Good afternoon, and a virtual welcome to all of you out at the screens from Evonik in Essen. Yes, here we go again. It's part 3 of our division spotlight series, but it's not like with the movies. We're already slowly running out of ideas with part 2, and then part 3 is already very boring. We actually have saved the best for last, our division, Specialty Additives.
Like probably no other division, specialty additives And their business model stands for high barriers to entry and a resilient and strong financial performance. Today, you will learn more about their success factors, about how they manage complexity with more than 1,000,000 of formulations in their folio and about the growth opportunities arising from, amongst others, sustainability and digitalization. Therefore, I have today 4 members of the management team of Specialty Additives with me: Lorne Schaeysen, the head of the division and to the 3 business line heads, Stefan Plus, Geerten Oblander and Ralf Marquardt. They will introduce themselves in a second. I think you know the format of the division spotlight by heart by now.
We'll start with our presentation shortly, which will last around 45 minutes and then go into the Q and A. You can post the questions already now in the Q and A box in your browser. And we intend to end the event at around 4:30. With that, I hand over to Lauren to kick off the division spotlight on Specialty Additives.
Yes. Thank you, Tim. So it's also a pleasure to be here from my side to be here as Part of the division spotlight series for specialty additives. As Tim mentioned, my name is Lauren Shelton, and I've been the division President of Specialty Additives for 1 year now. So officially today, 1 year.
And I've been with Evonik for over 19 years And had the opportunity to have a truly international career. So starting in Americas, spending some time in Asia and China, And also now here in our headquarters in Germany. And through that time, I've had the opportunity to experience several businesses within Evonik, starting with Catalysts. Now moving on to our personal care business, which is now known as Care Solutions. And last with comfort and insulation.
So in addition to that, my background is a chemical engineer and an MBA. And with that, I'd like to hand it over to Stephan Plas.
Thank you, Doron. Yes. I'm Stephan, Stephan Plass. I'm with Evonik more than 20 years already. I'm a chemical engineer by my background, And Evonik really gave me a lot of opportunities to do different things.
I was able also to collect international experience. I was 4 years in the U. S, 3 years in Shanghai. And I started in engineering. And since 15 years, I have business responsibilities With different products and different areas in methacrylates, also quite some time at high performance polymers.
And since 1 year, just like Lauren, I'm in charge
of
a business line, which is called Interface and Performance at Specialty Additives. And with that, I hand over to Geeti.
Thanks, Stefan. My name is Geetana Blunder. I'm Italian. And from the education point of view, I'm holding a PhD in chemistry and an MBA. I've been working with the company now approximately 20 years in different Technical roles and responsibility like development department, application technology and technical service.
But my major part I spent in numerous commercial and general management, where I could get experience in different business models that we have within Evonik. From these 20 years, I had also the pleasure to live 20 12 years outside from Germany and Italy and many years in Asia. And now I give it to Stefan to Ralf, sorry.
Thank you, Gisie. My name is Ralf Markvard. I'm a chemist by formation and joined Evonik 25 years ago. I spent some years at McKinsey and Company in between and rejoined Evonik in 2006. Since then, I had various roles in business and innovation, And I'm now heading the business line Comfort and Insulation.
In my previous role, I have been involved in our major acquisitions such as Air Products, Essence.
Perfect.
So now we start on the division spotlight. So what is specialty additives all about? We provide additives to our customers that make a difference in their end product. And most of the business lines in the division have 2 main criteria That's unites them all. 1 is expertise and formulation know how and 2, deep customer relationships.
And those deep customer relationships are built on trusting over the years. So small amounts, big effects, That's our claim. We are typically a small amount of the volume of the product, and we're also typically a small amount of the share of costs, But we drive big effects. For example, less maintenance, less energy, more protection, more durability. So we improve the product characteristics And therefore improve the sustainability profile.
So big effects for our customers, enabling value based pricing. If we move to the next slide, I can drive a bit deeper into those scenarios. You'll see 3 or 4 of these examples Driven down in our deep dives with each of the business line heads that just introduced themselves. I'd like to pick out one for example, where we talk about more protection. This is an example from cross linkers where we provide efficient cross linkers for paint systems.
VESTONA is put into our paint systems and helps form a lasting barrier, A barrier that goes on the coating surface. This protects from chemical cleaning agents and also from mechanical effects, for example, Scratch resistance or from the elements. And you can imagine if you apply Vistana into a formulation and it protects the surface, You can delay the interval in which you have to clean or repair your railcars. By doing this, you also reduce material consumption. So what is Specialty Additives all about.
When you have numerous different products and various applications driving these profiles, you end up with a large complex business. For example, 900 different raw materials, 5 major technology platforms that are shared among many of the business lines And also used in additional technologies that are one to one relationship with the businesses. You have over 3,000 products, 10,000 customers, over 100,000 shipments and over 1,000,000 formulations served. So what do you need to manage this type of business? You need an experienced management team with expertise and understanding of these businesses and business models.
We need a strong joint culture, So of openness and sharing and working together to leverage the best of our assets. We also need to provide supply chain excellence. When you sit in these types of businesses, You are a key part of your customers' formulation, and they rely on you to be on time inspect all the time, driving the value that they can derive from The performance. We enable this type of mastering of complexity through digitalization and automation. At the end, this results in high barriers to entry and resilient financial performance.
I'll skip through the next Three slides, they show a proven track record with resilient EBITDA margins and strong ROCE. We can highlight our attractive market applications and well positioned for current and future trends. So what will we focus on today? Today, we'll focus on our growth opportunities, which are driven by sustainability and digitalization. The deep dive will go into these areas in detail.
First part of sustainability will be making the difference. That's the core part of our business. That's where we provide additives that differentiate in our customers' performance And improving that sustainability profile. So light weighting to make it more energy efficient or adding a cross linker that makes it more durable, Really making the difference. The second element that we'll deep dive into is enabling the circular economy.
