Good afternoon, ladies and gentlemen. My name is Eva Frerker, and I would like to welcome you to the LANXESS Virtual Capital Market Day. We have prepared an exciting program for you, but before we begin, please take note of the safe harbor statement. I'm happy to have with me today our CEO, Matthias Zachert, and our CFO, Michael Pontzen. You know these two gentlemen already, so I think no further introduction is necessary. However, I do want to introduce to you Holger Hüppeler. Holger runs our newly established business unit, Flavors & Fragrances, and today he will share insights into this truly exciting business. Holger has been with LANXESS since the spin-off and has been in various management positions since then. Firstly, Matthias and Michael will start with their presentations, followed by the deep dive into flavors and fragrances.
The presentations were released shortly before the event and can be found on our website. After the presentations, we will have time for your questions. As there is a lot on the agenda today, let's not waste any time and get started. With that, I hand over to Matthias.
Thank you, Eva, and warm welcome from my side here to LANXESS here in sunny Cologne. Three years ago in our last physical Capital Markets Day event in 2019, the world looked different. What we have accomplished since November 2019, I think speaks for himself. That's the theme for our capital markets today. What we've done in the last three years should prepare us for stormy times, should prepare us for delivering. I will come to this in course of my presentation. The world has changed dramatically. We are still in a situation where the pandemic, COVID, is affecting the industry. We are now facing a new constellation through the Ukraine war that we face here in Europe.
What we experience through both is energy costs on the rise, logistics still be a concern being disrupted as far as value chains deliveries are concerned, but also as far as logistic cost explosion is concerned. After decades in which inflation was not a theme really in any of the global economies, it's now omnipresent. Of course, as far as global trade is concerned, we now speak about global trade barriers and geopolitical challenges. When we look at what strategic directions and decisions LANXESS took, I have to say we are prepared. What we did in the past should be a benefit for our company going forward. The specialty chemicals character of our company is very pronounced now. We are less energy-intensive, we are less volatile as in the past.
As far as raw materials are concerned, several years ago, we were really focusing on the big petrochemical precursors. Raw material today is not that much of a topic for us. As far as European exposure, and especially German asset footprint is concerned, which was dominant several years ago, we now have a strong U.S. footprint. The portfolio should weather any turbulences going forward. We are prepared. Not only that our portfolio is prepared and our business units are in a strong stance right now, we as a company also took swift measures at the beginning of the brutal war, aggression war here in Europe, and swiftly did everything that you have to do as company. We ensured in the early days of the crisis, March, April, substantial safety liquidity.
EUR 1.8 billion of undrawn credit facilities without financial covenants or the like are in our register. We have started cost control measures early and have put them in place. We have limited operational expenses and are preparing levers to reduce personal expenses as well. The contingency plan for potential gas shortage, gas embargo, has been analyzed, been communicated, and then operationally being prepared. As far as inflationary environment is concerned, you clearly see that from fourth quarter last year onwards, quarter-over-quarter, we pass everything through because our portfolio is in a position to do this. Now let's come to the details and let's address what we have done on the portfolio since we spoke to you in capital markets, November 2019. What have we achieved and what's the path forward?
I will afterwards pass on the ball to Michael. Then return to you to address sustainability, also dear to our, and especially to my heart. Let's start with portfolio. Since our last Capital Markets Day in November 2019, a lot has changed. Within just three years, Currenta's stake, not known to many of you in 2019, we monetized and we got cash proceeds of more than EUR 800 million into our bank accounts for a value that has been accounted with zero in the balance sheets. Leather business known to be somewhat a drag in the portfolio in terms of margin, in terms of volatility, but also with a risk with high exposure to the automotive industry, sold at good financial terms. Non-core businesses stuck with somehow stranded in terms of financial performance and market position. We sold and sold to strategic companies where the businesses are in good hands.
We were aggressively and rigorously addressing underperforming businesses as we had promised in November 2019, and have shifted our resources to areas that we wanted to develop and grow. With this, I come to Consumer Protection. For those of you that still recall what we said in November 2019 was we will open the door to a new division, to a new market, to a new customer base. We clearly stress that Consumer Protection will be a theme going forward. Now it has been established through organic growth, but predominantly by clearly building leaders in its fields through the acquisition of Emerald Kalama Chemical, IFF Microbial Control and in the animal health disinfection area, the acquisitions with Intace, Theseo, and the market leader in Brazil, IPEL.
With this, we clearly focused on secular growth, high profitability, asset-light, but strong cash conversion while having businesses that are complementary to our portfolio, thus offering plenty of synergies going forward. All with the prerequisites to be as CO2 light as possible. The segment Consumer Protection was just created in 2020 and now is turning into a powerful division going forward. In essence, what we did in the last three years after November 2019 Capital Markets Day, we truly changed our portfolio. Looking at the transformation journey that we basically started through industry consolidation in 2016, we see that we divested round about EUR 6 billion. For EUR 6 billion of euros, including the HPM transaction. In return, we acquired businesses for an amount of EUR 4 billion.
Leaving behind volume-driven businesses, leaving behind polymer assets, which by nature are more energy-intensive, raw material intensive and more volatile, and reinvesting the proceeds in specialties, additives, flavor and fragrances or actives and disinfectants, clearly characterized as specialty assets. The acquired businesses should comply with the high profitability and cash generation standards that we have, being rather asset light and less cyclical. The divested business all of you know. You've seen their volatility in the past, the lower profitability and definitely the high asset intensity. You know that we got good proceeds and reinvested in businesses where we now have to prove that they qualify with the ambitions we set for our company. I would clearly like to stress this massive transformation has been done without equity. We never tapped the equity markets.
