Good morning. Welcome to Evonik. Today, 1 hour earlier than usual, And I think you all have the next call already scheduled ahead of you, so we get started right away and also have, I think a hard cut. So should keep this relatively crisp and short today. With that, I hand over directly to Christian for the introductory remarks.
Thanks a lot, Tim. And ladies and gentlemen, very warm welcome also from my side, and thanks For taking the time to be with us today. I hope you are all in good health and successfully managing all the challenges the current situation is Demanding from us. 2020 was a year of the unknown In which we all had to learn, to learn how to deal with the virus, how to protect our friends, families and colleagues and adapt our private and professional life. 2021, despite a still challenging start with the pandemic is a year, a year of growth and optimism.
Growth and optimism In which we all have grown together to fight the virus and supporting each other in these difficult times and so finally overcome the pandemic. At Evonik, ladies and gentlemen, we are likewise optimistic. First, for our employees, we are enabling digital work and new ways of working. We've started to deliver To work and new ways of working, we've started to deliver lipid nanoparticles to BioNTech. We distributed 15,000 test kits to our workforce lately and are preparing to vaccinate our employees and their families with our medical staff.
2nd, on the business side, the consistent execution of our strategy also throughout the pandemic Is getting rewarded by a strong start into the year. Of course, compared To the 2020 pandemic year, this might look more obvious and less challenging. Therefore, Our ambition level is rather the year 2019, the pre pandemic year. So In the Q1, we are posting an impressive close to double digit EBITDA growth compared the Q1 of 2019. This is a solid basis for our full year growth aspirations.
The target is clear, crystal clear, to grow above the 2019 pre pandemic level. This growth both in the Q1 as well as in the full year is not a result of commodity driven cyclical recovery. Performance Materials, for example, is still below 2019 level in the Q1 and most likely also for the full year. Our growth, ladies and gentlemen, is and will be generated by the core and heart of our portfolio by our 3 growth divisions. While the group increased an EBITDA of 9% plus Versus the Q1 of 2019, our growth divisions progressed at double this rate, Plus 18% versus the pre pandemic level.
Of course,
We also benefit from the currently favorable environment. But beyond that, It is another proof point for the quality behind our growth divisions, their structural Growth drivers and their innovation and sustainability achievements. Just two recent highlights to showcase Our consistent progress on these two elements. 1st, a perfect example for innovation driven by sustainability. Evonik has introduced a new silicon carbon composite material as anode material for lithium ion batteries.
This makes batteries more powerful by increasing energy density and improving the fast charging capability, thus Increasing energy efficiency. 2nd, we have set up a new production site for lipid nanoparticles, An essential component for mRNA based vaccines against COVID-nineteen in Hano, a lovely village in Germany. Internally, this project has been Tristan's speed of light. What would otherwise have taken at least a year, we did up and running in less than 6 months. From the first talks with our partner BioNTech to the start of delivery mid of April.
Innovation and sustainability were also In the center of our 1st division spotlight event on the 13th April. We hope you had the chance to listen in. With a record attendance of close to 200 analysts and investors. Nutrition and Care early addressed structural market trends around sustainability as their guiding principle and very consistently executed their strategy with successful innovation and acquisitions. The result is a strong position in very attractive growth areas Like active cosmetic ingredients, drug delivery systems or biotechnology.
They will drive definitely the division towards its operational and financial targets, Like an EBITDA CAGR of above 8%, an EBITDA margin level of above 22% and EUROCI of above 14%. With that, back to our quarter one reporting. And over to you, Ute.
Thank you, Christian, and welcome from me as well. Christian already highlighted our EBITDA improvements. Hence, I will start with our achievements in free cash flow. Indeed, we delivered a record high cash flow level of €312,000,000 the highest figure ever recorded in the Q1 since our listing in is 13. Of course, the higher EBITDA level helped as a starting point.
On top of that, our consistent cash focus and Our structural improvements continue to pay off. We managed to keep the working capital outflows limited despite growing sales, and And we recorded lower tax payments in the Q1. Both impacting factors will revert to some degree in the remainder of the year. Nevertheless, the Q1 free cash flow builds a very strong basis to continue our track record of free cash flow growth in 2021. Let's now have a look at our operational performance by division.