And with regards to the circular economy, This is the next step of recycling, bringing recycling technologies into our arena so that we can keep carbon in the cycle. And lastly, we'll do a deep dive in our digital solutions, showing Evonik as an enabler of digitalization, not only for managing our internal Complexity in managing our internal supply chain in an excellent way, but also by delivering services to our customers By being rapid in our tailored innovation and being able to help our customers formulate into the future. So before we go into those deep dives, I've talked to you about our business model, so making small amounts big effects, bringing in small amounts of additives that make a difference our customers' products, now I thought it would be a good idea that we could hear from some of those customers, a sort of 360 if you like, where we can hear from around the globe, A cross section of our business lines, how our customers feel about working with Evonik.
We chose to partner with Evonik because of their Expertise in Specialty Chemical Development. This Besto Eye S product they have was kind of the perfect solution for creating this new epoxy resin that's allowed us to create this battery cover for our light battery that was about 10% lighter
Choice to have Evonik as a partner is also due to the fact that they invest money To develop more performing products, more respectful for the environment, new innovative solution for customer and are able to respond to increasingly stringent regulations.
On the one hand, Evonik is one Our most important suppliers and their products help us to optimize the performance of our finished lubricants. On the other hand, Evonik is also a partner With which we not only work together to develop new products, but also to foster our activities on the sustainability where we share insights and best practice. Evonik has early enough started to realize sustainability not only on a management level. Also Evonik was one of the first suppliers to supply us with detailed carbon footprint data for the raw materials that we buy
between Rain Carbon and Evonik is characterized on partnership. We really appreciate ongoing Communication. I can reach out to my partner whenever I need, and he knows that I'm available when he needs me. So this It's not a common practice at all, chemical sites, especially not in that size. Evonik has reached.
What impresses Over and over again is the willingness and the ability of Evonik to truly invest into new products, Do some fundamental research, do the application work. And jointly, over time, we then Develop a technical solution which is good and productive and effective for the customer.
So a sincere thank you to our customers for being part of our story today. And I know our team, Including myself seeks inspiration from those messages. So summing up what we heard, we play our specialty additives into the market with Four main criteria. So one, sitting at the table. As I mentioned, we're small amounts and oftentimes a small amount of the share of wallet, but we're a big amount of the value.
So we're a part of our customers' innovation agenda and invited to sit at the table. Ability to assess what's also critical in this type of business That we're able to understand our customers' formulations, their applications, their methodologies and mimic them so that we can provide rapid tailored innovation, Provide products that solve the questions that they have. And at the end of the day, mastering complexity is critical so that we're on time, in spec All the time for our customers and being able to provide them digital solutions to move their business forward.
Yes, Laurent, thank you very much for the introduction, and that brings us to the First breakout session, Stefan and Gaetano will explain us now how they make the difference with their customers. So, Stephan Gaetano, over to you.
Thank you. Thank you, Tim. Yes, making the difference, that is the headline of the next Chapter and Gitano and myself, we will give some examples where we truly make the difference To our customers and into our markets. How do we achieve that? And that is shown here on the right hand side.
It is very important that we combine 2 pillars, really improved outstanding performance of the products of our customers and improved sustainability profile of our customers. Both go always hand in hand. And also in our innovation pipeline, when we do new things, when we start things, we always look at that combination, improved product, Improved sustainability profile. And the first market and the first industry I would like to introduce where we make this difference is the construction industry. It's clearly a growing market.
This growth is driven by organization and a lot of update in infrastructure. Every week, 1,500,000 people are moving from the countryside into cities, into metropolitan areas. But at the same time, that industry is also a quite significant contributor to the CO2 emissions, accounting for roundabout 8% of global CO2 emissions. Also, raw materials are short, like sand in Asia. And how do we address now these issues at specialty additives in that industry?
It goes in 2 directions. The first direction is increasing really the lifetime of buildings. We do that with our hydrophobic agents, with our shrinkage reducers, With entrainers with a lot of additives that help to increase the lifetime of buildings. The second direction is also our additives help to save resources. And here, especially our Persing additives are making the difference because they help to use waste In the construction like from demolished buildings and reuse it for new concrete and make that possible.
Also, we help to develop and enable really high performance concrete structures, enabling them to make them Slimmer and therefore, less resources and a positive impact on CO2. And that Truly pays off. We have a really nice development. We also look at a bright future here, expecting Growth until 2027. The next example comes from the agriculture industry.
Also here, clearly, a growing market population is growing. By 2,050, we expect a world population of 10,000,000,000, And the world has the responsibility that this growing population is fed by a sustainable agriculture Industry. Also at the same time, arable land is limited. How do we help To solve these issues and these challenges, and it goes in 2 ways. The transformation of the Harsh industry goes really in 2 ways.
The first one is maximizing performance efficiency, really getting the most Out of the limited land. And the second direction is more and wider use of biosolutions. And for both, we have examples, and I would like to start on the efficiency part where we will see 3 really short videos that show how we do make the difference. And on the first video, you see a droplet Falling down, which is a protection solution, Crop protection solution from the farmer, and you have seen there were spray droplets and a bouncing off. And obviously, that doesn't should not happen because it is Investment of the farmer, and he invested a lot of money.
There is a lot of money in the droplet with all the additives, etch events, also With the active ingredients, so he clearly wants it to stay on the leaf. On the next video, you see what our additives are doing there. And clearly, there is no bouncing off at all, no spray droplets, and That is enabled by reduced surface tension with our additives. And we go one step further, which is shown on the 3rd video, Where you see the droplet on that leaf and with the help of our super spreaders, you see how nicely It is distributed over the whole leaf, upper side of the leaf, also lower side of the leaf that it cannot be washed off, And it is penetrating very nicely into the leaf and therefore, truly maximizing the performance and the efficiency in that application. The second trend that I mentioned is more use of bio solutions.
What is the major hurdle there? It is clearly Limited shelf life because we are dealing with living microorganisms. And what are we doing there with our additives? We pretty much we put these microorganisms into dormancy, kind of a deep sleep. And it's waking up again when it is applied by the farmer in the application when it is in contact with oxygen and water.