In this transformation time, we always paid our dividends and even adjusted it upwards when the time was ready for doing it. I clearly stress very loudly, while keeping a solid investment grade. There are not many transformations in the portfolio that are that visible and intensive while complying with all three statements I've just made. No equity, dividend paying and keeping investment grade. We did that with clear focus and with a clear game plan. The results of this are also that we substantially increased our U.S. footprints. If you look at this slide here, you see that in the last several years since we closed the Chemtura transaction, we invested roundabout EUR 5 billion organically and inorganically.
From the EUR 5 billion, about 80% were invested in a market that we believed in, and we stated that to you in our last Capital Markets Day event. We invested through Chemtura acquisition, Emerald Kalama, IFF, and for the bolt-on side, the disinfectant business coming from DuPont, Chemours. As such, we strengthened our Americas asset footprint and of course, reduced further our German exposure heavily. All this we conveyed to you three years ago. We stressed that in the industry configuration, we want to be more balanced. Please read your own reports. In 2020 and 2019, many of you on the analyst side stressed that LANXESS still has a big exposure towards the automotive industry. You stressed that this is more than 20%. Point taken. We pursued the direction of lowering this exposure.
With the completion of the polyamides joint venture, our automotive exposure in the new configuration will be less than 10 percentage points. A new industry has emerged as customer industry for us, and this is food, health, and consumer goods. Believe it or not, exactly this segment is on the growth trajectory going forward. Auto exposure has reduced and clearly a higher portion of end consumer-focused markets has been established. To sum it up on the portfolio side and our divisions, look at this slide with a focus on 2017. At that point in time, 50% of our portfolio was polymer-based, rubber polyamides. The red piece of the cake shows the exposure towards the consumer end markets. A few years later, looking at 2022, the picture has changed. From four segments, we are down to three segments.
Polymers are gone in the reporting structure completely. The biggest division that is emerging in terms of contribution to the bottom line will be Consumer Protection. The entire configuration is a chemical value chain, no longer chemicals and polymers. The specialty character of our company has been established. For the time being, clearly, this is the configuration we have. Now it's time to deliver on the financial matrix that we aspire, and this will be the focus going forward. In the Capital Markets Day event, November 19, we also promised you the company will be more resilient. Profitability, volatility should be history. Also here, we can show you that we are going clearly in this direction. If we look at the last severe crises that this company has seen, we go back to financial crisis, Lehman crisis, 2008, 2009.
At that point in time, our automotive exposure was not that pronounced, but already there. Our profits plummeted outwards by 35 percentage points. In the rubber crisis, of course, in 2012, 2013, this was a mild one compared to Lehman, but we were hit harder because by that point in time, through the rubber expansion, we had an exposure towards the tire and automotive industry of up to 60% market-wise. Even though the crisis was not as severe as Lehman crisis, the EBITDA collapsed even more by roundabout 40%. You all know how we have performed in the so far worldwide toughest recession post worldwide World War II, because pandemic 2020 was hitting the worldwide economy harder than 2009 or 2013.
If you now see how we performed and we blend out HPM, you see that our portfolio turns towards very mild volatility, only 6% on a like-for-like basis, 2020 versus 2019. This is solely driven by balanced end market splits, reduced automotive exposure, clearly in a better shape to pass on prices and definitely more diversified, more balanced geographical footprints. This is now the starting base. We think as management boards, with this starting base, we can now bring it to the next level. To sum up on the portfolio, 2020, I think in this capital markets day event, we can say to you out there in the capital markets what we promised to you in November 2019, a lot has been achieved. We stated at that point in time we want to be a forerunner on sustainability.
I'll come to that later on. I think we are for. We have become a front-runner in sustainability. In 2019 we stated we want to grow Americas and potentially China. We delivered definitely on United States, Americas expansion. We said at that point in time that industry balance should be improved. You've seen that automotive exposure is no longer dominant. It's now one among many industries that we like, but we found our position in the right percentage points. Definitely the group has become far more resilient than ever before. Now, there are two objectives where we still have to deliver on. Margin and cash, and we will come back to you on this with focus. This is where we want to tick the box. This is where I personally cannot tick the box. I like ticking boxes. I like delivering on ambitions.
First of all, though, we get the LANXESS ship through 2023 because our assumption is that will be a tough economic environment, but we know in LANXESS how to deal with that. 2023 we want to navigate through the crisis and then delivery, delivery, cash, profits. That was my comments on portfolio. Now I would like to take it a little deeper. Let's come to the configuration. Consumer Protection, Specialty Additives are clearly set for growth going forward. Intermediates is our stable backbone and will be the cash delivery machine. 40% of profitability should come from Consumer Protection, growing. Specialty Additives around about 30%. Most likely, Consumer Protection has the potential to grow organically and also inorganically in the years to come. Let's address segment by segment.
Here let's come to the new order in terms of, in terms of sequence, reporting sequence, but also in terms of strategic imperatives. Let's address Consumer Protection, which was just created two and a half years ago. What have we done here strategically in the last two to three years? We've not only created the segments, we have built two global leaders. Let's address the first one. That we like materials protection you could have noted already in 2016 when we did the first move. The next one was a big one. In Consumer Protection, we clearly have seen a situation where five big global players existed in the microbial control world. Two of them are LANXESS and IFF Microbial Control. IFF basically standing for the DuPont heritage and the Dow heritage, which eventually was Rohm and Haas that everybody dreamt of all the time.
