Good day, ladies and gentlemen and welcome to today's Evonik Third Quarter 2018 Earnings Conference Call. For your information, today's call is being recorded. At this time, I would like to turn the conference over to Mr. Tim Langer. Please go ahead, sir.
Thank you, and good morning, ladies and gentlemen. Welcome to our Q3 earnings call. With me today are Christian Kuhlman, CEO and Utewell, CFO of Evonik. And with that, I hand over directly to Christian for the introductory speech.
Thanks a lot, Tom. Jim, and also warm welcome from my side. Thanks for taking the time to be with us. The third quarter of this year was another quarter with solid and broad based earnings growth and in line with our expectations. Despite somewhat more challenging macro conditions.
And we are confident that the robust demand and most of our end markets and businesses will continue into quarter 4. Consequently, which today confirm our outlook for this year. But even or maybe, especially in our currently volatile environment, let me start with a more strategic perspective and give you a short summary of how we executed and will further execute our strategic agenda. Last June, we have set ourselves to target to China Vonage, your best in class specialty chemicals company. Since then, we started initiatives on all levels.
With the aim to improve our portfolio structure, our cost base and to initiate cultural change within the company. And progress is more and more visible. The 2018 results are already benefiting from the initiated savings programs. The broad based margin step up in our operating segments was only possible with a strict and swift implementation of these efficiency measures. Also on business line level, the progress is evident.
We constantly improve our portfolio by selling or closing unprofitable assets and changing business models. The divestment of the JHawk site in the U S, which we just closed on November 1, or the project audio 2020. The merger of our business lines, personal and household care are just two very recent examples. We'll also continue to strengthen and balance our portfolio The exit from MMA is on We'll have a closer look at it. We are targeting businesses with GDP plus growth in attractive and resilient end markets.
With an EBITDA margin sustainably at or above group average and a high cash conversion, and of course, at a fair valuation. Skimming Slide 4, and coming directly to a topic, which is very important to me personally, cultural change. Our 4 new corporate values are the guidelines for our more performance oriented culture. They are now drilled down into the organization on the one hand and especially for the values, performance and trust, workshops for our executives provide toolkits, how to establish the new values. On the other hand, Autumn Up workshops for employees of all levels will fill the value of speech and openness with more life.
Here, we will challenge our ways of working and share ideas across segments and hierarchies. Of course, it will not happen overnight, but I'm convinced that our new values will make Evonik a better stronger and more performing company. And I personally am at the forefront of living these values every day. The organization can hold me responsible for that, and you can do so as well. Another important element of our more performance oriented culture is our new incentive system.
From next year onwards, The new system will implement a leaner process and a strict alignment with our group financial targets on all levels. We want to encourage our employees to work together rather than silos. To achieve this, The financial targets of the group are the most important targets for every employee in contrast to individual goals like in the past. Along with this comes the clear differentiation of individual performance levels. This means that outperformance is rewarded, but on the other hand, also underperformance is addressed more directly and different than in the past.
It will have a tangible influence on the individual bonus. With this ladies and gentlemen, let me hand over to Ute for the 3rd quarter financials.
Thank you, Christian, and welcome also from my side. In Q3, we delivered another quarter of healthy organic growth mainly driven by strong pricing. On the volume side, most of our end markets have shown continued good growth more resilient like animal feed, personal care or health care anyway. But also markets like paints and coatings, engineer plastics or consumer goods have shown solid demand trends. Only towards the end of the quarter and especially in auto related end markets, we observed some signs of slowing demand.
Additionally, we were impacted by low Rhine River water levels Our utilization rates in our plants and limited raw material availability. Chart 8 shows some details on earnings growth in the third quarter. And the key message here is our growth segments are the drivers of our year into our growth segment. Progress is also visible on the free cash flow side, we improved by almost 1,000,000 after the 1st 9 months. Earnings growth obviously contributed to this, while net working capital outflows, especially towards the end of Q3 at a lowering effect.