And also there, we are, just like in construction, really in the sweet But we are addressing what is needed in these markets. And also there, we expect very, very nice growth until 20 27% in the range, 10% to 15%. And with that, I would like to hand over to my good friend, Piet Houten.
Thanks, Stefan. Another aspect to make the difference is our innovation capability and innovation power. The first example which I brought is representative for many examples. In this specific case, it is the Ferrilex. Based on our deep customer intimacy, we have clearly identified and sharpened a customer need, the market demand, in this specific case, Burnish resistance.
Burnish resistance is please imagine you are sitting in hope with a lot of friends around a table. And one of your friends is opening is standing up and scratching the wall with your chairs. And you will see some stripes at the wall. You will see some unevenness. And you have the perception that the wall is damaged or the color The wall is not looks very appealing anymore.
Think about big infrastructure like airports, where normally in a good time, 1,000 of passenger are running from one gate to the others and how easily a suitcase is touching the wall. And again, you have stripes, You have unevenness and you have the perception that the wall is dirty and is damaged. Consequently, you are forced to repaint this wall very frequently, which on one side is not very sustainable solution. On the other side, it has also a cost impact. Our solution was that we could translate this clear identified market need in a product called FerraLex, which is Unique and novel particle size, ceric.
And the physical and chemical surface really allow that everything what Touch the paints, the surface is sliding and sliding around over the wall, which then have superior burnish resistance and scratch resistance. The market is highly accepting this solution, which gives also clear confidence that we will grow double digit in the forthcoming years. The second example which I brought is highlighting that our division is Striving always for the best solution. We have the innovation power continuously to develop further our existing product portfolio, And we have the capability to invent our portfolio. So starting point is always the same, What create values for our customer?
In this specific case and in the light of the existing pandemic situation, which We are unfortunately, I think the value of the market is easy to understand. The efficiency to control microorganisms. Please imagine that you could claim a microagronism and free surfaces like a table like screen. This really would make a difference for the customer and for our markets. We analyze the existing solutions, and we come to the conclusion that we wanted to we're coming up with a completely new approach.
We're taking visible light and we are converting this visible light in UV light, which is light which has much more energy. And by releasing this energy, we can destroy microorganisms. The first market Feedback also from end customer are very promising so that I'm very confident that we will get a significant market share in the forthcoming years. Now I hand over to
Thank you very much, Geetano. That was on the first breakout on making the difference by Stefaan and Gaetano. We will change the team now. I was actually thinking about making some comparison to soccer substitution and so on. You know, I spontaneously decided against that on Tuesday evening.
So it's now just over to Stefan and Ralf on the second breakout on how we and how they, with their products, enable a more circular economy.
Let me start with how we, as Evonik Division Specialty Additives, Contribute to a circular economy, namely how we help to decouple growth from resource consumption. Stefan and myself will highlight how our products and solutions enable reduced emissions and material consumption and Mechanical and Chemical Recycling. Circular Economy will Become the dominant topic for the next decade around the world, specifically covered by action plans such as the European Union Green Deal, The Chinese 14th 5 year plan, the PACE program of the World Economic Forum and the U. S. Initiated Leaders' Summit on Climate.
So how do our products exactly help to reduce emissions? I've picked an example from the polyurethane spray foam market. Spray foam, as you can see here on the slide, is often used in the U. S. Housing market to insulate the typical residential building.
So spray foam systems are an excellent insulation system for this application. To provide you a perspective of the potential of this solution, There are 113 single homes in the United States. If each of these homes used spray foam, Americans could save up to $33,000,000,000 in energy costs each year, and That is an equivalent of 180,000,000,000 kilograms of CO2. So What is now our contribution there? Sprayform always needs a blowing agent.
And blowing agents are halogenated hydrocarbons that are actually released into the atmosphere during this blowing process. And unfortunately, they have a very high global warming potential of multiple 100x higher than CO2. The industry has already reacted and is introducing a fast generation of blowing agents. So far, so good. However, These glowing agents actually tend to decompose in the polyurethane system and thus limit the shelf life.
So new novel PO additives are required that actually solve this storage stability problem and are also stable and have a consistent application performance. And this is where Evonik comes into play. We have Additives exactly addresses the challenge of the good stability and good compatibility with the blowing agents of the 4th For this innovation with a high growth sales potential of more than 20% per year due to two effects. On the one hand, The underlying growth rate of the spray foam market is already 7% to 8% per year, much higher than the overall PEO construction market growth. And that substitution effect in addition to this brings us up to these high growth rates.
Another example is coming from the textile industry. And here, Evonik Additives are essential for enabling the transition towards a more environmentally friendly artificial leather production process. Let me explain. Artificial leather comes with significant environmental and social risks. Therefore, the industry has already started to replace classical leather by artificial leather.
And artificial leather is Polyurethane foam, finely dispersed and spread on a woven fabric. The current production process is a solvent based process, The industry wants to migrate towards a more environmentally friendly waterborne process. And here, we have with some force, I developed Already a few years ago, a new article P Series PU Additive that actually addresses this challenge and is Helping to enable the production of via waterborne process of artificial leather of highest surface quality. And surface quality is essential when you talk fashion, clothing and good looks. And here, again, let's have a look at the market.
Already 2% of the artificial leather production last year was based on the new process, and the transition now happens towards this waterborne, environmentally friendly process, and that rewards us with a high growth potential of more than 30%. Let's have a look at some additional examples from Interface and Performance. Stephan, please take over.
Thank you, Raj. Yes. I would like to introduce another really nice product innovation at Interface and Performance, which we call Linerless labels, and I brought 2 samples with me. I hope you can see that in the camera. There is We all know that the conventional label and when you apply it, you always have some leftover, the liner, and Essen.
