring prices further?
Thanks a lot for your question, Alexander. I may take the first one. And then I will hand over to Ursa for the first one. Let me give you some more color about the CapEx level in next year. First of all, the CapEx level depends on what on which macro scenario becomes reality in the next year.
If you look to this, We've proven the child CapEx management and we've cut our CapEx budget from in the first step from $950,000,000 to $900,000,000. And now it might come out even slightly below $900,000,000 on this year. If we look to the next year, Yes, we will continue. We will continue with the tight CapEx management and I do assume that if a further weak environment will stay put that you can expect that in 2020. So once more, tight CapEx management will continue.
In this year and the first step with a cut, we've reduced the CapEx budget from 950 to 900. It could come out even slightly below 900 in this year. And for next year, if this is what you can expect that the CapEx budget will start with an age as first number. So with this, I will hand over to
Yes. To your question on the synergies, there is still a smaller portion of synergies next year like 10,000,000 to 20,000,000 No integration costs anymore, of course, as the integration lies largely behind us. So one off in 2019, our ramp up costs for our ME6 plant for our Veramaris plant and partially also for our silica plant. And on the other hand, the earnings effect from the raw material constraints in RSC4 businesses, which appeared at the beginning of the year and also now in Q3. So that could sum up to 1,000,000 over the whole year.
Just to give you a rough indication. The MA6 ramp up, we have always said we will ramp up the plant according to market needs in market growth. So the facility is technically ready, technically running very smoothly very well. And really very flexible to drive utilization
as we
needed for protection and delivery into a market. As the demand is currently very strong. As you said that, of course, we are fully flexible and also happy to ramp up here. The plant may be somewhat quicker than originally thought.
And the next question comes from the line of Chetan Udeshi from JPMorgan. Please ask your question.
I was just looking at that slide where you showed the acceleration in terms of cost savings on SG and A. And I'm just trying to figure out if I look at the 1st 3, quarters of this year and see the change in SG and it actually is down only 24,000,000. I'm assuming there's some benefit from lower bonus accruals. Maybe I don't know if I file a 16 benefit. So I'm just trying to understand.
Is there some offset on the selling expenses line, which is probably offsetting any of the benefits you have in terms of cost, costing or is it more reflected in some of the other lines? Maybe, I don't know. I've just calculated for G and A, but maybe if you can help us just sort of bridge the gap in terms of how much you can see on P and L. That would be useful. The second question was just a clarification because I think, Ute, you probably mentioned it already, but your pension provisions have risen, because of the lower discount rate.
Can you remind us now what is the sort of coverage ratio? Because I think at the end of last day, it was probably around 17% or so whether that is deteriorated significantly or there's a small change overall from that level? Thank you.
Yes. Chetan, thank you for the questions. For the pension funding ratio, that fluctuates always a little couple of percentage So it also depends, of course, on the development of the assets. So I would say we are between 65% 70% and that's the range. Where we want to be.
And then regarding the cost savings, the bonus doesn't play so much in the other segment as the biggest portion of our employees is in the services and, of course, in the operating segment. So from that point of view, the bonus has a relatively small effect here. The cost savings are not only to be seen in corporate others. It's also internal services like IT procurement HR, which then translates into the costs lines of that business segment. So from that point of view, you only see parts part of that in the corporate segment.
And of course, our program does not only technical admin, but also, marketing and sales. And if you look at the overall P and Ls. You also see that our sales expenses have gone down. Of course, there is a little bit of a volume effect in that as well. But also a clear fixed cost cut effect in that.
And on the other side, we have a sector cost increase here and there that works against the But this is how the overall SG and A savings distribute in the segments of the group.
Can I just follow-up on the previous comment around the sort of ramp up costs? Did you say was the total of ramp up costs and the raw materials?
No, that was the effect from the raw material constraints in RSC4 chemistry, which has been appearing at the beginning of the year already. You might remember in Q1, And we now also have some in Q3.