Besides the already mentioned slowing demand and auto related end markets in September, preparation for maintenance, and the logistical challenges from the low Rhine water levels resulted in higher than expected inventory levels. Part of this will be released in Q4. The other part should give us some free cash flow potential for the next year. Resource Efficiency delivered another strong operational quarter with an earnings increase of a 9% compared to prior year, particularly pleasing segment margin of 23.7% is on continued high levels. Organic sales growth of 4% was driven by pricing, successfully compensating for higher raw materials.
Demand was solid across most end markets, even against the high prior year comps. Our eco friendly waterborne, Coating Additives had another strong quarter and so did high performance polymers. Only auto related activities has seen some slower demand. And our volumes were held back by product availability. This was caused like in the previous quarters, by tightness in our own capacity.
Additionally, we have to cope with the limited raw material availability for example, for specific fatty alcohols. This will also continue into Q4. Nonetheless, no doubt that Resource Efficiency will have a good finish of a very successful year 2018. In Nutrition And Care, Q3 was another quarter of improving operational performance with strong organic growth of 10%, both from volume and price. We continue to expand margins, driven by successful management of higher raw material prices, and ongoing implementation of efficiency measures, like in animal nutrition.
Operationally, health care and personal care with their strong performance are the drivers of the segment. Also Methionine continues to see robust demand trends and good volume development. The long term growth drivers in this market remain very intact. On top of that, the third quarter benefited from competitive shutdowns in Asia. And also, Baby Care has seen good volumes in Q3 from premium as well as private label customers in Europe And North America.
Concluding with Performance Materials, Operational performance was good in Q3, both in C4 and in MMA. The majority of our end markets have shown robust prices in Asian bulk business and standard grades became visible, while pricing, especially for the more specialty applications, remained healthy. The double digit positive price effect in the quarter was mainly a result of notably higher NASA prices. On the earning side, the time lag in the past on of our NASBUND C4 products had a temporarily negative effect. In addition, we had several extraordinary effects in Q3 with an impact on volumes and adjusted EBITDA, respectively.
Limited raw material availability as a consequence of lower utilization rates and crackers. Logistical challenges around the low Rhine water levels and scheduled maintenance turnaround in MMA impacted EBITDA by around 1,000,000. And the critical situation on the Rhine is holding on, it is actually more challenging today than it was during Q3. While we cannot predict the weather and hope for rain every day, the situation will have a negative impact on Q4 as well, the exact level needs to be seen. With that,
Following our strong performance in the first half, we increased our group outlook for the full year in August. QUARTER 3 was broadly in line with our expectations, and we generally expect the robust end market demand to continue into quarter 4. While we are observing that some of our customers are becoming somewhat more cautious, but no broad based or material slowdown is visible in our businesses as of today. So having said this, We fully confirm our guidance for all KPIs for the group and all segments. And in such an environment, it is even more important to focus on what we have in our own hands.
First of all, the execution of our strategy. Next, the realization of our saving targets and the upgrade of our portfolio. With this, I would like to close our brief presentation. Thank you for your attention so far. And now we are happy to take your questions.
Thanks a lot.
You. We will take our first question today from Nuth Hinkle of Equinix. Please go ahead.
Yes. Good day, everyone. Thank you for taking my 2 questions. My first question would be whether you consider your logistic chain in general due to the low Rhine water level, because, regarding climate change, it could be could be a sustainable effect from my point of view? And second question, I would like you to give an outlook on your How do you perceive the misunion markets going forward in 2019 volumes and demand?
That would be very helpful.
Good morning. Thank you for your question. I'll start with methionine and then Christian will explore on the general logistic chain. For methionine, the general trends are very much intact. We see good volume growth in the market.
We also see good volume growth in our own businesses for the full year. Also, the price development is as we is relatively stable throughout the year as we, as expected. Looking ahead, the market will continue to grow. As I the fundamental trends are very much intact. For next year, it needs to be seen how the new capacities will impact the market, especially in that year 2019.