Pretty much waste is not needed. And we developed a technology, which we call linerless labels, which I would like to show here, which is also sticking really nicely, But it does not need the liner. And therefore, we are really saving a lot of waste because on the surface of that label is our product, and that is making that nice separation from the glue. And that is a really good development. It saves cost.
It saves material. It saves weight for transportation and making a really good difference in that application. And when you do some counting, we expect that our accessible market, and that is a conservative estimate, is 40% of the total label market. And this 40% are around about 10,000,000,000 square meters per year. And if you calculate that in CO2 saving, we could save by the application of these linerless labels 750 1,000 tonnes per year.
It took a lot of effort to develop that, so don't think that is done in a week. It took years but was very successfully introduced a few years ago, and we are looking really in a bright future also with That linerless technology. That brings us to the next topic, mechanical and chemical recycling. And as we learned from Lauren, from my colleagues, it's always the best if we can avoid Things like on linerless or if we can reduce things like on slimmer concrete constructions. But Products end products have a lifetime.
And at the end of their lifetime, it is a good idea If you recycle them instead of landfilling or burning in waste incinerations. And There are obviously in the world a lot of initiatives, many different regulations in the regions, in the countries, A lot of pilot plans on this topic, but clearly, the breakthrough that we all hope for a large scale implementation that is still missing. And we at Specialty Additives, we want to contribute to make that happen really contribute to close that circle with our chemical and mechanical recycling initiative. We expect, and that is the number on that slide, by 2,030, at least a sales potential of €350,000,000 For Evonik on these topics. And the next slide starts with mechanical recycling.
This chart pretty much Shows the whole process, starting on the left hand side with washing and our additives really contribute Through the whole value chain of that mechanical recycling process with our anti foaming agents in the washing process, Our wetting agents help in the so called float, sink process where we separate the plastics. We are working on the labeling additives, deinking additives, always with a focus to make this process more efficient to enable large implementation and scale up. What we are also focusing on is improving the quality of the reticulate because currently, Most of the recycled plastic ends up in quite simple applications like buckets, like waste bags, park benches, etcetera. But this reticulate is not reaching higher quality Applications, and that is certainly the biggest opportunity. And one example we have in the portfolio already is TEGO So I have an odor absorber who is removing the bad smell that is developing in that process.
We do that with a principle we call key and locker. So we keep the volatile bad smelling molecules Permanently in the reticulate, which is important for the applications because you don't want to have some long term outgassing, Obviously, in these applications. Yes, we are very confident In this mechanical recycling, we will invest. We will expand our portfolio, looking very deeply also in increasing the mechanical properties of the reticulate. And we have a Proven track record where we are really able to enter new markets, new applications with our really wide Chemical toolbox that we have with our really great know how, process know how, Understanding effects on surfaces, and therefore, we are really confident that we will make the difference also in that industry down the road.
And with that, I hand over back to you, Ralf.
Thank you, Stefan. Within our division, we have several examples of how we support chemical recycling. For mixed plastic waste, we actually support pyrolysis solutions by providing process additives such as anti fouling additives. For defined polymer waste, we're engaging in developing monomer recycling technologies on Silicone recycling as well as polyurethane recycling. And it shouldn't come as a surprise to you that I like to focus now on polyurethane recycling.
And that brings me to mattresses and their life cycle. All of us use mattresses, and typically, these are polyurethane based ones. However, it is recommended to change your mattress after 10 years, and that leaves us with mountains of waste. In the European Union alone, every year, 30,000,000 mattresses are discarded, and that is an equivalent of 450 kilotons per year. Imagine we could all recycle that back to new mattresses.
Our, basically, contribution to solving this industry change is twofold. On the one hand, We are helping our customers, the mattress producers, to recycle a large portion of the materials back into new mattress production. And our PE additives ensure that this can be done without compromising on the quality of the newly made foam. And here, we can build on our profound expertise and broad PU additives portfolio that we have developed over time. On the other hand, we have developed a proprietary recycling process that recoups the monomers in high yields.
And that process is a hydrolysis, meaning a water based process. And we intend to pull off the industrialization of this process in agile partnerships. And options can here range from licensing, joint ventures or even proprietary own production. With that, I'd like to hand over back to Tim.
Yes. Thank you very much. These were the first 2 breakout sessions with 2 very dynamic duos. The third one on digital solution, I'm confident that also Gaetano on its own will deliver a strong solo performance, if you want. So with that, over to Gaetano on Digital Solutions.
Thanks, Tim, and thanks
for the pressure. Digitalization has for us only one scope, to maximize and to create value for our customer. All our solutions, which I will present in course of this presentation, are creating value for our customer because it makes the life for our customer easier and enables the customer to make faster and better decision. In addition, and this is also very important to understand, this new digital interface, which is always for us Database and analytical driven is providing us feedback, which leads to better service and solution. This solution, we can provide again back to our customer, which are incentivized again to use our digital interfaces and so on and so on.
But let us make me a little bit more precise, starting with the motivation. The core and the heart of the of our customer is the formulation. There are hundreds of formulations. This is how our customer are creating value. And every day, our customer are forced to touch the formulation.
They need to reformulate by changing raw material, by adjusting formulation and, therefore, to create new formulation. And this costs time, and time is money. And this is exactly the starting point where we are coming in. We wanted to make the life of our customer easier And again, enable them to make faster and better decision. Let me make it a little bit more concrete.
We are the frontrunner in the industry, And already several years ago, we have introduced our high throughput equipment, our HDE and the concept. The high throughput equipment is an equipment which is working 20 fourseven and can mimic exactly the level as an application test that our customer has to do in their lab. But we do it in the 20 fourseven series. And we can provide our customer with objective and the results. Again, we are able we enable our customer to make faster decision and also better decision.
