Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining the Lanxess conference call. I would like now to turn the conference over to André Simon, Head of Investor Relations. Please go ahead.
Thank you very much, Judith, a warm welcome to everybody on the phone to our Q1 2021 conference call from my end as well. I have with me our CEO, Matthias Zachert, and our CFO, Michael Pontzen. Please take notice of our safe harbor statements. With that, I'm happy to hand over to Matthias for a brief presentation. Afterwards, as always, the Q&A. Matthias, please go ahead.
Thank you, André, and warm welcome from my side to Q1 2021 conference call for Lanxess. I start with a presentation on slide number three, where we shed key attention to strategic highlights and financial highlights. As far as strategy is concerned, definitely the acquisitions that we have embarked on beginning of the year with two bold ones in Consumer Protection and the larger one yet to be closed, Emerald Kalama Chemical, were definitely a clear sign that we are on track as far as external growth is concerned. We will continue pursuing this direction. However, with focus and with discipline. Noteworthy also what we've communicated recently, the team-up and partnership with Tinci, where we are going to start producing the electrolyte for Tinci for the European customer base, for their European customer base from 2022 onwards. As far as financials are concerned, we clearly see that industries are rebounding.
There's definitely restocking that is happening across the industry. We also see production is moving upwards. In some cases, supply chains are extremely tight. Therefore obviously our volumes are needed. We also see quite drastic increase in raws across the value chains. There are some that are particularly hit also due to force majeures. Therefore we have seen price increases in many of the raw material products that basically have not been seen in the last 10 years before. As far as EBITDA is concerned, we came out better, compared to what we've stated in March. This is basically driven by March momentum, which was very strong, and therefore we could catch up with profitability even though I clearly have to stress that we took internal hits, so to say, due to the winter shutdowns in the United States.
All of you know that we have substantial production assets in North America, in El Dorado, Memphis, but also in Charleston, et cetera. Our El Dorado wells, where we extract bromine, were frozen for two weeks. Believe it or not, even in Texas, I had never thought that this would be possible, but even in Texas, we had blizzards and water infrastructure leading to our sites were down, and because of that, we could basically not produce any more for around about 10 days, hitting the entire disinfection value chain. This, besides freight and energy costs, and of course, also escalation on prices and raws and the devaluation on the dollar, were impacting Q1. By and large, we closed Q1 on the level of 2020, which was all in all still an okay quarter with little impacts from Corona. With this, I move to page number four.
ESG is dear to our heart, as you know, I think we've accelerated here nicely. We were one of the most ambitious chemical companies in Europe, communicating early on our aggressive CO2 reduction targets. From that day onwards, we are benchmarking ourselves in absolute terms versus our previous year, and step by step, we are able to reduce emissions nicely also for the year 2020. As many of you have seen, I hope you have studied the AGM agenda. We have put say on pay on the agenda of our coming AGM, and we link boards incentive schemes towards absolute CO2 reduction going forward, should shareholders, of course, vote in favor for it. On the right-hand side of this slide, you see that we don't have to shy away from being benchmarked against German industry trajectory or European Green Deal industry commitments, which might even accelerate further.
Even if this is being put legally into place, we are well ahead with our CO2 reduction targets. On page five, we conveyed to you that we also now go for new standards of ESG reporting. We see SASB and TCFD are being internationally recognized, and in order to give more transparency on the sustainability reporting standards, we embark on them as well. Of course, we will try then to move into the leading slots for these respective standards, depending on who is eventually going to be the global standard, which most likely will be decided in the years to come. Page number six, we shed some lights on our divisions and industry exposures. For Advanced Intermediates, I clearly would like to stress we saw a hit on margins in Q1. This has to do with the raw material escalation.
I indicated this already in March and gave pre-warning on this. We have contractual clauses, which is an asset, and with this we show that we have something that many of our peers don't have, so we can pass on raws. This always happens with a quarterly delay. You should see prices on the rise in Q2 in this big business unit called Advanced Industrial Intermediates. This is the delay effect stemming from Q1. It will be passed on Q2, as you have seen in many of the other years in the past. The only one thing which will burden us in this year are energy prices. We normally don't have energy price clauses.
