Ladies and gentlemen, welcome to the Q3 2026 earnings conference call. I am Shari, the Chorus Call operator. I would like to remind you that all participants will be in listen-only mode, and the conference is being recorded. The presentation will be followed by Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Dr. Claus Rettig, Interim CEO. Please go ahead.
Yes. Good morning, and welcome to our quarter three earnings conference call for the first time from our new head office here in Essen. Thank you, everybody, for joining today. Given we are in a new Executive Board setup since the end of August, let me start with a few words about myself. For many of you, I hope I am a familiar face by now, but let me give you a little bit of background. I am a chemist by education and joined Evonik more than 35 years ago. I worked in several leadership positions in Germany, South Africa, Japan, and Singapore over the time. For the last four years, I am heading the Asia region and have been an associated member of the Evonik Executive Board. I also served as an interim CFO from September 2025 until beginning of May 2026.
My start as an interim CEO was therefore, let us call it, very smooth from my point of view. We have a very competent and well-working management team. While Christian Kullmann is recovering from his surgery, there is absolutely no standstill here at Evonik. We continue to execute our strategy with full speed. Before we come to the strategy execution and our excellent financial performance in the quarter three, a few words on the BASF takeover situation. As you know, we have decided not to enter into negotiations with BASF on the basis on the information we have received so far. That said, we will engage in a purely informational and confidential exchange with BASF in order to explain our position and to give them the opportunity to outline their rationale and the key consideration underlying their interest.
Please understand that we will not comment any further, also not during today's Q&A session. We remain fully focused on our strategic direction and our development as an independent company. This I will demonstrate now by laying out our roadmap to our most important midterm goal of achieving return on capital employed of around 11% by 2029. Michael will then comment on our continued strong operating performance in quarter three, and then we will end the presentation with the outlook for this year. In the next three years, we will shape Evonik into a different company, a company that is much more focused on its core, that is much more agile, and that in the end, latest by 2029, will earn more than its cost of capital. That is something that not many companies in our sectors will achieve.
I can only refer you to a survey that is done recently showing that only one in five companies in the chemical industry is earning cost of capital today. We are highly confident that we will get there. This confidence is backed by tangible measures, a lot of them. We are looking at return on capital more holistically now. On top of the equation stands the increase in earnings in form of adjusted EBIT. That is not new. The existing strong emphasis on growth and efficiency will continue. The same strict focus is now on the denominator, aiming at the reduction of capital employed. We will show you the enhanced focus on CapEx and net working capital for the coming years in a minute. Almost as important, the whole management team is what we call laser-focused this time on execution.
By launching portfolio change, by driving Evonik Tailor Made, and by investing into new solutions and sites, we have in the last years laid the foundation for strong financial success. Now is the time to take final execution steps and to harvest the results. Our strong performance in 2026, with a return on capital employed gaining more than 2 percentage points, shows us that we are moving into the right direction. I will not go through all the slides that we have prepared for you today, but will only highlight one example for each of the five return on capital employed levers. The most important lever is growth. The company has to grow to be successful in the long run. This is currently not easy in chemicals, as you know, but it can be done, and we see it.
Growth for Evonik will not come from one single new product or plant. It will come from a combination of factors: launching entire new products and solutions, bringing existing products into new markets, enhancing our plant utilization, and increasing product contribution margins, and therefore have an EBITDA margin expansion. At the forefront of future sales growth are products developed in our three innovation growth areas. These products are targeting markets which by far outgrow GDP. For example, our biotech platform already posts a few hundred million EUR of sales. This is an incredible strong basis we have to drive further growth where customers shift to bio-based products in cosmetics, pharma, but also in some industrial applications, such as coatings. The second big pillar is about efficiency.
Since the end of 2023, we are tailoring our organization to better suit our business needs and to become more agile, while at the same time keeping our cost base under control. Balancing inflation is the minimum target, and any additional savings are contributions to our targeted earnings increase. The first phase of Evonik Tailor Made is almost concluded, and we kicked off the second phase of the program mid of this year. It now takes a more holistic approach by integrating all business optimization and administrative programs under one roof. We have strong proof points of our progress. Employee numbers are falling fast, by more than 700 already this year alone. We announced three site shutdowns this year. This is a decisiveness not seen before from us. On top, we are getting divestments done. The sale of Oxeno will be signed in the coming months.
