Earnings Call: Q4 2020

Mar 11, 2021

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 Andres Ziemond, Head of Investor Relations. Please go ahead. Yes. Thank you very much, Judith, and a warm welcome to everybody to our Q4 and full year 2020 conference call from my end as well. As always, I have our CEO, Matthias Zachert F. O, Michael Pontzen with me. Please take notice of our Safe Harbor statements. Since we assume most of you have had Look at the presentation already. We have again decided to only briefly set the tone today with Matthias highlighting some key aspects of Q4 full year 2020 and of course, the outlook on 2021. So we dedicate more time to your questions. With that, I'm happy to hand over to Matthias. Matthias, please go ahead. Yes. Thank you, Andres. So ladies and gentlemen, a warm welcome from my for CYRUS WEP's full year performance, and I will address the one pager that by now should be in front of you Thanks on the screen. So overall, we finished 20 20, with a strong performance. 4th quarter was one of the best quarters, 4th quarter performance Finishing quarter in the last several years. EBITDA at around about €200,000,000 despite some onetime Losses like the unplanned force majeure in 8 PM. So overall, A strong operational but also strong performance on our operating cash flow. And we clearly see that in the Q4 business was coming back. We had in the December month a utilization which we never had before, Roundabout 80%, which for December has been impressive. And the good momentum has continued in Q1. So overall, the industry started With strong volume, the momentum and many of the industries with the exception of aviation It's coming back in the order book. We clearly see that Q1 is dominated by rebound in demand. However, also stemming from replenishing of tight inventories. So while we see that this momentum in Q1 is pretty healthy, I would like to give a reference towards 3 elements that somewhat hurt us Despite the operational strength, one is definitely U. S. Dollar weakness. We compare here to a U. S. Dollar, which is far stronger in Q1 2020. 2nd, as far as raw materials are concerned, you have realized now for the last few years that in a few businesses, especially in intermediates, we do have quarterly swings. I give reference to Q3 last year when intermediates performed soft And you saw now in Q4, a strong rebound in intermediates. And this is a trend that we've seen over the last Several years, why is this so? We are in a fortunate position to have contractual agreements to pass on raw materials volatility. Thus, this gives the business stability. Whilst in a running quarter, we sometimes Simply have to absorb the raw materials on the spot market. So in Q1, in this segment, we will take a hit due to the inflationary environment of raw materials. But please take note of the fact you would see a rebound then in the second quarter. So next to ROTH and FX, notably U. S. Dollar, We were hit in February quite heavily due to the severe winter Simon. Season in the United States, we even had in states like Taxes, where you normally don't have severe winter seasonality, we had to shut down our plants in Memphis, Tennessee, which never happened before in the plant's history, but no energy electricity was there in the net. Water supply was not given because water pipes did freeze and burst. And our plants in El Dorado was down for 2 weeks because the wells were icy. So February, we were hurt due to maintenance sorry, due to winter Shutdowns, fortunately, plants are back up and running and in solid state. But this, of course, has impacted So will impact Q1. And as far as winter standstills are concerned, it takes around about €10,000,000, €15,000,000 of idle costs in our P and L, which is sad but not ongoing. And the sun is shining not only here in Kelowna. I was told Yesterday, Sun is shining back in Texas. Now as far as margin is concerned, If you look into 2020, we have finished the year with a 14% margin, which is In light of the heaviest recessions, at least that I have seen in my professional career, still in the range of our target corridor 14% to 18%, and we've achieved the 14% despite a plant utilization of around 70 2%. Achieving such a margin, EBITDA margin with such a low utilization in your plans gives us the indication If volumes return, this portfolio will not only be at different levels in absolute EBITDA terms, but also as Far as EBITDA margin is concerned. Now based on our performance and Financial strength of the balance sheet, we've decided in the management team to propose to our shareholders for the AGM a with dividend increase of 5%. And this surely demonstrates our belief and our confidence in the strength of LANXESS going forward. Ladies and gentlemen, we are not only looking at financial excellence, Operational Excellence and Strategic Improvements. We clearly have ESG Targets, improvements, sustainability targets and improvements clearly on our radar. We don't only talk about that. We implement it. I'd like to make clear reference that we don't shy away from hardest benchmarks to the industry. If you look into the European industry, With the climate neutrality targets 2,040, we are 10 years ahead of the curve. If you look at our CO2 reduction performance from spin to 2020, we have achieved an absolute reduction in CO2 emissions of more than 60 50% as of now and further steps will be taken through key projects that we have identified and execute. So we are clearly here accelerating. We want to be at the top of the pack, top of the ranks. And because of that, in order to clearly implement