We are looking into the contracts now. We discussed it with our customers because energy is, of course, on the rise for this year. We have to see how much we can mitigate this because the end demand is strong. Therefore, we see what we can do. At this point in time, we have to be a little bit more humble, therefore, on our Advanced Industrial Intermediates, even though the business is in full acceleration modus. As far as construction is concerned, I'm basically hinting to our pigments business. Construction will do well this year and next year. With all these government stimuli, the one industry that does benefit is construction. IPG should do well. Specialty Additives. We had the strongest quarter in Q1 last year. Therefore, we are not back to the same performance level.
However the end industries are rebounding, except aviation, still weak. You should see from Q2 onwards that additives comes back into the performance range. Again, outpacing then previous year performance. Consumer Protection. You all know that last year this business did extremely well, increasing by more than 10%-20% bottom line, expanding margins above 20%. I know that some of you said this is somewhat high level, tough base. Well, ladies and gentlemen, our expectation is Consumer Protection will continue to grow versus 2021, even though this is 2020. 2021 should be better than 2020 despite the high base. We see that this business is on the rise. We took a hit in Q1 because Memphis was down, impacting the entire disinfection chain. Memphis is up and running again, and capacities are being debottlenecked.
The Virkon capacity by end of the year, beginning of next year, will grow up nicely, and therefore we are quite optimistic on the entire division of Consumer Protection. Of course, with the acquisitions that we've done, INTACE, Theseo, they will contribute in the second half. Once Emerald is closed, of course, depending on the antitrust approvals. As United States is now approved, our expectation is that in third quarter, end of third quarter, we have clarity on the other jurisdictions. Of course, Consumer Protection will automatically also strengthen from this contribution. Engineering Materials, doing strong. We have issues here due to force majeures from a supplier side. Pocan, which is pretty much needed in the entire automotive industry, but also electronics and in the capital goods industry is tight. We saw how much this product is wanted.
We are doing everything, even sourcing from Asia now the precursor in order to be back to operational levels for our customers. I think we've shown a speed in replanning, rearranging our supply chain so that we will be earliest back to our customers with supply, I think, which will be recognized from the customer going forward. With that, I turn your attention to page number seven, Lanxess guidance. Current economic environment we see is rebounding everywhere. Restocking is visible. Difficult to quantify because customers don't tell you how much they restock. We see that customers move back production. In some cases, they are at 100% utilization. We see that even agro industry is rebounding. Construction, as I commented before, should be strong for this year, next year.
Aviation, our assumption will improve in the second half and potentially go back to happy days next year again, which would be earlier than we had originally assumed. Oil and gas is gradually improving, but of course, uncertainties are out there. We are living in volatile times. Therefore, we should all be humble, but nevertheless, optimistic. This is how we look at Lanxess. Second quarter, our range, EUR 240-280. This is what we were deciding in the management board when we prepared our numbers for the streets. I know that some of you are questioning, is this a rather wide range of the guidance? Well, it is our guidance for Q2. If you ask me specifically, I would be even comfortable to nail it down to EUR 250-260. Hey, let's look at the guidance provided here.
For your models, I try to be a little bit more sophisticated. We take a hit in Q2 on HPM, Pocan here, due to the shutdown. We face the US dollar being weaker, which is protected somewhat by Oliver Stratmann's hedging approach, but nevertheless, we take a hit here. As far as full year is concerned, we are more optimistic than March and move up the guidance to EUR 950 million and EUR 1 billion. That's basically the short summary on Q2 outlook for entire year 2021. With this, we accelerate to your questions and hopefully come up with good answers. Thank you. Please go ahead.
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 touch-tone telephone. If you wish to remove yourself from the question queue, you may press zero followed by two. If you're using speaker equipment today, please lift the handset before making your selection. Anyone who has a question may press zero followed by one at this time. One moment, please, for the first question. The first question is from Andrew Stott, UBS. Your line is now open.
Thank you. Good morning. Good afternoon, everybody. Just start with pricing, and then I've got a separate question on the balance sheet, if that's okay. Pricing was -2% for the group, and that was due to AII and Consumer Protection, specifically. Your peers, your European peers, did a range and a wide one of that of 0%-5% on pricing in Q1, but obviously none of them negative. How would you respond to that point that you're really not displaying pricing power in an inflationary environment? What do you think you can do going forward to address those two divisions? That's the first question. The second question was around the balance sheet. Your definition of net debt means that you don't include non-current assets.
The non-current assets have grown by about EUR 150, EUR 160, which sounds like a really boring point, but it's trying to explain that net debt delta. The simple question is, why can you not include those non-current assets in your net debt definition, and when will you be able to? Is it just the maturity profile of what you've acquired on the money markets? Thank you.