Thereafter, Evonik will account for only one-third of the chemical activities at the Chemical Park in Marl. For our infrastructure business called SYNEQT, which is serving Marl, we will find a new best owner shortly after. Of course, we will go through these processes with all our stakeholders in mind, but especially our employees, and find the best future for these two assets. We will be focusing on what a specialty chemical company like us should be focusing on, namely on our business, on customers, Custom Solutions, and Advanced Technologies segments to deliver benefits to our customers and to our end users. Infrastructure services shall be better owned by infrastructure specialists or large-scale integrated chemical park owners. We will deploy the divestment proceeds to invest where we see our future, in additives, in biotech, for growth markets.
Michael will take over as we move from increasing earning to reducing capital employed. Michael, words yours.
Thank you, Claus. Welcome to all of you also from my side. As Claus said in the beginning, capital employed is now a bigger focus than before. Starting with CapEx, you can observe a steady decrease already over the last years. This trend will continue. We see our run rate for CapEx even lower than today at around EUR 700 million for the coming years. This is a reflection of the reshaping of our portfolio, less capital-intensive businesses with higher returns, like additives or biotech solutions. A CapEx level below our historic depreciation and amortization is a sound testimonial of our strategy execution. It is clearly not a sign of us in under-investing. After exiting Oxeno and SYNEQT, the CapEx needs will even fall further. To bring capital employed down further in the coming years, we will also reduce our net working capital needs.
In the last years, we had to take heavy year-end net working capital optimization measures to then end with around 18% of net working capital- to- sales ratio. Our target is to reach a net working capital- to- sales ratio of 17%, and this is much more balanced throughout the year. To this end, we will, among other measures, also leverage the power of artificial intelligence to further optimize inventory management and improve administrative processes for our payment collection and execution. Moving on to current performance in the third quarter of this year. Our adjusted EBITDA rose by 40% to EUR 629 million in the third quarter. This is exactly in line with Q2 and our expectations set at the time for Q3. The increase was driven by mainly higher prices in Advanced Technologies and in our C4 business. Volumes were also up in Advanced Technologies as well.
As anticipated, methionine delivered a strong third quarter, with price increases now fully coming through. Other businesses performed well, despite some Asian competition slowly coming back. For example, we recorded strong volumes for polymers and solid pricing for Crosslinkers again. This shows that the strong performance is not just due to slowly vanishing supply chain disruptions. Our results are a clear sign that our customers value our solutions and services, as well as our supply reliability. This will not go away again. Cost savings made a good contribution, while higher bonus provisions had an adverse effect. This is, as usual, mostly visible in the others line, which is more negative than last year. One remark on adjustments. As projected during our Q2 results call, we now did a provision for the second phase of Evonik Tailor Made program in Q3.
It is a bit over EUR 300 million, and we expect another high double-digit million euro amount to follow in Q4 when all negotiations are finalized. As already demonstrated in Q2, we once again were able to convert the strong operating performance into cash. For Q3, we improved our free cash flow significantly year-over-year by more than 20%.
Ladies and gentlemen, please hold the line. The connection with the speakers has been lost. The conference will continue shortly. Thank you. You are back on the line. Please go ahead. Ladies and gentlemen, please hold the line. The conference will continue shortly. You are back on the line. Please go ahead.
Wait, wait. Where did it stop?
We start here.
I just learned that unfortunately, the line broke down, so let us please resume. I was commenting on the more than EUR 1.7 billion adjusted EBITDA in the books after the first nine months. You will be likely not surprised about our confidence to deliver earnings in the upper half of our guidance range. This implies also earnings growth in Q4. On return on capital employed, we revised our guidance upwards, now expecting more than 8%, and with that, making good progress on our way to earn more than our cost of capital. Looking into Q4, we still have to work hard for a solid finish to 2026, as Q4 is typically a lower volume quarter due to seasonality of our businesses. Raw material and energy costs are increasing, while methionine prices are normalizing from the elevated Q3 levels.