Sumitomo is already marketing the volumes towards the end of this year and next year at a sale, we'll have another 40 KT and we will start our own plant in Singapore as well. We are prepared for whatever scenario occurs. We have our efficiency measures from our adjusted 2020 program in place, So we have further potential on the cost side and full flexibility on our global asset footprint. So we will secure our cost leadership even in a scenario where prices might come under
So the next question, first of all, let me take the chance to address that our team in our businesses and in our procurement that they have really done a great job, because they have to make sure that our logistic chains are working pretty well. And we First of all, second is that we'll make sure that we will have, a challenge if, trading during the next years. And 1st of all, you know, and third of all is, that we are now in a situation that we have already realized, alternatives to make sure that we could compensate slower shipping, of our products and raw materials. But, it is that certain that, actual situation, talking about the Rhine water is really critical. Okay, thanks.
Thank
you. We will now take our next question from Gunther Zechmann of Bank Stim. Please go ahead. Your line is open.
Thank you. Good morning, Ute, Christian, and Tim. Two questions, please, one on demand and one on your cash flow. Can you just highlight your exposure to automotive OEM customers, what that is on a group level? And also quantify the slowdown that you've seen at the end of Q3.
Maybe you can give some visibility around order books as well and how good you ability is in that end market? And the second one on cash flow and your guidance for a noticeable increase in free cash generation this year. Given when November now and that it can be quite tricky to forecast your working capital moves into year end, Can you help us guide a bit more closely on Q4? And if I can bolt on an outlook question on that as well, what would be in your viewer satisfactory outcome for cash generation on a constant portfolio for next year, please?
Okay. Let me start with the automotive question. You know, as of today, we do really not see broad based slowdown in any of our markets and also not in our auto related businesses. And having said this, for a quarter 4, we do expect somewhat more cautious, orders, but these patterns, but the patterns to continue. From this point on, if you look to our sales exposure and our end markets, in the Automotive business, we talk about roughly 15% to 20% Having said this, it is to it is notable that we have a high degree of diversification in our automotive product portfolio for example, from silicaapa Chiles, by a lightweight applications like Poem H12 to the lubricant additives.
And if you look I guess, this was another part of your question. And if you look to our sales split in automotive, it is roughly fifty-fifty. That means, half is, in the replacement area and the rest is in the OEMs, I guess. And just
to be clear, the 15 to 20% that you referenced, is that on resource efficiency level then or on a group level?
On a group level.
Okay. Yes. Good morning. And now to the question on cash flow, In Q4, we will see different developments, higher year on year earnings, a cash inflow from net working capital. So the buildup in Q3 will be then, yeah, brought back to a certain extent Contrarely, we expect higher cash taxes if you compare it to last year's Q4 cash flow.
All in all, we expect the free cash flow more or less, on prior year level, which then together with the 1st 9 months brings us to the level, which starts with a 6 at the beginning. I said that last in last call, so the guidance notably higher will be met. We have to be realistic here with the challenges in the Rhine level, water level, we might need to have higher storage for the raw materials or intermediate So, the cash flow will probably not be materially higher than just the 6 in the first figure. If we look to next year, it is clear that our focus and our clear target is to cover our dividend with a free cash flow in any given year. For next year, there are also some technical factors.
I'm sure you have seen that in our backup pages the mandatory application of the new leasing, the accounting standard, IFRS 16, and we will adopt them mechanism that the cash out for interest is, according to the industry standard shown in the financing, cash flow so that we are now better comparable to our peers. What are the main moving parts for next year? We will have some one time cash out for our SG and A program on a like for like basis more normalized cash taxes, of course, the discontinued MMA cash flow will not be in at some point in time next year. On the other hand, we will further intensify our focus on costs, so that will drive the earnings line and also the cash inflow strict network and capital management. We have now even more potential since the 2018 levels are somewhat higher than they should be normally ongoing CapEx discipline.
I think that are all the drivers of the cash flow for next year. To sum it up, we will continue our high cash focus also in the next years, and it goes without saying that in any given year, it is our clear target to cover the dividend with the free cash flow.
Thank you. We take our next question today from Jeff Hair of UBS. Please go ahead.
