Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining the LANXESS conference call. I would now like to turn the conference over to André Simon, Head of Investor Relations. Please go ahead.
Yeah, thank you very much, Aurelia. Welcome to everybody to our Q4 and full year 2021 conference call from my end as well. As usual, I have today our CEO, Matthias Zachert, and our CFO, Michael Pontzen, with me. Please take notice of our safe harbor statement. With that, I'm happy to hand over to Matthias for a brief presentation, and afterwards, as always, the Q&A. Matthias, please go ahead.
Thanks, André. Welcome from my side to everybody who is listening in. A warm welcome from LANXESS, a warm welcome out of Cologne. The conference call today is focusing on Q4 and full year 2021, but in light of the current situation, we would like to first of all start with the aggression war on Ukraine. Herewith, I would like to go to page number four. Overall, I clearly would like to say that we are shocked by the aggression that is happening vis-à-vis the Ukraine. In this call, however, I would like to focus on the implications that we have assessed for our business and not dive into moral explanations, which could be endless. Let's focus on the facts. The overall exposure that LANXESS has to the market in Russia is limited.
Less than 1% of group sales, we do have, in absolute terms EUR 60 million, 45 employees, all of them are in Russia. In Ukraine, we have literally no sales and no employees. We have assessed by now the supply situation and can say that from the raw material side this is modest. On the Thursday morning when the aggression took place, I instantly talked to my fellow board members. We established a crisis team with business interactions and function interactions like procurement, logistics, treasury, et cetera, in order to get transparency on all relevant topics like sales, assets, raw materials, contracts, you name it. I will address that in a moment. We've taken immediate decisions. No further investments will be done in Russia. New businesses, whenever possible is being stopped.
Existing business is being phased down, phased out to the legal bare minimum. From the EUR 60 million we have today, my assumption is that within weeks or a few months, it will go down to single-digit millions. Let's look at some details just to give you full transparency so that you see what kind of exposure we have. If you go for specific topics, specific risks, you see that on the employee side, it's not a lot. It's 45 people. Direct sales, I made my comments. Accounting, of course, we went through the entire balance sheet implications. If we from today immediately unplug, we would have an impairment in our balance sheet of EUR 20 million. Thereof, around about one million exposure on receivables, and I do believe that we are doing now everything to collect our receivables.
If they are contractually, legally binding sales that are still done, we only do this with prepayments. Procurement, we went through the entire sourcing. We have not spotted here substantial shortages or issues going forward. While this was higher on the radar, it has now turned to be lower on my radar. This is how specific risks are concerned. Let's touch on general risks. Energy, I mean, we all see the energy volatility and, of course, economic volume momentum. This is something that I think none of us can truly forecast at this point in time, so we have no crystal ball on this. The one thing I can state, the one thing you can be sure of, this is a management team that has gone through a few crises and managed crises in a determined and very swift way.
It's therefore a leadership team that is experienced, and I think this is what it takes to manage crises of this nature. Now let's turn to 2021 financials. Ladies and gentlemen, overall, if I look back into 2021, as a CEO, I have to say that was a tough year. I've, in the last seven, eight years, never really said something like this. The year started with blizzards in the United States, even sites in Texas where normally you have warm temperatures, humidity and barbecue. There was a blizzard and our monomer site was not operational. The same was true for the other big sites. February blizzards. March, force majeure with suppliers. We had our own force majeure in polyamides. We had the logistics constraints worldwide whenever we wanted to ship from one region to the other.
All of you have taken note of raw material price inflation. We had this horrible flood in North Rhine-Westphalia, where our teams and employees even were impacted. I've not seen that before. We had this dreadful explosion in the ChemPark in Leverkusen. All of you have seen it on the television or read about it in newspapers. It was a tough year. Despite that, I clearly would like to look at the highlights. Without portfolio, we were able to pass on the entire raw material price inflation one-to-one. In our company history, we were rarely in a position to ever achieve something like this. Last year we did it. Also proof that the portfolio right now is in a position it has never been before. Second, in 2021, we were running behind on energy prices.
