Good morning, ladies and gentlemen. Thank you for standing by. Welcome, and thank you for joining the first quater 2023 earnings conference call of Evonik Industries AG. Throughout today's recorded presentation, all participants will be in a listen-only mode. After a short introduction by the management, there will be a question-and-answer session. If you would like to ask a question, you may do so by pressing *1 . Press the *0 for operator assistance. It is my pleasure. I would now like to turn the conference over to Tim Lange, Head of Investor Relations. Please go ahead.
Thank you very much, and good morning and welcome to our call. With me today, and now I need to be careful not to use the same script as for the last six years. With me today are Christian Kullmann, and for the first time, our new CFO, Maike Schuh. With that, I hand over directly to Christian.
Thanks a lot, Tim. Welcome also from my side, and thanks for being with us today. Today, it is another special call. Last time, we said goodbye to Ute on our last quarterly call. This time, I'm really excited to welcome our new Chief Financial Officer, Maike Schuh, for our first earnings call. Maike, it is my great pleasure to work with you even closer from now on. Your financial background and business experience make you a valuable new member of our management team and a highly respected partner for me. Jointly, we will continue to work on our transformation into the world's leading specialty chemicals company. Good to have you with me already today, so you can directly take over the tougher questions.
Thank you, Christian. I would have expected nothing else. From my side, a warm welcome. The opportunity to shape Evonik's future as CFO is a great honor to me, and I'm very much looking forward to it. To be totally open, of course, I had the thought that the job will demand a lot of me. What helps me is knowing that I have been with Evonik for a long time, and that I have a great team behind me. I also still had Ute by my side for the last couple of months. They have all done their best to prepare me well for the job. Of course, as CFO, you need a good analytical understanding, or very simple, you should like numbers. I see in my new role that a good understanding of the business behind the numbers is also important.
I can only interpret figures correctly if I know the context, the markets, and the products. Over the last years in my different roles in Performance Materials, I also got to see the perspective of operations. That is now incredibly valuable for me. Everything ultimately ends up in figures, not only in your models, but also here at Evonik. What we do with these figures and passing that on to the relevant decision-makers is a very truthful task in my new role. In my first month as CFO, I had already the one or other investor call and analyst contact, and there will be many more to come. The dialogue with capital markets is a high priority for me and gives me also an important perspective on Evonik. In this spirit, back to you, Christian.
Thanks a lot, dear Maike. Let's start, ladies and gentlemen, with a brief summary of our strategic milestones over the last weeks in which you, Maike, have already been deeply involved, both in your former role as head of Performance Materials and, of course, also in your new role. At the beginning of April, we signed the sale of our Lülsdorf site. For us, it is the first deal in the divestment process of Performance Materials. The second one, the divestment of our superabsorbents, is well underway. Speaking about our transformation, we continuously improve our existing businesses too. For Animal Nutrition, we will steer the business with two distinct operating models that better fit the nature of the underlying activities. This ensures the competitiveness and secures at the same time its role as a strong and important cash generator for Evonik Industries.
The first of the EUR 200 million in cost savings will already be realized this year. The biggest contributions will then come in 2024 and in 2025. After my brief strategic introduction, I hand over to Maike Schuh once again. Maike Schuh, it's your stage.
Thank you, Christian. As you know, we are implementing short-term contingency measures to safeguard our earnings situation in 2023. We are executing the defined actions and have individual saving targets for all divisions and functions. We have live dashboards by cost type, and we are discussing our achievement level regularly at the board. In Q1, we were able to deliver the first savings as planned. We reduced maintenance where possible. We used less consultants, traveled less and cheaper, reduced events and optimized IT costs. The biggest buckets are savings related to personnel and operations. These will even accelerate as the year progresses.
For example, the benefit for temporarily not refilling up open positions obviously will build over time. With our financials, t he EUR 409 million of adjusted EBITDA for Q1 were mainly the result of the strong volume decline and the corresponding lower utilization of our plants.
