Ladies and gentlemen, thank you for standing by. Welcome and thank you for joining the Q3 2022 Earnings Call of Evonik. Throughout today's recorded presentation, all participants will be in a listen only mode. The presentation will be followed by a question and answer
In case you're wondering, no worries, Tim is still around. Unfortunately, he had to call him So for the first time in almost 10 years, there's an Evonik earnings call without him. Get better soon to him. But of course, We have as usual our CEO, Christian Kuhlmann and our CFO, Ute Wolf, on the call. With that, over to you, Christian.
Good morning, ladies and gentlemen, and thank you, Christoph, and welcome and thanks for joining our call today. And before we get right started, all the best to you, Tim. Stay healthy and come back as soon as possible. Ladies and gentlemen, 3 months ago, We reported a record first half for Evonik. Nevertheless, it felt somewhat Strange.
As we all knew, the demand slowdown was coming. The only question was indeed when and how pronounced. Now I'm tempted to say finally, the slowdown is reality invisible in our numbers. But We are well prepared also for a potentially weaker macro environment. With experience from recent slowdowns, We manage cost inflation very proactively with a global exposure with a balanced regional footprint.
We have made our energy supply as price as true as anybody in the industry, and we continue to execute our long term Specifically for this quarter, this means we have delivered a solid result With EBITDA only 5% below the strong prior year level, and we are confirming our adjusted EBITDA guidance range for the year. Ute will elaborate a little bit more on the operating performance in the quarter in a second Maybe in 2 seconds. Let me first make some remarks about our strategic progress that we continue to make Hi, our even accelerated through the increasingly difficult environment around us. In the Q3, Which is another step in streamlining our portfolio. When talking about portfolio management at Evonik, many directly Think about performance materials, but we are also constantly optimizing our growth divisions.
Last quarter, We announced the sale of our U. S. Veterinarian activities out of Nutrition and Care. This quarter, We can announce the divestment of GAA Derivatives out of specialty additives, which do not fit our specialty portfolio criteria anymore. With €100,000,000 of sales, this is a quite sizable business and the same is resulting in an active cash Attractive cash flow.
Regarding Performance Materials, we are progressing as planned towards our target to find new owners in Moving to the even more exciting stuff, businesses That stands for the future of Evonik. As challenging as the current environment is, as much That is a push for the sustainable solutions in our portfolio. For many of our next generation solutions, we see an unchanged Strong customer pull despite the overall downturn, and we also continue or even accelerate Our innovation activities in this field. I would like to highlight just the second example on Slide number 5. Our contribution to better recycling of lithium batteries.
Recycling of lithium can solve Two issues. Help fulfill the rapidly growing demand and push circularity. Right now, Battery recycling is complex and expensive. To change that, Evonik is developing innovative electrolyzer So whose special feature is a ceramic membrane between the anode and the cathode. The lithium extracted by this membrane is so pure that it fulfills the high standards for battery grade material without Any need for further processing.
We are now changing the Stolgy to a pilot plant level. Market readiness is It's expected in 3 to 5 years, but a lot of first generation EV batteries will need to be recycled. I'm closing the strategic update path with another example of our accelerated transformation into next generation Evonik. Just a few days ago, We have signed our 1st sizable power purchase agreement with EMBW. EMBW will build a new wind farm In the German North Sea and from there, Evonik will receive green energy to cover around 25% Of our European electricity needs as from 2026 onwards.
That We'll not only reduce our dependency on fossil energy sources. With long term fixed conditions, It will give us also more planning security. More projects are in the pipeline in our regions, and we make Trying to reach our ambition 2020 emission reduction targets. And with that, ladies and gentlemen, On the current operational performance, Ute, it's your turn over to Ute.