Besides these five global players, there were a few mid-sized players and many, many national small champions. Well, this is a market we liked. We detected that this is a growth market for various underlying trends, like replacing antibiotics through disinfectants in stalls. Therefore, that was the journey we embarked on to consolidate in this market. What has happened since 2016, 2017? New champions have been created. From five global players the industry turned now to three global players. We consolidated IFF Microbial Control and Lonza Specialty Ingredients teamed up with Troy. Out of five you now are down to three global players. We, in the fields that we operate in, are the market leader. It's a different thing to be a market leader compared to a follower. A champion has been created. The second champion has been created in F lavors & fragrances.
If you look at this graph on this page, you basically see that market position-wise, we were always a decent player. It was somewhere hidden in our portfolio. Basically since 2015, 2016, I was always looking at the number two in this industry, and I personally said the consolidation of number two and number four would be marvelous. A new global leader would be established. When the asset was opening up for process, we were there, and we were lucky enough to get the consolidation done. Now, LANXESS in the F&F markets for the precursors that we are in, has turned into a market leadership with best purified quality, best consumer proximity, because we are globally present, and the best technology. We have integrated value chains, and we'll explain that to you later on in further detail, because this is a stronghold going forward.
It's a global champion. If you look at the asset configuration, we started off with one asset in Europe, one asset in India, supplying notably, the Asian markets, but also the rest of the world. Asset-wise, we are now the only player for the global F&F industry, because through the acquisition of Emerald Kalama, we have the stronghold global world-class, world-scale plant in Kalama. I visited it in August this year. Of course, we also added the specialty site in Widnes, U.K., and Botlek in Netherlands. Also, Botlek, clearly the world-scale plant in this fields. Now we are present in the North American markets, present in Europe, present through our Indian sites in Asia. A global player in the precursor worlds for the flavor and fragrance industry. Holger will give you further details on that later on. Pay attention to it.
As far as integration is concerned, I clearly would like to say that, on Emerald Kalama Chemical, closing has happened in August 2021. Earnings development is clearly in line with expectation, very visible also in the Q3 data we've reported yesterday. Consumer Protection showed a growth of more than 60% on earnings. Holger and his team contributed nicely to it, despite the plant standstill in Botlek. As far as IFF is concerned, I visited the IFF team myself in summer this year, welcoming them after the closure of the transaction. The enthusiasm was great.
I've, as a matter of fact, never seen so much passion, of a business being integrated because they realized now they are part of a global family, they are part of a global business, and have finally, after being transferred in the last few years, two to three times from owner to owner, now they found their home. It's us, LANXESS, the leader in microbial control in the world. That's a good home. Here the interaction and the management team is great. The business clearly was undermanaged in the past. We've explained that already when we announced the transaction in August last year, and it has not been better managed afterwards. We clearly now are accelerating and, we clearly see the business fits to our portfolio is tremendous.
Now it's up to us to unlock synergies and to bring the business towards a champion, a leader, profitability, technology-wise, product-wise, financial-wise. Looking at market growth. We are in markets that are nicely growing, more than GDP. We definitely benefit from tighter regulation, which is unfolding everywhere, very strong in Europe, visibly more and more in Asia and also in the United States. Population growth and urbanization plays into our hands. Higher health awareness, definitely on the animal side as well. I mean, antibiotics are more and more banned, even in Americas, north and south. Of course, home and personal care is on the growth trajectory, and this is something we want to conquer further. Water quality and scarcity is being a theme more and more worldwide in respective jurisdictions.
Consumer preference towards milder solutions instead of more aggressive, partly toxic solutions is wanted, and we are playing clearly in this direction. The market growth is there. We want to get there. Let's sum up. Consumer Protection, three categories that I would like to use for all three segments, and I start with Consumer Protection. We are globally having leaders. The business units that we have in this Consumer Protection segment are at least number three worldwide. In some cases, we are number two or number one. Technology, you need to have a very high technology if you want to play successfully in this area. For those of you that are rather looking at 2023 financials, feedback to you is, we look at this segment and it should grow versus 2022.
Growth coming from material protection, stability to growth from flavors and fragrances. Growth from the business that is very tilted towards crop protection. We clearly see the Agro cycle positive for next year, but also the innovations from the major Agro players are visible for next year, too. Some of them are being launched, and we are part on the ingredient side. We are positive for the Saltigo business, too. As far as Liquid Purification Technologies, here our assumption is a little bumpy here and there because some of the recycling companies, water recycling will potentially be delayed here and there. Overall, we look at stability in terms of profitability. Now, let's turn our attention to the second growth segment, additives. Also here, over the last few years, we have built leaders. Leaders with a strong U.S. footprint as well.
The two biggies in this division are polymer additives and lubricants. These are two strong business units. As far as polymer additives is concerned, it boils down end market-wise to flame retardants. There are three players taking, according to good analysts, more than 75-80% market share. The three players are Western players. You know them. Having a consolidated market for Western players means there is no stupid, irrational, sudden, funny behavior. Everybody needs to earn money, which is positive. Everybody knows environmental standards are important, legal standards are important, customer standards need to be at highest level. That's a good playing field. We are in it, and we clearly see that despite construction industry now softening, the underlying trends to insulate houses in order to reduce CO2 emissions is positive.