That said, this is a specific Q4 situation, which does not tell much about next year. Order books are looking good going into 2027. We are seeing continued healthy demand. Our good business performance continues for longer, so we can say already today that we expect a good start into 2027. Coming back to 2026, we reiterate our cash flow guidance for 40% cash conversion. This should bring us to a strong cash generation of around EUR 850 million. The strong free cash flow is leading to a significant deleveraging. At the end of September, our net financial debt declined by almost EUR 400 million compared to one year ago. Our leverage is now down to 2.1 x and trending down further. Our strong financial position has also been reflected by the Moody's upgrade to Baa1 end of August. We will continue to improve our financial strength further.
With that, back to Claus for some final words.
Thank you, Michael. I hope we can still be heard well because technical problems here on the phone line. Let me sum up what we just discussed. As you can see, we are executing on our strategy with full speed and direction. We drive earnings growth through growth investments and efficiency gains, and at the same time, we reduce our capital base. The exits from Oxeno and SYNEQT are underway. This will make Evonik a much more focused and agile company, more competitive, and more profitable. We will post a ROCE of around 11% latest by 2029, with a continuously high cash generation. With that, we can come to your questions. The floor is yours. Thank you.
We will now begin the question.
Just a quick one from my side. We will dial in the main line again before we start the Q&A. So Cedric, please. We take a quick break. Unfortunately, as Claus just said, we have some technical difficulties at the new headquarter. First time in the new room, just bear with us one second. Thank you.
We will now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets when asking a question. Anyone who has a question may press star and one at this time. The first question is from Chetan Udeshi, JPMorgan. Please go ahead.
Hi, can you hear me?
Yes, Chetan, we can.
Yeah, hi. Morning. I had a couple of questions. First, I was just hearing your comments on Q4 where you said, what you see in Q4 is specific to Q4, and you expect a good start in 2027. I am a bit confused. Why is it different for Q4, and why is it better in H1 2027? I do not understand if methionine prices are normalizing, why would it be any better in 2027? Can you maybe explain that? The second question I was going to ask you is, I tried to ask this last time, and it seems it is also a bit visible in Q3, at least optically, which is your Advanced Technologies. You have beaten there, but then the Custom Solutions is weak. I guess it is not hard to see this again, a quarter driven almost entirely by strong methionine prices. I know you referenced polymers being strong.
Maybe you can sort of help us understand what is going on in Advanced Technologies outside of just methionine trends, just for us to get confidence that this is not a one-off that does not continue into 2027. Thank you.
Hi, Chetan. Thanks for your two questions. Michael will start with the first one, and then Claus continues on the Advanced Technologies versus Custom Solutions question.
Yeah, Chetan, good morning. Let me be clear on what I said. Typically, we have the seasonality that in the fourth quarter, we have weaker quarter, which we have also seen in prior years. That was my remark with regard to volume in general. The second remark was with regard to the methionine prices, where we see the price levels which were elevated in Q3 coming down a bit. The third remark was regarding Q4 in relation to the start into 2027. We do expect for the year 2027 a good start. Even though methionine prices come down a bit, they do not come down so much. We are not falling off a cliff. We see the good business performance continuing longer. You also mentioned yourself the polymers and also the Crosslinkers. We see that effect continuing.
But typically, what you do have in the fourth quarter is also inventory variation and other year-end effects. That is why we see basically weaker fourth quarter than the good start into 2027. For the second question, I would hand over to Claus.
Yes. Question was about comparing CU performance and Advanced Technologies. First of all, Chetan, just to make clear, it is not just methionine. Also on the, let us say, with Advanced Technologies for the moment, methionine is of course strong. We see already normalization happening as we speak. From that point of view, the peak prices were in June, July, but we are already this year on the normalization pathway, and we are pretty confident that we will have also a good business going forward. We can see it already, I think Michael mentioned it, order books Q1, that is why we say good start into Q1. But not only methionine. We pointed it out, I think, also in the papers we distributed. High-performance polymers, namely our polyamide 12 business, super strong this year. Regaining shares, which we have lost before.