I've just got two questions. First of all, very simplistic. Could you just tell us what the cost savings in Q3 were? From the cost saving program that you've got? And then secondly, a question on protein in China.
I think there was some speculation that Chinese government is going to try and reduce the protein content in China for animal feed. I just wanted to explain to us what either benefit or negative that would be for, your methionine and Licensing business, please?
I'll start with the cost savings. Good morning, Geoff. Our admin expenses are 5% down year to date if you compare that in the P and L. Majority, but that comes from our SG and A program. We announced some EUR 50,000,000 will be realized this year.
So that is more or less evenly spread over the year. And I think you've covered that in the year to date numbers, in the G and A costs and also in the slower growth in sales costs. Also, what I was noticing, I think, is our decrease also on the research and development costs. So we also apply the costs discipline to research and development to really see that we apply our our funds here in a very efficient way. From the adjust 2020 in animal nutrition, you said around 1,000,000 will arrive this year.
So I think that's in the numbers as well, but that is spread out over several positions And of course, we see some first benefits from our audio 2020. But this is very early days. And so I think more on the product mix and we will see more of that next year.
Thanks a lot for your question. I think I could answer it in a nutshell because, there's no substitution possible between Luzine and methionine.
No, sorry. And then obviously, you've got a Lysine business and a methionine business. If China reduces the amount of protein used, is that a negative or is that a positive for those products separately?
Definitely. That's the potential positive for lysine especially for lysine, but I wouldn't overestimate it for the next year.
Thank you. Paul Walsh of Morgan Stanley has our next question. Please go ahead.
Yes, thanks. Good morning, Christian Ute and Tim. First question I have is, there's been a sort of notable change in the dynamic in the top line in the third quarter with volumes down slightly, but pricing up strongly. Other than the cyclical dynamics in the performance Materials business, has there been a change across the other 2 divisions in Nutrition And Care And Resource Efficiency to go much more for price versus volume? That's my first question.
My second question is, I know, Christian, you just said no notable slowdown in volumes, but hypothetically, if that was something to pan out moving into next year, on the cost cutting front, can you dig deeper? Would you find other ways of being able to drive EBITDA forwards given the SG and A programs and the other initiatives you're taking to take out cost? Thank you.
Paul, good morning. Thank you for your questions. I'll start with your question on the dynamics in volume versus price development. In Nutrition And Care, pricing, the pricing influence was 5% year over year. That had several influencing factors, positive product mix, especially in health care and personal care, Additionally, we had price effects from successful pass on a higher raw material prices that relates to the silicones where we saw sharp price increases towards the beginning of the year, but also baby care has passed on mechanisms propylene prices, which were weighing on Q2 a little bit and now in Q3 that these prices are passed on.
Animal Nutrition has, of course, on the pricing side easier comparable to year on year, but we expect, as I said, prices to be fairly stable. We look towards efficiency. As I said, the volume development was also due to raw material constraints was due to capacity constraints. You might have seen that we open our new silica plant in the U. S.
Just a few days ago. So this is really badly needed. So that is a little bit the story behind volume and price development in our 2 growth segments.
Okay. Well,
the answer to your question, let me say that it's grave and into stone, yes, we see, further potential on business level For example, we're not satisfied, with the business line baby care in this respect. But as you know, And you know we're pretty well, we will do it step by step.
Okay. Thank you very much.
Thank you. We now move to Chaton Udeshi of JP Morgan. Please go ahead. Your line is open.
Hi, thanks. Just wanted to ask a question around the volume growth dynamics because you addressed previously saying that in resource efficiency, you were capacity constrained. So thinking about next year, if the demand environment remains okay, how should we think about possible volume growth in the resource efficiency this next year? Thank you.
Yes, Chetan, good morning. Thank you for the question. I think the volume growth in our E will be moderate overall next year. There are different influencing factors to that. As I said, we now just opened the new silica plant, which is really part of our master plan for silica facilities.