Specialty Additives was in the quarter. The leading portfolio of mission critical additive solutions unveiled its power. That translated into strong and Volume growth and a margin level of 30%. We experienced strong growth demand strong demand, sorry, Especially from the coatings and construction industries across all regions. And we also Enjoyed a solid start into the year for crosslinkers.
So far, there are no signs yet of a slowing momentum in Asia. Consequently, we uplift our full year outlook for the division. Now we expect an EBITDA figure slightly above the already strong prior year levels. Our second growth engine is Nutrition and Care. Earnings were up year on year by 20% or even 25% versus the pre pandemic 2019 number.
This strong performance is driven by the robust structural growth of our end markets. We have experienced an unchanged strong demand, especially for active ingredients and Care Solutions. In Healthcare, we had a slower start into the year, which was related to a planned maintenance shutdown. The effect of the shutdown will be offset soon, not at least by the additional lipid nanoparticle business with BioNTech. On the efficiency side, all businesses have structurally and Smart Materials has shown a continued nice sequential improvement.
Inorganics for hygiene, personal care and environmental are growing on the back of a solid and resilient 2020 level. In the auto related businesses, silica for tires have continued their way of recovery. And also PA12 has followed these improving trends and is already back to high utilization rates. So the margin is back to the prior year level of 19% again. In Performance Materials, We continue to see improving demand and spreads in the C4 chain.
We are observing a favorable environment for butadiene and And OXXO products partially supported by competitor outages. MTBE is also on a recovery path. Baby Care was impacted by lower weather related volumes in the U. S. And the usual 2 to 3 months time lag to pass on rising raw material prices.
Here, I'm talking specifically about propylene. So overall, our portfolio and especially our growth divisions have proven their growth potential in the Q1 and should continue to do so for the remainder of this year. With that, I'm handing back to Christian.
Thanks a lot, Ute. Now let's dive into our full year outlook. On the back of these positive results, We stay confident. And it's worthwhile to underpin it, we stay confident for our clear growth aspirations actions in the year 2021 against 2020 and also against the pre pandemic level of 2019. In the 1st quarter, we were 9% ahead of the Q1 of 2019.
And our 3 growth divisions as our driving force give us confidence, strong confidence to deliver a similar growth rate for the 2nd quarter as well. This would have put us around 10% ahead of the 2019 pre pandemic level in the first half of twenty twenty one. Looking ahead, we still have to recognize that the pandemic is still not over. For example, We experienced more and more raw material shortages in several businesses. Nothing dramatic yet, of course, but something to keep a certain level of Caution for the rest of the year.
And also, our customers secure volumes throughout their supply chains to avoid any kind of shortages In charge markets. So this might explain some part of the strong volume growth we have seen in the Q1 and are Currently seeing and enjoying for the start into the Q2. While this might normalize in the course of the year, there are still Several other businesses in our portfolio, which have further growth potential in the second half of action for Vetsense. Thus, we're confident, confident to upgrade our outlook and cut the lower end of the range. We now expect €2,100,000,000 to €2,300,000,000 or to put it differently, it is our clear ambition to come out better than the 2019 pre pandemic level of EUR 2,150,000,000.
For free cash flow, we continue to guide for a cash conversion on the high prior year level of around 40%. And since we narrowed the EBITDA range towards the upside, this translates into now expected higher Absolute cash flow for 2021 as well. With that, ladies and gentlemen, we thank you so far For your interest and your time. And now we are happy to take your questions. You could now Start to plaster us with anything you want to know.
Thank you. Now we will begin our question and answer The first question is by Charlie Webb of Morgan Stanley.
Good morning all. Thank you for the time. Just a couple from me. First off, just around the guidance. Looking at kind of the both upper and the lower end Of the guidance and accounting for what looks
like it's going to be
a fairly strong H1, perhaps you can just help us understand What normalization you anticipate? What you see in the current order books that would lead you to be a little bit conservative or cautious, sorry, should say, on the second half, just given things seem quite positive heading into Q2. 2nd up is just one around the biolipid nanoparticles. It clearly sounds like you've got that up and running quicker or very quickly. So just wondering what your expectations are from that in terms
of its contribution, I think
last time we were talking or we were looking at some sort of double digit million sales contribution from that this year. Given you managed
to get that up a
bit quicker, maybe you could just give us a sense of how the ramp up is going and what you now expect for the full year
from that? That'd be great. Thank you very much.