This led to a notable under- absorption of fixed costs. Pricing on group level remained positive at 3%, despite the lower volume and increasingly tougher comparables. This was driven by strong pricing in Specialty Additives and Smart Materials. Here we were able to again compensate for further cost inflation. Let's move on to some details by division. First, Specialty Additives. There were basically two reasons for the weak Q1 volumes. We saw continued customer destocking in the first weeks of the year, especially in Asia. The business is typically more late cycle, meaning it was robust for longer in the year. Now we have seen the weakness a bit later in Q1. Through the quarter, a clear pickup in volumes and order books was visible.
On earnings level, the main driver of the notable decline were higher fixed costs due to underutilized efforts. Nutrition & Care. The earnings situation in Nutrition & Care is clearly unsatisfactory. Health & Care, and specifically health care, had the expected slower start in the year. Similar to last year, the business will accelerate in Q2 and mainly in the second half of the year. The main driver of the low earnings and profitability was Animal Nutrition. Animal protein markets continue to struggle with high feed costs and low margins. Our methionine volumes in Q1 were lower than expected, especially in China and Brazil. The drop in prices continued faster than expected, reflecting weak demand and already anticipating new capacities coming to the market mid-year. The price decline was even faster than the decreasing raw material prices, putting pressure on margins.
Smart Materials saw a good sequential earnings pickup. Volumes were also weak on the back of the still sluggish demand visible in businesses like silica or in the shutdowns of our HPPO plants in Asia. Earnings were supported by strong pricing of 10% year-over-year and long-awaited, a strong performance of polyamide 12. Our new plant in Marl finally came on stream and into a tight market. In March, we produced record volumes with both plants running. Performance Materials has seen the expected drop in earnings after a strong last year and a still solid Q4. The C4 business faced weak underlying demand in customer end markets. We have seen pressure from lower spreads and margins, while energy prices provided little relief for us.
On the positive side, our superabsorbent business delivered the expected improvement in earnings and is back on its way to showing its full earnings potential again. Before I hand back to Christian for the outlook, a few words on the free cash flow in Q1. Let me look at it from two perspectives. Sequentially, the very strong year-end cash performance last year limited our cash generation in Q1. Year over years, the biggest impact obviously came from the lower earnings starting point. The benefit from a less pronounced net working capital outflow could not level this out. With that, Christian, over to you again.
Thanks a lot, Maike. To take it simple, we have two positive trends that make us confident heading into the second quarter. First, volumes and earnings should recover further. During the first quarter, each month was better than the previous one. Second, costs keep coming down. With improving volumes, we will see improving utilization and better fixed cost absorption. Our raw material basket did not fall much yet in the first quarter, but this tailwind will start to kick in as well now. Our contingencies will ramp up further. What, ladies and gentlemen, does this mean for our full year outlook? The start into the year was weak, even weaker than we had expected. We knew that we needed a recovery during the year, so it is a first positive that this recovery has now started to materialize during the first quarter.
The start into the second quarter continues on the improved March level. We expect a further acceleration during the second quarter and the second half of the year, which is exactly what we need to remain on track for our full year outlook. This acceleration should be supported by improving utilization rates, by falling raw material costs, and by the ramp up of the contingency measures. The recovery during our 1st quarter was especially visible in Specialty Additives and in Smart Materials. EBITDA in these divisions were more than 20% better in March versus January and February. For the full year, we continue to expect that EBITDA in these two specialty divisions is combined above last year's level.
In Animal Nutrition and Performance Materials with our Q4 reporting, we had assumed an EBITDA decline of combined around EUR 400 million for the full year at the midpoint of our guidance range. The ongoing price decline in methionine was stronger than we had expected, and also volumes are below our initial expectations. This means that we do now expect a combined EUR 500 million decline. The delta is fully explained by methionine. C4 is even slightly better than our initial expectations. This implies that the lower end of our EUR 2.1 billion- EUR 2.4 billion guidance range for the year is more likely. For free cash flow, that means to achieve our target of a higher number in 2023. We need to step up our efforts.