that company wise, We have now decided and are implementing it as we speak for this year already To set boards and leadership team remuneration on absolute CO2 reduction targets, not relative. We are going a step further, absolute CO2 reductions. So we walk the talk. Now let's come to for 2021. Ladies and gentlemen, normally, we give at this point in time only a qualitative heads up on what we expect for the running year. Due to the fact that in light of pandemic and further clarity, transparency That shareholders should have from our side, we decided to give a Quantitative guidance, this begins with €900,000,000 and finishes with €1,000,000,000 EBITDA. It's a broader range, but we are at the beginning of the year, and corona has shown that Unexpected surprises have always occurred in the last 12 months. All in all, we think that surprises should Gradually decrease going forward, but you never know. And for that reason, I think, for the starting of the year, this is The right approach in line with our company history, and therefore, please take it as That's now in terms of 2021, you've seen that we started the year with 2 Small bolt on acquisitions in the disinfection area, we've continued in February with acquiring Or signing a binding agreement to acquire Emerald Kalama. It's a business that fits very, very well into our consumer Himans. We have by now seen, of course, further the management team and Had some discussions, of course, strictly adhering to legal standards. But of course, first contacts have been made. I'm impressed by the team, By the energy, by the competence, and we are now gradually working on the integration. But first thing The top on the agenda is to do the antitrust filing. And as far as what We can say is everything is running according to plan. We are impressed by the team, by the products. And Therefore, once we advance further on antitrust, we will also then give communication to The Street, how we are going to integrate that within our Portfolio and of course, what kind of implication this also has for our numbers. As of today, we don't Factor in any penny in our guidance because, first of all, we need to get the transaction closed. And once this is happening, we give you feedback when and where it's going to improve further our EBITDA. Now with this, ladies and gentlemen, I turn the call swiftly immediately after quarter to the Q and A floor. So we are all yours. Please go ahead. Ladies and gentlemen, at this time, we will begin the question and answer session. Andreas And the first question is from Thomas Wigglesworth, Citi. Your line is now open. Matthias, I assume Michael is there as well. Thank you very much for the presentation and the opportunity to ask questions. Two questions, please. The first is on your thoughts around Capital allocation going forward. Where does the buyback currently sit? How much capital are you willing to allocate towards that? Simon. Can Lanxas still has balance sheet firepower? Can you do Emerald and another deal? Or does Emerald Simon. And then in terms of you've built The organic growth, the CapEx level, what's defined that this year? Can you go for more? How are you thinking about That level of driving growth organically and the amount of capital allocated to that. That's first question. Second question is, You highlighted one component of your bridge. It doesn't include Emerald in the guidance for 2021. But are you assuming kind of consumer unwinds a little bit and there was some kind of exceptional gains, any one Costs that are repeating that will come back into LANXESS for 2021. Just a little bit of color around maybe what you're kind of assuming normalizes versus obviously the clear strength we're seeing in Advanced Intermediates and the Air and Materials business. Thank you. Hi, Tom. Good to hear your sound and healthy voice. And we will Michael and myself, we will address the questions 1 by 1, and I would take capital allocation. So all slots On capital allocations are possible, we've clearly flagged that 2021, 2022, we see Years of organic and inorganic acceleration. We have entered into of acceleration as defined and explained to you in November 2019. So This chapter is on, and we will do this on the inorganic side as we have shown through the 2 Amis Bouche transactions beginning of the year and followed by Emerald in February. And we will continue doing this because our balance sheet is still in a very strong position. We have To headroom for doing further focused acquisitions, which will rather Follow the current pattern that we have done over the last few years. And therefore, is Emerald something Is Emerald a business that would be complex and long lasting as far as integration is concerned? No. I Recapitulates, I reiterate, we are talking here only about 3 sites. The chemistry of these sites we understand. The second, we are talking here about Roundabout 500 top notch people, great culture, great expertise, strong chemical engineers, Strong chemical sales force, motivated teams. They've seen different markets, Different companies, so I'm impressed by what I've seen. It's a business where that we understand Market wise, product wise, customer wise, so integration will be relatively Fast and not very complex. So therefore, we have the Corporate's muscle and capacity to continue, but of course, it has to fit with our Strategic direction, and we will not just go for acquisitions to grow size. We only do acquisition if the strategic rationale is strong and the financial fit also is appealing. So inorganic investments definitely are on, but also organic investments. We