I have also selected this example because I truly believe that digitalization is always a combination between Physical touch points and purely entirely digital touch points. In this case, we have an HDE equipment, which can provide panels, which we can hand over to our customer. But at the same time, we are generating data. And this data, we are injecting to our Cortina, which I will
As a customer and partner of Evonik Coating Additives, you know that we are always thinking beyond the additive. Therefore, we've created an industry specific network that brings digital front runners together, manages For example, product recommendations, coatings, formulations, learning journeys or customer interactions. Find your optimal guiding formulations and adjust them to your needs. Learn more about the coatings and inks technologies and their usage on Coccino Campus. For beginners and experts alike, We offer interactive e learning modules and comprehensive live events.
Listen to the new voice of Coteano. With our smart speaker or our voice assistant, you get a secure access to the formulation network from anywhere Essen. Put on our Coccino glasses and see for yourself. Digitalization doesn't replace human interaction. It enables it.
When you need our expertise, it will be transferred to you via live Coitino, the dynamic formulation network, underlines our ambition to
With Cortino, we have set a clear benchmark and standard in the coating and ink industry. Our product finder will give or enable our customer in a very easy and intuitive way to select the right product. But the uniqueness of our product finder is that this is based on a machine learning algorithm, which continuously will improve Our search for our customer, the uniqueness is that we are able to provide to our customer a certain confidence level. We are telling to our customer, We recommend you this product, and we are sure by 90% or 80% that this product will fit to your formulation. The uniqueness of a product finder is that we are able, based on what the customer is looking for, to make cross recommendation to boost their search, to boost their formulation.
This is where, for example, we make the difference in the market. Formulation Builder, virtual lab, this is really a hard task because the formulation is a very complex and complicated and the system. We are tackling this task with a diverse, very diverse and multidisciplinary team. And we are building up very fast capabilities that in the near future, we will able to provide to our customer not anymore a Product recommendation, but really a recommendation how they can improve the whole formulation. This really will create value for our customer.
I'm very proud that we have developed and designed our Cortino speaker, the first voice assistant in our industry. And I'm very proud about this because this will change really the interaction with our customer. Allow me a comparison. At home, I have some private voice assistant. And here, I can buy bottle of wine or I can switch off and on the light.
But this advice does not understand what's an organomodified siloxane is. He does not know the difference between a dearerator and a deformer because they don't understand our customer. They don't speak the language of our customer. We do it. We understand our customer.
We speak the language, understand our customer. We know how our customer is thinking. And this, We are trying to transfer in advice where they can approach us when physical touch points like sales, Application technology, customer service are not available. This really will lead to a point that our customer can approach us seamless, Easy. Whenever they want, wherever they are.
Of course, we are also inviting partners On our ecosystem along the value chain, we give them also support based on our digital competencies to translate their Their knowledge in solution for our customer. So Cortino is really an ecosystem Around the formulation, around our customer, and the difference is a dynamic. We wanted this platform is learning every day continuously so that we can continuously providing the best solution for our customer. Now our customer has only one touch point and get all answer to all their questions. I would like To close my session by highlighting that in hopes that you see it, that we are really a team, and we are sharing best practices and experience.
And you can see that we will upscale this digital concept also in Other industry, depending on the specific of the industry. Now I hand over to Tim.
Thank you very much, Gaetano. I forgot that you're not alone. You brought your Cortino speaker with you. So you had some support at least. With that, I that was the 3 breakout sessions.
With that, I hand over to Lauren for the closing remarks of the presentation.
So yes, a sincere thank you to the team for showing such great highlights and such good examples about how specialty additives in small amount Enable so many capabilities and so many aspects of our life. However, I want to emphasize what Stephan said is that although the team presented very clearly and very simply some of these technologies and how we enable, There is a massive amount of expertise and dedication and taking chances behind each and every one of these opportunities that we bring to market. So, we spend a bit of time talking about the growth opportunities driven by sustainability and also about by digitalization. And it's important to understand that maybe every individual example that we've shown, maybe in itself Not a huge market, a huge application, but that's how specialty additives works. So we have many of these interesting opportunities, Many of these areas where we can share our expertise and when you add them up, they create a very resilient, very impressive business.
And so the nature of the business is small individual products and projects, but at the end of the day, they not only differentiate and provide solutions for Customers where they value, but also the return then to Evonik for those efforts. And digitalization is a perfect example Where chemistry and digitalization is not the easiest topic, but with our efforts and continuous work over the last several years, we bring a leading Technology to the market. So what have we been working on last year in the formation of specialty additives? We've been driving A clear strategic agenda. And we started a little bit before the launch, so maybe in June of 2020, really working first on culture.
And any of those of you who have worked on cultural initiatives, you know it's the marathon, not the sprint. So and we start from a good base. So we have a lot of elements in our the way that we work together that are very strong. And what we tried to do is refresh a little bit about our openness, about our ability to share knowledge and that the belief that when we share knowledge it grows. And this is really important for specialty additives because each of the business lines Have their core expertise where they really play a strong role.
And then as you move out from that expertise, the areas start to get a little grayer, and where we maybe have a coating that as another surface or a surface that comes in contact with concrete. And in these areas, when we work as a team, we have the ability to, Let's say, utilize the best competence for the solution for our customers. So, we work on this foundation, expanding and Continually working on that cultural basis. And from there, we move to a topic regarding securing the growth of our core businesses. You can imagine with the performance Like specialty additives, strong EBITDA margins, resilient growth that it's really important in our unique positions with our customers that we can deliver product On time, in spec all the time.
So it's important having all of the managers at the table to discuss our shared assets And make decisions on triggering the debottlenecking on the stepwise advancement of those assets and having that clear perspective from The entire team was the next area in which we worked on with our strategic agenda. After that, we've been starting to focus on our R and D pipeline. And if you've Listened to a decent amount of the presentation today, you would imagine that's where a key area of our growth comes from, right? So, of you have your base business and there's reformulation within your base business and we need to defend our strong positioning. But at the end of the day, that growth comes from How well are we able to identify the trends?
How quickly are we able to come with a solution? And that will differentiate our growth rates going forward. We also have so many different end markets and so many different submarkets that it's really important that we look at where are those areas where that growth is most Impressive. And where should we focus our efforts? So that was the second our 3rd pillar of our agenda.