Thank you, Kristin, and a very good morning to all of you also from my In Q3, sales again moved substantially higher. Volumes declined across virtually the whole portfolio, But the plus 17% in pricing demonstrates that we continue to compensate our higher variable costs This also includes Energy Corp. While it is becoming more challenging to push for further price increases, we do not We have seen prices coming down on a broad basis. And on the other side of the equation, raw material and logistics costs have started to come So maintaining attractive price levels in a slowing environment will be the next proof Thank you for our specialty portfolio. Let me quickly run through the divisions.
Specialty Additives was the best performer in a challenging environment driven by another outstanding 18% in price increases. In Nutrition and Care, Care Solutions continues its strong growth track record. Animal Nutrition had a weaker quarter, impacted by And we expect to see sequentially higher volumes in the 4th quarter. In Healthcare, we had a kind of Murphy's lower quarter. At several of our production sites, we had to deal with some hiccups in production or logistics.
While Each individual one was manageable, the accumulation of incidents resulted in one of the weakest quarters ever, but it's clear. With most of the Issues being resolved by now and quite some order backlog, we expect a good catch up in Q4. Smart Materials delivered a solid quarter with year on year stable volumes and earnings. While silica and silanes performed really well, PA12 suffered from lower butadiene volumes due to planned and unplanned maintenance in our The PA12 market remains sold out and order intake is strong. In hydrogen peroxide, with natural gas as a main raw material, the very high prices forced some of our Following a record quarter in Q2, Performance Materials experienced normalized C4 as well as lower volumes due to the aforementioned planned and unplanned maintenance.
Throughout the 1st 9 months of 2022, we faced a net working capital outflow of slightly more than €1,000,000,000 This is €500,000,000 more than last year. Considering that, €100,000,000 more than last year. Considering that the positive momentum change in Q3 in cash generation is a clear With a very high focus on net working capital reduction throughout the whole organization, we were able to generate almost €100,000,000 of free cash flow in the quarter. And we will continue to work on all levers in Q4 to further substantially reduce the
As you're taking the 2nd term, you've heard it, ladies and gentlemen, the environment is getting tougher. But you have also recognized the one with a company you can rely on, In particular, in those difficult times, let's not forget, we have been Navigating uncertainty and difficulties for a while now. When looking into 2023, This means there's quite some structural support. 1st, we'll benefit from our resilient A regionally balanced portfolio setup and the strength of our growth division. Also in the next year, we're confident to see growth in selected product groups driven by our sustainability focus and defensive end market Explosion.
On top, our new PA12 capacities will enable volume growth. 2nd, 2023 is the year in which we take the next steps in simplifying our portfolio. Progress And divesting Performance Materials is and remains on top of our agenda for the next year. This will result In an even more balanced portfolio with reduced exposure in Europe. 3rd, The measures we implemented early to reduce our dependency on natural gas give us confidence to secure supply And high level of cost control.
With our high hedging rate and our alternative energy sources in place, We are less dependent on the outcome of the political decisions in Germany. And finally, we are well prepared to 5 factor cost inflation. Let me skip Chart 14. I'm sure we will discuss 2023 In the question and answer session in more detail. So moving directly to Chart 15.
Over the last month, we have been confronted with a debate about the competitiveness of European Chemicals. Some have even called out the deep industrialization of Europe. Ladies and gentlemen, That is what we cannot confirm. We do not confirm this view. 1st, With a very balanced regional footprint, especially so following the intended divestment of Performance Materials.
We will then have less than 40% of our products being produced in Europe, and all major value chains have production hubs in all And secondly, our Specialty Chemicals business model ensures Profitable operations in all regions of the world. Our production is on average less energy intensive, And our solutions are highly innovation driven and customer centric, resulting, and as you have seen already, In good pricing power, this shows the high profitability level we have in Europe and in Germany Already in September, we have successfully switched substantial volumes of our gas Supply in mile from natural gas to LPG. Other measures are also underway, Overall, reducing our gas needs in Germany by 40%. Combined with our hedging strategy, Visibility on the energy costs that remains high. Into 2023, we expect an increase of €300,000,000 is significantly less than we had to digest this year.