We always had difficulties to truly pass it on. In Q4 we did it. We basically established more and more of energy clauses throughout the year in contracts of importance. In Q4 we went out in several business units also with a special price energy surcharge. Q4 all in all was a good one. If you look at entire financial year 2021, we had a sound momentum on volumes. 10% growth is good. Despite all these supply chain constraints, it could have been better even. EBITDA went up again above EUR 1 billion. Challenges, clearly, I mean, margin turned softer because when you arithmetically add something like EUR 750 million-EUR 800 million to the top line, which is strong when you pass on all raw materials, then of course, arithmetically your margin declines.
Challenge, definitely also the time lag on passing on the entire energy price increase of 2021. We did the lion's share, but of course could not address all of them. Due to the negative one-time effects I alluded to earlier, we took hits on the profitability as well. I will not repeat the one-timers I mentioned before. I turn to page seven. Input costs. That was a topic that was a difficult subject in 2021. We had an increase in energy costs, which was significant. I said very clearly at the outset of the year, this is something we have not experienced and therefore in first quarter last year, I said we will address that. If we can address more than 20, 30 percent my statement was, I was humbled at that point in time.
By now I can say, and if I look back in 2021, I can say that on all relevant and major contracts, we have now addressed them and could agree with our customers to include energy clauses and therefore we could mitigate that. Nevertheless, we had a substantial increase in absolute energy costs from EUR 300 million-EUR 500 million, and this is the entire energy bill. If you look at natural gas, it's of course not the same number. It's rather in the area of EUR 200 million. Our target, ladies and gentlemen, for the year ahead is to further increase our contract clauses with energy pass-through clauses to 60% or 80%. But of course, this is a target. We have to make it happen, and we are working on it. On the right-hand side of slide number 7, you see logistics costs.
That's also a biggie. It needs to be further addressed because I don't see that tensions on the logistics side are going to ease. They will be still tough in 2022, and most likely only in 2023 capacities will be adjusted and value chains, logistic chains will be a bit smoother. That's at least how we look at it at this point in time. Now, when costs go up, you need to work on price. I turn my attention to page eight. 2020, as you know, was a deflationary environment, because volumes went down, markets were soft, the pandemic was hitting sentiment and economy. 2021, the situation changed basically in Q4, Q1. From Q1 onwards, when prices really strongly moved up, you saw that we acted accordingly.
We have a lag effect normally in our contracts, and we needed to get, of course, further contracts adjusted. As you can see from the sequential diagram here, we were making quarter-on-quarter, we caught up and of course in fourth quarter had a substantial price increase if you compare quarter versus year before. In my professional time here in LANXESS, I've never had seen a price increase like this. We work on that and fortunately the portfolio is strong. I turn my attention to page nine because 2021 was operationally a tough year. We did a lot, we addressed a lot, but also from the strategic side, despite pandemic not being over, we further worked on the strategic direction shaping our company portfolio. We did successful portfolio management.
In February we went out and announced the Emerald Kalama acquisition, which was completed in August. We grouped together all our Flavors & Fragrances business and have now a, one of the leaders in this very industry, and it's doing well. I like the business a lot. I have taken personal charge of this business unit. All of you know that in August we announced the intended IFF Microbial Control acquisition. Of course the transaction yet has to be closed. We did two bolt-on acquisitions in taste and in the sale, also in Consumer Protection, also in the field of disinfection and animal care. We also divested businesses like organic leather chemicals. I think this was a good move. Eventually we sold also our chrome mine in South Africa. That was the project.
On top of that, we announced in November that we are going to carve out our polyamide business units or, in brief, High Performance Materials. This went to the press, this went over the ticker. I read many analysts' reports. I will not contribute to speculation, but the one thing I would like to be very blunt and direct about is the likelihood is high that this can lead to cash ins because I stressed that very clearly what the company direction will be in 2022, and I made that clear in November last year. The likelihood is low that this will lead to cash outs. Clearer I cannot be. Operationally, we also like the moves into battery chemistry. We talked a lot in the past about this, but eventually now it's coming.