This is one big market outlet, and the second definitely is the E&E customer industry. In lube adds, lube adds are needed. Lube adds are needed for industry, which is our prime end market, so machines, robotics, everything, turbines for aviation, turbines for wind energy, et cetera. All of these are products we are supplying to the industry. We are part of that. Through the combination of LANXESS and Chemtura, a number two globally emerged. Market positions in these two dominating businesses in our division are definitely existing. As far as the asset base is concerned, the majority of our assets are not in Europe. Most of the plants are in the United States. This is not bad in these times. Again, how do we look at these businesses going forward? Market position, very strong.
Are we the number three globally? Are we the number two? Are we the number one? Our good analysts will know, but they will all know that one of these top three position is being held by us. Product technology. High intensity on technology needs to be there in additives and in both polymer and lubricants. Here, innovation for the customer on application technologies, et cetera, is high. With this, of course, eventually you also differentiate. Rhein Chemie, good in technology, but here and there are definitely some pieces in the accelerators and antioxidants space where technology innovation is not that omnipresent anymore. Here, cost delivery is needed. If we look at profit potential 2023 versus 2022, I mean, polymer additives are a little bit humble because we rejoiced massively in 2022.
This business was reaching peak profitability and growth rates and profitability, especially in the first half, that was sensational. Our view on 2023 is it will still be a very good contributor, but not as high as 2022 when construction industry and brominated prices were at its best. Lube Additives should be stable, and if all goes well, might show even growth. Rhein Chemie profitability this year was appalling. It will rather stabilize or get better from this low level. It's more volatile due to automotive industry exposure. Intermediates. Two business units. Here the following needs to be stated. These have been always strong contributors, and from a market position and technology standpoint, they will be strong contributors. We've shown you here that these were always backbones to our portfolio.
The reason behind that, in the Western Hemisphere, Advanced Intermediates, we have a lot of precursors being produced for our other business units in the other two divisions, but also for the merchant market. This business unit is the last man standing in the Western Hemisphere. As such, we have strong leadership. As such, we always had strong profitability and high cash conversion. The same holds true for Inorganic Pigments, where we take most likely the most dominant position in terms of market share. In Europe, well, easily above 40%, easily above 50%. In the world, at least 30, if not to say 40%. We are the undisputed number one globally. That's a good position to be in. If I look at the industry cost curve in Inorganic Pigments, we have the so-called Laux process.
If you blend out energy, we are the lowest in the industrial cost curve. These two businesses do need volume, and these two businesses, at the end of the day, are more energy intensive than the rest of the pack. Here, as they are German-based, they do suffer right now. Nevertheless, we do think that once we are through 2023 and business somewhat normalizes and energy somewhat normalizes, potentially at a higher level, but not at the crazy level we have seen in 2022, these business units will come back. Definitely at Advanced Intermediates and also in Inorganic Pigments. You cannot do without Inorganic Pigments in the paints and coatings industry. There's one thing that has the high-priority sticker as corporate projects. That's for Inorganic Pigments, the LFP technology. LFP stands for lithium, ferro, and phosphates, and ferro stands for iron oxides.
We have been approached by the biggest automotive producers in the world who are testing the LFP technology. If this flies, and there are good reasons why this should be a successful technology, and iron oxides qualify for the ferro piece, we will have a market which might be as big as our existing market, and it would catapult inorganic pigments into a e-mobility battery precursor machine. We are sailing through stormy weather right now. For both businesses, we see these could be strongholds also in the future. We manage the current situation and would rejoice once we see better opportunities arising. To sum up, intermediates, leading positions, last man standing in the West, and clearly globally number one as far as IPG is concerned. Here we are talking about process leadership, and this applies to both business units.
For 2023, we are humble in our expectations. We need volume, and we need reasonable energy costs. This might be something where these two businesses might be hit as they have suffered 2023. Here, still potential for reduction in profitability. We're not talking about collapsing profitability, but reduction. Now, let's take a step back. In normal terms, how should these businesses perform? Normal terms means no inflation. Normal terms means no wars and global pandemic, but somehow stability. I don't know when this is going to come because the last three years have shown different things, but there will be normal economic cycles and economic environments. When we look at our businesses here and see what technology, market proximity, and market positions we have, Consumer Protection should be a segment not only growing, but profitability-wise after synergies integration is implemented, moving above 20% on average.
Specialty Additives, we group some lousy businesses like the accelerators, antioxidants into it, which had EUR 300 million sales, no profitability, so it diluted a little bit the overall performance. Nevertheless, we think that also this division, despite some diluters here and there, can achieve profitability up to 20%. Please take note of the fact that in 2019 we already were at 18%-19% in the segment. Advanced Intermediates used to be between 16%-18%. We should get there in a little while. That is how we look at the profitability configuration of these respective divisions, and this is our ambition to get there should economic environment should be somewhat normal. Now let's look at the group. Three segments, two growth profiles, one with stability.
In the first two ones, organc investments for growth, inorganic investments are likely. Growth profile, one above GDP and two with GDP. Way forward on Consumer Protection, growth-wise, organic, synergies, innovation, additives, clear focus on organic and innovation, and intermediates, we do what we are good at, operational excellence, efficiencies. CapEx for growth, definitely the case for the first two segments. In intermediates, we've done our bit. Now we run them for cash generation. Market position, very strong in all three divisions and, therefore, we feel good about the configuration that we have now put in place, all geared towards chemicals, not polymers anymore. To sum up, since the last Capital Markets Day here, November 2019, we massively sharpened our portfolio. What has happened in just three years, I think speaks for itself and stands for itself. Champions have been established, worldwide market leaders. Now we have to deliver.