We have way above market growth in polyamide 12 globally contributing to this. The Crosslinkers business is better than the year before. These are three elements on the Advanced Technologies side. Custom Solutions, you could say only a sales growth of 7% or EBITDA growth of 7% is, of course, much less than the other one. True. Here we have a lot of effects which we are addressing with our portfolio changes. We have here clearly growing areas, and we have one that are shrinking. Also, in the cosmetic side, we have and the base ingredient business is really shrinking, and of course, overlying the growth in other areas. That is contributing a lot to, as you see in the some lower one. Of course, this is also much less affected by any kind of the supply chain problems, the business.
So this, you can say, is almost not touched at all by this. You see pure business development. With the portfolio measures and the investments you have seen would be what we are doing also on the side of our healthcare business. Super strong focus on delivery systems, where we are super strong. Refocusing our energy in the cosmetic solution side, on the specialty part of the business. Then, of course, also, I think, making portfolio cleanup of the non-performing part or not as we want them to perform part. This today, this is also moving it forward, where you will see Custom Solutions taking more and more the role which we see in Custom Solutions being the growth engine across the portfolio.
Got it. Thank you.
I hope that answers—
The next question is from Roediger Martin, Kepler Cheuvreux. Please go ahead.
Yes. Thanks for taking my three questions, actually. What is the real reason why you do not want to speak about the BASF bid, although it is a very important topic for investors? Secondly, unrelated to this BASF bid, we know the chemical industry, especially in Europe, is not really in a great shape with low growth, high cost, high bureaucracy, plus some geopolitical tensions. You say you want to stay independent. But is there any circumstance when you change your mind and say, "Okay, now we need to team up with a larger player"? The third question, Evonik wants to play an active role in the consolidation process of the chemical industry. Can you define your M&A criteria and your financial discipline?
Thank you, Martin. As you can imagine, we are not commenting on BASF, right? That doesn't really make much sense. But Claus will for sure comment on our own view on the portfolio and how we see potential M&A and the consolidation in the sector.
Yes, like you said. First of all, I think we made it pretty clear we have a very good view on what we can do ourselves in the future. I think we also said always, consolidation is a path we want to play in as an active player. From that point of view, this is what we I think this is the clear path of ourselves. I can only repeat what I said. We have clear capital allocation priorities for us. We are independent, we have good performance, we are in very good market in our businesses. Not everywhere, that's where we are cleaning up the portfolio. But that's where the future focus is on more than in the past, and therefore also we will use these strengths to foster our growth.
The capital allocation priorities for us are also very clear, have not changed. Disciplined investment into our own growth. I think you heard also Michael, when you look to the portfolio of the future, it's much less capital- demanding. It's also an important element. Then second priority is and will be attractive shareholder returns through dividend, no doubt, has not changed. Then we strengthen the balance sheet, deleveraging in order to be ready if something that fits comes along. The chemical industry is very diverse. There's a lot of topics that could make sense for us if they would become available. We're executing our strategy, I think we said it, with full speed. You know that we have the divestments already. The big ones are all already announced. Optimization program is announced, progressing well. Deleveraging also going on, progressing well.
So once again, if the right target comes along, we have a very good view what are targets that are interesting for us. When it comes to consolidation, it has to make sense. We invest in, we would also add on only stuff which is adding to our portfolio in growth fields where we can achieve extraordinary growth. I just repeat it again, growth is so important for our industry, and that's why the combination has to be focused on growth. Yeah, so complementary portfolio mainly for Custom Solutions. I think this is all what we have said. It's not changing at all, and this is the basis for our view of the future. Let's call it like this.
Thank you.
The next question is from Sebastian Bray, Berenberg. Please go ahead.