This year we will start to produce more than 10,000 tons of electrolytes for one of the biggest electrolyte producers in the world, Tinci. In Chinese, Tinci. This will be done in Leverkusen, in the heart of Germany, in the heart of the process industry. We will produce the electrolyte at ultra-purification grades that comply to 100% standards, quality standards of BMW's, Daimler, Tesla's and the like. Eventually, it took some time, we also signed an agreement with Standard Lithium. You know that we had been working on the pilot plant for quite some time. This pilot plant is a big one. It has now been operational for several months. Eventually after pandemic and borders were closed, you know how much delay this caused.
Eventually we've made an agreement with Standard Lithium based on which, from our personal point of view, I look into the eyes of Michael, our CFO, we conclude that this can only yield upsides and no real entrepreneurial downsides. We can decide once the feasibility study is completed. This will be true engineering work. This will take most likely something like 12 months to get it completed. You see exactly how a full real extraction unit is engineered, how much it costs in investments, and what the economic business plan looks like. You have really everything worked out with massive engineering work. Then we have the optionality to decide if we co-invest and if we want to stay on the sideline, which would be likely in light of the cash flow commitment we've given to you.
We can take the offtake from the volume of lithium carbonate and have a market discount which can reach up to 20%. I think this is a good direction we take. No upside. Sorry, no downside on the upside. On page 10, I comment on the targets we've provided in 2017. Hey, that was a different economic environment. I think the KPIs we reflect at that point in time, margins 14%-18% through the cycle, low volatility on margins, cash conversion 60%. Let's look at that. I think we made very good progress in the first three years, making upgrades on the margins year-on-year. My assumption is if we would have continued in a normal economic environment, you would have seen something like 50, 100 basis points continuation in the years afterwards. This did not happen.
We fell from 15 to 14 in 2020, so low volatility. Due to the massive price inflation that we faced in 2021, which we fortunately could pass on, of course, margin eroded in 2021. If we take the average, however, 14.2 over the last five years, we reached. Volatility, I think this speaks for itself. In 2013, our volatility was around about 500 basis points. The 0.9 you're seeing in 2020, I think speaks for itself. Cash conversion, I think we made our comments, and we take them very seriously, so this will be addressed. Page eleven shows you our dividend. Based on 2021 financial performance, management board and supervisory board will propose to our shareholders in our annual general meeting to increase the dividend to EUR 1.05 per share.
This is a sign of positive expectations on the company development going forward. On page 12, we would like to address sustainability. I'm a father of four children. I take that seriously as a father, but I equally take that very seriously as a company CEO. I think the faster you are on emissions, the better it is also for your P&L, because it is a business case. We take that very seriously. You see that year on year, we made improvements from the day we announced it in 2018 to until today. 2020, of course, we saw a drastic decline, more than the roundabout 5 percentage points we normally had, because in 2020 we had a volume collapse due to pandemic crisis of more than 10%. 2021, we did four acquisitions, and we increased our volumes drastically.
Despite that, we were basically on par, nearly on par with 2020 emissions. Noteworthy that we are a company that have, based on shareholder approval in our last AGM, linked our variable pay also to absolute CO₂ reduction. This is what I take very seriously. Only absolute CO₂ reductions are needed. Relative CO₂ reductions, if we produce tons of volumes, we might increase our absolute CO₂ emissions. Therefore, I consider it as very important that in remunerations, absolute targets are being fixed. Now to guidance. The start of the year was strong. We had a good January, we had a good February, and the order books for March, I went through that basically two days ago together with Michael and he was, of course, doing even further granular work.
I personally spoke to our biggest business units just to be crystal clear on current trading. Order books look good. We had in our annual report also, of course, a guidance prognosis for the full year, which we here also reiterate. In all clarity, I would like to say I have no crystal ball. I see the volatility out there. What I would clearly like to say, we are firm on Q1. We guide for EUR 280-EUR 320. With 320, everything needs to go right. With a 280, we feel good. And if it's in the middle of the corridor, we would be happy. That would be a substantial increase versus Q1 last year. On this year, on this Q1, we guide hard.
As far as 2022 full year is concerned, we thought a few weeks ago that we will be substantially above previous year without IFF. That shows you that momentum in the business overall is good. Of course, I need to make clear that the implications on the Russia-Ukraine war are unpredictable at this point in time. This is a big statement I make because if I would say anything else, it would truly be unserious. The one thing you should be sure of, however, we, the LANXESS management team, are crisis experienced. We've managed a few crises already. We will steer this company through the volatility. That's our job. That's what we are paid for. Thank you so much. With this, I open up the floor for questions.
Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press zero followed by one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press zero followed by two. If you are using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press zero followed by one at this time. One moment, please, for the first question, please. The first question is from Matthew Yates, Bank of America. Your line is now open. Please go ahead.
Hey, good afternoon, gentlemen. One very short-term question and one perhaps a much more longer-term question. We'll do the short-term one first. On the additives division, given the logistical constraints you had in Q4, does that mean that there's a material amount of business that you weren't able to book and that has slipped into Q1? I'm just trying to reconcile what was a slightly depressed quarter in Q4 versus a fairly upbeat guide for Q1 and whether there's a timing or a transitory issue that explains some of the additives performance. Then the second question, the more long-term in nature, and I wanted to ask about your polyamide business and how you see the impact of electrification in autos.
Because there seems to be a number of applications in nylon for under the hood parts, which are perhaps at risk. I see when Celanese recently announced their acquisition of the DuPont business, they put in a slide arguing that the content in an EV would be roughly similar as some new products emerge. I wondered if you could share your perspective on whether you see EVs as a risk or an opportunity for the LANXESS polyamide business. Thank you.
Matthew, very valid questions. Let me address short and midterm. Your first question on additives. I will not be now specific on EBITDA numbers for Q1. I think we do this always for the group. We did that for the group. You're on the right track. Your expectation for Q1 and Specialty Additives can be sound. Therefore, if you look at the entire year, 2021 for additives, that's my first request, I think you will come to the conclusion it was a good year. Q4 was not a star. If in Q1 they can catch up for that, please give them forgiveness. I think additives is on the right track.
Now on polyamides, I know your report, and I clearly would like to stress to you, we made a detailed assessment. We even spent money, not hundreds of thousands, but we made a very profound, sound analysis with customer discussions, et cetera, et cetera. We came to the conclusion that electrification is a clear positive for our nylon business. This would be an opportunity. There was, I think yesterday or two days ago, a report in a German economic journal that flagged a new innovation that we are currently bringing to the markets. That is basically replacing the housing of the entire battery with replacing the steel aluminum with polyamides. I mean, this is a lot.
Therefore, we conclude that with all the other opportunities, that will come, there will rather be more volumes than less volumes. This we also get confirmed through the projects that we have with our OEMs, tier one suppliers, that are basically now, kicking into our order book. I think, this is clearly stated an opportunity and not a risk. What Celanese has communicated in their slides, which of course I looked at, good presentation, we have no different view on it. I hope this answers the two questions, Matthew.
Thank you, Matthias.
I'm looking forward to see you next week in physical form. Eventually we get there.
The next question is from Rikin Patel, BNP Paribas Exane. Your line is now open. Please go ahead.
Hi. Thanks for taking my questions. Just firstly on your comments on the good start to the year and the strong order book. Going into Q2, can you maybe give us an indication of what the order book is looking like? Have you seen any I guess initial impacts from customers in light of the situation in Ukraine? Then I guess in relation to that just more generally speaking how do you assess the demand environment right now in terms of I guess customers restocking versus underlying demand? Then thirdly just on the guidance for 2022 I think you pointed towards EUR 100 million exceptional items. Can you just remind us what is included in that number? That'd be helpful. Thanks.
Yeah, thank you for your questions, Rick. Michael will address exceptionals. I will take the first two. Well, we have now provided feedback on current month. We're now starting to giving color on month in second quarter. I think the focus is clearly on Q4 and Q1, and we are one of the few companies that give confirmation on Q1, so I think that should suffice at this point in time. Demand environment stocking, destocking, we basically rather went into a year with a normal order book. We saw soft. Sorry.
We saw no strong balance sheet cleaning by our customers in Q4, so people ending the year but also beginning the year with rather making sure that supply is there because everybody around the globe, not only in Europe but also in Asia and North America, is suffering from the logistical capacity constraints. I think people are basically ordering exactly what they need. Some even are in the process of stocking up. This changed in the automotive industry when the chip shortage led to production shortages, so no restocking, but rather buying what you need for production occurs. This is how I look at the situation at this point in time. Exceptionals, hey, Michael, you are the expert.