We had already decided to cut our CapEx by EUR 75 million. For the full year 2023, we now expect CapEx in line with previous years at around EUR 900 million. This number also includes our Next Generation Technologies investments to reduce CO2 emissions. We are not dialing down on our environmental commitments. The lower CapEx is rather a reflection of the flexibility in smaller projects, maintenance schedules or debottlenecks. Additionally, to reach our ambitious free cash flow target, we need to be really disciplined with net working capital. As you know, we are really used to this. With that, thank you so far for your interest and your time. We are now ready to take your questions.
Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one. If you wish to remove yourself from the question queue, you may press star followed by two. In the interest of time, please limit yourself to two questions only. Anyone who has a question may press star followed by one at this time. We have the first question from Andreas Heine from Stifel. Your question, please.
Before starting the Q&A, we have an opportunity to start the Q&A session. I have indeed two. The first question is to understand more how much earnings recovery we can expect in the second quarter. You outlined that in the first quarter have already seen month-on-month better trends. On the other hand, methionine prices will be sequentially down, and I expect that the PA 12 turnaround will also cost something. Maybe you can outline what we can expect here. Also, I would appreciate if you could spend some words on how sticky prices in Smart Materials and Specialty Additives are after several quarters of lower volume and prices still being high. Can you defend this price level or will that come down with sluggish demand going forward? The second question is on methionine.
You have outlined that you will implement a new business model in Animal Nutrition, with separation of the special and the more commoditized business. What does that mean for the capital allocation? If I look at what Evonik currently spends on the methionine business with the investment in the backward integration in the U.S., the expansion in Singapore, I think it's 40%, and improvement of the value chain in Europe. If I add this all up, I will probably get more than EUR 200 million in investment. Will the change in the business model also change the capital allocation towards this business? Thanks.
Um.
Second question.
Hi, Andreas. Good to listen to you and pestering you with our questions. Maybe I take the first one about the pricing expectations. Let's keep it like this. Yes, it is an increasingly more challenging situation to push for further price increases. It is what goes without saying. The reason for this is mainly that customers cannot pass costs increases on to end customers anymore. Still in the first quarter, pricing for Evonik was held up pretty well. Here we talk about overall of a 3%, and especially in our specialties. With Specialty Additives, we talked about 5%, and Smart Materials, even 10%. It is worthwhile to mention. On the other side, declines are most severe as indicated in Animal Nutrition and in our commodity-based C4 business.
Second part of your first question before I will hand over to Maike, was about what do we expect for 2023 in this kind of instance. Let's keep it like this. For this year as a whole, we expect raw material prices to fall. That is what we can already see, that is what we can already observe. This process will maybe even become stronger during the second quarter onwards. In other words, in Specialty Additives and in Smart Materials, that should definitely result in a positive margin contribution. We protect, as we have shown in the past, our prices as long as possible. It is somewhat of the reversal of negative margin effect from 2021 to 2022. With this, I hand over to Maike.
Thank you, Christian, and good morning, Andreas. To your question regarding earnings recovery in Q2. You mentioned rightly that we have seen the recovery has started to materialize in Q1. We have seen a month-by-month improvement. Also, our order back books are improving, and that means that the start in Q2 will, that's how we expect it, continue on this improved level from the end of Q1. We also continue to expect an acceleration during Q2. This should be driven by the following factors. On the one hand side, China continues to pick up after reopening. We will see the utilization rate of the assets improving. Christian just mentioned the falling raw material costs while we keep our prices as long as possible. Also the contingencies are ramping up in Q2.
If I go maybe by division, because you asked also Methionine and PA, but I give you for the sake of completion, I give you the overview of all divisions. Starting with Specialty Additives, there are actually a couple of reasons for a better Q2. We expect a clear improvement in production volumes and order books from actually a very low level through Q1. We expect a good auto-related business and also finally the end of destocking in coatings. This again results in a better plant utilization and fixed cost absorption in Q2. As mentioned before, we expect the raw material costs starting to fall, especially acetone and siloxane, while prices in Specialty Additives should stay robust. That will widen the gap between cost and price development and lead to a margin improvement.