Charlie, thanks a lot for your question. I guess I'll take the first Part of the first question, Ute then will add something, and I will give him a little bit more color about the progress we made in Back of our lipid nanoparticle business. But maybe let me start with the personal address. As you know, I'm a conservative. And since I've taken helm in summer 2017, I have delivered.
We have delivered on everything we have promised. This kind of moving ahead, this Kind of creating future for Evonik and for our investors is paying off definitely. So don't get me wrong, but not for all the tea of China, I would change this Attitude, which is much more than an obligation for me. So please forgive me if we and I stay conservative. But nevertheless, it is definitely right that we will see a brilliant first half of the year.
And following the line of this, I think, Shouldn't. Conservatism, it is fair to say that there are still chances in the second half of the year On the one side. On the other side, that is what we should not underestimate. There are Some factors, let me call it, we have to watch for. For example sorry, Sorry, for example, that the markets are definitely very tight and our customers have secured volumes And they do really order every kind of kilogram they can get, but not necessarily.
We see that our customers have started to build inventories in this respect. And it is fair to say that we should not That we should not put a blind eye on the, let me say, development of raw materials and some of them are even critical for our customers. So this might have an impact on volumes in the second half of this But on the other side, we do see definitely further growth potential in the second half of the year, Thinking about our Veramaris, thinking about the lipid nanoparticles. So in a nutshell, we expect a Strong first half and are confident. Confident as a conservative Sky like me and Ute, I may say so, could even be for the second half of this year.
With this, I ask cordially and politely Ute to give you a little bit more color about some detail.
Yes, with pleasure. Thank you. Yes. I think Christian very well described what would bring us to the upper side of the range. Of course, if the strong momentum continues throughout year, you can do the math yourself.
But I think you also asked what could bring us more to the lower part of the range. And I think we should keep an eye on rising raw material prices. We had last year, Especially in Q3 and also Q4, very low raw material prices. That helps a little bit also in the margin here and there in Q1. So that is a factor to watch.
And of course, also the shortages can limit growth Here and there to a certain extent. And last year, we discussed several times what are one of savings due to the pandemic, you might remember that. And when one was, of course, lower bonus payments for our employees, we had, of course, a much lower EBITDA last year and then that, of course, delivers lower short term bonuses that will not repeat this year. So this effect of lower bonuses was a onetime last year we described And of course, that is to be kept in mind this year. If we look
at the
divisions, Specialty Additives and Smart Materials, we have seen very High volume growth in Q1, especially visible for Coatings, durable consumer goods and automotive. So here, the question It's really what is a re or pre stocking at our customers. Are they even with all the Logistic constraints we see, supply chain constraints. Maybe they are ordering a little bit more than they would do in a normal environment. That is something to watch.
And we see customers fill up the supply chains from very low inventory was at the end of 2020. That normally will normalize throughout the year. And so this very strong growth Of Q1 and Q2, especially also compared with 2019, might not be realizable in the second In crosslinkers, Van Hoegh market entry is still expected towards the end of the year. I think on the demand side, Demand in Asia is very strong, so that helps. And we have to see how the market reentry then in the end influences Our business, our volumes.
Nutrition and Care, all business will see a strong demand in 2021. We described that. Ingredients in cosmetics and the ramp up of the LMP, of course, will give further support throughout the year. But also in Animal Nutrition, Tight supply demand for methionine that we have at the beginning of the year has already normalized. So we'll see normalization of contract prices On good levels throughout the course of Q3.
Volumes growth should stay healthy. We described that also In the last quarters that really the market is in a very good and resilient shape here. So volume growth in methionine will be there as in every year, Especially then after the end of the global lockdown. So overall, our growth divisions will continue to deliver the structural growth and drive earnings Above the 2019 pre pandemic levels, it depends a little bit on the momentum in the second half if we get more to the middle Of the range or more to the higher end of the range. And of course, there are some risks towards the lower part of the range.