are yet In the process of analyzing with what kind of strength We will invest in battery chemistry. We are running or working on several projects here On existing plant capacities like hydrofluoric acids, like phosphochlorides, we are here in an area where We can grow organically with existing capacity, but we might also enter, as you know, into a third precursor of battery chemistry like lithium, which is still on as far as testing is concerned. And we might even consider to move further into the electrolyte value chain. This depends also on discussions we're having with World class leaders in the segments. And therefore, This might be an area also where we could accelerate further. It would be something that would take time because capacities would have to be built. But the growth prospects, especially in this chemical area, is substantial. So far, we see that the Public is focusing very much potentially too much only on the anode and cutouts. If you look into the battery cell, To resell, however, there's quite a lot of chemistry in the housing, and the biggest part Simon. In the area of the electrolytes and electro salts. And this is exactly an area where we are playing in, and that's The reason why here we are in intensive discussions and this might determine also our appetite for organic Investments. Now share buybacks, of course, are also one category. We have announced today that our overall program remains in place. And therefore, we have all optionalities to decide on our future capital allocation depending on what is on and what makes sense from an overall company perspective. Now as far as the Consumer segment is concerned, one Point, and I would like to clarify and then Michael would take on costs that will come back that has been cut last year. Consumer segment Consumer Protection segment, please understand that on Saltigo, basically momentum has Improved in the agro industry modestly 2021 versus 2020 comparable days. As far as the NPP business is concerned, we had a very, very strong year last year in the disinfect area. We assume this is going to stabilize. But the business nevertheless will continue growing more modestly Then 2020, which was an exceptional growth year, but it will despite that still continue to grow, which is a strong sign. As far as our water purification business is concerned, this business should also improve margin wise, EBITDA wise Because the membrane polluter, so to say, is gone and the resins business, per se, is growing. So that should give you a color on consumer protection. It's clearly a growth engine, but of course, you cannot grow every year With something like 18 percentage points, I think it will be more in the high single digits percentage points area and cost of 2021. Nevertheless, it should continue growth. Michael, on costs? Good morning, Peter. Hi, Peter. Hi, Peter. Hi, Matthias. Hey, Tom. Good hearing you. Yes, with regards to Of course, we told you guys that our plan is to save around €50,000,000 in the course of 2020, and that target was achieved. So ticked the box on that. And we told you as well that the majority of these costs are variable costs, and we expect them to Largely come back into 2021. So Vietnam 70% or 80%, that depends on the further development on Because as you can imagine, a portion of that is travel cost or other variable cost. But in our books, we expect to the majority to come back in 2021. Thank you both for the questions. Appreciate it. You're welcome, Tom. Next question, please. The next question is from Martin Rediger, Kepler Cheuvreux. Your line is now open. Thank you. Good afternoon. Three questions from my side. Firstly, how much of the current demand is due to restocking as Ziemann. Customers expect rising chemical prices. And please differentiate your answer by the regions because in the past, I understood that customers in Europe and the U. S. Did not do destocking as the their focus was on tight working capital, while in Asia, in particular China, restocking and destocking Simon. The second question, you indicated the good momentum in Continued into Q1 this year, but you and also other companies mentioned that uncertainty is still very high. The order book is still unchanged compared to, for example, September last year, I. E, customers still buying on short term notice? The third question is on logistic costs. I would assume that they may go up in various regions Simon. This year because we hear about logistic issues in the U. S. And limited availability of ships in Asia. Are logistic costs a concern for you? Or is it not relevant as you are very close to your customers and shipping costs are low anyway? Thank you. Well, all valid questions. I take them 1 by 1. I mean, our customers are not telling us Blankly with every order, if this is restocking or not or if it's Underlying demand, but the one thing that we can tell you is, of course, we do our own corporate intelligence. And as conveyed over the last 3 to 6 months, When I was on the roads or virtually on the roads, that inventory levels are Hello. We've seen that they have been hammered down in December 2019. We saw then a replenishing in Q1 last year, 1st 2 months, and then we saw a brutal collapse Rundown of working capital. And this only changed now in from November onwards. And from my perspective, from our Corporate Intelligence, it is still ongoing. How much it is in the order book? I think it's very, very difficult to tell, but it's definitely driving currently demand Upwards. And we also see on the tightness of delivery chains that at least in Europe and also North America, you get At