Earnings Call: Q1 2019

May 14, 2019

Ladies and gentlemen, thank you for standing by. Welcome and thank you for joining the Linksys conference call. I would now like to turn the conference over to Andre Simon Head of Investor Relations. Please go ahead. Yeah. Thank you very much, Michelle. Good morning to everybody from Sunny Cologne and a warm welcome our Q1 twenty nineteen conference call from my end as well. As always, I have our CEO, Matias Sakat, and our CFO, Michael Ponton with me. Please take notice of our Safe Harbor statements. And with that, I'm happy to hand over to Matias for a brief presentation. Afterwards, as always, the Q And A. Matias, go ahead please. Good morning, ladies and gentlemen from Sunny Cologne. I start the presentation with slide number 4 showing highlights and challenges. Of first quarter 2019. All in all, we delivered according to expectation and according to guidance. We hit Q1 EBITDA compared to previous year and even with a slight increase of two percentage points. First time in history, we reported a margin uplift to 15%. So the historic margins average have been left behind despite operating in challenging economic environment. Share buyback has been vastly advanced and we have, by today, nearly completed the 1st or the share buyback that we've announced and which we want to complete by endoftheyear. As far as segments are concerned, 3 out of 4 segment improved profitability versus previous year. Challenges, like you've seen with other peers, most of the companies have reported a decline in volumes due to the exposure that we have on Automotive Industry we are no different. On top of that, we clean up certain sites, which we don't consider as sustainable and good sites in the future. And of course, we've terminated all also tolling contracts that were taken on board by Kaltura, it's literally no margin. So this is of course, impacting volume decline in the segment, but also overall, I will address that in a moment. Of course, we also mitigated the increase in freight and energy prices. And despite all that profitability is up. Let's move to Slide number 5. Here, we show the key KPIs for the company as far as EBITDA is concerned. Clearly, showing resilience as far as margin is concerned an uptake of 20 basis points. And EPS over proportionally has outgrown sales and EBITDA. As far as net financial debt is concerned, we have an increase driven A by IFRS 16 of around about 1,000,000. And of course, we have increased, net debt due to the share buyback program. A short glance on slide number 6 shows how we compare with our peers. And I think here, after Q4 has already shown a good resilience. Q1, which was definitely one of the toughest quarters, has clearly shown that we with a different setup in the portfolio have shown resilience and strength. With this, I hand over to Michael to address segment reporting. Michael, take it to the next level. Thank you, Matthias. Good morning as well for my side, looking into the segments, you realize that 3 out of our 4 segments contributed positively to the development of the overall group. Starting with Advanced Intermediates, which posted a very strong quarter in a still weak ag market. Both business unit improved EBITDA at AII clearly investments in the debottlenecking in the past couple of years are starting to pay off. And in Saltigo, we were reporting earlier this year or endofnextyear that we got new contracts, which are now getting in place and improving profitability of Saltigo. Margin now with 19.5% at very attractive level. Next segment is specialty additives. Again, here, improvement both of EBITDA and margin despite the volume reduction there were 3 drivers for the volume decline. 1 was the termination of tolling agreements with relatively low margin. Which stands for the majority of the volume decline then obviously affects some site closures, which we did in the past and a decline in the auto market, which hit especially business unit Rhein Chemie. Synergies, pricing levels and currency supported the EBITDA and we're posting now a margin of above 17% in that segment. Next chemicals. The good news is chemicals are stabilizing. All business unit, excluding leather with volume growth, IPG is as well stabilizing. We proceeded our closure of the Jin Sun site back in China in the first quarter as announced, but leather remains a challenge. The Chrome activities in South Africa remains challenging. We were again facing a strike in our mind. And on top of it, we still saw the weak auto market as well in the first quarter why profitability in leather was as well or again negatively impacted. Still NPP and LPG and LPT are performing nicely, why overall EBITDA of the segment is further improving. Last in the row is engineering materials. The only segment with a decline in EBITDA in the first quarter which was driven by the exposure weak markets in auto and China and Europe, which led to a volume decline of 6% in that segment. But as the business units were able to keep prices up, margins are still at 17%, which is a rather good level at that difficult market environment. With that, I hand over again back to Matias. So I move to page number 9. And here we, would like to inform that the supervisory board yesterday has decided to appoint Anno Bokovsky. Most of you know him already. He presented several times in our Capital Market Day events. In the last few years