Andrew, good to hear your voice. Loud and clear and healthy. That's positive. On price, I will take this, and Michael will address the balance sheet question. Let me start with price. We entered last year, 2020, on a relatively strong footing as far as prices were concerned. Therefore, we benchmark ourselves right now in Q1 versus previous year with a relatively high pricing level that we still have to reach again, and this will most likely come in Q2. As the inflationary environment right now accelerated in Q1, we are bound in AII basically to our quarterly contracts with take-or-pay clauses, everything being spick and span. We can only catch up on the prices in Q2, which will happen. I see that already now in April.
Prices are on the rise again now in Q2. We will again roll that over in Q3. This is currently how I look at the market developments. Here on pricing for Advanced Intermediates, you basically see this quarterly lag. With the statement I've made at the beginning, we started on a 12-month basis with a relatively high price base already in Q1 last year. Versus peers, that would be the catch-up that we will do, and therefore you should see that being neutralized going forward. Consumer Protection, this has to do with one contract in Saltigo, where we changed the pricing formula, and that led to a distortion. Also to one other product where we had an underlying contract with a 12-month clause, that was therefore reducing the prices on an agreed basis.
However, this will vanish in course of the forthcoming quarters because pricing eventually and raw materials in Consumer Protection do not really matter. This business is relatively resilient towards raw, because raw materials are simply not name of the game in this value chain and this business profile. Michael will address Baljeet.
Hi, Andrew. Hi, everybody as well from my side. We had the discussion about how to display the investment of EUR 150 million, which we did now in the first quarter. Already in Q3 last year, because we did the same kind of investment at that point in time, and the clear message and the feedback was, it's not part of the way we should determine liquidity and therefore net financial debt. Your observation is principally absolutely right, Andrew. We have the increase in reported net financial debt and the decrease in liquidity and the majority, or basically the vast majority is driven by the EUR 150 million investment, which will come back next month. In Q2 reporting, you will again find the inflow and the cash flow statement and therefore the improvement in the liquidity coming from that investment.
Okay. Thank you very much.
Welcome.
The next question is from Thomas Wrigglesworth with Citi. Your line is now open.
Matthias, Michael, thanks for the opportunity to ask questions. Just with regards to the electrolytes. Is the Tinci contract exclusive? How much capacity have you got available above and beyond that which you've already agreed? Can you give us some sense of the margin of this business relative to AII? I assume that it will be higher than the group. A second question is, clearly you have an ambition for Specialty Additives to get to a 20% margin. Obviously, the aviation situation is exogenous to Lanxess. Maybe taking account of that, noting that bromine markets and prices are back on track, when should we think about you being able to hit this 20% margin ex aviation, for Specialty Additives? Thank you.
Well, Tom, good to hear you. Let me address the questions one by one. As far as electrolyte is concerned, I mean, first of all, we are happy to team up here with the worldwide leader in the electrolyte chemistry, Tinci. I cannot be specific on our customer and his plans. I would just like to indicate they are following the requests on the OEM industry, that I think you are well aware of. That a lot of the big players in Asia are coming to Europe as far as battery cells are concerned. Again, these are the worldwide leaders. They bring along their current suppliers, but these suppliers eventually need the raw materials. We stressed we have the raw materials. At this point in time, however, we use our high technology base in Saltigo to already produce the electrolyte.
This is the first that comes. Now we have to see what else we are going to do with Tinci. This is definitely an exclusive contract with us. It's a bilateral long-term contract starting from 2022 onwards for the next few years. I cannot indicate capacities, et cetera. This is all under confidentiality agreements. Definitely this would not suffice to satisfy the market development, which is going up like a rocket. We are talking here about 20%-30% volume growth rates on a yearly basis. Now, I think this is the first step. We have to see what other steps we are going to do. This is yet to be sorted out. Now, as far as your second question is concerned, 20% on Specialty Additives, I would like to make the following adjustments to this.
The first one you mentioned yourself, the high-margin aviation business is not yet back on track. Point number one. Point number two, we transferred beginning of the year, out of Advanced Intermediates into Specialty Additives, a business, the accelerators antioxidants, that reported around about EUR 300 million in sales and no EBITDA. We transferred that, adjusted our segment reporting. If you move EUR 300 million sales with no profitability, i.e., zero EBITDA, of course, margins are not going up, but they are diluted, and you need to take this into consideration for the SA segments. Having said this, we moved the business over in order to derive synergies from the combination of Rhein Chemie and the antioxidants and accelerators, because eventually they have the same markets, the same customer base. Of course, we would like to achieve synergies going forward.