Specialty Additives is expected to be clearly up in Q2 versus Q1. Regarding Nutrition & Care, methionine and of course, Care Solutions Health & Care, we have seen a solid start in Care Solutions, and we expect even some catch-up potential in Q2 after some sales delays in active ingredients and also an unplanned maintenance shutdown in the Cleaning Solutions in Q1. Health & Care, we see a slow improvement as usually. We see this business is typically more weighted toward the second half, towards the second half of the year. Animal Nutrition, however, will have slightly higher volumes, but we see another step down in prices. Overall, EBITDA is expected to be stable quarter-over-quarter, better Health & Care, lower Animal Nutrition. Maybe one more sentence to Animal Nutrition.
The volumes we expect to be lowest in Q1, improving in Q2 and then stable from there onwards. The prices we see declining in Q1 and in Q2, but they should stabilize during Q3. Health & Care, as I said, expected much stronger second half of the year. The efficiency program and the contingency measures at Animal Nutrition will give us more support throughout the year. Coming to Smart Materials and your PA12 shutdown, you already mentioned, Andreas, the Performance Materials business line, there we expect that we continue in a very tight market. We have our owner capacities limited in Q2. Of course, you mentioned that we have this planned maintenance shutdown of our existing first plant in Marl in May. Active Oxygens will have positive signs.
On the one hand side, early signs of tightness for the hydrogen peroxide in the U.S. Asia will have a potential restart of our HPPO plant based on the improved spread between PO and propylene. Rubber silica should, we see an expected demand increase, especially China is improving. Also catalysts should improve in regarding the order intake. Overall, Smart Materials, we see an EBITDA in Q2 to be slightly above the Q1 figures. As I said, we have a positive business momentum, but a capacity limitation in our PA12 business plant in Marl. Last but not least, Performance Materials. We expect that with regards to butadiene, we have slowly recovering spreads in April and May. MTBE actually has kept up very nicely, now we see the start of the driving season ahead, summertime and shorter markets.
We expect to keep that MTBE will keep up even further. DINA shows positive signals from Asia, that gives us hope for a recovery in Q2. The plasticizer business shows positive signs of stabilization. Q2 has typically a high demand for plasticizers. Superabsorber positive will stay with the improved earnings in 2023. Overall, EBITDA of Performance Materials is expected to be above the Q1 level.
Okay. Thanks a lot, Maike. Now, Andreas, you could see why we are positive in gaining the lower end of our given outlook because there's very good chances for the incoming months. Now coming to your last question about the role of methionine. You will remember that we have always been very clear about the role of methionine, the function of methionine in our portfolio. It is not a specialty kind of business for us. It is our cash cow. I'm not the butcher of our cash cow, so I'm not willing to slaughter it. Instead of that, we will better the market position of methionine. That means, first of all, cutting costs once again.
As you know, we have announced a reduction in cost of around EUR 200 million in this business, which is also translating in a reduction of headcount of 200 employees. Second, we will lift up the efficiency of our methionine business, which translates into smart and CapEx-light debottlenecking initiatives like we do to activate further potentials in our sites in Singapore, and like we do starting the backward integration of MetAMINO Macapá in our sites in Mobile, US. Having said this, you should please check in mind that the profitability of this business over the last years have generated very strong, a very strong cash flow, and that has cumulated over the last 10 years. It was twice as high in comparison to the CapEx we have spent, for example, in our own methionine plants.
Sum it up, it is a cash cow. We will not butcher it. We will groom this cash cow, by, first of all, cost-cutting, and second, by efficiency improvements like I've given it to you to make sure that this cash generator will also in future pay off in a way like we've seen it in the past already. Thanks a lot for your question.
Thanks for this comprehensive answer. Thanks a lot.
The next question comes from Georgina Fraser from Goldman Sachs. Please go ahead.