has been appointed as new board member in charge for the Additives business units, Anno has let the integration and the business unit ADD successfully. Profits are up and more to come. And he would basically enrich the management boards with clear focus on downstream activities. And therefore, it's, I think, further enhancement of our capabilities in the management board analysts in the industry since many, many years has more than 30 years of experience as a chemist from background and simply a great character. We will have a lot of fun having him on the board as well. The two business lines, the loop ads and polymer additives will now be upgraded into business units, both are flagship business units with roundabout 1,000,000,000 in sales and high EBITDA contribution as far as polymer additives is concerned and also look at with roundabout 650,000,000 in sales, will be headed by a a great guy, Martin Ziever, a PLR headed by Carsten York, 2 great actors, good fun and great professionals. So this would be the new composition in Additives. And of course, adding to, this is Rhine Chimie headed by Philip Junger. Also, the next generation is moving into the next line reporting to the management board. So all in all, I think a strong team and you will get to know all of them in due course. With this, I'll move to page number 10, giving indication on our guidance here, like we normally do with the first the quarter of the year, we give a range. The new range for 2019 will be 1,000,000,000 to 1,050,000,000 as far as EBITDA pre is concerned. So this is now the quantitative guidance we provide to 2019. We look at the economy and basically assume that 2019 is going to have a softer economic environment we don't see that things are deteriorating. We see clearly like you've seen with other peers that volumes are soft and in some industries declining, we clearly assume that auto motive sectors continuing to be weak, especially in Asia. Agro, despite the fact that Saltigo recovers, but this is rather self help and focused steering. The industry per se, we don't see recovering yet. China, of course, there have been initiatives taken by the government in order to ignite domestic demands. But so far, we don't see that China is back on growth track. If I look today into 2019, I think we've managed the challenging first quarter. 2nd quarter will be the toughest base. If I look at second quarter today, I look at rather, tough comparable base. At best, at best, I clearly state that. At best, we would be at previous year level. My today's assumption would be that we would be below Q2 previous year. Q3 assumption is after we've made intensive business reviews in the last 2 weeks that we would be round about Q3 last year whilst Q4 should be slightly above previous year level. Therefore, on the guidance, clearly, we see us midpoint of our guidance today. If the economic environment remains as is, we would be in the 1st half of our guidance. If economic environment improves in the second half of this year, we would be in the second half of the guidance, but the crystal ball is not in our hands and therefore we clearly, today see us in midpoint of the given guidance. With this ladies and gentlemen, I open up the call for your questions. Please go ahead 0 followed by And the first question is from the line of Thomas Wigglesworth with Citi. Please go ahead. Good morning, gentlemen. Thank you very much for your presentation. Just a couple of quick ones from me. Firstly, on the improvement year over year in Advanced Intermediates, is that step up all really Saltigo? And, is that kind of type of improvement something that we should now expect through the rest of the year? Or is there a seasonality to Saltigo that we should think about Secondly, again, give me about mechanical, how much do you think the strike impact was in Performance Chemicals I'm just wondering what the underlying level of profitability is, given some of the improvements you noted in NPP and L PT. And then lastly, on engineering materials, I mean, you've obviously given a very clear picture there for the rest of the year, but just specifically in the Nylon's business, within that guidance, do you see Q1 as the floor margins and profitability? And it should at least hold Q1 going forwards? Thank you. Well, Tom, let me address 1 by 1. As far as advanced intermediate is concerned, not everything is coming from Saltigo. So we always said that the big business unit AII fundamentally mitigated and even overcompensated Zalpigo in the past. So ARI did tremendously well over the last few years and this continued in 2019. So AII, the big ship did very well. And please take note of the fact we've highlighted in the last 12 months on the road, but also on conference calls that we made, major debottlenecking investments, which gradually come through. So AII did very well in Q1 and AII will continue to do very well throughout 2019. What changed of course was that Saltigo no longer fell in terms of profitability, but basically stabilized and posted also improvements. And if you look into the momentum here, And despite also AI facing some hiccups here and there as far as soft trading in some industries are concerned, overcompensated this completely. So, both business units contributed well and you will see that AI, the segment advanced intermediates will have a good year 2019. As far as seasonality in Saltigo is