So that was relatively badly needed. That has started just a week ago or so. We will have new capacities also in other products like our gas filtration or in our, camcoding business Of course, we have macro uncertainties. Christian alluded on that, which I've seen some signs of slowdown here and there. We have to see how that works out in the next year.
It's a little bit too early to really forecast the volumes that these are some of the dispensing factors.
Can I just follow-up and just to understand this better, I think at the Capital Markets stay or meet the management, the aim that was presented was to grow faster than the GDP? And especially this year when we look at the volume growth definitely seems more on the weaker side in aggregate for the business. So at what point do we start to see that sort of improving towards more than GDP level? Is it once you're new expansions come online maybe in 2020, 2021? Or is it possible that maybe at some point, 2020, 2019 might also see an acceleration.
I mean, not only resource efficiency, but just generally across the group.
So we have seen good volume growth in Nutrition And Care. I think that's not so much the point of discussion for today. Resorts Efficiency has demonstrated volume growth for many, many years, in 20 17, 6%, which is substantially more than the GDP growth of that year. As I try to explain, we have step by step new capacity coming online. So that will help, of course, on the capacity side for next year.
In resource efficiency. As I said, the silica plant in the gas filtration, we have in other plants. We are not still at the full capacity yet. We see good demand for many, many of our applications. We talked about the situation in coatings, but also cross linkers.
Has good demand. So there is, room to grow next year. I would not over estimate the situation of this year, we had specific influences this year. You might remember the strike in the French railway at the beginning of the year influence the big bulk businesses in Resource Efficiency. It's really a mix of very isolated and single factors.
Very useful.
We take our question now from Thomas Swoboda, Societe Generale. Please go ahead.
Yes. Good morning. I have two questions, if I may. First question, a little bit more complex. And is regarding the input cost inflation that is building.
I mean, so far, you are passing on your raw materials cost increases perfectly on. My question is more towards 2019. Energy prices, wage inflation, other costs inflation. I think when you presented your strategy at the beginning of the year, you said Mr. Kumar that you want to buffer inputs or eliminate input cost inflation on the operating level, on the operating business level.
I just want to ask you again, how do you feel about delivering on that and how do you see inflation overall developing in 2019? The second question, it should be quite quick. I'm just interested if you could give us a better hint on what we should expect from CapEx in 2019 as you are building on the PA12 plant, how should we think about CapEx, please?
Yes, Thomas. Good morning. I wrote down a lot to really make sure I got your complex question right on the customer station. We have implemented since many, many years, a factor cost compensation program. We've been very successful in that.
You might remember that every year, we take out million of costs to compensate factor costs inflation factor cost increase. Excuse me. So that is mainly wage inflation, but also others like energy costs and so on. For energy costs, we also have parts on mechanisms in some of our products. So over a formula pricing, we are hedging our exposures for natural gas and also the carbon permits And we, of course, we use wherever we can that we have self sustain, then we are set to stay mainly for electricity.
So we have our own generation on the sites, which is very efficient in the management, but also very efficient under the energy cost scheme. We see a more smaller effect from the recent European energy crisis as less than 1,000,000 for next year. But again, that's, just a very isolated On the labor cost inflation, you have seen the big tariff agreements So, that is 3.6 percent over the next years. Again, that is something we have to compensate why our factor cost, factor cost compensation program. Raw materials are passed on by formula prices for many products or even with price increases in our end product, I want to draw your attention to the very, very sharp increase in siloxanes we have seen at the beginning of this year.
We managed very well to pass that on in the price and at the same time, improve our supplier base here. So that is how we deal with these cost inflation issues. It's something we have done really for many, many years. So this is built into the everyday management is built into budgeting. This is how we look at it.
Okay. Talking about the CapEx 2019 and going forward, it means, that after years with higher share of gross CapEx for Nutrition And Care, now Resource Efficiency who will receive a higher share Results efficiency has grown very resilient over the past years and the capacities are on a high utilization level, in order to continue this growth path, future investments are needed here. The CapEx peak in Resource Efficiency will be in 2020. Because it's a new EMEA-twelve plant in Marl. That then this fine point of time, we will reach the highest cash out level.