Hello, hello. Good morning, and thank you for taking my questions. I have two, please. The first is on the interest costs that can be expected over the next two or three years. The adjusted net financing costs of Evonik has crept up over the last few years. I think around the time of the pandemic, it was about EUR 100 million. It could be a bit more than that, actually. It could be as high as EUR 160 million, EUR 165 million this year. Are there any debt refinancing or short-term rate sensitivity that means this number could go higher in 2027 and 2028, net of delevering effects? And any comments on the tax rate to be expected for that year? And my second question is on your unfortunately unwell CEO, or at least on an interim, on a full-time basis.
But I appreciate I am asking something that bridges the gap between private and public life, and if Evonik cannot comment, that is fine. Do you have any indications on when Christian Kullmann may be well enough to return to work? Thank you.
Thank you, Sebastian. Michael will start with interest costs and tax rate, and then Claus can take over on Christian.
Yes. Thank you, Sebastian, for asking those questions. Well, as you all know, the interest rates, unfortunately, in the markets are still high, so that also has an impact on us, and that is why we pay higher interest costs than in previous years. You know the debt instruments that we have out there on the market. You also, Claus, and I can only reiterate what you said earlier, we are on a good path to further deleveraging. We have our Oxeno divestiture, and the next one up is our SYNEQT divestiture, and we will use those proceeds also to pay back debt. Then, all else being equal, our interest costs will also go down. Your question was also on the tax rate. I can be very precise here. We have for 2027 tax rate implied for about 25% here.
We will go back to the usual level of tax rate, which we have as a run rate also originally projected for 2027. Sorry, for 2026, before we went into some special effects. With that, I hand over to Claus for the second question.
Yeah. Thank you, Sebastian. Thank you for asking a question about our CEO. I find that really nice. I can tell you not too much, really. I have once in a while exchange with him on WhatsApp. He is in a rehabilitation clinic where they pay a lot of attention that the patients are focusing on rehabilitation. From that point of view, we also ask not to do too much of exchange. Unless we have no clear picture when he is coming back, we still believe this will be beginning of 2027. Nothing has changed with that kind.
That's helpful. All the best to Christian and yourself, and thanks for taking my questions.
Please hold the line. The conference will continue shortly. We lost the connection with the speakers.
That is a good news, no?
The next question is from David Symonds, BNP Paribas. Please go ahead.
Thank you. Good morning. Thanks for taking my questions. The first one is another bridging one into 2027. Could you talk about your energy costs expected into next year and hedging position? Secondly, could I ask about the EU Critical Chemicals Act, your latest thoughts on that, the next steps, and then which products you're hoping will be included on that? Finally, another question on 2027. It's interesting to hear you taking confidence on the 2027 outlook from the current order book, because I remember earlier this year, you and peers were struggling to extrapolate anything from the order book because it was so patchy. Could you talk about what's changed, which end markets have started to become more reliable for you to be able to extrapolate that confidence into next year, and the general behavior of customers as you see it today? Thank you.
Yeah. Hi, David. So first one, energy costs, Michael will answer. The second one, Critical Chemicals Alliance goes to Claus. Also the last one on the end markets, then back to Michael.
Yeah. Thank you. I'll start with the first one. As you know, there is still a level of uncertainty regarding the duration of the conflict, and the conflicts I should actually speak about here in the world, and that does have an impact on energy costs. With that caveat said, we are expecting energy costs around a similar level. There could be a little bit of a spike in prices, however, our exposure in energy is also well hedged, so we have a hedge quota going into next year for more than 50% of energy that is being hedged here on our end. So we do expect a similar level like 2026 with a slight spike up here, which we are prepared to take. With that, I would hand over to Claus for a second question.
Thank you, Michael. I hope you can hear me now because we have to use our mobile phone, which is not usually the case. Critical Chemical Alliance. Let's give you a little bit of background in here. The outcomes of this Critical Chemical Alliance have been presented to the General Assembly of the EU in October. And the chemical sector has been reaffirmed as a strategic industry for Europe, with a focus on safeguarding existing production while accelerating the transition to sustainable technologies. And a preliminary list of critical molecules has been presented as the basis for these future industrial trade and funding measures. The list is expected to be narrowed down significantly by the end of this year to accelerate implementation. In total, 49 products have been on the list. Eight of them are from us.