This business will dilute the Specialty Additives, which is, of course, a negative. At the same time, the positive is, when I look at the new configuration of Rhein Chemie, we now have it in 2020 at a low. My personal belief is if we approach this business in a correct way, this business will at least double in profitability. My expectations are, however, that it's going to triple. If everything goes well, it's going to quadruple. What will happen then is a different story. I think then we have to see how further we can scale it up going forward. This decision will be taken, I would say, in something like two to three years down the road. First of all, we are trying to extract as much profitability out of it, going forward.
Okay. Thank you. Very helpful.
You're welcome, Tom. Next question, please.
Yes, the next question is from Jaideep Pandya On Field Research. Your line is now open.
Thank you. I just wanted to ask you on polyamide 6. 6,6 is basically out right now. What is really happening in nylon 6 in terms of your ability to sort of pass this crazy benzene move up? If you look a little bit more longer term, once the polyamide 6,6 sort of improves in precursor supply next year and the year after next year, how do you see that as an impact on nylon 6, just in terms of as EVs ramp up and given both these polymers are so important for the auto industry? That's my first question. The second question is just any update on Emerald Kalama, given the fact that the flavors and fragrance market is coming back, the pharma industry is doing well. Any update there would be appreciated.
The third question really is about bromine, and apologies for this, but Chinese bromine has hit new records, and both your key close peers have talked up this business. If you can just remind us, how should we think about your flame retardants business in terms of pricing versus whatever spot bromine we can track? Thanks a lot.
On polyamides, I agree. PA is tight on the 6,6 side, also on the 6 side. I do assume PA6 has, in Europe, the better position going forward, due to the value chain being more robust than the 6,6 value chain. As long as the market is tight, and it is very tight these days, we cannot produce as much as we want to. If we see that the demand is on the rise and continues to go up, we have various customers, like competitors, that currently don't get volume. In some areas, we have to cancel key customers because we simply don't have the volumes anymore. This is something happening in the entire market. We have seen benzene going through the roof, going up by 200, 300 percentage points. Unbelievable. This hits cyclohexane, of course, as the next step.
We are now passing all of that on. Peers and ourselves are out with price increases, and this will be a theme going forward. As long as demand is robust and not yet all industries are back in the order book. The situation from my point of view is not going to soften, at least in the next few quarters. It might even get tighter. This is therefore a good time for the polyamide value chain. All in all, for 2021, with all the e-mobility accelerating in 2022, 2023, I think that the polyamide value chain is going to be after two tough years, 2019, 2020, should benefit going forward. This is what I would like to say on PA6. On Emerald, I agree. I think we bought Emerald at the right point in time.
Of course, the business is not in our hands yet. We are doing all the filings, answering to all jurisdictions, antitrust authorities. Of course, whatever we can do and what can be done from an integration standpoint, which is in line with legal prerequisites, legal laws, we are doing. We are preparing for day one. We want to be ready with operational analysis, synergies, verification, et cetera, by end of June, so that we are prepared for taking the business on board should approvals come. We like the team, we like the people. Great people, energized, fitting very well to us. Yeah, I think it was the right purchase at the right point in time, where industries are quite robust, moving up forwards, as you indicated.
I'm looking quite positively on the second biggest acquisition that we did, and it will catapult the Consumer Protection business in a different league. Emerald is a business where we've detected some substantial savings on a business which is already around 20 percentage points. We see growth here, sales growth. We see, of course, productivity gains. I think this business going forward in the next two to three years, together with our Consumer Protection businesses, will move this entire segment into a new league. Which from the KPI standpoint is, of course, impressive. Your third question, I know that Albemarle went out with good comments on bromine. I agree on prices. I mean, the prices you see are Chinese prices, spot prices. We have not only Chinese prices, but also European and U.S.-based pricing, often with contracts in place.
The Chinese prices are spot market prices, but if they're on the rise, it's good, and we are happy about it. Markets are tightening again in bromine business, definitely the case also on flame retardants. We had simply one big issue, Jaideep. We could not produce. We could not extract bromine. Our wells were frozen. El Dorado was basically for two weeks out of production. We had demands and orders all over the place. We couldn't ship. I looked at their comments in Q1. Their Magnolia plant was impacted because it's 50 miles away from ours. They were also down and alluded to the fact that they will have volume impacts from the winter season, not only in Q1, but due to the lack of production, they will also be short on volumes in Q2.