Although The German government has issued a new draft about the gas price gap last week. Remain and the benefit for us is not clear yet. But the main message from us is we, our That's high visibility and control on our energy bill in the next year. And this is Nearly irrespective of the outcome of the political discussion here in Germany. Therefore, For the time being, with a conservative approach, we do not assume a material impact from it.
But again, The main message for you is we have done our homework on the energy side, and we are in the driver's seat. We have successfully compensated higher costs to higher prices in the last 2 years. But we also need to get prepared for lower volume and continuously high inflation environment. Deliberately, We decided against the specific cost savings strongly in the current situation. We have constantly streamline our operational and admin activities by continuous improvement over the last years.
We are clearly Profitable in all regions of the world. We have learned a lot from the still recent COVID crisis. Consequently, we have a comprehensive contingency measure toolbox Ready to deploy. It has proven very effectively in 2020 already. We have now We activated this toolbox.
This toolbox is in place. We implement swift and adequate contingency measures Both in operations and administration. Different from larger cost savings program, our toolbox is Active immediately, with a high degree of flexibility and the scope can be adapted to the actual macroeconomical environment. The cost savings potential is a triple digit million amount in the next year without Any sizable cash out? So you can say we will take a balanced view on leverage Growth opportunities off the one hand and cost and consciousness on the other hand.
Moving on the outlook for 2022. We are confirming Our adjusted EBITDA outlook between €2,500,000,000 €2,600,000,000 This narrow guidance range is unchanged since March, Which is quite an achievement in the volatile environment around us, and it has implied a very good 7% growth at midpoint. This is assuming a similar pace of macro slowdown for the Q4 as already experienced during the 3rd Ekwu. Ute already discussed the challenges around free cash flow, mainly Linked to the net working capital headwind. But you have also seen that cash generation is pointing to the right direction.
We will keep executing our defined measures to free up net working capital, and by this, To come as close as possible to a cash conversion rate of 30% for the full year. This lower cash conversion rate is temporary. For next year, we aim to return to our target of 40% That we've been delivering over the last 2 years and that has differentiated us from many of our peers over the recent years. And also this year, as you can see on Chart number 20. Ladies and gentlemen, with that, thanks for your interest So far and now we are happy taking your questions.
Ladies and gentlemen, at this time, we will begin the question and answer In the interest of time, please limit yourself to 2 questions only. The first question is from the line of Andreas Heine with Stifel. Your question please.
Thanks for the opportunity to ask these Two first questions. The first is, could you provide please an update on the polyamide 12 plant? You mentioned this as Driving earnings in 2023, but so far it was always delayed. Maybe you have I have an update available. The second is on Healthcare.
I really would like to understand a little bit more what was happening in Healthcare And whether everything of that is solved and what we can then expect going from Q3 into Q4 from this segment.
Yes. Okay. Good morning, Andreas. And Let me start with your question about PA12 and then Ute will provide you with some more precise details about the potentials and Effective of our health care business, but now it's about PA12. It's a really attractive technology.
And Yes, in this respect, the market is narrowed and we do have brilliant perspectives,
yes.
So in other words, But on the other side, and that is fair to say that we do have here once and once again, let me say, to deal and I personally to suffer with some delays. Delays because of the coronavirus impact, delays because we have suffered from getting the The technical devices we need for several times. So yes, here we will see the good And contribution and good positive EBITDA contribution from the next year onwards. So in other words, It is something like an EBITDA reserve we will activate for 2023. And yes, It is fair to say that we have some delay because of those corona impacts and all the difficulties to get To write technical devices and to implement them.
So here, we have a situation where we are That we have now made our points and that we will be able to start the capacities and to bring our capacities into the market. And talking about the market, Fair to assume that the market environment for our PA12 is really attractive. I will think about the automotive, especially the EVs here in the automotive areas. I do think about electronics, I do think about oil and gas and I do think additive manufacturing where we do have really attractive With perspectives and chances. So in other words, we are prepared and will be and we are now, let me say, Pretty well on track to benefit from our PA12 capacities in 20 And 'twenty three, as mentioned, onwards.