this point in time, more visibility from the customer side instead of short Ordering and even on short notice cancellations, you see that companies are starting to more flag Annual demand again and also demand for the next 3 to 6 months. So there is an increase in visibility again. And my personal assumption is due to the 1,000,000,000,000 and 1,000,000,000 of government stimuli that now enter into North America and Europe, My personal assumption is that this momentum is going to continue as also pandemic uncertainty is going down. Now your point on customer pattern in Asia and Europe, I can simply confirm Asia is very strongly on spots And distributing and dealing and wheeling, this is only modestly changing here and there, whilst Europe To high extent, it's more on a contractual indication. And therefore, we have more stability and also less volatility as As far as ordering is concerned here in Europe. On pricing, prices on raws are by and large on the rise. It started in November, December and continued. We've seen some of our petrochemicals And aromids like benzene, toluene, where prices in the last 2, 3 months Basically, Doubled. I've not seen that very often in my professional career, But we've seen that within a short period of time. Now thanks to our contractual agreements on benzene, for instance, We can pass that on, but we will pass that on due to contracts in with a 3 months' time lag. So this gives you indication on pricing. Then on uncertainty question on customer side, I think I've answered. Last point is on Logistic costs are on the rise. On freights, for instance, shipment freights, container Siemens. In some cases, have quadrupled. Again, this is something I've rarely seen. Idle capacities are currently being mobilized and brought into the logistics chain. So our assumption is this will moderate. Now the good thing, in our company, we try to get logistics, especially Ship Logistics, which is very important. It's the most important driver next to railway. On shipping and containers, we try to have contractual agreements and here rather on a yearly basis. So here many of our underlying costs are protected through long term contracts, which have seen an increase versus 2020. Therefore, we will not be penalized by these 200 500% price increases. On the spot mark, you see that in some cases, we take the hit here as well. But The big portion of our freights and logistics are fortunately covered. That's Therefore, the beauty that we avoid huge swings, of course, in second, Q3 last year when logistics collapsed, We did not benefit from the short term reduction in pricing, but currently, we definitely are not taking the hits whilst others face here the cost volatility. With this, I think all questions have been answered. Thank you. The next question is then from Samuel S. Semien as we work for MEGUFRATURE. Your line is now open. Yes. Hello. Can you hear me? Loud and clear. Okay. Perfect. So You know that I'm invested in LANXESS since a few years. And despite all the stock volatility, I Was never concerned about the true value of this company, and that's because it's in the best possible hands. So thank you very much for that. Now my first question is, There is one despite the solid set of results, there is one consistent little blemish That consistently shows up. And the operating cash flow is strong compared 2019, but compared to maintenance CapEx, the excess is around €300,000,000 and that seems to be well below The potential of your company. So my question is, how will this excess of operating cash flow over maintenance CapEx Develop in the next few years. And the second question would be, are there any news about your exciting start up, Chemontis? Samuel, Thank you so much for your questions and thank you also for your introductory comments. Now You address value of the company. It has you see the value of the company, so do we. And therefore, you can assume that we are energized to further work on unlocking unhidden value, Which according to our own investments in the shares has been at higher levels. So we feel Good about the future prospects. Now to your questions. You've indicated flat maintenance of EUR 300,000,000 Our guidance is maintenance Being around €300,000,000 €350,000,000 So definitely, we have in the past done Higher operational investments in the last 2 years. Some of them, of course, were associated to Upgrades as far as acquisitions are concerned, I refer to the EUR 50,000,000 in Chemtura. Some of them have related to organic growth. Now going forward, to answer your question, we have to be Clear on what we want to do organically. If organically, On our portfolio, we take further strides. We will, a, Further now invest into Emeralds, reflect here that we want to upgrade production facilities by roundabout €40,000,000 €50,000,000 going forward. We flagged that at the day of the announcement because we see world scale capacities. They have been in the private equity hand. So here and there, we would like to make technology upgrade because we are long term profit thinkers and not Short term cash flow optimizers. So this will be one element, making sure that our plants are world scale and Long term world scale competitive seconds depends pretty much on our organic appetite. I just flick A few elements and they relate in this case towards battery chemistry. It's a big field That we see profit and turnover wise only in 3 to 4 years to come, but we see here that Opportunities are big. Lexium is known. I think in the next 3, 4 months, we will eventually be able to test the technology life. So far due to corona, it was very burdensome. There was some improvement made here and there, but we need to check The technology. 