Therefore there is a lot of demand out there from flame retardants, construction industry, but two of the three big players had issues to get the volume for the customers. That's the situation in the market. I'm not negative on bromine, the opposite, as long as we can keep our production running. We have to catch up with the volume demand coming from the end market, and the end market is strong.
Very clear. Thanks a lot.
You're most welcome. Stay tuned. Next question, please.
The next question is from Andreas Heine. Sir, your line is now open.
Yes. Thank you for the opportunity to ask question two I have. One is on Rhein Chemie. You were talking about your ambitions to double, triple, or quadruple your earnings. Well, it's easy if your starting point is very low. Going to what the margin might be after having done the homework, can it be close to 10% or, let's say, in the range of where the group margin is? Is that so tiny right now that this quadrupling is even not getting Rhein Chemie to that point? The second question is the sequential improvement from Q1 to Q2. If I just take what you mentioned about Advanced Intermediates rolling over on prices, which you were not able to do in Q1, have done with Q2, and taking the U.S. weather-related impact, then I would basically get to the midpoint of what you have given as guidance.
Is the second quarter in general more or less the same, and these two negatives in Q1 are not existing anymore in Q2? Is that the right reading on the sequential trends? Thanks.
Well, let me address the margin question first. Margins are, if you take zero EBITDA on EUR 300 million in sales, the margin is not there. Of course, this was the case for the accelerators and antioxidants. They were badly hit. At the Rhein Chemie business, I would say the former Rhein Chemie business, the Rhenograns, was a business in last year in the high single digits, low teens margin. Simply unacceptable. Therefore this business, we've changed the management team. It's a good one. I'm looking at this now carefully. They take the right steps. I'm impressed by the analysis that we now put in action. Therefore this business, definitely, this is a double digits margin business in the new configuration periods.
If it will not achieve the group margin standards, and the margin standards for me are not where they used to be five or six years ago. We are bringing this business, our group, to different margin levels. Either this business moves there or it moves out. The first thing that I want to see is that in absolute terms, this business goes up strongly. As long as it goes up strongly, they have the right to be under the Lanxess roof. If they long-term can then keep a low asset base with high double-digit margins, I will revisit. This is something the business yet needs to be proven, and this is the strategic plan we discussed, and now we put it into place.
Now, as far as Q2 is concerned, the one thing that is clearly visible is strong volume momentum and that we catch up on prices. The one thing that, of course, is negatively impacting us is the force majeure. It is the energy prices and it is the USD, which last year was something like EUR 0.10, EUR 0.11 better in our direction. Now it's the opposite. Oliver is mitigating this to some extent, but of course the delta is still something like EUR 0.06, EUR 0.07 points, so it does hurt.
All in all Q2 should be a sequential further improvement versus the Q1 numbers you have seen, and that's what I've indicated earlier on also in terms of narrowing the guidance range somewhat on an operational basis, but still, the guided number for the streets to be absolutely certain is EUR 240-EUR 280. You are most welcome, Andreas Heine.
Next question, please.
The next question from Markus Mayer, Baader Bank. Your line is now open.
Good afternoon, gentlemen. Two questions remaining. First one is on the Engineering Materials business. We've heard from other companies, more anecdotal evidence, but I think you have better views maybe, that there was double sourcing, in particular the automotive customers. Do you see this as a risk for the second half, or do you think that this was only as I said, anecdotal evidence? Secondly, on the Specialty Additives business, this EUR 10 million one-off winter impact. Do I understand this right? This was basically mainly in the Specialty Additives line and in particular in the bromine line.
Can you repeat the second question, please? I did not catch it.
Yeah. You lined out that you had a EUR 10 million negative one-off effect from the harsh U.S. winter. My question was if this effect was mainly then in Specialty Additives or if it's even solely, and if so, if this then was basically then attributed to your bromine business, as you said, your valve was off over two weeks.
Okay. Very clear. Thank you. On your first question, you're totally right. Automotive industry is normally going for double source, sometimes even triple source, but the big guys are double sourcing. Hey, in this case, both suppliers of the PBT business, the two big players in the European camp both were on force majeure. It was not us who had the issue, it was the biggest raw material supplier who was supplying our competitor and ourselves. Therefore, the next step of the value chain was reporting as well the force majeure, leading to tightness in the capital goods industry, E&E industry, and automotive industry. By now we have sourced from Asia, so we are liquid and we will go back on stream already earlier than anybody else, most likely Friday this week.