The 4th part has to do with looking at inorganic growth, Which we will continue to do, but it will take a little bit more time and not an easy feat when it comes to specialty additives. So mid term targets, Maybe it's a quick to start where we are today, our current performance. So we're pretty successful business. One of the highlights within Evonik With a consistent EBITDA margin of around 27% and also a ROCE of 16% in 2020. So we started a pretty high level.
And where we plan to go from here? We picked out 3 areas. So we referenced people, profit, planet. You can say people, profit, prosperity. You can say society, environment, economics.
The point is, is that we try to look at all aspects of And we believe we're only successful when we're successful at all. And when we talk about people, we chose diversity and in 2 elements We will continue to build. One is cultural diversity. So we have a really global business. So 1 third business roughly in Americas, a third in EMEA and a third in Asia.
So to continue that and to keep that pace, we need to make sure that we have those nationalities and the way that they solve problems and how they solve problems Coming through in our management team and in our decision making. On top of that, if you also was able to follow the discussion today, We require a lot of competencies. So, it's a lot of know how that's throughout these businesses. And we would like to make sure that we continue to develop that competency, that we expand how many We have and how we put that puzzle together to be ahead of our competitors and also there for our customers. So we also talk about Planet here and this is about next generation solutions.
And next generation solutions are when your product Portfolio is above the standard or significantly above the standard and 37% is pretty ambitious to make sure that our next generation solutions are there. But please keep in mind, a large percentage of our portfolio today is enabling sustainable solutions, but is setting today's benchmark. And by the logic, when you set today's benchmark, you are a performer. And we target even more through next generation solutions. The last part is about the profit.
And we would like to see continued volume growth at a growth rate of greater than We pick only one metric here, but we also could take a look at sales and we will see sales also at or above the 3% level as well. We talk about adjusted EBITDA and ROCE being able to secure and defend those continuous robust returns, both on the EBITDA margin level of around 26%, 27%. And also our reference point of 2020 with a 16% ROCE. So to sum it up, I use this slide again about the specialty additives play. And maybe we first talk about our positioning.
Specialty Additives is well positioned. We have many end markets. So no one end market is dominating our performance. So we're about well balanced in that portfolio. The model in which we have is an additives model, which Providing additives into unique formulations, selling by the performance of those additives is a high barrier to entry.
And if you think about how long we've been at this additives business, each of these pieces build year after year, decade after decade To build up a competency and also a robust and routine business. So this business model is not easy to mimic, maybe parts of it and there is Competition in this world, yes, for sure. But parts of it are possible to mimic at one point in time, but the entire collection is very robust. Growth drivers and those opportunities are driven by sustainability and digitalization. I think those are some pretty big words, but hopefully we've Showing you some examples of what that really means for us today.
And at the end of the day, we aim for strong profitable return levels as we have in the past and have a Solid track record for delivering that. So thanks for listening, and I'm now happy to take some questions through Tim.
Yes. Thank you very much, Lauren. Thank you very much to Stefan Gaetano and Ralf for this presentation. And we will now go to the and A, we already have received a couple of questions, but please feel free to send us more via the browser Q and A box. The first question goes again directly to Lauren, so not much time to read for you, Lauren.
There's a couple of questions on the margin target, on the Resilience of specialty additives, where is it coming from? How do we defend the margins? Why are we confident to keep this attractive and high margin level?
That's a good question. As I presented a bit today, not any one of our end markets is more than 20 5% of our portfolio. We have 4 or 5 different large end markets and a variety of others. So we're pretty well balanced from this side. We're well positioned in those key markets And most of the cases in a leading position.
And to defend the margins, we will also continue to stay ahead, Stay ahead in innovation, making sure that every product in our pipeline provides more value and not only more value for the customer, but also more value for Evonik. And getting that timed right and a full pipeline will ensure that we are able to deliver this performance like our track record in the past.
Yes. Thank you very much. And, Lawrence, sorry, also the second question directly for you. It is a couple of questions on Asia by Dave or by Jaud, I hope I pronounced it correctly, on our Asia strategy, what our specialty addition strategy in Asia is and how we differentiate from Asian local competitors.
Yes. So, good question. So, Asia is a big market for us, as I mentioned already. Currently, already a third of our business is done in Asia with a large percentage of that done in China. The good thing is with specialty additives is that in most of our business lines, we have a footprint already in China and since many, many years.
So, we have local production. We have local personnel and talents in the region. And it's Seeing how much we try to focus to compete local and how much we try to also add what's the Evonik way or what can we bring that differentiates us. And so this balance is what we work on with our local assets and our local talent. And if I take a look at our competitive base within the region, There are competitors in each and every one of the aspects that we play in, but not able to duplicate what we have at Evonik And the synergies that we have between the different business lines.
We were recently showed the example of synthetic leather and Which Ralph Markgaard presented today. And we were able to host in China the association related to synthetic leather Because we have 4 business lines that are providing solutions into making that technology more and more sustainable. And it's this cross Change between the way that we can solve problems and provide solutions with one mindset from the region And marrying that also with maybe some global expertise and really able to have a different take on how to solve the problems, yet being as local as
Yes. Thank you very much, Lauren. I think now it's time to give the 3 gentlemen also the opportunity, Al, to answer Three questions. We have a question for Stefan from Tobias Lutz on mechanical recycling. What is needed for mechanical recycling to establish in the market?
And how do we, as Evonik, contribute to it?
Thank you, Tim. Thank you to Tobias. It's a pretty large question, Especially what is needed for mechanical recycling to establish because as I mentioned, it is not established yet. And I need to think how to start My 10 minute answer to give colleagues also some time to read the next questions, it really starts with demand. It always starts with demand.
And the demand is clearly there. The regulators, the governments of the countries, they want a higher share of recycling. That is clear. And also the end Consumer, they want that. And there are many, many initiatives, as I mentioned.