That is what we see
today. Charlie, back to your second question about the further potential Of our lipids. Ute has given you some more color about potential risks. Here is some more color about potential upside, tremendous upside. For this year, we do expect a clear double digit sales contribution.
I conveyed to you last time and that is what I could confirm and that is what I could confirm by underpinning it Because there's definitely chance to come out better. And that, I guess, is the answer the crispy answer to your question.
Brilliant. Thanks a lot, both. That's really helpful.
The next question is by Andreas Heineau of
I
have 3 questions, if I may. The first is on Specialty Additives. You have given very positive comments Also on raising the guidance in Nutrition and Care, actually the highest deviation to the Expectation was in Specialty Additives where the outlook is flat earnings. Maybe you can comment how cautious you are in that respect. 2nd, Maybe update on polyamide 12.
My understanding is that it effects already in start ups with the earnings in Smart Materials. Maybe you can highlight where you stand there. And lastly, with also your very strong growth in all the high margin and innovative products, Is it fair to assume that extrapolating this in the next years means that your CapEx budget has to be adjusted as well?
Good morning, Andreas. Thank you for the questions. I'll start With your first one, Specialty Additives, We described, I think, in our full year outlook that especially the business in Asia and the reentry of Wanhua is a little bit Risk factor, we described how that has developed in the Q1 and now that we have more visibility. I think the good momentum will continue in the second quarter and to a certain extent also in the second half. We see especially strong demand from Asia.
That's true for all of our growth divisions, and we also see continuously good order levels. If we look at Specialty Additives, then I think the others like Comfort Insulation, Interface Performance We're all on a good track. So from that point of view, that explains the now more positive view on that division. I could also now take the 3rd question on CapEx. We have analyzed CapEx throughout the last years and have really under I found out or in the end seen that this sustainable level of EUR 850 is, as an average is enough for maintenance and for growth CapEx.
We have to see that in our portfolio now step by step, The share of more CapEx Life businesses is growing. So we need less CapEx here So from that point of view, I mentioned portfolio step by step is getting somewhat more CapEx And the number we have given this €850,000,000 is designed in a way that it allows the growth That we are seeing in our portfolio.
Hi, Andreas. I will try to answer your question about PISA. In other words, our PA12 plant here, we are building up in Germany. Yes, there is a slight delay, a slight delay of a very few weeks. And that translates into and I dare say, as a matter of fact, that we will Ramp up we will have to ramp up in the second half of this year around summer vacation, a little bit earlier, a little bit later.
But around this time, You could definitely bank on that we would have to ramp up of this planned year. And if I compare situation talking about our construction plans here in Talking about PA12, with those of our competitors, we have really extended and expanded our position and that might Be very helpful and fruitful in paying off in the next year. That is what we do assume. And there's good reason for assuming this in such.
Thanks.
The next question is by Chetan Udeshi, One second please of JPMorgan. Your line is open now, sir.
Yes, hi, thanks. Couple of questions from my side. First question is, we've Seen a significant increase in crop prices. And I don't know if you had any perspective on how it may or may not impact The demand for methionine in general, that would be the first question. And second question is Just around the topic of recyclability of some of the products of Evonik, whether it's in smart materials or whether it's in additives.
Can you talk about what is the recyclability scope today or in the future for some of the polymers that you supply to customers? Thank you.
Yes, Chetan. Good morning. Thanks for the questions. I'll start with the first one, and then Christian will talk about Circular Economy in a couple of minutes. Normally, what we see, there is no correlation between corn prices or Props and methionine, we have had these constellations throughout the last years many, many times.
So there might Here and there, a local influence, but not that it really moves the needle in our overall global methionine business. So from that point of view, we don't see any specific influence from there. What will drive and what drives the methionine growth very, and resiliently and very, very sustainably is really the professionalization of meat production, the Sustainability aspects in the developed markets, so less food input, less, of course, waste Output, healthier animals, gut health, I think, is the big headline here. And of course, with increasing wealth and increasing food consumption, That is the 3rd pillar, and that is very, very robust now over decades, and that is what we see also for this year and the years to come.