We run extra shifts, we are the first to supply customers again, we will go out to customers telling that we are now internationally sourcing so that this situation will not occur again. We are doing everything in order to be speedier and help our customers to regain lost production as quickly as possible. I'm not concerned that in the second half we will face an issue. Rather the opposite, I think customers will give us credit for our speed and agility we are showing in this particular case. Now, with the second question. You're right. The biggest hit on the EUR 10 million was in bromine, because Eldo is definitely our biggest site in North America. We were also hit in LAB, because with the Chemtura acquisition, quite a few sites of lubricants are in North America too. A little bit went on Memphis.
It wasn't the millions, low millions, but we were basically hit in all big production sites. The biggest chunk, definitely out of the EUR 10 million, was in El Dorado. With LAB, of course, the significant chunk was Specialty Additives, where we were incurring the idle cost, and the idle costs are seen in the EUR 10 million. We lost volume as well, so this was really bad.
Okay. Thank you so much.
You're most welcome. Stay healthy.
The next question is from Rob Hales, Morningstar. Your line is now open.
Yeah, good afternoon. Thanks for taking my question. On Saltigo, I was wondering, given the ag market, I know your business is project-based, but are you seeing an increase in potential projects, discussing with your customers? Is there more in the pipeline, I guess? Do you have some comments maybe on your view on raw material inflation for the full year? I'm just wondering if your guidance implies an easing in the second half. What are your thoughts around that?
Two good questions. On Saltigo, momentum is clearly better. We were, despite trophy ag industry, doing reasonably well in the last two to three years because of innovative products and projects. We did well in the last two to three years. Last year, we achieved the best result in Saltigo ever since. Now the agro market comes back, and this, of course, gives you a different negotiation power going forward. My personal belief is Saltigo will be on the rise also for the years to come. Now we start with electrolytes. It's a different industry, which will somewhat diversify the setting of Saltigo. All in all, I'm looking optimistically towards the Saltigo business. This will not move up every year in the double digits, but it will move up in the millions, and in the high millions.
Therefore, I'm optimistic on this year's performance of Saltigo, but also for the years to come. Now on raws. This is potentially one of the most difficult questions to be answered right now. Macro indicators at this point in time are alluding towards a softening of by and large raw materials in the second half. I'm saying to my guys, "Don't plan for that." Let's do the bottom-up work and analysis and forecasting based on raw materials that potentially might be a bit softer. Operationally, that's what I'm saying to my teams. You should all be prepared that even in the second half, we would see a further rise in raw materials. If this is happening, we have to go out with further price increases. The situation right now is one that I think you have to simply be flexible, agile. Speed is everything.
You cannot make predictions like you've done potentially five or 10 years ago.
Great. Thanks so much.
You're welcome.
The next question.
Next question, please.
The next question is from Georgina Iwamoto, Exane BNP. Your line is now open.
Hi. Thanks for taking my questions. Just firstly on Consumer Protection in Q1. Of the 10% volume growth you printed, how much was underlying volumes versus the IFRS 15 impact you mentioned? Secondly, on Q2 guidance, could you possibly strip out the raw material headwinds that you're assuming in that range? Thanks.
Let me take both questions, though. With regards to Consumer Protection in the first quarter, we're not detailing out the exact effects. They are some part of it, but not the majority. The underlying business is, like Matthias said earlier, growing nicely in Saltigo, especially with regards to the overall environment in the ag industry. Second, we were as well displaying that the acquisitions which we did a couple of years ago with regards to MPP are contributing nicely as well to the overall growth of the volume. Therefore, it's a part of it, but it's clearly not the majority. With regards to Q2 raw material headwind.
I think if you read the newspapers, if you look into the market, there are a few of our raw materials, which are benzene, toluene, which keep on skyrocketing. We saw further increases now in course of the second quarter. Therefore, it is of utmost importance that we keep on rising prices fast now. Matthias was mentioning the price forward escalation clauses. Clearly then on a sequential basis, we will further see pressure from the raw material. The pressure must be forwarded to our customer through price increases.
On the spot, Michael. Very good. Next question, please.
The next question is from Martin Roediger, Kepler Cheuvreux, your line is now open.