And with this, Ute, Jotun.
Thank you. Good morning, Andreas. Yes, to Healthcare, I think I want to start with a clear positive message. The demand from customers is strong. It is really a combination internal issues, smaller issues, but then in the combination that they come together in 1 quarter And that resulted in significantly lower shipments to our customers.
I'll give you some examples. We had production downtime In the U. S, because the water heater was bursting just above a clean room. So the clean room was, of course, not clean And you can imagine how much work that is and how much time it takes to make that up again. We had a crack in an inland layer of a reactor that also takes time and of course, to repair it.
We had a COVID outbreak On-site when then shift could not be a 1 S brand and similar issues, not only in production but also logistics. The clear message is most of the issues have been resolved already. So the business is largely up and running. We had a clear catch Q4, it is also not unusual that Healthcare has a very strong Q4, so many The shipments are shipments for the next year for our customers. So they have a lot of fetches and campaigns I made ready for Q4 sales, so that is also not unusual, and that's why we are very confident that this will Delivered in the Q4 of this year.
Already late September, early October, We saw really high shipments from the drug delivery, so what we can see confirms that you completely. If we look at next year, I think that's maybe even more Today, the pipeline for 'twenty three is also very strong. We have new mRNA lipid based development Of course, the cell culture ingredients for COVID antibodies also has a good potential for 'twenty three and Higher materials and fermentation projects also are very strong with an unchanged good track record.
Thanks a lot.
The next question is from the line of Gunther Zechmann with Bernstein. Your question please.
Good morning, both. And best of recovery to Tim as well, if he's listening in. A couple of questions from my side as well, please. The first one on volumes in Nutrition and Care. Could you just talk us through the main drivers?
How much of it is animal The final volumes, what gives you confidence that it's destocking? And how long would that destocking last? And are there any other drivers Beyond Healthcare, to Andreas' question earlier, that is causing the volume decline. And then secondly, on the strategic progress on the divestments, if you could please just Run me through the progress in the various asset divestments that you're seeing right now. Thank you.
Yes. Hello, Gunther. Thank you very much for your question. I'll start with your question On volume in Nutrition and Care, as methionine is the largest volume business in Nutrition and Care, of course, that is driving the overall Volume development for the division very much. What we have seen here is an ongoing customer destocking.
So I think People were talking very much last year and this year with all the experience from COVID and Lockdown, and that is now step by step brought back to a more normal level. Of course, we have an impact In the market from the global inflation on low income in emerging markets. So from that point of view, there is also Lower meat consumption, and that's why a somewhat lower demand for methionine. And of course, for As a company, we don't sell into Russia. These businesses are missing for us.
The volumes year on year, of Amit, thanks. Healthcare, as I said, the temporary supply chain challenges, but here volume is It's maybe not the most sensible indicator. Care solutions, very healthy demand. But As we move more into specialties, it's also a mix effect that we have, that we have very profitable sales, but maybe with lower volume because it's more So I think that's a very good development here as well.
Good morning, Gunther. I'll take the second question. Let's keep it like this. All the projects are steaming and stamping into the right direction. So we have made good progress here.
Give you a little bit more color about the details in Baby Care. We have a mandate on the investment bank and the documents for the official start of The process are already prepared, functional solutions. Here, we are in the due diligence with some potential buyers, And we do see good progress here, too, and the carve out preparation are already well planned. Talking about the Performance Intermediates business here, the carve out processing is moving ahead as planned. This transaction structure is already defined in the asset structure largely clarified.
In Chia, as add on, the investment bank is already mandatory, too. So in other words, All the projects do show good progress. And once again, here, with this respect, we do steam and stamp, as you know us, Moving to the right direction, in other words, into the future to get our aims In 2023 to get these businesses to sell these businesses.