LANXESS is significantly more resilient across various dimensions and definitely in the years to come after synergies have been implemented. We now want to go for the remaining two targets that are still left over from the Capital Markets Day in 2019 that I stressed, and we are prepared for doing so. Closing the first chapter of today's presentation is what are additional value opportunities that potentially are on your radar. Some of you don't have them on the radar, but at least you should be aware of them. Engineering Plastics joint venture is no longer reported in the company configuration. You don't see them in the Bloomberg and Reuters numbers and matrix. In most of the models it has been excluded, but the value is still there. HPM that we contributed to the joint venture is a strong business.
One of the top five players globally. Strong backward integration that is valued by the customers. Strong knowledge and technology on PA6, PBT, and Tepex, with customer proximity through the globally built compounding network, with a high exposure to the automotive industry. You can see this as a positive or as a negative. Definitely, it has been always due to also the automotive industry exposure, most volatile in terms of earnings. This is known to the industry, this is known to the analysts. The rationale for the Engineering Plastics joint venture was clearly for many years. Both businesses are very complementary from the regional setup. On top of that, very complementary from the industry exposure, thus being a real advantage to our customers worldwide. We strengthen our technology position and are in the position as a bigger player to take more care about sustainability innovations.
Last but not least, highly synergistic. In the meantime, we've done a lot, I think. We found a known, acknowledged CEO in the chemical industry, Colin McLean. He has done that before. Known to the markets, known to Advent and myself. We have full trust in a strong CEO bringing this joint venture to the next level. We are very happy that we have found a mixed senior executive team, being a good blend between both worlds, DSM and LANXESS. As far as the shareholder committee is concerned, we've nominated already three persons and this represents one from Advent, one from DSM, one from LANXESS. In this case, I will take the role here for LANXESS. Also here we are, I think, doing a good blend in order to get all knowledge and all power drive into this joint venture. Carve-out is running.
I mean, we are doing all our respective work in order to have the carve-out completed by year-end globally. In many jurisdictions we have created by now new legal entities. As agreed with works council and unions, the transfer of employees, it has been put in place by now. Legal entity-wise, we are up and running. Employees have been transferred and now we do the final permits that are being registered in all the respective jurisdictions and should be ready by end of the year. DSM had been carved out already, carve-out accomplished. Financing had been agreed prior to signing with three Western banks and European banks. Western banks, this is carved in stone.
As far as the antitrust approvals are concerned, in the eight, nine, 10 global jurisdictions that we have filed, I think we are now having the approvals of seven or eight. So green light has been given and, the remaining ones, the only bigger one, which is normal according to the legal process, is European Union, where you first of all have to clear all questions, which now has been done or is about to be done. Then in the next few days we are going to do the filing. The filing normally takes round about 30, 40 days, and then, the time is running.
For that very reason, our assumption is not only that it will close in the first half of next year, the likelihood is higher now based on all the approvals that we've received, that the closure will happen in course of first quarter 2023. We see here clear value creation for all shareholders. First of all, for us, because with the closing, we achieve what we have promised in 2021. After we did two acquisitions, we stated that we want to deliver, and at that point in time, we already worked on the HPM transaction. Here, the company should go into a deleveraging mode once the closing has occurred. EUR 1.1 billion should strengthen our balance sheets. But we have a big value creation opportunity in the stake that we hold in the joint venture. It will not occur in our balance sheets.
You will not see it. If you group two highly attractive businesses together, 40% or up to 40%, one day it can turn into value generation after synergies have been put in place, and that's the intention that LANXESS is pursuing. Definitely a value opportunity going forward. There are other projects, the lithium projects. Definitely lithium project was hit hard through Corona and closed borders and travel restrictions. The project has accelerated again, and now the final ticks need to be made. This will happen through the so-called FEED study. In our language, in our company, this means feasibility study three. This is the final full-equipped engineering study. This is being done also through a lot of engineers from an external engineering company. By the end of the feasibility study three, you have everything.
You have the economic plans, you have the investment costs, you have the engineering, 3D, piping, vessels, everything analyzed and put in place. At the end of H1 2023, the investment decision will have to follow the go/no-go decision. At that point in time, most likely we will give them a detailed update on the lithium project. We see currently that the technology is further upgraded. Efficiencies, extraction efficiencies are improved, and this will, I think, continue. Of course, we are rejoicing when we see the lithium prices. Should this project see daylight, I think this will be a hidden pearl. Electrolyte projects, we are working on this. Here, unfortunately, different to the United States, there are still lockdowns in China. Traveling is restricted, quarantine is heavy and severe.
I personally don't see that it's feasible to get a joint venture in place with governance model, financial plans, contracts, et cetera, what have you. When you do this in a digital way, you need to have physical meetings, and then from my point of view, this will accelerate. I hope that here this will, like in the U.S., improve and interactions, physical interactions are more likely. This project we are still pursuing definitely because it's very attractive, and we will see electrolytes projects and electrolyte investments in Europe because the market is taking off. We will see the same in the United States. The market is taking off. We want to be part of it, but of course, we need to have physical interactions as well. Tremendous, I mean, we are working here nicely.
We are currently testing monetization features and adjust and learn out of them. Here the approach is that in course of next year we will further refine our monetization. Currently, we are working on the supplier side. We will introduce further monetization features in the second half of 2023 for the buyer side. If this works out well, then we would open up with data and monetization facts. We would then open up the doors to venture capitalists by end of 2023, beginning of 2024, and then the 100% share ownership that we currently have would then be reduced by around about 10, 20%, and then we see further. These are additional strategic projects we are pursuing, to name a few. There are others in the waiting line.