Hi, everybody, as well from my side. Yeah, with regards to our exceptionals, comparing to the EUR 150 million which we reported now in 2021, we see the reduction of, as of today, EUR 50 million. The majority of the reduction will come from the pockets of, let's say, M&A and digitization. If you take a look into the backup of the presentation, you find these three elements in which we're reporting in. Strategic realignment and restructuring, we reported some EUR 38 million in 2021. M&A, digitization, and others around EUR 81 million in strategic IT projects, which is namely the implementation of our SAP S/4HANA, another EUR 31 million. As you know, and we told you guys before, we will go live here in Germany in course of the next couple of months.
That means we have a lot of things on the table. We are training hundreds of people a week. All in all, we have to train some 7,000 people. That is consuming a lot of money. Therefore, you should not expect a relief with regards to that. With regard to strategic realignment and restructuring, kind of the same story. We're still working on some topics. Obviously, the integration of Emerald Kalama is picking up, so that number should be pretty comparable as well. While you should see the decline in the M&A and digitization, and we said in earlier times, especially with regards to M&A, when you do a lot of M&A transactions, namely in the U.S., namely on the buy side, you spend a lot of money, and that is what you should not expect for 2022.
Okay. Thanks.
Next question, please.
Martin Rödiger, your line is now open. Please go ahead.
Good afternoon. I have three questions. Firstly, on energy costs and passing them on. You say in your presentation that around half of your relevant major sales contracts now include an energy clause. Just a clarification question on that. What means relevant here? Are there any irrelevant sales, i.e. business with small customers? And if so, can you provide a hint how your business is split up into sales with large clients and sales with small clients? Second question, you have a big production hub in Germany, and as you know, Germany is highly dependent from imports of gas from Russia. Assuming there is no import of Russian gas anymore for whatever reason in that country from one day to another, what would happen to your production? Do you have any backup supply for natural gas?
The third question is on your guidance for Q1 2022. Is it fair to assume that based on this feedback you got, good order intake, good business, good demand so far, and your explicit guidance for EBITDA in Q1, that you have been able to manage well the inflation of energy costs, logistic costs and raw material costs so far in Q1? Thanks.
Yeah. Martin Rödiger, welcome to the call and all good questions. Let's address them one by one. Relevance, what does that mean? Of course, it needs to be a business where we have large tickets with large implications. If we have no contracts for instance, because we only sell EUR 1 or EUR 2 million, it's of course leading to sales, but it's simply not relevant. Everything that is on the radar means there's a large customer behind it. It's not only a large customer, the energy ticket is visible. For these sales, we normally have contracts, and these are the contracts we need to address.
I think I've given in the road shows in the last two, three quarters indications or implications for one of our big businesses, Advanced Industrial Intermediates. This is a business that is energy-intensive. Advanced Industrial Intermediates will most likely have something like, I don't know, I speak out of now estimation. The business unit will most likely have something like 200, 300, 400 contracts. But I always very clearly said only 20 to 30 are relevant. If these contracts are all addressed, you basically are hedged. That is what we try to explain with the relevance. It needs to be big ticket first. Second, it needs to have energy implications. If you're a big ticket without energy-intensive production, it's not a relevant contract.
This question number one, I hope that is full clarity. Now, your question number two. Well, this is a hypothetical question. And therefore, I don't want to be in complete speculation here. At this point in time, we are of course in contacts with ministries and with North Rhine-Westphalia, also with Berlin. We see that the German government is doing everything to open up alternative sources. Of course, the German industry is dependent, like the consumer is dependent on energy, also on Russian gas. I've given you the indication that out of the EUR 500 million energy costs, EUR 200 million are gas relevant. So it's not the entire EUR 500 million bucket, but only EUR 200 million.
If you go to Germany and the industry, the public statements are by the industry that half of 40%, 50% of gas in Germany being consumed is going to the consumer and to the industry. That's, I think, the indication you can have. Of course, the European ministers are doing everything to open up alternative sources. Now, Q4 and Q1, I think we've been very transparent on what we did on passing on raws and energy in Q4. I've given you a headline number for EBITDA for Q1 and, therefore, I will look into Q1 results once I have them in March. See exactly the raw spend, the energy spend, logistics spends, if this is matching one-to-one.