2nd, we indicated that we are working on the electrolytes and with electro Light Companies and here not with the Mickey Mouse's, but with the giants of the world markets. And this is something yet too early, but should we engage in the production of the Electro Salt Purely as raw material supplier, we don't need big investments. Should we decide, however, to really with a world scale giant to enter into the European markets and to create here a team up for A powerhouse of electrolyte supply, this will take money, and that will drive The organic investments going forward, but the return on rewards would be Significance according to what we see, but here, we will only communicate once we advance further in our analysis, Strategic partnership analysis, cultural sets and of course, eventually the financial terms need to be convincing for both sides. Now I come to Kemondis. Well, Kemondis, we will do or we will provide on a yearly basis updates. The only thing that I can say to you right now, we have further worked on this in the last 3 months. Like I've indicated to you in the last conference call, we are have analyzed in the last 3 months with the top 25 customers So called monetization features, we have a concept in place. This concept will now be tested On a pilot basis, in the Q2, then we see what reaction The monetization features lead to the traffic on the platform. And if this is all positive, we will introduce that in the 3rd quarter to the entire customer base, to the suppliers as well as to the customers. And then we would see how the monetization features And then we will scale that up. And latest with the Q3 numbers in November, we will give them again a full fledged Update on after 12 months where traffic on the platform is how monetization has worked And what have you. So we are energized on Commodus. And Of course, it's hard work. And as I always said, the jury is out. But as far as public Traffic data is concerned, Chemonis is the most active and strongest trading platform for chemicals In the European region, so we are proud on what we've established so far. I hope with this all questions are In a detailed way answered. Yes. May I Just ask one clarification. I think there was a little confusion because the EUR 300,000,000 that I mentioned were related to the excess of operating cash flow over maintenance CapEx, and it's the same number as for the CapEx itself. So your answer addressed CapEx, but my question was more focused on the operating cash flow where there seems to be a lot of potential going forward. And perhaps any words on that, and then I'm perfectly happy. Thank you. You might Further clarify your question with IR later on. I give you high level feedback. If you look into the cash flow statement that we have, we have an operational cash flow of roundabouts despite Corona and lower profitability around about €600,000,000 which is pretty equal to last year, even though last year there was no corona. We digested in the operational cash flow of €600,000,000 close to triple digit 1,000,000 for current taxation, Which you have to pay if you get a capital gain of nearly €1,000,000,000 which was unexpected I think at that Point in time, so if you exclude the capital gain tax, operational cash flow would even be higher. Now if you also look into the exceptionals, which we incur deliberately because clearly, We will do M and A. We will continue with Chemondis as long as this is something where we believe we can have success. So all in all, we had exceptionals In the company, not all being cash relevant, but roundabout 70%, 75% of it being relevant for restructuring, M and A Transactions and also for digitization like Chemondis. So if all of that we would stop, Cash flow would be definitely higher. But guess what, if we continue doing good M and A deals on the divestiture side, Look at this. We've divested Rubber in 2018 for 2nd tranche, EUR 1 point €5,000,000,000 roundabout cash. If we had used our put option on the basis of the contractual agreement we had right now, The proceeds would have been pretty limited. Did we pay M and A costs for lawyers and bankers In 2018, we did because we thought it was the smart move. And therefore, we will continue doing exceptionals, Which are truly one time in nature, if we consider this will unlock value in the future. And therefore, we continue working on getting this company to a position that will definitely in a few years be in a completely different league then where it operates today, also cash flow wise. Thank you. Perfect. Next question, please. The next question is from Matthew Yates, Bank of America. Your line is now open. Hi, good afternoon everyone. A couple of questions then please. The first one would just be around Saltigo. There's obviously been a significant improvement in some of the agricultural crop prices. Can you just remind me, does Saltigo have much leverage to that general backdrop? Or is its growth much more driven by The timing of product introductions and contract wins. The second question would be around the additives division. Obviously, volumes have fallen about 15% over the last 2 years due to some of the weakness in the end markets. I think the slides alluded to some restructuring in the Ziemann. Would you mind just elaborating a little bit on what you're doing and what benefit you expect to get from that? Thank you. Well, Matthew, on Saltigo, in general, if pricing It's healthy on sawyer, crop, whatever. In general, this is something that is Benefiting