And what would be the ramp up cost you might have had for the full year, you think, for all the different projects? I think the timing was 1,000,000 each in Q1 and Q2, but I don't know if that's the right number, but anything but here on top from other of the other projects,
probably CHF 30,000,000, I think is a fair assumption of quartz of Covera Morris and silica is much lower as these are smaller smaller facilities, smaller sites. We say up to 10% of invest costs, I think that's a good guidance for Amber costs.
Understood. Thank you.
Thank you. And the next question comes from the line of Michael Schafer from Commerzbank. Please ask your question.
Yes. Thanks for taking my two questions. That's basically. First one is sticking to Veramaris, in your opening remarks, is that your basically the progress as well. And I just want to wonder whether you can update us on what should we expect basically on the ramp up side in the upcoming quarters, maybe you can help us also already modeling some of the sales you're expecting.
And also maybe to kind of earn this contribution you from this one heading into 2020 into 2021. This would be my first question. And the second is coming back to Performance Materials. You mentioned the 1,000,000 burden, as we should account for in 2019. So I really like get a better understanding of what really drives the, let's say, regular type of either issues, outages, raw material constraints, etcetera.
Is there something which is structurally from your point of view? Is the entirely related to your suppliers, what kind of, what should we expect in the years to come? Are there significant Quebec's need from your point in order to tackle this one. So this would be my second question.
Okay, Michael. Thank you for the question. I'll start with the second question and then question will elaborate. On Veramaris. So for the c force, chain, we said, limited raw material availability, in the beginning of the year.
This was due to outages at our supplier. So of course, we only have limited influence on that. There were shutdowns and also unplanned outages for unexpected turnarounds at our supplier. And in the current quarter, we've had a planned outage which then brought some more technical difficulties so that we have also an unplanned work to do in some of our facilities. That has nothing to do with CapEx levels over the last years.
It's just If you have such a big maintenance overhaul, things can always happen and then you have some individual things that happen on top. And this is what we have experienced. As we said, the business is working very consistently to tackle all these technical issues so that they should be taken back in the next couple of days or weeks. So that is more or less what we had seen this year. So it's isolated incidents on supplier's level in our level.
Which can happen here and there. The total effect for this year is around 1,000,000 as I reset it.
Just a couple of weeks before. Fiker has dropped me in line And we've talked about Veramaris and we, he and me. So both of us, we are really confident and are convinced that this is a great investment, in the future. So for 2020 for the next year, we do act in respect of the earnings contribution and amount of a low double digit already of a low double digit amount in of the earnings contribution and target for next year will be to expand the customer's base space, which is already on a good level. So we are in this respect very hopeful that we could ramping up this business.
We could earn sales potentials of roughly 1,000,000 for the JV, you know, that would be split up fifty-fifty. So, this is the story, the actual story, the current story about, Veramaris. Okay. Thank you.
And the next question comes from the line of Gunther Zechmann from Bernstein. Please ask your question.
Christian and Tim, a pretty good carpet forming on Andreas's question at the beginning. Maybe I can just follow-up with some precision forming on a couple of follow-up questions. Firstly, how will we further progress on the contingency measures that you outlined in 2020? Depending on the macro environment as well. So what are the key levers for that you have that you disposed for incremental progress over 2019 next year?
And combined with that, that's one of fixed costs, but also secondly, what do you see on the variable costs going into 2020. So that's question 1a1b. And then second question is on the license income in active oxygen. How big that business be for Evonik in the long term, please?
Good morning, Gunther. Thanks a lot for your question. Let me start with the cross savings, the potential of cost savings in next year. First of all, we do expect 1,000,000 from the SG and A program. And besides this, Moreover, we do expect 1,000,000 from the adjusted 2020 program plus the restructuring programs we have initiated in the Baby Care business and in the Care Solutions business.