concerned, please take note of the fact that first half is always stronger with Saltigo Q3, Q4 softer. This has to do with the end industry. But all in all, the TIGO will post an increase in profitability versus 2018, the same holds true for Advanced Industrial Intermediates. As far as the strike is concerned, the strike did not so much impact Q1. As a matter of fact, we lift from the inventories in South Africa, and we could not pile up enough for the turnover of Q2. So I would rather see that low single digit million drop was caused through the strike, which, however, predominantly will hit Q2 and had less impact on Q1. We absorb idle costs, had to absorb idle costs in Q1. But as far as lack of turnover and margin is concerned, that will hit Q2. Now as far as HPM is concerned, Please take note of the fact that different to peers, we posted, I think, a quite strong margin still. I would not say that the margin that we posted in our engineering materials segment is low. This is we are in the high teens, and I cannot predict now the or I don't want to even predict now the single margins for every quarter. We normally don't do that, but it will be clearly at higher levels than you've ever seen before in weakening economic environments in historic times we fell to single digits and we'll see that engineering materials will remain a double digit business. But of course, eventually it has 45 percent exposure to the automotive industry and this industry remains sluggish according to our guidance. I hope this answers your questions. Thank you so much. Excellent. Thank you. Next question please. And the next question is from the line of Georgina Iwamoto with Goldman Sachs. Hi, good morning, Matthias. Good morning, Michael. Thanks for the presentation. I wanted to understand if you've been very clear that you factored in sluggish demand from the automotive industry. But I wanted to understand if your FY 2019 guidance, factors in the potential for the implementation automotive tariffs later in the year. And then I also wanted to get your thoughts on whether year to date volumes, for the industry. Do you think that there's any chance that in Q1 there has actually seen that we've actually had some pre buying ahead of the deadline for the U. S.-China trade discussions on Friday last week that may have kind of supported demand And then just generally versus how you expected the year to develop, it sounds like potentially the kind of news over the weekend U. S, China, could have been a bit I guess disappointing versus your expectations, but yet you're still able to give this very narrow range for stability. So I'm just curious why not sounding a little bit more upbeat. Thanks very much. Well, Georgina, thank you for all your questions. Very bluntly. I think it would be it would be it would be we cannot factor in something that was just decided on Friday. In our guidance and where I think nobody knows what kind of implication this has on the worldwide economy and on regions specifically. So this relates to your first question as far as auto tariffs are concerned. In the outset of 2019, we will always humble on the economic outlook and therefore, we've never factored in a, the macroeconomic improvement. So we are humble in our economic environment But what auto tariffs and counter auto or counter tariff measures will lead to, we are not here to make the call on this. What I clearly would like to stress, we remain humble. We focus on our business. We see that advanced intermediates is definitely, extremely resilient and will be in a position to do well in 2019. We think that specialty additives is positioned well for 2019 through self help. We clean up the barn. We close plants that are not needed. We terminate unprofitable contracts. So also in Specialty Additives, despite having exposure to auto, we think additives will do well. Performance Chemicals, I think everything that we are doing here is showing good progress. Engineering Materials, we are humble because we do have automotive exposure. But I think we have addressed this reasonably well. What tariffs are leading to, we would see. And therefore, we don't factor in domestic improvement in China, which might come from the stimuli, but we also don't factor in the collapse of the world economy. As far as pre buying is concerned, we are not seeing, in March, for instance, major rejump in volumes. We haven't seen a awkward development in order pattern from our customers. And therefore, I cannot stress that March was abnormal. We also haven't seen that April was abnormal. It was normal trading, but again, we haven't seen a major revamp in volumes anywhere in the world. And as far as U. S. China implications are concerned, I think I've answered that with giving clarity in the first question. We remain humble and I think everybody is well advised to remain humble at this point in time. Focus on the business. That's what we are doing. And I think in Q1, we've proven that business is what we do well and we manage that appropriately especially in comparison with peers in the industry. Next question please. Next question is from the line of Patrick Rafaisz with UBS. Please go ahead. Thanks. Good morning, everyone. And thanks for taking my three questions. The first one And just on the tolling agreement impacts, assuming that there was about half of the volume declines, How should we model that for the next three