everybody in the industry because normally when farmers have more money, They go to more sophisticated instruments with higher productivity and yields And the most expensive products they can use are fungicide or crop protection. They simply cost more. If you don't have good earnings, you go for the commodity stuff, which is cheaper. And therefore, by and large, Saltigo is a prime supplier of higher technology focusing on fungicides. And therefore, By and large, we benefit if pricing is solid. However, whilst this is the General environment, it always boils down to specific projects. So Saltigo is not a spot producer That gets ordered today and produces tomorrow. For this, the sophistication is Clearly more advanced. That's the reason why in the past 2 years, we sailed through the downturn reasonably well because we are in Saltigo pretty much a contractual business. When we have blockbusters, we have long term contracts. And therefore, long term contracts with take or pay clauses, so not 100% slotted in, but roundabout 70%, 80% slotted in on take or pay as far as volumes are concerned. So therefore, whilst overall environment On prices is good. It also helps you on negotiating prices for new projects. It eventually always boils down on contract specific negotiation. I hope this Answers the question. And Michael will address the reorganization Rubber Additives. Michael, go ahead. Thank you, Matthias. Hi, Matt. Yes, indeed, we decided mid of last year to change the organizational setup. As you know, some 2 years ago, when we Speed up the former business unit Rubber Chemicals. We decided to put the Rubber Accelerator Additive business into AII and to leave the Rubber Additive business within Rhein Chemie. Over the past couple of years, We saw some developments in the market, and we told you guys in the Capital Markets Day 2019 That there are some businesses which we are still looking into how to organize it in future. At that point in time, that was The membrane business, that was OMS, that was leather and that was the Rubber Chemicals business. On the first 3, we ticked the box. We cleaned the portfolio. We addressed the portfolio. On the latter one, on the last On the Rubber Chemicals business, we decided now to integrate both businesses. 1, the more specialized business in the Rubber Additives business formerly or as of today still in Rheinschemi and the more volume business, which used to be in the AII Business Unit and now will be in the Rubber Rhein Chemie Business or Rhein Chemie Business Unit. The idea behind is that we can review the setup when it comes to sales and marketing And that is why we put a new management in place on the business unit, Rhein Chemie. And the management team has asked to present to the board the way forward, which will be due in the next months to come. And we think with the new setup with the integration of our remaining Rubber Additive businesses, we might have Better opportunity than on 2 separate stand alone businesses. That's the reason behind. And I would like to add to this because some of you I look here at one particular investor in London. We raised the question going forward. On the Specialty Additives margin, reflect that this business should move up, Up to 20% when we did the Kaltura acquisition. We have moved up since 2017 from 2015 to 2016, 2016 Simon. In 2019, we closed at 18%. So we did pretty well in each consecutive year following the acquisition. What we now do, we move roundabout €300,000,000 sales from Advanced Industrial Intermediates With literally no EBITDA into Specialty Additives, this will lower, of course, the underlying margin in the segments, But we see this as an opportunity as far as not margin, Underlying features are concerns, but of course, this business will rebound. And therefore, in the combination of accelerators Antioxidants rubbers with our Rhein Chemie rubber additives. We will, of course, work On the sales force, on streamlining its go to market approach, making the organization faster, leaner. And this should leave its footmark on the profitability, even though we bring into Additives a business which per se The The next question is from Markus Mayer, Baader Helvea. Your line is now open. Good afternoon, gentlemen. Only one clarification Question left you said in your guidance, of course, Emerald, the earnings are not included. Are there also no costs included from this acquisition? Markus, thank you for your question. Now at this point in time, And we gave the indication that the first OTCs are expected to start beginning of next year. What we have in our numbers is another assumption that there will be maybe at the end of the year We said in the second half, but rather towards the end of the year, the closing of the transaction, that we put some €10,000,000 to €15,000,000 into our CapEx on budget because we told you guys that with regards to the asset part, we think we have to invest some EUR 50,000,000 to upgrade that. And therefore, we already put into our CapEx numbers some EUR 10,000,000 to EUR 15,000,000 for 2021, but that's it for Karl. Okay, perfect. Thank you. You're welcome. The next question is from Chetan Udeshi, JPMorgan. Your line is now open. Yes, hi, thanks. I was just following up on your previous comment on investment Simon. In electric vehicles, it seems interesting. Just how is your company going to manage What it seems like a problem of multiple investment projects. You've got, on one hand, Decision to make on lithium, which I think at some point last year, you talked about up to EUR 400,000,000 of investment over multi years. Now you're talking