Yes, thanks, good afternoon. Actually, it's two questions on the same topic on antioxidants and accelerators. According to the restatement, we can calculate that the sales of that activity last year was EUR 237 million, and EBITDA was actually negative by minus EUR 6 million. I wonder about your EUR 300 million sales figure. Is there any other retroactive change in the Specialty Additives and Advanced Intermediates we should be aware of? Staying on antioxidants and accelerators, you shift that business from Advanced Intermediates to Specialty Additives, actually back to your Rhein Chemie unit where it was some years ago. My question here is, what went wrong in the past under the Advanced Industrial umbrella? From your experience, how often did it happen that a low margin business or negative margin business has caught up to a level where it did not anymore dilute the group margin?
Finally, you say the profitability will rise due to synergies because it has the same customer industries as Rhein Chemie. What is really different today compared to the past when it was part of Rhein Chemie? Did the customer industries change in the meantime? Thanks.
Hey, Martin. Good questions. By the way, my son who is 13 years old, hears the Martin song currently all the time. I thought about you when I heard that first at home. Let me come to your questions. The EUR 300 million with zero EBITDA, it's basically not the guidance on where true numbers 2020 are, but basically what's the configuration of this business? How has this business behaved in the past in a trophy economic environment? In 2020 and in past cyclical downturns, this was somewhat the sales and the bottom line contribution. The precise numbers you have mentioned are the ones that we have given in the adjustments overview that we, I think, issued in March. Here you have the precise numbers, I think, for 2020, but also for 2019. With this, I would like to answer then the second question.
This business, when we integrated it in Advanced Industrial Intermediates, way back in 2014 or 2015 it was, I think, it's continuously on the rise. We went from basically zero after the last crisis, 2013. We went from zero to round about EUR 30 million in profitability. 2019, the automotive crisis came, 2020, Corona. This business will go back in normal times to EUR 30. With the synergies we can achieve in the Rhein Chemie business on the sales muscle, on logistics, warehousing, you name it, my personal expectations are that this business will even go further than EUR 30. If you add the bottom line contribution from Rhein Chemie with respective synergies on top of this, you will understand that my expectation on this business versus 2020 is that this should not go up by double times.
Definitely rather 3x , if everything goes back and they are really doing well, 4x . That's how I look at this business. I hope that you understand the rationale, but also that we successfully repositioned the business under the Advanced Industrial Intermediates umbrella. Any further question, Martin?
Thank you.
You're most welcome. Do you know the Martin song?
No.
I send it to you.
Okay.
The next question is then from Matthew Yates, Bank of America, your line is now open.
Hi, everyone. Two questions maybe. The first one, just around the cash flow and the sizable swing in tax payments. Not that I want to overanalyze and dwell on a given quarter, but can you talk a little bit about what happened there? Whether that was anything structural or whether that's purely a bit of randomness around quarterly timing. The second question, perhaps more of a midterm one, but it's around R&D for the group.
It looks to me like you're only spending perhaps half of what some of your diversified peers in Europe do on a percentage of sales basis. I appreciate it could be an issue with definition or asset mix, but I just wondered what the approach was towards R&D as you continue this journey to becoming a more specialty company, whether you're investing enough right now, or whether you need to use some of your stronger financial flexibility to ramp that up over the coming years.
Yep. Two valid questions. Taxes, that's a difficult matter that only Michael will be able to really shed light on. I pass it on. Before that, I address R&D. Well, in R&D, you have to look specifically where we report what kind of R&D. I've looked into this with other companies who made the assessment. In our company, we are doing R&D in three areas that other companies combine. We don't. The process R&D we do on technology, like when we now do R&D in order to reduce CO2 emissions. We are one of the leader in N2O, that is, in German, laughing gas. We are one of the innovators here in Europe as far as this CO2 technology is concerned. We developed it in a catalytic but also thermal reduction way. We have patents, et cetera.
With this, we have improved our own CO2 emissions drastically in Leverkusen, but are in process of reducing this in 100,000 tons in Belgium in two steps. This is not reported under R&D. Even though we have patents and stuff like this, we report that in cost of goods sold, because it's process technology, thus production-related. Second, I know that some peers are reporting technical application that is not on a yearly but two to three years basis in R&D. We post that in Marketing and Sales. We basically did that right from the beginning, and we stuck with this ever since. The CFO that followed the first CFO in this company was not bold enough to change it, and therefore, we are still having it in Sales and Marketing. The rest staying in R&D is the normal R&D stuff.