Nutrition And Care now has its idled global footprint for methionine plants reached. In other words, Evonik will not invest in methionine capacity expansions, such as the Mi6, for the next 10 years. Market growth in this businesses can be served with smart debottlenecking measures investments in our business lines are on a much smaller scale and are included in attritional and care growth CapEx budget. I guess this was the answer to your question.
Yes, it's perfect. Thank you very much. It was very helpful. My pleasure.
Thank you. We now move to Laura Lopez of Baader Bank.
Good morning. I have two questions. So can you please give us an indication on the sales and EBITDA impact that the sale of your agrochem the land in the U. S. Will have in 2019?
And I don't know if it will also have an impact in the fourth quarter because I think you you announced the closing a week ago or something like that. So maybe what will be the impact on your P and L resulting from from that business now going away. And my other question is in your active pharmaceutical ingredient business, And we've heard some other competitors referring to some raw material disruptions coming from from China, and we actually had some profit warnings because of raw material supply, issues So have you felt that? Have you been able to compensate for that? Or do you see this also as a risk for the health care business moving forward?
Laura, good morning. On your question with Regarding JHawk, this is really a very small business, so it has no major influence on the group overall. And also not in Q4 for the sales, for the purchase price, we said a high digit, high double digit million number So but really it's not worth really working on your model to adjust for that. It's really very minor for the overall group.
On health care, as you know, very successful year 2018, we're very satisfied with this business. It's becoming like a really cornerstone of Nutrition And Care. As we said already at our meeting management in September, the year 2019 will be more transition year in health care with most likely only stable earnings, which is already a success we have to say, because we have, the last, if you want, so legacy contract in this business, expiring at one of our sites, but nevertheless, we'll be able to keep earnings most likely stable in Healthcare. The market is looking very good. We are very well positioned with our business So the long term growth is intact, as we said, targeting 10% CAGR over the next couple of years in the health care business.
Okay, thank you Tim. Thank you.
Thank you. We now take a question from Sebastian Bray of Berenberg.
Hello, and thank you for taking my questions. I would have to please. The first is on volume growth again. In excluding the impact of a new methionine plant next year? And are you also at capacity in your nutrition and care business us.
The second one is also related to volume growth. Is are there if I knock out the one off FX, which I think were mentioned earlier during the call, I'm still getting to a figure of about 1.5% to 2% for underlying resource efficiency volume growth. Are there any projects for 2019 or 2020 that would potentially move this move the volume growth level from this figure?
Sebastian, good morning. I'm not sure whether I got your question right. Volume growth in Nutrition And Care will be driven, is driven this year and will be driven next year by merely all business lines. Tim explained the specific situation in Healthcare. In Animal Nutrition, we see a very healthy market, a very robust volume growth.
Also in our Personal Care business, we see very good demand, we reposition our products there. So that works very well. Baby Care has started to show some volume growth in this quarter. So we see a lot of volume growth potential there for the next quarters. In resource efficiency.
Your calculation, I think, is more or less correct. I'm can we iterate what we see, for volume growth? The next year, as I said, the new silica plant is just starting. So that will, is needed very much and will produce and deliver into the American markets, specifically the North American markets. We see good demand in our coatings.
We see good demand in our cross linkers. We see good demand in our polyamide business. So here it's really also the product mix that makes sense. We see good we have new as it is for our gas filtration and for our powder, which goes into 3 d printing. So there is a lot of bits and pieces which are have become online this year, which will start production towards the end of the year, early next year, and will then help volume growth year in resource efficiency.
Just as a follow-up to that, if I look at your pipeline towards 2020, And I, from what I understand, the new polyamide facility, the big one is due to come online in 2021. Am I right in saying that it looks as if the macro environment remains the same, there will be roughly 2 years of 1% to 2% volume growth in this area.
You're talking about the polyamide business on an isolated basis or what are you talking about?