quarters? Would you say similar level of impact until the base runs out? Then secondly, a quick one on IFRS 16. As you already guided million impact for the full year, does it make sense to break that down pro rata for the quarters? And then lastly, at the Q4 conference call, you talked about the monthly performance of China with volumes declining for several months in a row. Which was unusual compared to previous volatility. So has this continued into Q2? Thank you. Patrick, I will take first and third question, Michael will take number 2. So as far as volume is concerned, will it continue for the remaining quarters of the year? The contracts we terminate basically by end of la/st year. And therefore, they started, vanishing or they reduced volumes in course of 2019 first quarter. And of course, this will continue in 2nd, 3rd and 4th quarter. And it would be, of course, that we're as these were contracts, which with literally no margins, So volumes sales with literally no margins, I mean, low single digit It had always been a dilutive effect. It has always been dilutive to, the sales base and earnings base therefore, that will continue in course of 2019. But of course, please take note of the facts. We've also closed plants last year. And that, of course, will also continue. But all in all, this will be positive to ROCE. This will be positive to a margin and it will clean the base further as we have promised for the segments. As far as China is concerned, we saw that in gen and fab volumes continued to decline March We saw after Chinese New Year that margin that volumes started to creep up again, but on a very moderate basis. So we see that China so far in March April has stabilized and slightly improved. But of course, we have to see if this is going to continue. Automotive was still very, very sluggish. But of course, Chinese economy is more than automotive industry. And outside of the automotive industry, we see that China is relatively stable. Michael will address IFRS. Hey, Patrick. Yeah, with regards to IFRS 16, indeed, the around 1,000,000, you can divide for RATA over the different quarters and basically over the segments, including obviously reconciliation. Not only the operational segment, but as well the recon segment. Matthias? Okay. Good. And the next question is from the line of Martin Roediger with Kepler Cheuvreux. Please go ahead. Yes. Thanks for good morning and thanks for taking my three questions. I started with the cash flow statement. The in your quarterly report, there is a cash outflow for financial assets of 100 and 1000000 in Q1. Can you explain what you have bought? 2nd question, there was news out yesterday that the CDU politician Klaus Schuler will move to LANXESS as of 1st July becoming a representative of Linksys management board in political affairs. Can you explain why lobbying is so important for LANXESS? And the final question is on the slide 14 in your handout in your presentation, you said you had higher exceptional due to M and A projects, just a clarification. Is that because you had to pay for some investment bankers for their work either looking for acquisition targets or looking for potential partners who could buy some assets from you? Thanks. Well, Michael will address cash flow. I will address the other two questions that you've mentioned. And I start with M And A, we are continuously in a portfolio alignment and analysis the one thing I would like to make clear, however, we don't need investment bankers to provide targets to us. This is something that we do internally. But as far as, of course, due diligence work is concerned, lawyers work is concerned, etcetera, we have lawyers. We have tax experts and we do also expert sessions with professionals knowing certain businesses products in order to understand better our targets and to cross check and have 2nd, 3rd, 4th opinions on targets that we are analyzing. So this is ongoing activities and We've done that in the past. We would do that in the future. When we do a transactions, we normally are very, very well prepared. And as I indicated, portfolio management is a theme that we have undergone over the last few years and will consider also going forward. So this addresses question number 3. As far as your second question is concerned, Linksys always had a representative for political affairs. And we retired a senior manager, who had this job before who was potentially not as prominent as Klaus Schuler, but that shows you that top notch people are joining our company because they think that this is a great company to work for. And with this, he joins 15,400 employees that are energized and enthused as I'm sure Claut Schuler is going to be. And then Michael will address cash flow. Michael? Thanks, Matias. Martin, yeah, with regards to the financial outflow, as you know, we received the proceeds on the sale of Alank fail and, as soon as we put the money into, for example, investments with the duration above 90 days, These are then financial assets and have to be posted accordingly as cash outflow from our liquidity. And that is the reason behind. Thank you. The next question is from the line of Alex Van Sauteng with Morgan Stanley. Please go ahead. Good morning. Just two quick questions from me. Firstly, just on the bromine Obviously, you've seen that pricing has been quite strong for some time now. And it has continued into this year. You