about electrolyte, possibly investment opportunities. So how do we think in terms of managing This different sort of significant growth opportunities along with maybe some more inorganic Sort of investment to come in terms of prioritizing all of these. Well, the good thing here is, Chesson, we have alternatives. If you don't have alternatives, you eventually just go for your one possibility on the table. If you have alternatives, you can make the call. So what is strategic wise from your perspective The best in terms of execution possibilities, in terms of financial accretion. In terms of culture, if it comes to partners and in terms of competencies. So If you have only high risk opportunities with low financial attraction, I mean, then go for buybacks. If you have high growth opportunities financially with modest This might be in the long term far more interesting for all stakeholders and also shareholders. So for me, what I always strive to have in the organization is a culture of bringing up ideas. And if you have a culture of bringing up ideas, then you create something like Chemondis. Again, I stress this is not The jury is still out, but I see here from the feedback I'm getting out of the digital and software industry, I mean people are calling us. This is not a given. On electrolytes, The agents are calling us. We have not called them. So apparently, we are attractive to them. We are not contacted, as I said before, From no names or no bodies, we are contacted here by the top 3 players Siemens in the electrolyte industry. And therefore, if you have these kind of data points, at the end of the day, We need to start sorting out your alternatives. You need to look at the cultural fits at the negotiation. Sometimes you negotiate with great partners, But they think they can squeeze you like a lemon, and we are not a lemon. We are world class Players on our side as well. We know this. We have something to offer. And when you come to WinWin Solutions, on an Acceptable risk profile with attractive financial conditions for all sites, then you can say We go for it. And therefore, my objective clearly in this organization is Get a culture of openness, speed and ideas on the table. If you do that, if you achieve that, You can choose on the alternatives. And then normally, you go in the right direction. Wherever this direction will Eventually ends is something that you would see in 3, 4, 5 years, but we love to have alternatives. Got you. And can I just confirm one thing? From what I heard previously, it seems there is no contribution at all from Emerald included in the But what about the other smaller acquisitions? Are they material enough to move the needle at all in 2021 numbers? Emerald is not included because first of all, we need to get the filing done. And once we have further back and forth with the antitrust authorities. We will communicate the time line as we've done in the past. We see no hurdles in the approval, But nevertheless, we are here in the early stages. And next week, we are going to file and then we will see the kind of interaction we have in the respective filing jurisdictions. Now on Intease, Intease is a business Where turnover was single digits, so the business should perform great. But even if the Profitability should double, you will not see it. As far as TESEO is concerned, this is different. We see very high synergy potential. The business, all in all, reported around about €30,000,000 sales. We assume that over the midterm, you will see nice Contribution, but with €30,000,000 give this business the chance to accelerate in growth. With this, we see Profitability growth at the same point in time, but this will rather be something you would see in 2 to 3 years once we've Pushed the product portfolio of TESEO through the LANXESS worldwide sales muscle. So this is nothing for this year, But we're excited about the opportunities down the road. Very clear. Thank you. You're most welcome. Next question please. The next question is from JP Panya, On Field Research. Your line is now open. Thank you. Firstly, you have iron exchange resin, which at least from the literature I read, Can be used to clean PFAS. Can you just confirm if this is the case? Is there any People that have contacted you, as you've alluded to, in other areas, in this area as well. And as Heat increases on in the U. S. Under the new precedent, whether we could expect some interesting Nice things on this side. And then just secondly on bromine, if you can just give your view on what you're seeing in China With regards to prices and then just your security of supply in your brine assets. Is there a contract coming up in the next couple of years renegotiation wise? Or are you very comfortable that you have long term supply in brine, in bromine? Thank you. Jadib, thank you for your questions. Let's take them 1 by 1. As far as our resins business is Concerned, you can do purification, ultra purification with all sorts of ingredients or toxic materials. And of course, this is something we follow the request by our customer base. At this point in time, we focus Customer wise on a variety as far as process industries are concerned, It's again water purification. Depending on what kind of toxic assets you have in mining, we are in Nuclear power plants. So PFAR is not a topic there, but PFAR is, of course, also a toxic Element that needs to be followed. So the resins business can purify Water in general, whatever ingredients are there, what is going to be purified eventually depends on the Functionalization of the little ball of the polymer ball And either mono