What is needed that it really establishes, I think that whole value chain, it starts from collection. It actually starts from designing of the product, Having maybe a little bit less multilayer films, for instance, on the design of the product and then really Collecting it, making the recyclers more large scale. So from many directions, We need to work together to make that happen. The good thing is there is a lot of dynamic in What I tried to explain, many, many companies are working on it. Many, many talks Also with big OEMs are ongoing to close that circle and make it more Economic because even with regulation in place, you are in competition with virgin plastic, and you need to be competitive.
And we at Evonik, that is maybe the second part, how do we contribute to it? We don't want to become a recycler. We will stay in our game as an additives player. Small amount, big effect. That is our story.
But with that story, we are also contributing, and We will have a lot of cooperations already ongoing with large automotive OEMs, With the food industry, with recyclers, with compounding partners, so a lot has to come together to But it will take a while. It will take years, but we are on our way, and it's going fast. There's a lot of dynamic in So I'm actually really confident that it will happen because the industries wants it and the demand is there. I hope that answers it.
Yes. That should be and it was below 10 minutes, so I was already a bit. You can't be down. So next question goes to Gaetano from Martin Evans from HSBC, who is also Excited on your COUTINO digital offerings, Gaetano. So the question is from Martin.
Where is the demand for the COUTINO digital offerings coming from? Don't large, coating and paint companies do this in house anyway already today?
Thanks for the question, and I hope that I can grasp it correctly. The first point is that It is really unbelievably complicated to touch a formulation, a formulation which has ingredients between 1020, 30
ingredients, if
you are forced to reformulate, this is really a headache because the formulation need to be stable. But on the other side, you must Give a guarantee if you apply on your car or on a wall, it's really fulfill all the requirements. In addition, major more and more regulation are coming on the shoulder of our customer, reach in different countries, Sustainable requirement in different countries. And this makes the life of a formulator really, really complicated. And if now we are coming with our digital solution, it makes the life easier by saying, okay, we help you to identify which raw material Yes.
You can use in which country because you need also to fulfill country inventory. If we make the life Easier to tell them, okay, with this raw material, you fulfill all the regulation for a Blue Angel. This really help our customer to reduce the formulation time. In addition, to give you additional insight, we run this Cortino Set up really as a digital project, always with lean experimentation, prototyping and including always roughly 50 to 100 Customer in our feedback loop. That means everything what we have shown today, we received a concept by our customer, At least for 100 global customers.
Therefore, I'm quite sure that the offering and the demand is there. The second part of the question, don't large Coating paint company do it anyway. Of course, I think everybody is doing something on digitalization. But please don't Take in consideration that the paint industry is also very conservative industry, and it's and we need also to have the mindset. And based on what I have seen, based on my discussion, we are at least several years Essen before our customers.
So it is based on my experience.
Yes. Thank you very much, Gaetano. And with that, we come to Ralf and a question on bio based materials in PU forms. What is your solution to the trend of higher usage of bio based materials in PU?
Okay. I already presented you the artificial leather example. And actually, that Autogold P Series is a bio based material. And you can even truly say the artificial leather being produced is a truly vegan solution. And whenever we start innovation projects and we do a lot of new product developments every year, we clearly check Whether we can base the chemistry on bio based raw materials, but we have to be careful that in the source of that bio based material, We do not compete with the food chain.
And that brings me to another example. When you talk bio based materials and polyurethane, we are talking about the polyole component of the polyurethane Specifically, in a greater sense. And that is a component where I believe Recycling of plastics waste will become a major source of these polyol materials. And I've presented you the hydrolysis Recycling process that we have developed, and this process will exactly enable that.
Thank you, Ralf. And with that, we come back to Lauren for a again, a question on the more financial side, both from Jaydeep Panjia and Andreas Heine. They are asking Why despite the high level of innovation that we demonstrated throughout the presentation that we have in the division, why the business has not grown stronger than in the past. And why is it going forward? Not expected to grow more than the targeted at least more than 3% going forward.
Yes. Thanks. I can hope to clarify a little bit. So, we're not totally independent from the industry. So, our additives really hang with the end applications.
And maybe I'd give an example For 2020, during the recent pandemic time, with our portfolio of technologies, for example, maybe we have Strong wind energy market, right? So lots of incentives ongoing, lots of building up of wind capabilities, especially in Asia. But maybe our consumer goods are printing on high end packaging for cosmetics was then maybe soft during certain time. On, for example, maybe lower mobility. So, the use of maybe some of the additives for refill into oil packages were lower, but Renovations at homes were quite strong.
So we often see this balance within the different markets that we're in. What we see in the Q1 of this year is, of course, all of those markets really hot at one time. I don't think we had a single weaker area. And then you see something like our Q1 where you have a 10% volume increase in a short period of time. But usually we ride a bit with the market and our objective is to be just a tick above that performance.
So we gain share and we pick up A broader spectrum of those applications than our competition. I would also say, maybe it's a little bit Too easy to say, only 3%. If you look in the longer track record, it's quite a bit we have a couple percentage Points above this and also with the, let's say, next generation technologies we bring to the market, they often have a higher value ratio, therefore, also driving the Sales benefit from this side. Hopefully, that gives a little bit more insight as to why We communicate greater than 3%. You have to marry, of course, the volume with also the sales growth.
Thank you, Lauren. Again, next question directly to you on the crosslinker business. Markus Mayer asking the question, how we see the wind energy market right now after the record year 2020? And related to that, whether our crosslinker business can still grow in 2021 and beyond?
Yes. So thank you for the question. And with crosslinkers, keep in mind, a decent percent of the crosslinkers business is in wind energy, but also a large percentage in Industrial applications in construction. So it's also some balance within that portfolio. In the industrial applications, we definitely see an uptick On the side with a lot of investments in infrastructure and so on.
With regards to wind specifically, the market in and of itself with all the announcements on how we will move towards more sustainable energy sources. There is a robust view on the wind market going forward. So and yes, we are positioned To take a share of that growth. We have production of course here in Europe. We have production in the U.