So this amount of in total 1,000,000,000, we do see as, given because all the activities in respect of cost cutting, restructuring, reshuffling, bettering, the efficiency of the company are spelled letter by letter to the word being sustainable. And this is what you could definitely rely on because we have shown that what we are what we have announced since 20 17 in this respect, we're strongly and definitely delivered. So this is about the, have G and A program and about the cost cutting programs in those business lines I've mentioned. Moreover, We do have implemented, toolbox, which we have developed through the SG and A program. That is what we could make use of for more, activities in this respect, but I cannot I cannot give you for today the exact level of this additional amount, because we have to see how strong the macro environment headwinds were below in year, but one thing is that is what you can take really for granted, that we are prepared to activate those additional cost cutting positions.
Okay. On the variable cost, which is more or less raw material We expect overall raw raw material markets to be longer in 2020, so leading to rather stable raw material prices Of course, factors like technical tensions or strict environmental regulations can always have pressure on some selective raw materials But of course, this is something we are used to monitor closely and tackle when it, pops up. If you look at petrochemicals market, they are also expected to be longer in 2020 as demand remains relatively weak. In the U. S, there is good investment levels and additional progress in Asia.
This will lead to more material availability. So for the major synthetic organic products, like acetone ethylene oxide or propylene oxide, we expect longer market and ensure good material availability and rather stable prices here. For all your chemicals, the supply situation is also expected to be good. And, to continue on high inventory levels. However, higher demand, higher diesel, food and feed applications can year and there might not be fully matched by increasing productivity.
Therefore, a slight increase in prices is expected in general, although it's on historically relatively low levels. In the inorganics markets, we also see generally more friendly environment, where lower prices for commodities and flat prices for specialties are expected. Demand and Industrial Applications weakens. Inventories are high. Broadcast consumer market and non cyclical business are still stable.
So that is more or less the picture we see there. Your question towards the licenses, I think a level of 1,000,000 to 1,000,000 is a good proxy. But again, it's really not the main driver of the overall Resource Efficiency segment. What comes on top is, of course, catalyst sales then as follow-up, which has been an ongoing effect in our Catalyst business line.
Thanks. And just on the last question, that was, I think what you gave the 1,000,000 to 1,000,000, I understand what the run rate of licenses sort of 1, maybe 2 licenses per year. I'm just wondering how big that business can be overall to you.
Longer term.
As I said, license might not appear every single year. So we changed our strategy years some years ago that we do not invest ourselves would rather go down the route of licensing. That's also, of course, the CapEx consideration or what is the consideration at the time. Again, yearly license fees can be around 20. Sometimes it might be somewhat higher.
That factor is from year to year. But if you really take that fluctuation in comparison to the overall EBITDA of resource efficiency, I think that should not be the biggest point of concern. And again, for the Catalyst business, of course, that is then an ongoing business to deliver the Catalyst into the facilities of our customers.
Georgina Iwamoto from Goldman Sachs. Please ask your question.
Thanks for taking my questions. I've got 3. The first one is just, I noticed that you didn't pay any cash taxes this quarter, for the cash out of a 100,000,000 last year. I'm just wondering if you could elaborate on why that was and what to expect for 4Q, and next year. And then a question, just to follow-up on the active oxygen's licenses, can you just remind us what the kind of structure of those is is it a one off payment, and how long is that kind of lifespan?
Is it something that we would expect customers to renew at some stage? And then my final question is a bit longer term looking. We've been through, so far, a difficult 2019, another year of kind of lower profitability and weaker volumes. And I was just wondering if you could think sort of 2 to 3 years ahead. How do you think Avonik is going to kind of work towards reaching its group margin targets and then pushing to grow volumes above GDP?
Thanks.
Hey, Georgina. I'll start with the cash taxes. Of course, when earnings are a little bit lower than cash prepayments, tax prepayments. And this is what you see in the cash taxes as well is lower. From that point of view, in that given quarter, I think for the full year, of course, cash taxes are there.