Hi. Good morning, Christian. Good morning, Maike. Thanks for taking my questions. It would be helpful if you're able to quantify the PA12 maintenance impact, so we can think about the size of an improvement into the third quarter. You mentioned that there's ongoing strength in demand, I assume automotive related, but have you seen any changes in terms of which end markets have been driving the strength in PA12? My second question is on CapEx. I think over the last couple of years, we had a kind of increase to the mid-term CapEx outlook that was related to sustainability or decarbonization investments. We have this reduced CapEx guide today. Does the challenging demand backdrop that we have mean that the rate of sustainability projects is slower than you would have hoped?
What kinds of investments are we seeing, being impacted by the reduced spending? Thank you.
Um.
Okay.
Meike.
Good morning, Georgina. I'll take your first and second question. With regards to the PA shutdown. As you rightly mentioned, the PA12 plant is a good part of our sequential improvement regarding Smart Materials from Q4 to Q1. Yeah, totally right. That comes, it is coming from PA12. We expect that the Q2 will be slightly lower with regard to course of the plant maintenance. However, Q3 will be strongly up with both plants running. Regarding your end market development. We see across all markets, for PA12 that they are driven by tightness. We are market leader for PA12, and we offer this entire range of the high- performance plasticizers.
The market shows still a long-term growth of 5% per year, and this is why we see that we see unchanged strong demand within all markets.
Okay. Hi, Georgina, it's me. I take the third question, in respect of, talking about our sustainability investments. I just say that in this respect, we have the lucky chance of chemicals industry. Why? A good amount of our businesses we call the Next Generation Solutions, fits already to the sustainability approaches. For example, government in Berlin or in Brussels have declared to reach so around more than 40%. Around 40% of our business already fits to it. That means investing in these businesses. What we will do means nothing else than being on our way to invest in the future of green growth. Second part here, you have asked about, I guess, it was Next Generation Technologies.
Obviously, here it is not to be very clear about it. It is not that we will slow down our investments in this, next generation technologies. There is no cut to our investments, plans. Everything is running here like we have announced it during our capital market day last year. Everything is here, well-placed. No changes in this respect. I guess that is my answer to your question.
Thank you.
The next question comes from Gunther Zechmann from Bernstein. Please go ahead.
Good morning, Christian. Good morning, Maike. Welcome. Couple of questions from my side. Thanks for slide 17 for providing the month-by-month trends during the quarter. We don't usually get this data, and it would be good to have some context. Could you just describe as quantitatively as possible the scales of that chart? You've given some numbers. I think you mentioned, Christian, a 20% improvement in the specialty division, Smart Materials and Specialty Additives. Can you help us square that up with, I think these are group numbers and how that looks like? That's the first question. The second one on the divestment of the polymeric superabsorbents. You mentioned it's well underway. Could you give us any detail around the number of bidders, the level of interest, and the timelines?
Likewise, I don't think you mentioned, the same comment with regards to Performance Intermediates. Any update on how that divestment is going as well would be greatly appreciated. Thank you.
Good morning, Gunther. Starting with your first question on the slide 17. I'm glad that you like it. We are showing you that we have this clear improvement in March, even slightly above our expectation. April continues on the improved March level. It is, as April has less working days, so basically, depending on the region, it is on this level, on the less working days. We expect an acceleration that will materializes during Q2 in May and June. We are well on track to reach our expectations in Q2.
As I said, if you take the maybe March level, and you take it in April, May and June, and then a further recovery in the second half of the year, we are basically on track for our forecast.
I take the second question in respect of our C4 chain business, Performance Intermediates business. The carve-out is processing pretty well. In other words, it is as planned. Here we will monitor the M&A market to see where is best starting point to start the process of the divestment. Worthwhile to mention that in this respect, we are not under pressure in no way. Talking about Baby Care, that was your second part of your question. We do, as of today, observe that the market's dynamics are improving and that we therefore will have a good, a good and positive financial outlook for 2023. In other words, the investment of our superabsorbents business is, I dare say so, well underway, and we are optimistic. Looking to Meike, we are still optimistic.
We are optimistic for finding in the course of 2023. If you would now give me a second question about it, I can't dismantle anymore. Otherwise, Maike would start to crucify me, and that can't be what you would intend. With that, this has answered your question.
That's very helpful. Thank you both. Thank you very much.