just provide a little bit more color around what's driving that pricing and whether or not we should expect some normalization in the second half? And then just my second question, I mean, you've obviously been very clear around the weakness in autos in China, but could you provide some an update on end markets, what underlying demand is doing on the other end markets and also geographically? Thanks. Yes. Address both of these questions. So as far as bromine is concerned, I would like to make the following statement. We see China construction markets, and that's also electronic markets, a modest So volume increase on the flame retardant sites or downstream products has been okay, but not strong. So compared to previous year, it was slightly softer. The question that you've addressed, as far as pricing is concerned on bromine raw materials, which is an indicator, but should you shouldn't read too much into this, but Of course, if roaming prices are up, in general, this is a positive. We have alluded to the fact that reserves brom bromine reserves in China are more and more deployed. They are still there, but at lower levels. And this has lead in the last 2 years to an increase in regional prices in nature continuously. Different to the past, we've now seen in Q2 that prices, which tends to go down in Q2 and Q3 on a seasonal basis, remained firm, which is a positive. And that simply has to do with a lack of supply. And of course, when supply is tight and demand is there, you normally have a stabilization on pricing or even an increase in pricing. So this is the reason why bromine prices currently are rather at the 4050 level, which is, of course, to historic terms a good price. Now as far as end markets are concerned, I think I've given indications on the industries in our outlook. So everything is there and communicated. As far as the regions are concerned, we haven't given any indication. So let me be very crisp. We see that we consider that Asia will be modestly up in terms of volume We see a kind of stagnation in Europe. We see a softening in growth in North America, but here no longer volume increases 3% to 4% like in 2018 that could be in the area of 1 to 2 percentage points. Latin America driven by Brazil should be up more than 2018, but of course, this is not a major implication at group level now that rubber is gone. And that's how we look at the regions. I hope this helps. Next question please. Next question is from the line of Andreas Heine with MainFirst. Please go ahead. Actually, most questions have been answered. Starting with only 3 very minor ones. You outlined already that Q2 indeed has high comps looking sequentially, usually Q2 is seasonally stronger. Is that what you envisaged this year as well? Secondly, in the within the additives, could you outline the lubricant additives? So you haven't stressed that that is dependent on the automotive industry. I would assume that then the volume of this part was rather resilient. Maybe you can outline on this. And the last one, inorganic pigments, maybe also some flesh on how the trends are here, probably quite some positive tailwind to get the EBITDA on a good level, but what is the underlying demand in the construction industry for these products? Thank you. Yes. On Q2, today, I wouldn't say that Q2 2019 would be the strongest quarter. We have, of course, here a difference to last year situation that we have lower billing days in April due to Easter holidays. So that could be an implication for Q2. But also you should see that Q2 last year was the hottest quarter in 2018 after June basically volumes went softer. And that's the reason why Q2 will be the toughest comp. For that very reason, we are cautious and at best we would be at previous year level, it could well be that we would be in Q2 at the level of profitability that we posted in Q1. So that's on the first question as far as Lep is concerned, in the million of sales roundabouts that we have in lubricants Additives, we indicated that around about 100, 20, 130 have exposure to automotive. The rest are industrial loop adds. The industry loop ads do pretty well. They are stable and growing. As far as automotive lubricants are concerned. We see the volume decline that you see in automotive. So here we have a reduction in volume. But of course, it's, compared to the entire loop at just a portion, but here we have clearly impacts on from the automotive customers. Now as far as IPG is concerned, the markets are still tough. If you look at the a company who basically has majority wise titanium dioxide, the Nattor in the U. S. But they also have inorganic pigments, they posted a decline in profitability of roughly 60%. So I cannot state that this is the same with us. We took our hit last year. Markets are still tough, but we've stabilized and slightly consider an improvement in this business unit on a full year basis. And therefore, many measures that we have taken in 2018 should lead to a stabilization or improvements whilst overall the business unit is well positioned in the current consolidation that happens in the pigments inorganic pigments market. So overall, we think that this would be a healthy consolidation leading to stronger players that emerge out of this consolidation. Most welcome. Next question please. Next question is from the line of Tobin Trega with Deutsche Bank. Good morning, team. Thanks for having me on. And