S. And we also have production in Asia. So we're well positioned to be able to take advantage of growth in the wind energy. I would also mention there are competitive dynamics, Right. So all of these attractive businesses, there are we have some competitors, one of which is coming on stream now and has we've been digesting that through the course of the year.
And with the strong crosslinkers market, luckily and as we see going forward, That we've been able to maintain a really strong performance also in comparison to last year for this business.
Thank you, Lauren. With that, we switch to the field of sustainability, and We switch to Coating Additives and to Gaetano. Question is whether the move to water based coatings. Is this threat or rather an opportunity for Evonik?
For Coating Additives, definitely, the move to water base is a big opportunity. We are the leading company, additive supplier for water based or environmentally friendly solution, which consequently lead for us to higher growth in the future. Therefore, for us, it is definitely an opportunity.
Short answer. With that, we are directly back to Lauren. Have to complain at Gaetano. So the question is On the surfactants business across Evonik actually comes from Thomas Bogoda. Surfactants are also widely used in and across the different divisions also within Evonik.
Yes. So thanks for the question. I spent the majority of my career at Evonik in our personal care business. So I also know a bit of that portfolio, Which is now of course Care Solutions. And the majority of the applications that go into the life science market is housed With our Care Solutions group.
They are by far the strongest providers in both the home Style and personal care applications. So textile meaning laundry detergents and softeners. So, by far they are the large share of this. It's not black and white. So there are some gray areas where there are some products in our portfolio that we sell into those markets.
For example, in specialty methacrylates, there's some personal care applications. But in general, the majority of our focus in specialty additives is on the industrial market side. That does not mean so material science. That does not mean that we do not share technology platform. So there are definitely Parts of the Oleochemical platform in which we housed in the division of Nutrition and Care and which provides us super interesting organic that we use in synthetic leather or in other applications.
So, it still requires that we manage across the divisions, But the setup is really market facing and the majority of the portfolios are technology platforms that are supporting end markets life science are then housed in that division. End markets material science are more housed in specialty additives.
Yes. Thank you, Lauren. Next question would go to Ralf again on the PU Additives business again. And the question is how cyclical this business is given the correlation to MDI TVI and the correlation of our PU Additives business with the demand and volume correlation to MDI TDI.
Okay. Our business model is a specialty additives business model and therefore less volatile than the classic The PU component business such as polyols and isocyanates. And this is on the one hand due to the fact that we are In broader application profiles, I presented today artificial leather and spray foam, for example. And on the other hand, Prices in additive businesses are not so much subject to supply demand balance, I would say, fluctuations, And that makes us more resilient and less vulnerable cyclicality effects. However, If a COVID crisis hits like last year, where our customers have to shut down their plants, then naturally, we are also not immune to these effects.
Yes. Thank you, Ralf. Next question again on sustainability And on the Next Generation Solutions of the division, we presented the target of 37% of Next Generation Solutions. Question from Charlie Webb is where we are today on the Next Generation Solutions share of the portfolio of Specialty Additives.
Yes. So thanks for the question. Regarding our current situation, it's above 30% our next generation solutions. And this target is definitely challenging. We'll move us some percentage points above our current position.
And if I talk a little bit about how we do that analysis, So we use the PARC analysis, which is taking your product and your application in your region and putting that together as a combination. And then you look at the characteristics of the product and its operational footprint, the raw material footprint, Characteristics of the product itself and you marry it with its application. And when you do this, you try to see is it how is it positioned in comparison to the best alternative on the market today. And already, as mentioned, we have a pretty strong portfolio of performers. We want to inch up our next generation solutions and try to make sure we're addressing any areas in our portfolio that may be challenged or that we see risk Over time.
Thank you, Lauren. Next question also kind of related to sustainability As probably the whole division is, which should have become clear in the course of the presentation, hopefully, goes to Stefan, and he talked about these bio Solutions. You probably remember in this presentation, the question is whether the bio solutions from Evonik are competitive in terms of pricing with conventional crop protection products.
It's a clear yes. It's growing very nicely. It's growing by 10%. So these biosolutions Competitive, I need to clarify a little bit on that question. Evonik and we at Specialty Additives, we are not active in the active Microbes, but we are making sure that these active microorganisms are very efficiently used.
And these biosolutions, as I explained, they have hurdles like shelf life is really one of the biggest. If you need to cool them and they die within 2 weeks, that is not a solution. That's why this life the shelf life A hurdle is really a big one, and there we help. But clearly, these biosolutions are competitive. That's why they are asked The demand is there, and they are growing already on a decent level by 10% per year at least.
Thank you, Stefan. We're now coming already to kind of the last questions at the moment,
And you're seeing it's getting
a bit more granular, a bit more on the modeling side. A question from Jofaer from U. S. He's asking What is the sales and profitability split of actually, he's talking about 8. It's not that complex.
The business is only 5 business lines within Specialty Additives. 3 are present today. We also have cross linkers in all additives in the portfolio. So the Lauren, question to you, sales and profitability split and difference between the five business lines in your division?
So, hopefully, this isn't a boring answer for you, but roughly all five of the business lines are roughly about the same size. Crosslinkers It's a bit bigger than the other 4. Profitability, all above 20%. So, it's really routinely robust Through the division and through this collection of additives business.
Okay. So if I look at the Q and A tool, I think we answered all of the questions that we have so far. That would, a bit ahead of time, bring us to the end of our session today. I hand over to Lauren for some Closer remarks on the division.
So thank you, Tim. Hopefully, we were able to present to you today, some insight into what Specialty Additives is our 1st year in this construct with these five business lines together. I think you can see we start at a really Strong position in our markets, in most cases, in a leading position built on decades of experience and know how and trusting relationships With our customers, we have a strong position in growth trends going forward with sustainability and digitalization as an enabler And a strong track record with high profitability and also, above industry growth. So thank you for the opportunity to present the division. It's a real pleasure and hopefully next time we'll be able to meet in person.