Is then lower than last year. Overall, we see some cash taxes over the full year. Like 250,000,000 around that level, give or take to, of course, some fluctuations here. Next year, I think it could be on a similar level depending on how of course, the earnings then grow. On the active options licenses, it's mainly an upfront payment.
And then there are some smaller, payments later, but again, really, it does not really drive the overall resource efficiency earnings too much. So that's why I think we've given you some indications here. And I think that should be it. And discussion of the licenses.
Good morning, Regina. You've asked what do we see for the long term future and the long term future to make you want to be a company? First of all, we will focus on our 4 growth engines. As you know, animal ration has in care of smart materials and specialty additives. These other businesses were exclusively invest in, in respect of organic growth and in respect of decent and disciplined M and A.
Second, and that is, of high relevance for the whole company that will focus on very disciplined, cost cutting activities, which we will further implement and go on with this in a very sustainable way. So, those are the, core pillars. Let me convey it like this. These are the core pillars to make Evonik a better company. And this is what we are totally convinced will be paid off over the next years.
Okay. And then,
I guess this is a bit of a follow-up then.
If you could kind of look at the portfolio management from a kind of disposal candidate potential, if you could just remind us which parts of the portfolio you would be, you know, lessening to do in the long term, which are noncore And if there are any areas of the business where volumes have been disappointing and and might not contribute to the strategy that you see in the in the long run. Thanks.
First of all, it's a brilliant question, a question, and I could check that everybody's really keen on. Getting some more information out of it. But given this, that everything outside our growth engines, is what we have to look to in this respect. But I do really think that you would agree with me and everybody who's on the line would agree with me that it is not very, that would be from my point of view, not very prudent to comment on this in detail now. Please forgive me.
Okay. Thanks very much.
Thank you.
The next question comes from the line of Thomas Swoboda from Societe Generale. Please ask your question.
Yes, hello everybody. I just have one small question left and it is regarding the raw materials supply in Performance Materials. Can you expect any kind of reimbursement for the loss earnings in 2019 from your supply and any kind of insurance or whatever you can expect in 2020?
Thomas Sulte. There are very clear rules when there is a force majeure or not. So, we have no reimbursement here. So that stays in our or goes out of our pocket. Thank you.
And
the next question comes from the line of Mubasher Chaudhry from Citi. Please ask a question.
Hi, thank you for taking my question. I was just wondering if you can provide some color on how the costs are likely to develop going into next year, I. E, should we be thinking of the level that we are in 2019 as a new base going forward? And my second question is around, how you're thinking about M And A given the situation with PeroxyChem? Are you on hold until things are resolved from that side?
And from a further bolt ons and additional M and A, And if not, how is that pipeline looking?
Okay. Thomas, thank you very much for the question. Corporate costs, I think we've reached a good level. So that should be then also the ambition going forward, of course, over time. With some more improvement potential.
And on the question of M And A, for Oxygen, of course, of course, court case has started some weeks ago. So it will take a couple of weeks or months until we see the decision there. We expect the decision early 2020. So from that point of view, we have to see how that is in the end decided. We are monitoring all smaller M and A, possibilities and opportunities all the time.
I think we, Christian also laid out in his page that we are very disciplined on M And A. We focus on our growth engines. And if we have suitable opportunities there, we do an acquisition so far that had these smaller acquisitions. And I think that perfectly describes our approach.
Thank you.
Thank you. And this was our last question. I'm now handing the call over back to Tim Hunter. Head of Investor Relations. Please go ahead, sir.
Thank you. And I'm handing everything over to Chris for the final words for today.
Ladies and gentlemen, please allow me to find a reference to our Capital Markets Day, which will take place on the 1st April in London next year. No, that is no April fools. The Evonik Management Board with Hutte, Harald, Thomas and me will come over to London And we will act on what we have already achieved over the last 2 years and maybe more important for you, look ahead on what's still either ahead of us. Please already pencil the gate into your diary. Further information on the event will follow in due course.
That closes today's call. And, I'm really thankful for your attention. Wish you a good day and goodbye.