I think the numbers tell you a clear story. If we meet 280-320, we will have a rock solid Q1 in a volatile environment. More we will communicate in May when we report Q1 numbers. I hope this satisfies your information requests.
Thank you.
Thank you too for participating.
The next question from Jaideep Pandya. Excuse me. Jaideep Pandya, On Field Research. Your line is now open. Please go ahead.
Thanks. The first question is on the Consumer Protection business for volume growth of 8%. I mean, you've been obviously doing very well in this business and you've been tight on capacity. Just curious, where did you see volume growth and sort of, you know, what are the trends also in relation to Enpro? Then the second question sort of linked, and I fully appreciate you still don't have the IFF Microbial Control business under yourselves, but oil and gas is a very important market for that. You have exposure through clear brine fluids in the shale industry. What do you see there, which sort of excites you versus when you bought the business? That's my second question. Then the third question really is around Advanced Industrial Intermediates and very well done on passing the price increases.
Do you think that this business comes back to its traditional 18%-20% margin range in the first half this year, or it's gonna take a little bit more longer time because of the energy cost volatility? Thanks a lot.
Jaideep, very valid questions. Let me address them one by one. On consumer protection volume growth, I have to be somewhat business unit specific, so let me address them one by one. Saltigo, we see volume momentum. You know that the agro cycle, which we are exposed to, especially on crop protection and here fungicides, the market has improved from the trough that we saw over three, four years. That was the situation 2021. Now let's see if 2022 continues in that direction. If it does, you will see ongoing good momentum on the volume side. On the newly created F&F business units, we do see volume growth definitely from the F&F and other personal care applications which we also acquired. The constraint is here capacity.
I mean, private equities normally don't like using CapEx, so they were very humble on investments. That is something we are now starting to do despite the CapEx commitment we have given. We would be very restrictive, but we will do debottlenecking in this business. We will implement projects this year, next year, and then you would see that growth is kicking in, especially on the sodium benzoates or natrium benzoates. That's a good business. It's fun looking at the numbers there. Here, F&F, we'll rather see pricing than volume growth, even though if we had capacities, there would be a tandem of these elements.
Now, if we go to the material protection business, I flexed in the press conference this morning, but also to investors, obviously, over the last six months, we made two investments in our disinfection products, Trident Tool, fantastic products, but also in our Virkon value chain. These capacities will come on stream in the next 12-18 months. The biocides business obviously is set for growth, not only the biocides and disinfection space, but also in the beverage technology, where we've also upgraded our capacity. In this segment, you should see volume momentum going forward. The constraint here is definitely logistics. Last year, we suffered quite a bit because the value chain from Memphis to Sudbury, from Memphis to Germany, was not broken, but extremely tough.
Many of the tonnages that we produced in Memphis on the intermediates could simply not be delivered in due time or delivered to the customers. This was really a major headache in this business. Also from Europe to China, we went that far, to if you believe it or not, to rent an entire cargo plane, because our products could not be delivered through the shipments and containers to China. We eventually wanted to keep delivery chains intact, and customers were asking for our wonderful disinfection products. Last but not least, our liquid purification technology. You will see pricing here that is more pronounced than volume because our capacities are tight. We are debottlenecking currently our purification technology products in Leverkusen and Jarrie.
That will only come on stream in 2023 and 2024, then you will also see more volume momentum. With this, I think, you have got not segmental data, but business data. I think, that should be lots of transparency. IFF Microbial Control, I will not comment. First of all, we need to get the closing done, then I will start commenting on business. Everything else would not be serious. Advanced Industrial Intermediates margin, I mean, here, Don't, please, Jaideep, look at the margin. In an inflationary environment where you have soaring energy and raw material costs, I would not like to focus solely on the margin, but on the EBITDA. This business was solid despite soaring energy prices in 2021. Look at the absolute EBITDA of this business.
It performed well despite being here exposed to a brutal inflationary environment. The business should be a very stable performer also going forward. I hope that clarifies all questions.
Thanks a lot. Well done on cash as well.
Well, we take it serious.
The next question is from Samuel Weber. Your line is now open. Please go ahead.