To sum up, in the next 12 months, we are working to get the best out of our existing portfolio. Don't assume that we will do next to what has been announced, big M&A moves. No, we are focusing on what we currently have and getting the best out of it. First of all, of course, addressing and navigating through volatile 2023, which we assume if it comes better, wonderful. We will focus and address and manage our weak spots that we have. This is the time where I take the ball and pass it on to Michael. Michael, take it from here.
Thank you, Matthias. Hi, everybody as well. From my side, welcome to our online Capital Markets Day. Yeah, as Matthias mentioned rightly.
We give you an insight now what we think our weak spots are and how we tackle them, and I assume that you share the same view when it comes to our current weak spots. We listed now three, basically, which we need to manage in course of the next months and quarters to improve not only on the portfolio, on the strategic roadmap, like Matthias said, but as well on the operations and on the financials, obviously. First is energy, obviously a topic we're discussing now for quarters. Second, cash flow, same old so far cash flow. The third is the leverage level, which we're currently having. Let's start with energy. When talking about energy, we are basically talking about the energy situation here back in Germany. When talking about energy in Germany, we predominantly mean gas. Why is gas of such high importance for us?
Because for us, gas is basically the raw material to produce steam and electricity to run our assets. Therefore, gas is of importance. Then the question is twofold. First price and then volume, like in our operational businesses. Let's first look at the gas prices, gas price development back in Germany and what it means for LANXESS. On the left-hand side, you see a chart basically reflecting the development of the gas price here in Germany. Basically, it's a spot price because we're basically acting and we're basically putting into our P&L the spot price for gas. If you take a look at history, gas price in Europe was always around EUR 20, sometimes below, sometimes a little bit above, but again, by and large, EUR 20 give and take. You can divide the graph basically in five phases.
The first phase is until summer last year. Gas price is around 20-25 EUR per MWh, which meant in our P&L a number between EUR 250 million and EUR 300 million. Why? Energy was never a big topic in our, let's say, management discussion. Of course, we looked at it. EUR 250 million, EUR 300 million is a big thing, but not comparable to where we are as of today. In summer last year, energy prices, gas prices went through the roof. First, in the third quarter last year, from 25 to 50. In the fourth quarter, from 50 to 100. It stood at around 100 then until summer this year. Basically in the third quarter, so the quarter we just reported, it absolutely went through the roof.
The average price for gas in Europe was around EUR 200. Ten times the price which we were facing 1.5 years ago. Since October then, when finally the German government stopped buying all gas at any price collapsed again. We saw prices around 30, 35. Only recently in the past days, it went up again. Now in the current phase in which we're actually in, energy prices, gas prices are very volatile and still again going up, but we already saw very low prices. High volatility, very volatile prices, and as we speak, back to EUR 80 per MWh, which is still 4x the prices which we paid a couple of years ago, actually.
That means for our P&L coming from 250-300 in 2020 to around 500 in 2021, now peaking into 2022. The estimation as of today is give or take EUR 1 billion. We have to swallow EUR 1 billion of energy costs. Now the question is which assets, which businesses, which segments are affected the most when it comes to German assets and energy consumption? Let's zoom into our German asset base. There are many assets, many plants, which we are having basically here in Germany. The majority of the energy-consuming sites you find here located around Cologne in our known sites, Leverkusen, Dormagen, and Uerdingen, where we have by far the largest asset park.
Where we have by far the highest number of plants and sites which are linked to the gas price, as gas is needed for steam and energy. If you then zoom into these three sites, you will recognize that the vast majority of plants which are consuming energy, steam, you find in our Advanced Intermediates segments. It's not that LANXESS as a whole is affected in each and every segment in the same magnitude. By far, the highest exposure to the energy prices we have in our Advanced Intermediates segment. Advanced Intermediates, which consist out of the two business units, AII and IPG, are affected the most. What did we do until as of today? You know that we are very powerful in passing on prices. We proved it now over a decade. We always were focusing on raw materials.
I told you before, energy, the energy bill was never of, let's say, such importance because the energy bill was rather stable over time. That changed last year in the third quarter, if I was just as I was just saying. Since then, the teams did a tremendous work to not only forward the raw material prices, but also the energy prices. The little gap which we were behind in 2021 because we were caught by the rapidly rising energy prices, was made up in the course of 2022. If you combine both graphs, we're still okay on a company level. 2021 successfully, still a little gap behind when it comes to passing on energy prices. 2022, absolutely fine for the group.
What we saw in the third quarter is that still we were successful for the group, but the Advanced Intermediates segment had a shortfall. Because when the energy prices are going through the roof, there are simply limits in passing on the prices. Believe me, the teams did a tremendous job in passing on prices. You only saw yesterday that, again, in the third quarter, we improved prices by 26%. That is a tremendous job which the organization did. The environment is changing as we speak, especially for AII and IPG. Matthias was mentioning. In these two businesses, we are largely the last man standing in the Western world or have the high asset base here back in Germany.
In normal times, where you have as well comparable energy costs, we have a fantastic cost position, especially at AII, and therefore, AII was the cash cow in the last or in the past years. With the energy prices in Germany going through the roof and then having players elsewhere on the planet, namely in China, you suddenly find material from Asia in our Western markets. On top, you have industries like construction industry, which is weakening. The recipe of the past, especially for the intermediates, now to push prices to the limit is as we speak, coming to its limit, which opens the question, what we're doing now? We discussed it with the business unit heads and with the teams, and we determined possible countermeasures.