just one question from my side. Could you just perhaps talk through the rationale behind the reorganization of Specialty Additives? Is there perhaps anything that has changed in the way that you look any of the, any of the business lines? Thank you very much. No, not at all. If you look at to the management boards, it's, we have, in the past, had, I think, high stability in the management board. If you look at the age structure, in the next 12 months, there would be a normal retiring of one board member. And this is a pre preparation to have, stability in the management board as far as competencies are concerned. So this is a well orchestrated succession planning and and that's basically all. Michael, who is still below 50 will not be retired and I will also still hang around for some time. I hope this answers the question. Next question is from Laurence Alexander of Jefferies. Good morning. On bromine, does the end of the tolling arrangements improve the ability for that business to pass through, volatility and elemental mean prices, but if you get historically, you can share a struggle on that front? And secondly, can you give an update on the process for evaluating or progressing on lithium extraction in North America. And then thirdly, can you speak to volume trends in liquid purification? Yes, I take them 1 by 1 as far as your first question is concerned. The tolling contracts that we eliminated were not in the bromine area that was basically related to loop ads. So we communicated plant closures And we had plants where Contura in the past divested businesses and basically agreed and found that already in the due diligence basically agreed, that they would take on board on the requests of the buyer tolling arrangements. That we're at that point in time favorable for the negotiation, but eventually we're, of course, a compromise on filling the sites whilst our conclusion was, it would have been better to just terminate and close the sites. And that's basically what we are executing. I've alluded to the fact that Campura had too many production sites for the amount of sales and we reconfigure the production network and we are doing, I would say, quite well on this in terms as far as time is concerned, And as far as unlocking the value is concerned, so this is something that we simply execute, As far as your second question is concerned, lithium, the project is doing well. We monitor it. We have test pipelines will be finished according to plan. So this would be most likely beginning of Q3, then we will see how the extraction works, what purification grades will come out everything that we are seeing right now is running according to plan. But we will report on this of course, in due course, once we see the results and it's important to look at the extraction results and As far as the pilot plant is concerned, we think this will be up and running, but then of course, the extraction and the purification grades of lithium are important. They determine eventually the price you can get in the market. As far as LPT is concerned, Volumes are very good. We see that the market is more and more needing the resins that we produce. And we think that this will clearly take further uplifts in the years to come. And therefore, we have already taken the decision to debottleneck our liver plant in liver cuisine because volumes here are tight And for that reason, we are also quite focused and pronounced on pricing initiatives here. So getting volumes and pricing up will definitely be an important theme for the resins business going forward. I hope this answers all your questions. Perfect. Thank you. Most welcome. Any questions left? Next question is from David Phillips with JP Morgan. Hi, Chetan Mahesh from JPMorgan actually. Three questions on my side. Firstly is just coming back to the previous discussion around the exceptional items. And Matt, as you said, to that question that M and A is ongoing team. And so I would think those costs associated with M And A should be an ongoing theme and should they be even classified as exceptional as a question? First question, second question was you had a slide where you compare the EBITDA performance of LANXESS versus the peers in the industry. I'm curious if you guys do the same sort of benchmarking on free cash flow as well, not on Q1, of course, but just in general versus your peers in the industry and how do you feel in terms of land sales getting maybe up to the average of the industry or if not better? In the future. And the last question is, we had this unfortunate explosion in China at an industrial park a couple of months back. Have you guys seen any impact from that on your business? Because it seems there were a number of pigments and die companies who operated in that park? Thank you. Yes. Michael will address the exceptional question. I would take a second and third one. So as far as benchmarking is concerned, we do benchmark ourselves. I think everybody I assume everybody does that. We do this on an ongoing basis, not only as overall company, but also on business units. And even on product level in order to see if we are doing well or where we can improve putting the mirror in front of your face always helps to accelerate further. So cash flow, however, is one where, of course, you have to look at the company specifics We know that cash flow in 2018 was mitigated and we've guided already at