The next question comes from Matthew Yates from Bank of America. Your question, please.
Hey, good morning. I'd like to just go back to slide number six in the new Animal Nutrition model. Can you expand a little bit on the EUR 200 million in cost savings? I think you said that's 200 headcount- related cuts. I assume there must be other savings around asset closures or something. If you could expand on that. What are the challenges of implementing this plan, both internally and then also from a customer perspective? Because I would question why it hasn't been run like this historically, if you think this is the better business model. Thank you.
Thanks a lot for your question. To give a little bit more color about the EUR 200 million in cost savings, it is first that we have now started to optimize our production and our technology positions. Here, we need to cut fixed costs and cut variable costs through further optimization of our businesses. Second, that goes to the market and sales area of Animal Nutrition. Here, it is worthwhile to adapt the role model to a more, let me say, to definitely exclusively commodity approach that translates into lean commodity sales teams. By this, we will enhance the digital competencies of this business that will definitely become stronger. Last but not least, thinking about the supply chain management here, we have started strong initiatives to reduce and to optimize costs in the outbound logistics.
This is what will really be pay off over the course of the next years. That is what will help us to reduce the cost positions of around EUR 200 million up to 2025. That is also what includes the reduction of 200 jobs worldwide. With this, Meike is really keen on giving you some more color about this, so I have to hand over to her.
Good morning, Matthew. Yeah, regarding your question, why wouldn't we start earlier? Actually, we have already improved the efficiency and the reduced costs in methionine over the last years. We had a program called Adjust in 2019, we closed our Wesseling plant in 2020, 2021, its most recent example. Now the next program is the next step to aim a leaner organization with commercial and operational excellence. I think it's safe to say that we are proactive to secure our cost and competitive position in the business and to secure the attractive margin of methionine.
Thank you. Can I just follow up? I think it was Georgina's question earlier on the CapEx. I think you said you're still committed to the, to the major kinda growth, next-generation projects. That, that EUR 75 million in savings then, is that some debottlenecking that you've deferred because demand is? Can you just talk a bit about what's been changed within the budget?
Yes, Matthew, you're absolutely right. For me, it's very important, or for us, it's very, very important to make sure that the Next Generation Technologies are still included in our CapEx. The EUR 75 million that we have taken to reduce the CapEx are not the EUR 75 million that was linked to the Next Generation Technology investments. What we did is that we reflected a, yeah, we have shown a certain flexibility for smaller projects, for maintenance schedules or for a couple of debottlenecking. We have already started actually with activities regarding our Next Generation Technologies. For example, in Antwerp, we have a site-wide heat integration with a heat pump for waste heat recovery.
In Wesseling, we have replaced a gas-fired dryer by an electric dryer. In Hanau, we have various measures for heat integration and waste heat utilization. I hope that helps.
Very clear. Thank you so much.
The next question comes from Martin Roediger from Kepler Cheuvreux. Your question, please.
Yes. Hello, good morning. Can you provide more color about the weaker end demand for Animal Nutrition in China and Brazil? Is that due to any diseases and shrinking herd sizes, or is that a structurally lower meat production? Secondly, regarding the disposal of your Lülsdorf site to ICIG, you agreed not to disclose the price, but maybe you can reveal whether the multiple you get is well above or well below Evonik's own multiple and if you expect any book gain or book loss attached to this disposal? Thank you.
I'll take the first question about the weakness of the signing in China and in Brazil. That is because first of all, that the customers in these areas do really suffer from the inflation. That is that in China we have a strong rebound in the food services because of some shortages, the so-called day-old chick, in February. In Brazil, it is as mentioned, that is the same what is only true for China. Here we talk about inflation and that it is here in this respect that the chicken producers are suffering from some oversupply and the low chicken prices. Taking all these things in consideration, that is contributing to the lower than expected volumes in this region. It is maybe because of the current economic situation.
Nevertheless, we will see that consumption is recovering, especially in China, and that will help over the course of the year to lift the volumes up. That is first, and now second goes to Maike.