These countermeasures do, of course, as well reflect that we might adapt our production facilities in terms of running our plant maintenance shutdown longer than anticipated, maybe in some areas, start them earlier to simply make sure that our competitiveness will not lead to a decline and a sharp decline on profitability and cash. The second element, and Matthias was mentioning it as well, of course, we are looking into CapEx spending in the near future to come and cost-saving measures. In the current environment, we are prepared to as well tackle the challenges of pricing in gas in Germany, which is then focusing especially on these two businesses. What about volume? As we know, volume was the big topic earlier in the year.
Early in the year, we told you that we set up a task force when the war started to make sure that we have a good feeling and a good knowledge about the consumption in case there will be a shortage of gas here back in Germany. We shared scenarios with you in May, where we said, "Okay, the impact, if there is a shortage of 25%, will be X, and the impact, if there is a shortage of 50%, will be Y. We're having task forces and all these things." As of today, I personally would say there are limited concerns on the short term when it comes to the volume question. We don't know what the next years will come. There are too many questions circling around, but I would probably say as of today, there are only limited concerns on volume.
Closing the chapter of energy, basically saying volume should no longer be a concern as of today. Pricing, we have measures in the drawer, countermeasures in the drawer, which we will take and use and implement in course of the next weeks to come. Second topic, cash flow. In cash flow, to cut a long story short, free cash flow is too low and working capital is too high. Full stop. Let's look into the different elements of cash flow and free cash flow and how we think about them. We don't know what the EBITDA of next year will look like. Matthias gave an indication how we think about one or the other businesses and, on the other hand, we still don't know for sure what the development will look like. What we can assure you, like in corona times, we are prepared.
We sat together with the management team, with the next level, with all our business and group function heads, with our regional heads, and we agreed on different tools on the full HR toolbox, on plans to reduce our non-personnel expenss or to reduce our OpEX spending. There is a common denominator everybody agreed on, and it has an envelope of some EUR 50 million-EUR 100 million of countermeasures, which is lying in the drawer and will be put in place if needed. The second element, CapEx, and the third element, working cash flow, I will come to it in a little more detailed version. Here as well, there is a potential in the next quarters to come, which might sum up and lift cash in the volume of EUR 300 million-EUR 500 million. First, looking at CapEx.
We had the, what we call growth investment cycle in past years, where we spent some give or take EUR 500 million. There was a growth CapEx envelope of EUR 150 million-EUR 200 million and a maintenance CapEx budget of some EUR 300-EUR 350 million. Now two things are happening. First, HPM will no longer be recorded and therefore we no longer have to spend on maintenance and growth CapEx for HPM. That will reduce our maintenance CapEx budget to some EUR 250-EUR 300 million. The second element is that the growth investment cycle will no longer be that large. We will spend less, no longer EUR 150 million-EUR 200 million, but rather EUR 100 million-EUR 150 million.
That means that the new CapEx level will no longer be in the EUR 500 million area, but rather in the EUR 400 million area. You still find here the number of 450 expected for this year. This is as well an element I was discussing earlier, where we try to achieve some savings to not spend the full amount of EUR 450 million. Next, let's jump into working capital. That slide we already discussed yesterday with some of you, that was the famous then page 20 in the deck for Q3 results, where we displayed what happened in the working capital. No doubt, working capital is too high. We're reporting some EUR 2.3 billion end of September, which is an increase of give and take EUR 900 million.
If you separate the different elements of the deviation, you find there's a portfolio effect because Holger and the new IFF business deliver some EUR 200 million of working capital into that number 30th of September. There is obviously a currency effect because the US dollar is much stronger than it used to be end of last year. As our footprint in the U.S. is much higher, as our inventory and working capital level in the U.S. is higher, we have a currency effect. Still, there is an operational increase of some EUR 600 million, which you find as well in the cash flow statements for the first 9 months. In fact, it's 597. These 600 million, by and large, have two operational driver. One is price, the second is volume.
The indication we can give to you is that the majority, two-thirds or 70%, comes from pricing and 30% from volumes. In any case, we had to swallow and put EUR 600 million more into work, which is now as well weighing on our leverage. Where do we want to get again? There is no reason why over time we should be back to around 20% working capital to sales. There are elements to it, technicalities, why Q3 is so high, it's portfolio and, currency again, but nevertheless, the number is way too high. The elements, price and volume, give at least some indication that in the next quarters, this number will come down. Price on raws, we see a decline from the peak in the third quarter in course of the last weeks and months.
That is the first sign which is targeting in that direction. With regards to energy costs, namely here back in Germany, the same holds true. We're no longer in this on average EUR 200 per megawatt hour, but rather in the, I think the average is now at around 40-45 for the past weeks. In times, and at one point in time, the super inflationary cycle will come to an end, working capital will be set free through pricing. The second element is what we do to some extent have at hand in our control.
That is, one, the seasonal effect, and I was mentioning earlier, usually the pattern is that in the fourth quarter we see a relief in working capital because of the seasonality of the business, more turnaround in the fourth quarter, but maybe we will extend and enlarge the plant maintenance shutdown throughout the next weeks to come. The second element, obviously, the logistic concerns, which we are addressing for some quarters now. On top of it, we had, when we had the go live of our ERP system, some little hiccups in the logistics chain, which cost as well a couple of percentage points.