The next question is from the line of Matthew Jades with Bank of America. Your question please. Sorry, there was a change. The next question, the current question is from the line of Chetan Udeshi with JPMorgan. Your question please.
Yes, hi. I have a couple of The first one probably is for Ute. And Ute, I'm looking at the Slide number 33 in the back, which shows the development of net debt And leverage over time. And I'm quite curious with the net financial debt number because it's actually risen a loss from €2,800,000,000 At the end of 2020 now to $3,800,000,000 And this is despite very high free cash flow that you guys This year also based on the guidance, the cash flow should be at least €700,000,000 or so. I'm just Curious why is the financial net debt rising so much despite strong free cash flow generation we've seen?
I think there is an increase in the gross financial debt, which is much more than the cash generation. So maybe you can touch upon What is driving that development? And how do you guys internally see that? Because clearly, Any investor would like to see the deleveraging, especially when free cash flow is strong in the company? The other question was just in terms of Q4.
Can you help us understand how do you see the dynamic Today, in terms of demand versus Q3, do you see a stabilization or is it still a downward slope in terms of demand compared to, say, last quarter. Thank you.
Yes, Frieder, and good morning. Thank you very much for your question. Yes, That said, and you're right, have not developed very well this in the 1st 9 months. I think if you look at The constituents, of course, free cash flow is not where it should be in that year. So there is more to And if we take our guidance of the 30% cash conversion, that We'll give another EUR 500,000,000 also in debt reduction.
I think that would then take that to a much better level. But yes, I think the very high cash flow that we have on the free cash flow is also needed to a certain Point of view, of course, first of all, to pay the dividend, but also to do some other acquisitions. And we have here and there also lease And interest rate payments and if you look at last year, I think that very much then also consumes the free Cash flow and net debt is more or less stable. I think if we take the level of last year, So end of last year, I think net debt levels are okay.
But if
you look at the overall debt level, of course, We have some relief now from the pension movements, but of course, that can also fluctuate over time. From that point, I would say the levels As of end of last year, our cash flow forecast that we have for this year will bring us a reasonable step back Towards this level, so I think that are our thoughts on net debt. I also On the Q4 dynamics, of course, in every year, we have a certain seasonality in Q4. So Q4 normally is 15% to 20% lower than Q3 or another medium quarter. So I think that is what we will also see.
And this year, maybe a bit more pronounced as the economy is Going down now more visibly. So going forward, we expect lower volumes Across most of the businesses, maybe less pronounced in small materials as we have also seen here good Performance in Q3. So I think maybe they have an extra cycle here and there. Pricing will remain supportive. So and the raw materials, at least the organic ones, Inorganics, we still have some legacy in there.
So from that point of view, that will influence As Christian said, we have very good visibility and also flexibility here and there on our energy costs. So that's something we Completely in our own hands. And all in all, we are confident, of course, to reach in Q4 EBITDA, which will bring us to our guidance range. I think that goes without saying. And we also gave you some light on that in our Q2 call where we said, okay, first harvest and theft, the second half could be like this.
So from that point of view, the slowdown is pretty much As expected, from that point of view, I think we are very confident here with our
Maybe if I can follow-up, Guter, on your point on leases. Can you remind us what is the lease cash out now on an ongoing basis given that I think The Mal power plant was based on leases. So I guess the lease expenses will go up. So I'm just curious what is the total cash out on leases On an ongoing basis now. Annually?
If you look at net debt, of course, the NPV of the whole lease So I think that also drives the net debt development to acquire substantial amount. I think it's almost €400,000,000 The first 9 months, that is the commissioning of our power generation units, and it's the commissioning of a logistics warehouse here in So I think these 2 came together. The leasing payments, I think we will follow-up. I don't have that number here at hand. So I think we will follow-up with you at a later Of course, it will increase a little bit.
You have to see that leases are between 10 15 years. So I think
The next question is from the line of Matthew Jades with Bank of America. Your question please.