Yeah. Good morning, Martin. With regards to your question of Lülsdorf, let me comment it like this. It was more important for us to exit this more cyclical business and to reduce the complexity of our portfolio. Also talking about sustainability, to tackle one of the few challenged technologies in the term of the NGS classification in our portfolio, because you are well aware that the mercury electrolysis in Lülsdorf will not have an operating license beyond 2028. Maybe put it like this, the purchase price for the Lülsdorf site was rather low.
Any loss, book gain or book loss attached to that?
We can't actually comment on book losses.
Okay, thanks.
The next question comes from Jonathan Chung for Morgan Stanley. Please go ahead.
Hi. Thanks for taking my questions. Just on the lower order pattern for Health & Care, how do you disaggregate the weak demand or destocking effect versus the typical seasonality? My second question will be on just on the order book. You briefly touched on the Specialty Additives. Could you comment a little bit across the other divisions? Do you see the stocking coming to an end on all the other portfolios? How do you see the regional mix, best the two? Thanks.
Okay, Jonathan, I take your first question. What we mentioned is that we have seen a slow start in Health & Care. This is actually, this is a usual lower order pattern for the start. We see that Q2 will remain challenging overall. The business is, we expect that the business is becoming sustainably positive from May onwards. This is similar actually to last year. The strong operating business in the oral drug delivery part could also partially compensate for the lower lipid sales. With regards to Care Solutions, our other business line with regards to Health & Care, we have seen a very solid performance in Q1. Actually we have sales delays in active ingredients, and there we expect to see a catch-up effect in Q2.
We have also burdened by an unplanned maintenance shutdown in the Cleaning Solutions plant. There again, catch up in Care Solutions is expected for Q2.
Hi, Jonathan. I take second question. Yes, of course. We do have a broad-based weak demand, which is combined with continuity stocking across most of our businesses. What we've seen, especially in the first weeks of this year. Do you know what? Even the most glittering spring rain will and has come to an end, sometimes, and that is the same which is only true for the destocking. In other words, that we see, already a rather increase in our order books, so they are picking up. In this, it is worthwhile. With this, it is worthwhile to mention they are picking up but slowly. Nevertheless, the direction is the right one, and that is so far, what we could see across the board.
Giving you a little bit more details in this here, that the inventory levels of our customers, By saying this, they will come over the course of the next months. They will come to a lower level and that is what will help us as mentioned, picking up with what we could see picking up in our order books, but in a slow way. That is what I could give you about this question.
Okay, thank you. On the regional mix, a lot of data is pointing to U.S. slowing down. Do you see the same in your order book?
In respect to the regions, that is that we see the most, the strongest impact is in Asia. The strongest impact is in Asia, we see, let's tackle it like this. Let's come from the first quarter. Here we see a strong macroeconomic recovery in China. As I have already mentioned in consumption, that was the strongest driver, on big tickets. Big tickets for items, we'll see that the economy in China is still more cautious spending money on big tickets, like for example, real estate or automotive. It is relevant, therefore it is worthwhile to repeat it and to underpin it.
We do expect a stronger recovery in the following quarters, which is also enhanced by incentives, for example, increase in domestic demand in China. U.S., not to forget about the U.S. Overall, a softer environment in the first quarter, and as mentioned, we do see here a decent increase over the course. Rebound was already visible in March and that is what will continue in April. While image labor markets are, give or take, robust, automotive businesses continues on relatively good level, even slightly up, mainly in the area of OEMs. Not to forget, our crosslinkers volumes expect to remain strong, for example, in respect of our contribution to windmills and to rotor blades in this area too.
Yeah, thank you.
Ladies and gentlemen, in the interest of time, we have to end the Q&A session now. I hand back to Christian Kullmann for closing comments.
Ladies and gentlemen, it was great having had you today. We have tried our very best to provide you with sufficient amount of answers. That ends our call for today and we wish you a good summer and hope to meet you soon in person. Bye.
Ladies and gentlemen, the conference is now concluded and you may disconnect your telephones. Thank you very much for joining and have a pleasant day. Goodbye.