dispairs or hetero despairs, so this is what we are doing. But the core area is in general Water purification, we don't go for 1 or the other toxic application. This would be in the detailed for categories where we don't communicate on. As far as bromine prices are concerned, Bromine prices as far as the Asian spot markets has gone up. We are now in the areas of 4,000 USD or 5,000 low 5,000 USD, so the bromine market has gone up. And therefore, this is in general, as far as seasonality is concerned, no surprise. If you look at the underlying yearly trends, Bromine prices in Asia are on the rise. Now as far as contracts are concerned, we have in the brominated Business a variety of contracts. So this is normal in this industry. And on what we normally do on bromine is always the call on make or buy decisions. We have massive supply that we have licenses to in El Dorado. So we have basically the beauty of having Ample free capacity that we can extract. And therefore, when we want to extract, We need to invest in order to open up new wells or, in specific cases, super wells where the bromine contract is Extremely high. This is something that we always decide on a year, 2 years basis when External contracts are running out, and this is a normal make or buy decision that we do, and this will not change going forward. Very clear. Thank you. You're most welcome. Next question please. The last question for today is from Andrew Stott, UBS. Your line is now open. Yes, afternoon, gents. Thank you for taking the question. It's about Advanced Intermediates, Given that that's probably the most conservative guidance you provided divisionally, and this is probably from someone Armed with the spreadsheet and getting it very wrong. But if I go back in history, that division, and I know it's changed you've got pigments in there, but you're not calling out pigments Ziemann. You've done well in inflationary environment. If you go back to 2010, you added 400 basis points. You kept that in 2011 as well broadly. So why is it different this time? Is it the Scale that you were talking about Matthias on the some of the moves in benzene, etcetera Or is it just conservatism? Andrew, I see that you've been around in the industry for some time. So you are Addressing one specific topic that I fully understand. Let me give you some Color on Advanced Industrial Intermediate. So if you look at the 5 to 10 years trajectory of this business, It has been on the rise all the time and on an annual basis been a high margin business Throughout the years, this has not changed. So the business continues doing Nice debottlenecking projects like synthetic menthol and other great Individual project. So this business should normally for the next few years continue expanding leadership positions And continue to grow in absolute terms, and it has even the potential to Improve the margin. Now on the RAS, I am on a yearly basis, I'm not concerned. I would not say I'm relaxed. I'm never relaxed, as a matter of fact. On a quarterly basis, we have all volatility. While I'm a bit conservative now or cautious on the yearly guidance is, What we see different to the years before is energy costs are going through the roof. Notably in Germany, this has to do with the A German legislation on so called the EEG, as it is called. It's a complete bureaucratic monster with complexity all over the place. We understand it's going to be addressed Simon. Whenever the new government is going to be in place because everybody sees that this penalizes the business quite intensively. So here we take a currently, energy prices have really gone through the roof, substantially higher than last year. The one division that is most energy intensive in our group is Advanced Industrial Intermediates. And here, energy prices, we don't have price escalation clauses in our contracts. So we currently take the hits. This is not Single digit, this is double digits. And this is something in light of the volume uptick. We are trying in a professional way to talk to our key customers about that and basically I agree with him on a win win situation that we continue investing in this business. But here, this is pain. And In some cases, we hope that we will share the pain because we will continue growing together. But I stress it again, in Advanced Industry Intermediate, it's one of the Flagship businesses with long term contracts in place. This is because of their strong negotiation position and market leadership. But energy pricing normally in the chemical industry is never being factored in. You just have to absorb them on the up but also on the low. And right now, they simply escalate through the roof, and that's the reason why we are humble in the guidance for Advanced Industrial Intermediates because of these very elements. I hope this clarifies the topic. Very clear. Thank you. Most welcome, Andrew. We have no further questions. Since I hand back to Matthias I had for some closing comments. Well, you're so kind. And I would like to thank All of you, I thank the operator, of course, for orchestrating this conference call. I thank you for your participation. We are Energous here in Cologne or wherever we are around the globe and looking forward to see you on the virtual roadshow. And hopefully, We will see us all face to face once we are all fully vaccinated once and two times, and then we are going to Accelerate even further and have fun and are energized as we go. Thank you so much. Bye bye. Take good care. Stay healthy. Ladies and gentlemen, thank you for your attendance. This conference has been concluded. You may disconnect.