It is, for example, I can tell you methionine is one of them. And also, isophorone diamine is also one of them, being really critical for the value chain within Europe and also for food safety, as you know. But there are some others on this as well, but these may be for us the most important one, and we are pretty confident that they will stay in there. Then what another was question on the—
I think end markets view.
End markets, yeah.
Go back to Michael.
Thank you. I will take that. You were asking regarding the order books for 2027, and what do we see as development here going into 2027. Of course, let's be clear here, this is not the guidance call for 2027, but let's make a couple of remarks. First, we are not resting on this year's success. We are doing what is in our hands to be better placed in any environment, and we have growth investments, cost savings, and portfolio optimization to come. Evonik will be definitely a much better company in 2027, though we do not know what the environment will really be like. What we have seen is that actually our order books are picking up, and we have more visibility than we had basically during the difficult period coming into the year 2026 and then moving into Q2.
The strong business performance that we currently see is continuing for longer, and therefore, we expect a good start into 2027, comfortably above the level of this year's Q1. To give you also some tangible examples from our businesses, you notice yourself the earnings base for Custom Solutions as a whole is not particularly high. We are seeing in Animal Nutrition a stronger entry position than a year ago, so the starting point for the expected price normalizations is higher than it was at the end of the last year. Our backward integration should deliver middle double-digit million euro cost savings over the year. In hydrogen peroxide, we are well-positioned to benefit from the growing semiconductor demand. In addition, our innovative nanobubble technology is gaining traction in meat disinfection applications, particularly in the U.S., and thus opening attractive new growth opportunities.
Last one here in silica, just to mention, we are benefiting also from the capacity expansion in Charleston and expect further growth from customer-specific projects, as well as new specialty applications. All in all, we are more confident moving into 2027.
That is very clear. Thank you very much.
The next question is from Pandya Jaideep, On Field Research. Please go ahead.
Thank you. The first question is around, probably for this, but around methionine. Could we discuss some of the puts and takes that you see in the market for the next four quarters in terms of the capacity additions compared to the demand? Especially, I am very curious about the powder versus liquid dynamic here as well. The second question is really around your portfolio outside of methionine, really. When you look at the core Evonik portfolio outside methionine, what is the competitive landscape today? Referencing something like Crosslinkers, where you used to have very strong market share, and then you had increased competition. When you analyze your portfolio, are you confident that it is not going to have the same level of competition out from China, which is going to put pressure on your returns?
The last question really is, obviously there are rumors around what you are looking for in terms of M&A. Should we think that cosmetic ingredients, healthcare are the main areas where you are looking for bolstering your strength? Thanks a lot.
Hi, Jaideep. Thank you very much for the questions. Claus will start with methionine, then we go to Michael for the competitive dynamics for the two segments, and then back to Claus for the M&A focus areas. Thank you.
Yes. So, can you hear me? Sorry. Yes. Methionine, yes, that's of course always a big debate. We have very operational strength currently. It will continue into Q4. I said it already, we are at peak prices in June, July. Since then, we see a normalization trend, and strong volumes we still have. We also have the fact that our customers have seen in the earlier days of this year that we were able to deliver, that we are very reliable supplier, and reliability of supply becomes a new factor in competitiveness, that's for sure. Having said this, it is currently the case that we have strong demand. We have quite a bit booked already for Q4, so we have a very good view in Q4, and we also have very good view into Q1.
This is, of course, with the normalization of price, but a very strong volume trend over and above. This year we are going to grow slightly above market, and the market is still a very solidly growing market. When it comes to, you were asking about what's happening on the capacity side. I think you know that CJ announced to permanently close down its Malaysia plant, and this started mid of October. They still have, let's say, sold remaining stock this year. We believe, so the capacity, the announced capacity of this plant is, I think it's around about 170 KT, or 180 KT even. But we believe they only have produced 100 KT. 100 KT is going out of the market. We have Sumitomo currently down. They announced to stay down until the end of the year, so they have some problems.