Hi, good morning, everyone. Can I
just come back quickly on the Healthcare question from earlier? If you take those one offs, Are you able to more explicitly quantify what the missed profit was in Q3? Are we talking €10,000,000, €20,000,000 or so just so we can isolate for hopefully a one off issues. And then the other question, just to come back on the cash flow. You've spoken about taking some, I think, optimization measures on the inventory in Q4.
Can you just elaborate a little bit what you mean by that? Are you talking about cutting production run rates or discounting product. How are you going to optimize the inventory? Thank you.
Yes. I think on the net working capital, of course, inventories is one But it's also receivables. So we manage here, of course, these 2 categories very closely. If you look at our cash Flow in our balance sheet, we really have built up a lot of inventory. Of course, that was driven also by raw material But also by volumes, partially we had planned maintenance in the course of this year.
So the buildup was intentionally And of course, necessary. But of course, now towards the end of the year, that now has to come back to laminized levels. Since Q3, we are in very close discussions and very close monitoring where inventory levels are, what Are the plans in the divisions, how to reduce them step by step so that everybody has their own That production is carried out at lower utilization rates, that less raw materials are purchased, and you see that Already in our Q3 numbers that the payables went down. So I think that is one consequence of that. But Again, towards the end of the year, it's very much about inventories and receivables.
The Healthcare mix, I think it's hard to say because Healthcare has a seasonality also in But in Q4, so I would say it's a lower double digit million EBITDA. Not sure whether that really helps in correcting that, but of course, that is
The next question is from the line of Thomas Suboboda with Societe Generale. Your question please.
Yes. Good morning, everyone. I have two questions, please. Firstly, on the cost savings, I mean, Could you narrow the target range for us, if possible? Are we rather looking at €100,000,000 or €500,000,000 A more narrow ballpark would be very helpful.
And related to that, Do you want to retain most of the cost savings beyond the crisis? Or should we look at them like those during The COVID crisis rather of a temporary nature. And my second question is on the renewable contract You just signed the signing is during an interesting period. And I'm just wondering, What are the implications of on the long term costs, energy costs you will have in Europe? Could you talk a little bit what is the price of this energy compared to the pre crisis level?
Is it A steep increase, is it stable? Anything you could say about that would be very helpful. Thank you.
Hi, Travis. Good morning. I'll take the second question about the terms of the PPA With EMBW, the conditions the fixed conditions we have made with the long term contract Having a duration of about 15 years. And before shaking hands, we have benchmarked Surprising with several market experts, for example, Ernst and Young and several others. And in comparison We see conventional comparison with the fossil based electricity, checking in cost Generation, what I've said first, it is fair.
It is reasonable to assume that the pricing We have made here with our new partners is really an attractive one To say maybe, it is if you take the market Strange for those kind of contracts. We are Coming out, let's see on lower end of this range, maybe even a little bit better. So in other words, if you assume it is an attractive pricing with a long run perspective, You are on the bucket side of your interpretation. That was second question. First was about the cost saving program.
Maybe here in a nutshell, the cost saving program, We are very experienced in this because we have done it in the past for several times. And once again, we have opened our toolbox, which is Pretty well filled up with initiatives and measures, and that is what we have started. It is already in place, and that will support our positions in the next Yes. Definitely. And please forgive us, forgive me if we do not provide you with a very precise number.
I can get it. Ute can get it, too. I can read it in Ute's eyes that you are really keen on getting here a precise number, but It is just a little bit too early to provide you with, but please be sure that we will, as always, Since ever, I may say so that we have pressed the right button and the measures we have now in place are Already negotiated with our quota termination. So we are here Pretty well positioned to ramp some up to start immediately, and that is what we have done.
Thank you.
The next question is from the line of Sebastian Bray with Berenberg. Your question please.
Hello, good morning and thank you for taking my questions. I would have 2 please. The first is on technology and infrastructure. There have been quite a lot of one off effects year to date in this segment. What is a reasonable underlying run rate to assume from the year 2023 onwards?