I'm asking if for the Resource Efficiency segment as a whole, it looks as if you're comfortable with a volume growth rate of 1% to 2% for 2019. If I look at the pipeline of projects coming online as Evonik into 2020, I think there's a bit fumes silica, but broadly speaking, I'd expect the uplift to be similar. Would you also be comfortable with the volume growth rate of 1% to 2% for 2020? Resource efficiency?
Sebastian, again, I really described a lot of new capacities that come online, which will fuel volume growth, which are there already to be marketed. We also have some debottleneckings here and there. Of course, a 1% to 2% volume growth is not in line with our targets. I think it makes limited sense to discuss 2019 now in very much detail as we are still finishing 2018. We will come up with the guidance early next year in March.
And I think then we are ready to give you very detailed, expectations on volume and everything for the segments.
Thank you. We now take our question from Andreas Heine of Mann First. Please go ahead.
Thanks for taking my question. I have only a couple of smaller ones. Maybe you can give an update also how the MMA disposal process runs. I think it was that you were earlier saying, it should be done. Do you come should we come up with a potential buyer for Q1?
Is it more Qovan issue? 2nd question, again, on the constraints on the volume growth. Could you maybe split a little bit how much of how much was the impact on, let's say, these temporary Rhine issues and raw material supply constrained because of this and how much you were hold back by raw material supply and being anyhow tight, not only because of the logistics. One question on the Automotive. You said it's 15% to 20%.
Will that materially change when you sell the MMA PMMA business? I think that has quite a high exposure to automotive? And then one question on silox and where you were able to push through prices. Could you also say how the situation is here? You have seen that some prices came down in China.
Do you see also relief from very high Sandozan prices in other places? And does the tight Sandozan market also constrain your growth into respective silicone businesses? Thanks.
It was really a couple of questions with taking. Let me start with the MMA divestment process. First of all, the MMA process, the disposal process for MMA is progressing and it is In fact, really on track. As you know, we have sent out the teaser in July. And since then, we have got a good amount to several handful, a good amount of interest.
Having said this, the informal memorandum has been sent out around the beginning of October. And in this quarter, we will have the due diligence being ongoing. And that will lead to the results that we will hopefully be able to identify the winner of the rates in the first quarter of the next year. So in a nutshell, fully on track.
Okay. Regarding your in, raw materials and, raw material availability. The main impact on the low Rhine water levels is in PM. So they are really very much dependent on transportation with barges of our ship. With wind resource efficiency, it's a little bit a different picture.
It's mainly the fatty calls that I mentioned in my speech, which go into oil additives. So that is where we see, have seen some limited material availability for the raw materials. The silo stains, we are the whole year we have been working on really diversifying our supplier base to be, here, have a sufficient supply, both on the quantity, but also on the price side. So from that point of view, I think we're fine there. If we look to the volumes development in Resource Efficiency in the third quarter, it really partially high plant utilization levels than the limited raw material as I described and towards the end of Q3 in some auto related end markets, some signs of more cautious customer behavior.
So that is the mix we have seen in resource efficiency in Q3.
The last question, Andreas, I think, was on MMA and auto exposure, yes, I think generally the strategy is to make our portfolio more balanced, and that is also in line with, exiting the M and A business, which has a little more exposure more cyclical business like auto, like construction, like coating. And therefore, on the other hand, the key target is to and potentially also via bolt on acquisitions in more resilient end markets and more resilient businesses. So therefore, you're right, that's in line with the overall portfolio strategy. I think that's all. That's all.
And what I have on my list is only the one point on the side of things. You see that the prices are coming down as we have seen that in China. Is that only a Chinese issue or do you see siloxane feedstock costs for any, this less pressure going into Q4 in 2019?
I think there is a differentiated picture. We have seen some relaxation in some markets But again, for us, it's really to secure the supply very early, very reliably, and this is exactly what we've done throughout the year.
Okay. Thanks a lot.
Thank you. Ladies and gentlemen, I would now like to turn the call back over to your host for any additional or closing remarks.
Okay. Ladies and gentlemen, this closes our today's call. We've really enjoyed having at you. So thanks a lot for your attention and goodbye.
Thank you. Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.