We have over and above a new plant, Liben Crop Science coming in, is the only new competitor in this phase. In Inner Mongolia, adding, they will add another 100 KT for DL-methionine. Currently, we don't see anything happening there. It's already pretty cold in Inner Mongolia, so there's not much you can do until the winter is gone. We believe they will come onto stream maybe in Q2 next year, with a new technology, so we have to see how that works. Nevertheless, logistically, they are in a totally different territory. Then we have the extension of the other extensions that are announced, especially Adisseo, end of this year with 140 KT. It's all known. This is an existing player with DL-methionine, so existing players usually behave different than new players.
I think we can pretty well, we are pretty well in assuming how the market develops. From that point, this all is part of our statement that we see a very solid start into 2027. I leave it here on the methionine comments.
I will take over on the general competition comments, which you asked. We do take competition always very serious. We have also been proving throughout the year 2026, as Claus has mentioned, that we were very reliable. We were serving in the region, for the regions, all of our customers. That reliability has actually led to market share gains, which we will also continue to have going into 2027. We improved our competitive position here. You also mentioned the increased competition from China. Just to remind you, on the Custom Solutions side, we are not so much exposed to that competitive angle. On the Advanced Technologies side, we have actually done significant measures, as we also mentioned earlier in the call, and have said also during the last couple of conference calls, significantly improved our cost position here in Advanced Technologies.
That is why we are not afraid of the competitive landscape and are looking very much forward to serving our customers with reliable service and best solutions as we have done in the past. With regard to your last comment on M&A, of course, we do not comment on rumors, but for the general search fields, you heard Claus before and over to Claus.
Thanks, Michael, again. M&A, like I said, matter of principle on rumors, we do not comment at all. When you look to, I think that is also not new. First of all, let me say, M&A is one element of growth, but we also said, I think earlier, organic growth is number one on our list to do. I can tell you, we are looking into quite a few, let us say, organic growth options, which we are exploring right now in different degrees of, let us say, stage. I can tell you, we are looking into quite four projects in Asia. We will open a new plant here in Essen next week. This is not to be forgotten. This is something we are focusing on, it is number one.
When it comes to M&A, like I said before, it has to fit, and it has to fit on a portfolio level. Where does it make sense? I think no surprise, we said Custom Solutions is the area we are focusing on. There is no doubt. Custom Solutions, also different areas. We have a new business line in play that we are looking into, looking into where our add-ons. Generally speaking, additives, we are strong in additives. Additives for growth fields is an important area for us. We are looking into cosmetic ingredients, specialty ingredients, growth field, no doubt, and biotech. These are the three areas where you will see us focusing on when it comes to M&A, where it makes sense. Maybe it gives you a little bit more taste of when we are looking for something, what can it be.
Can only say we have a good list of interesting targets, but they have to also become available. Right now, we are focusing on our own growth. But again, if something comes along that fits very well along these lines, then of course, we look into it.
Just one follow-up, if I may, on methionine. What sort of capacity utilization are you at as of this year? I mean, just wanted to understand, because you have not invested in this business in terms of extra capacity through the last couple of years, or few years rather. Just wondering when would there be a need, given the dynamic has changed a lot, and as you rightly pointed out, there are a few competitors that have left the market now. What sort of capacity utilization are you at as of 2026?
Yeah, we are not commenting on the exact utilization, obviously. The market is growing 3%-4%, as you know, so we need new capacity. Claus mentioned some capacities also stepping out. Overall, I think we are okay with where the situation is in the market.
Okay. Thank you.
With that, I think we end the Q&A and go back for closing remarks from Claus.
Okay. Yeah. Good. Yeah. Thanks very much, all of you, for the questions, and sorry for these technical problems, yeah, from our new landlines here in the head office. We will fix this for the next call, that is for sure. And, yeah, thanks to all of you. This concludes our call for today. We are looking forward to our discussions on the roads in the next days and weeks to come, where we have much more time, and we will make a special effort to see many players in the market one-on-one, and there we have much more time to discuss than we have now. Thank you for now, and goodbye.