I'll take the second question. Very warm welcome from my side. A couple of weeks ago, Lauren, The Head of our Specialty Additives department has ordered something about our secular plastics program and has announced that This has just started. That means, in other words, that we do see here in the midterm sales potential of Sorry, that we do see here in the midterm, the sales potential of give or take €300,000,000 Even more, even more. And that means, in other words, you are Very cordially invited to attend our division day for the specialty additives, which we will have, Tim, in a few weeks?
Yes, correct. And it's the second one, so it's beginning of July.
And we will try To take this chance to amaze you about our Circular Plastics program. But I'm as you know, I Should stay polite here and give Laurent Kjellsen the chance to explain and to convey those brilliant contents and ideas and It is personally to you.
Understood. Thank you.
The next question is by Nicola Tang of BNP Paribas.
Hi, everyone. Thanks for taking my questions. The first one was actually on Veramaris. You mentioned, I think, earlier that maybe this is a source of upside for H2 versus H1 if lock Sound measures ease. So could you talk a little bit more about how this is progressing so far?
The second was, could you give us an update on the Baby Care carve out, how that's going? And then finally, could you Just remind us of the kind of long term intentions of RAG as your core shareholder. Just an update would be helpful. Thank you.
Yes, Nicolas, thank you for the questions. I'll start with Veramaris. That is progressing well. Sales Is it further ramping up? We are further ramping up the production, are working towards The €150,000,000 to €200,000,000 sales for the joint venture, keep in mind, it's fifty-fifty and of course, above average Margins, it is a biotech process.
So of course, that's not always linear. But we have really now tackled Some start up things in the last year. And so that technically, I think that is very well up and running. COVID-nineteen, you already mentioned, had impacted the whole restaurant catering business in major salmon markets last year. And in some of the countries, that was Down by nearly 50% compared to 2019.
However, the overall road map and the value proposition is well on track. And of course, we have seen it in our realized sales prices with in line with our business plan. To be more diversified, we have Adjusted our focus and building up a presence in pet foods, that was always a chance. So of course, that is now maybe Coming more into focus because also there, the demand is different and maybe even more stable than in the food And we are expanding our footprint with regard to species into warm water Fish and Trim, so that we have a broader appliance range. And of course, it's still difficult to travel and meet the customers to Discuss about the new applications, so I think there's more something for the second half.
But there is clear, we will further increase the sales This year and in line also with the increased capacity utilization.
Okay. I'll take the next two questions. First about our Baby Care business, the acrylic acid. And I would entitle the answer to this question by saying everything is well on track. We have announced that we will start the carve out process.
We have announced it in the autumn of last year. All work Streams, our project work streams are pretty well on track. And so we stick and I could confirm that we do so to our time line. Separation will be finalized in the middle of this year. And then thereafter, it is Our job to evaluate all further strategic options and to choose the best ones and that will happen in a related time.
So once again, everything is pretty well on track, and we stay put to what we have announced. And our aim is also here to deliver in due course. And then there was another question about the strategy of REG Foundation. Okay, it is my pleasure. I dare say it is my utmost pleasure being the CEO of Evonik.
And from this perspective, I could comment About REG Foundation saying that, yes, they do have a very clear intention to remain Significant, a significant shareholder of Evonik as an integral part of their portfolio. And as you know, REG Foundation is a professional asset manager. So taking this in consideration, their intentions are pretty well aligned With the intentions of the other shareholders of Evonik Industry, which I do really appreciate So far from my side. All
right. Thank you very much.
Pleasure.
The next question is by Thomas Obrador of Societe Generale.
Yes. Good morning, everybody. I have one question, and it is on your pricing strategy, Especially regarding Smart Materials and Specialty Additives. Earlier on the call, you stressed that input costs are arising. So in both of the before mentioned segments, pricing was slightly negative in Q1.
So my question is, do you expect that you can increase your prices accordingly to avoid margin pressure? Or should we actually prepare for some headwind on your profitability from input costs in H2. Thank you.
Yes, Thomas, thank you for the question. I think what you see is an aggregated number for the whole Portfolio of the division, it's a little bit a mixed picture if you go to the business lines. So overall, I think prices were broadly stable in Specialty Additives, as I said. If you look into the specific business lines, there are some where prices up, some with prices slightly down. That's Also due to product mix and other factors, if we look at Smart Materials, also here A slight price decrease of 1%.