And my second is on interest costs. I appreciate this is somewhat of a theoretical question given that the business is likely to make divestments that lower the level of leverage. But at spot interest rate market interest rates, what would the net financial item be for 2023? Thank you.
Yes, Sebastian. Thank you very much for your very detailed questions. TI, I I think the reporting you see is a level where we Already, we distribute internal internally profit from TI to the divisions Of course, it doesn't help if TI makes a good profit as an infrastructure provider, and we More or less run it on an infrastructure ROCE and then the rest gets then kicked back, so to To the operational division, that means the normalized earnings level for TI It's somewhere in that region, EUR 140,000,000 EUR 150,000,000 EBITDA because that's more or less the Equivalent of that mechanism. Interest cost, yes, what we see now is Higher interest will lead to lower financial results also better financial results, but of course, that's balance sheet technique. We have Refinance the long term margins already in the last 12 to 18 months, so there is no immediate The long term refinancing, of course, we have rolled over Our syndicated loan, but I think the cost increase is very, very limited from that.
And we have, of A good bunch of short term instruments should be more liquidity in the next year, but that more or less It's really on LIBOR or your LIBOR. So also, I think, with very overlookable, overseeable interest costs. So In that point of view, there is no long term financing here, which will then turn the financial result
That's helpful. And if I may just follow-up, again, it comes to down to leverage for next year. I appreciate, Wolf, the answer to this question might be, well, you'll find out early next year, but the price achieved for the divestment Of the €100,000,000 or so sales from Specialty Additives, is that comparable to the amount of revenue that our business generates on an annual basis?
Yes. I think you are more expert than we are what a good pricing is in the market, but I would not Yes. State of the opposite. So I think it's a very Adequate pricing, and I think you know what that means for such analysis.
That's helpful. Thank you for taking my questions. Thank you, Ote.
The next question is from the line of Martin Roediger with Kepler Cheuvreux. Your question please. Thanks. Actually my questions have been already answered. Only one left on the energy hedging.
I recall that at the end of last year, you had hedges running 2 or 3 years or you have been hedged already for a period of 2 to 3 years. Is that still the case for you?
The hedging mechanism has not changed fundamentally for the court. On the technical We are discussing that, but the basic mechanism is in place.
Thank you. The next question is from the line of Jaydeep Pandya with On Field Research. Your question please.
Yes. I want to ask firstly on methionine. In the Chinese market, if I understand it correctly, This has traditionally always been a powder market. And obviously, Adhesio has just increased their capacity materially on the liquid side. So how do you sort of see this dynamic in terms of powder versus liquid when you think about China and also sort of the rest of the world In a sort of slightly more difficult backdrop for your customers in terms of penetration, but also in terms of Pricing going into next year.
And then the second question really is around your cost savings program, but on a most slightly different note. When you do divest Performance Materials altogether, will there be additional cost savings needed to sort of right size the organization And to the sort of new 3 division level again. Thanks a lot.
Yes, Aviv. Good morning. Thank you for the questions. I'll do the second one and then Christian We'll take the methionine question. Of course, if we sell a bigger asset in our group, there are We have to see what is in the right side of the remaining organization.
We have, of course, 5 of the That goes with the asset that's clear because to make it really a self sufficient entity, but we did it When we sold the net Equulus, that's clear. We know that from the beginning, and that is then part of the ongoing Improvements continuous improvement process.
Yes. I'll take 2nd one. In fact, there is no really difference between powder or liquid kind of refining In respect of the market dynamic, it is, give or take, the same rhythm. And that is as clear as I Today, the answer to your question. All right.
Thanks. Thanks a lot. It's my pleasure doing so. Ladies and gentlemen, this ends our call for today. It was our pleasure having had you here on.
Thanks so far for your attention and take care.
Ladies and gentlemen, the conference is now concluded and you may disconnect your telephone. Thank you for joining and have a pleasant day. Goodbye.