Yes. Hello. Can you hear me?
Loud and clear.
Okay. First of all, I mean, your pricing power is really impressive, and it speaks to the strength of your company. It's very. I'm very happy to see that. I wanted to ask you, as an outsider, for me, it's difficult to understand in the case of an oil embargo or if for another reason, Russian gas gets cut off. Could you help me understand what the operational implications would be for your big production base in Germany? Is a partial shutdown possible? Which segment would be most affected? I know it's speculative, but just to help me understand how such a big production base would react to such a scenario, which is quite difficult for me to grasp. The second question would be for the cash flow.
Am I right in my assumption that given the high material cost increases, et cetera, that this impact on working capital probably will still exist this year regarding cash flows? Thank you very much.
Well, of course, thank you for your questions. The first one, it's indeed hypothetical, and, it's not the situation of today. Currently gas is being supplied. If gas would not be supplied, the question is, do we have enough in our tanks, in our storage in Germany, or have we opened up enough alternative sources? This is currently being worked upon by the European Union and by the Berlin government. If there is a shortage on gas, then the government, of course, will start the allocation process, within Germany, within the European Union. We are not there yet. If you want to have an answer on this, you basically, would have to most likely raise the question on the, address of Brussels, Berlin.
You can be sure that companies of our size are in constant dialogue with North Rhine-Westphalia, with Berlin. This is what can be said at this point in time. As far as cash flow is concerned, if we continue having an inflationary environment. I mean, I cannot tell you if we are going to have the same inflationary environment as last year. I've seen now in the last two weeks. I monitor on a daily basis raw material spots. I see some raw materials that go up 100% one day and then they implode 80% the next day. My assumption is right now that inflation will be a theme also in 2022.
If inflation will be a theme on raw materials, obviously we will also have to stock up our working capital. You've seen that for the entire industry happening in 2021. If this is the base thesis that you have, you will also see that in 2022.
Thank you.
Most welcome. Next question, please.
The next question is from Chetan Udeshi, JP Morgan. Your line is now open. Please go ahead.
Yeah. Hi. Thank you for letting me ask a couple of questions. I think the first question I had was just following up on the previous comment you made on the energy price and raw material price volatility. Can I check if the Q1 numbers already include any impact from that? Or just because of lag, it's more a question of Q2, how we manage or how the company managed that environment? Or should we assume some of that is already being captured in the Q1 numbers and guidance in terms of further inflation both on energy and raw materials.
Second question was, you know, there was this recent article in the German press about what LANXESS may or may not do in terms of the HPM business and possibly interest in some other assets out in the market for sale. Can you clarify what is the current thinking of the company in terms of HPM strategic alternatives? Any color there would be useful. Thank you.
Thank you for your questions, Chetan. On Q1, I come back to what I've said before. We've given you a corridor on EBITDA. This is more than other companies have provided for. What is now embedded and not embedded, et cetera, I mean, I will not go there. I think giving you a heads-up on the numbers is a very clear transparency commitment from our side. Despite these volatile times, we did everything to double-check business momentum. Now giving arithmetic or financial details, do we have EUR 1 million, EUR 10 million, EUR 5 million included, yes or no? That's our job to do that in May when we comment on our Q1 results. Please have the understanding that we still want to have some information left so that you look into the conference call in Q1.
Now, on M&A, there is only one thing that we from the company perspective select in November, and that was we carve out our High Performance Materials business to be more agile and to have strategic flexibility. I think this says it all. What this now specifically means, we will comment on once we have something to say. Until then, we do our job. I hope this clarifies everything.
Thank you very much.
You're welcome, Chetan.
We don't have any further questions at this time. I hand back to Matthias Zachert for closing comments.
Well, thank you very much, organizer, for moderating this conference call. I would like to thank all investors dialing in and listening in. I'm happy to say that for the first time the investor relations team, Michael and myself, start doing real physical roadshows again. Well, that's nice to be back in contact with investors and therefore my best regards to all of you. Looking forward to seeing or speaking to you going forward. Take care until then. Stay healthy and all the best to you. Bye-bye.
Ladies and gentlemen, this concludes the LANXESS conference call. Thank you for joining, and have a pleasant day. Goodbye.