There is some energy costs passing on, especially in the silica business, That has might have an influence. And also here in other divisions, we had a very good price development. And it's Sometimes, if it's catalyst, it's really how it's the product mix in that given quarter. So I would not overemphasize that. I think we are pricing our products in accordance with the specific value That they create for our customers, value based pricing.
So from that point of view, that is very well intact. If raw materials are expect it to rise. That is also part of your questions. Of course, we have to see that very early. We have to have early indicators to then Be able to phase that into our pricing policy as early as possible.
That is what we have done in the last years. We had here and there quite significant price increases in 1 or the other raw materials like 2 years ago, and we really managed So that is how we look at it. Again, I would not overestimate and overemphasize here the little fluctuations on the price side for Q1.
It's very clear. Thank you.
The next question is by Gunther Szechmann of Bernstein.
Good morning, Ute, Christian and Tim. Just to follow-up on the full year EBITDA guidance, please. You already said it's conservative. But if I can take that a little further. Back with the full year results in March, you guided for €550,000,000 EBITDA in Q1.
You did just under €590,000,000 So what do you see different in the next 9 months that you decided to increase the lower end of the guidance range €100,000,000 but keep the higher end unchanged, please? And then the second part of my question is If I take your reported Q1 earnings and the Q2 guidance, that implies just over EUR 1,200,000,000 EBITDA for the first half Yes. When I take a typical seasonality of Evonik over the years, that implies full year EBITDA of €2,300,000,000
Is that What do
you see as well that you're very comfortable with the upper end of your guidance range, please?
Gunther, very warm welcome from my side. Good to hear you. Hope everything is okay. Your question is, as always, a very tricky one. And yes, you've got me totally right That I'm conservative and I will stay put to it.
And as mentioned, not for all the tiers of China, I would change this position because we We have given ourselves the aim to deliver on what we promised to you. Having said this, it is that certain That we will see a pretty attractive and pretty good first half of this year. And please, Gunther, forgive me, But if I would now start together with Ute and Tim to give you more color about what we do see, what we do judge And how we should deal with the second half of this year. What Gunther, what would be the next The half year quarter reporting, what would Be good for. It would be good for nothing.
So in other words, Q1, great. Q2, we assume to do better. And then in the meanwhile, it is not to mitigate Your optimism about Evonik. But it is to say, please feel invited, come across in the summer of the year, and we will give you our Numbers and figures about the Q2 of the year and then we will see how we could do it. Give us a chance and give us a chance to convince you once again with our numbers and figures.
I guess that is a fair answer I could give to you as of today. Don't be too much don't be too disappointed.
Okay. Thank you.
The next question is by Martin Roediger of Kepler Cheuvreux.
Thanks. I have only one question left. It's on Animal Nutrition. Sales in Animal Nutrition was up By 2% year over year only. And this was mentioned in your fact sheet due to pricing.
So you did not mention volumes Actually slightly down. Is this correct? And if so, I wonder why you mentioned that supply and demand is good globally in malnutrition. And Mrs. Wolf indicated in her speech some volume growth in methionine.
So my conclusion would be, is there any drop Volumes in lysine, threonine and tryptophan, which has caused this volume performance.
Yes, Martin, good morning. So please keep in mind that last year's Q1, Animal Nutrition had A record volume development because you might remember in China, the pandemic was already going on And China was doing everything to secure food production and feed additive supply into the market. So from that point of view, the comparison to last year's Q1 is very high. So that's why, of course, The volume growth is maybe not. In this specific comparison, quarter 1, 2020 versus quarter 1, 2021 It's not the usual one.
Basically, the overall Growth trends are intact. I described them just a couple of minutes ago For the other question, we see that and that is what we are also working on. We see it throughout the globe. We have also that TIE Trust examination going on in the U. S, so that is also potentially helping us as we produce in the U.
S. That is what we see for Animal Nutrition.
Thank you.
There are no further questions. So I hand back to you, Mr. Kullmann, for the closing remarks.
Yes. Thanks a lot, Ladies and gentlemen, having had you today, it was our pleasure to keep you informed about how the company is running. And from our side, we wish you pretty well summertime and stay healthy and hope to meet you soon in person.