the outset of the acquisition of Contura that 2019 will be impacted as well due to restructuring that we undergo due to cleanup that we undergo. And therefore, that has been always part of our communication. And therefore, 'eighteen, 'nineteen are softer and cash flow generation. Once we set in our targets that we communicated for 'twenty one from 'twenty 20, 2021 onwards. We should then come into a higher level of profitability and also higher cash conversion that we've shown in the past years as well. So that's clearly what we do. But of course, we would like to change the company. And if you want to change the company, if you want to restructure, if you want to focus on innovation and, structural improvements. It first of all takes money to make sure that you unlock value and cash afterwards. And this is what we have communicated this is what we are executing on. China, yes, it was a dreadful accident that happened there with fatalities horrible. And of course, this has disrupted many supply chains. What however we see, is that the Chinese government has taken a clear stance, not only on this particular chemical park, China went out and rigorously investigated all plants in China producing chemicals So not only in this plant where the incident happens, but basically tightening controls in all chemical industry parts. We don't know what kind of impact this is going to have, but we are very focused on making sure that we get our supply that we need. And we are very fortunate to have put highest standards always into our plan so that we don't consider that this would be a negative for us. This could eventually be even a positive, all in all, but we monitor this very, very closely. Michael? Yeah. With regards to the exceptionals, we don't want to leave the impression that the majority of the exceptionals will spent for M And A. So the majority was spent for adjusting our production network and for digitization initiatives, and that are clearly exceptional. And the very minor part goes to M And A project, which are on a case by case basis as well and therefore regarded as exceptionals. Thank you. Next question is from the line of Nautengkow with Pareto Securities. Good morning, everybody. I'm reassuring to hear that you will still be around for some time. So thank you for that. One question, to be honest, you said in your market outlook that, the, ACRA recovery is not yet visible. My question would be, do you think this only postponed until later in the year or will not occur at all? And then second question, related to this? What is baked into your guidance with regard to that topic? Thanks. Well, on your first question, agroCycle is what it is. I cannot I cannot predict the agro cycle. We would change our tonality on agro once our end customers change their tonality. And Tier by and large agro commentary is still on a soft note. On personal perspective, I have seen the agro industry already when I started my professional career in Hooks. Where Hooks was having a company called Agrivo. And here, the one thing I can tell you Aqua underlying wise goes up, but it's cyclical. It has a different cyclical cycle than the chemical industry. And when it goes up, nobody knows, but when it goes up, it goes up. And here, clearly, today, we are trough levels and this will change. When it changed, it's not our job to make the call on this. As far as our guidance is concerned, we factor into our guidance, increase in profitability, for Saltigo. Because we have underlying contracts that basically give us comfort. We don't factor in an improvement in the agro cycle. Okay. Thanks. Host welcome. Next question please. So we have a follow-up question from Georgina Iwamoto. Please go ahead. Yes, thank you for taking my follow-up question. I'm just noting that your share prices nearly back to the levels where you announced the share buyback at the beginning of the year. Just wondering if you think that Lancashire is still like a good investment or if you have other priorities for the balance sheet? Thanks. Well, Georgina, for the time being, we have announced one share buyback program. And that's basically what has been announced. There's no further announcement on this. We look at resource allocation on an ongoing basis. We know that a share buyback to say are one instrument of various share buybacks don't structurally change the company for the future, but they have to be considered as one instrument in resource allocation. And that has been like this in the past, and this would be, for us the consideration going forward. Very clear. Thank you, Matias. You're most welcome. If there are no further questions, I thank you for your participation. I clearly would like to remember all of you that on 16th June, we are having the 10 K run, for those of you that would rather like to participate 5 K. Please do that. The brave parts can do the half marathon show. So whoever would like to participate to energizing running by LANXESS feel free to call Oliver Andre or the Investor Relations team. The entire management board will participate to this run. It would be for charity events. So high contribution of runners is welcomed. I wish you all the best. We would see us on the road. And thank you for participating today. All the best to you. Bye bye. Ladies and gentlemen, this concludes the length of conference call. Thank you for joining and have a pleasant day. Goodbye.