This will automatically go up over the years because Consumer Protection, of course here, automatically will post more R&D in this area. Therefore, if you solely look at our own reporting, you could beef it up. We don't do it, but we know what kind of R&D we are doing. I hope that gives a little bit of more clarity to your R&D question. Now we come to the real sophisticated stuff. With this, I pass on the words to Michael.
Thankful, Matthias, and I'm so happy that I'm not the CFO who followed the first CFO of this company, to remind everybody on that call.
Oh, shit. I forgot about it. Dark times.
With regards to the cash flow statement, Matthew rightly said. There is no quarterly timing, and there is no, like in the P&L, a quarterly right quote in tax payment. They come, I don't want to say totally randomly, but there are clearly timing issues. Over time, you should recognize that the P&L quote of 28% will as well become true in the cash flow statement, but there are quarterly changes, which means in some quarters we have cash-ins because we have down payments to the tax authorities, which in Germany carry a positive interest rate of 6% in case we finally receive money back because our down payments were higher than the final cash payments we have to do. In Q1 last year, that was the case. We received money back from the tax authorities, including a nice interest payment as well.
Not only that, last year in the first quarter, we were as well receiving some VAT payments which were due in different countries, and that amount was in the neighborhood of EUR 20 million. These two tax elements were basically the reason why our cash flow was impacted last year versus this year. For the next quarters to come, again, it's hard to predict the tax cash payments, but as we paid more in the first quarter now than our P&L reported, you should, over time, expect maybe a smaller cash out than the P&L expense.
Thank you, Michael. I'm glad that you have your tight hands on it. Next question, please.
The next question is from Georgina at Goldman Sachs. Your line is now open.
Oh, thank you. Hi, Matthias. Hi, Michael. Good to speak to you. I've got two questions. The first one, I think we'd been anticipating by the midpoint of the year, an announcement on your Standard Lithium partnership. Just wondering if you could update us on that. The second question is kind of a follow-up. If that ends up being a go-ahead and we've had this nice announcement of the electrolyte production with Tinci, how are you thinking about the portfolio in the medium term with all of the kind of growth that you are seeing in electric vehicles? You've done a lot of work reducing the auto exposure of Lanxess from 40 to about 20%. How high are you comfortable going for auto exposure as a percent of group sales? Thanks.
Well, thank you on your questions. Let me address them one by one. Step by step, we make further strides on lithium. Of course, in the current environment, not as fast as we would like to. All of you know about this. What we can say, at this point in time, the pilot process and technology indeed brings up or brings out, that's the better English, most likely, brings out lithium carbonate. We are able, it seems, to first of all extract lithium out of the wells. Second, to then convert lithium chloride into lithium carbonate with a relatively high purification of 99.85%, which is battery-grade quality. This is what we now see. However, the new process on this extraction is not fully there where we would like it to be.
We have still two areas where we will need to optimize from an engineering perspective, the process in terms of content of extraction and purification or waste reduction, better to say. Here, our engineers need to work. How long this takes in order to get our entire process data in an area where we can then go full scale, I cannot tell you yet. Here, I need simply my engineers to do the work, the groundwork. That's where we stand on lithium. All in all, another step in the right direction. Technology and production processes, especially when they are new one, simply need groundwork and some great chemical engineers to put their head together and to come up with solutions where today we don't have a solution yet. We know where the problem is, the solution yet needs to be engineered.
This is as far as lithium is concerned. On the electromobility growth, it's a big market. First of all, you see that we are looking at this big market. We can because we have the knowledge to do this. We have the precursors to do this. If we see here a big value pocket with a controllable risk, we will decide on going into it. If we then team up with a partner or if we do that on our own, we have to see. First of all, let us understand and analyze how big the value pocket is, and what kind of risk profile we would take on our shoulders, and then we decide how we are going to enter into it.
I think the positive thing I take for my personal self or for me as a CEO of this company, it's nice that we have many options in our company. If it relates to this, if it relates to Tinci, if it relates to lithium, if it relates to Chemondis, et cetera. The good thing is we have a strong platform and we have options, and now let's see what kind of options are coming through.
Thanks, Matthias.
You're welcome. I see no further questions on the call. With this, I would then like to thank you for your participation. We will open up the doors or the video cameras and tablets for digital road showing. I hope that in the second half of this year, when we are all vaccinated all over the planet, or at least in most of the cities, we are going to have face-to-face meetings again. We are energized and look forward to seeing you then. Take care. All the best for 2021.
Ladies and gentlemen, this concludes the Lanxess conference call. Thank you for joining, and have a pleasant day. Goodbye.