These elements are expected to ease in the upcoming quarters, but nevertheless, we already gave a target for the fourth quarter, which basically says the expectation is that we want to release at least EUR 100 million of working capital in the fourth quarter. There are other levers to the working capital or next to working capital and CapEx to improve the free cash flow. Free cash flow, like Matthias said, is now very high, if not top priority. We said yesterday, especially now in the fourth quarter, we're even ready to let go of some profitability to improve our free cash flow. Free cash flow obviously consists out of the different elements which we're tabling here. I was addressing EBITDA, the measures we have in our drawer.
The exception is which we're spending, the number EUR 100 million is driven by M&A, the integration and the ERP rollout. We have the tax rate. We're working on the tax rate. The expectation is in the next couple of years to bring the tax rate down and working capital and CapEx I was referring to. The generation of free cash flow is not only of your concern, it is as well of our concern, and we will work on it in the next quarters to come. Let's now look at the third element, the third concern, which is out there on the third weak spot. It's the leverage. First, before we talk about leverage, let's take a look at liquidity. You know us. You know us for years now. We are running this company on a very prudent financial approach.
When we saw that the markets are getting more tougher, when the war started, when things were turning, we started many proactive measures to secure liquidity. We issued bonds, we negotiated bilaterals, we prolonged our revolver, and we secured our cash at hand, and we, of course, as well negotiated a cash in from the HPM transaction for a good reason. As of today, there is basically a liquidity of EUR 3.5 billion, if we include the 1.1 which we will receive from the HPM transaction. Still, there are no effects included from the future improved free cash flow, which we as well expect. This proactive measures are not falling from the sky. That is as well what you can see what we did in history.
Be it in the financial crisis, be it in the rubber crisis, be it now in the COVID pandemic or be it now in the gas crisis, we always secured our investment-grade rating. The rating agencies always supported our views. If you only read the latest report from the rating agencies, they give a credit to us thanks to the change of the portfolio, change of the business risk profile. We actively manage our financials, and that can as well be seen if you take a look above the development in past years. I don't want to go now through all the details, but there is a clear pattern to it. We sell a business and then we buy a business until we touch certain ceilings not to lose our investment grade.
In between, if there's room in our balance sheet, we even do a share buyback. Not only, like Matthias was mentioning, paying a dividend or increasing dividends all the time. There is a clear path which we are conducting when it comes to our financial indebtedness. That is why we are at this point in time, because Q1 next year, most likely, we will receive the EUR 1.1 billion from the HPM transaction. Next to net financial debt, if you as well include the development of our pension liabilities, you see as well. A couple of years ago, we discussed the magnitude of EUR 1.1-EUR 1.2 billion pension accruals. That number shrank now to EUR 363 million as of September. Two elements obviously to it. One is the technical development of our DBO because of the increase of the interest rate.
The second element is because we manage our pension assets, and we decided a couple of years ago to put an inflation linker into our asset base. We decided early this year to shorten the duration in our asset structure because we were assuming that interest rates will rise. Through these measures only, we improved our asset base by EUR 300 million, with the funding status of our pensions is now at 85%. Therefore, when it comes to leverage, we feel comfortable because the numbers are in line, the rating agencies are fine, and in some months from now, we will get the EUR 1.1 billion from the HPM transaction. To summarize, we know our weak spots. Your weak spots are our weak spots, and we are tackling them. We work short-term measures to cope with the high energy prices.
We will work on the cash flow, be it on working capital, be it on the measures on cost and be it on the CapEx. Last but not least, we have ample liquidity at hand, and we manage our indebtedness. That's from my side. I would now hand over again to Matthias to run you through our achievement on the sustainability roadmap.
Well, thank you, Michael, and let's continue immediately on sustainability. Here I would like to shed light on Scope 3 emissions. We have, in November 2019 Capital Markets Day, addressed our targets for Scope 1 and Scope 2, and how we would like to reduce our respective emissions here. Two months ago, we communicated our Scope 3 targets. Of course, we registered these targets with the SBTi organization. We are very happy to say that SBTi gave us the audit stamp that we are on track as one of the few companies in the chemical industry worldwide. We are on the 1.5 climate path, Paris climate way, and therefore achieve the highest standards, I would say, as far as Scope 3 targets are concerned.
We have clearly defined the categories where we would like to optimize. One area is sustainable raw materials. We definitely here have identified opportunities on the inorganic side, but also on the organics. We see that more and more opportunities develop on the transportation side to go for green logistics, but also as far as climate neutral products are concerned. We've introduced basically on a weekly, monthly basis, new product lines under Scopeblue, which is clearly categorizing our product group that qualifies for bio-based materials, low CO2 footprints, what have you. Also in this regard, we try eventually to move our entire portfolio to climate neutral products and product group.
As far as Scope 3 is concerned, I think we are again turning to be a front runner in the chemical industry as we have proven to be in Scope 1 and Scope 2. On the next slide, I would like to give you an update. Many analysts, but also buy-side investors have asked for that. An adjusted target milestone plan for Scope 1, Scope 2, excluding HPM. Here we are. We precise our targets now with a new parameter of Lanxess for 2025, 2030, while we keep our target 2040 switched on as we defined before. Here the targets for 2025 will move down from the 2.6 million tons level to 2.3.
For 2030, we have defined, in the first place in 2019, 1.6. Through the exclusion of HPM, this now moves down to 1.3, despite the other acquisitions we did. As I stressed earlier, the acquisitions that we have completed by now rather follow the CO2-light footprints, and as such, we are able to keep the targets in place that we had identified for 2040 for sure, and now just adjusting 2030 and 2025 for HPM. The major projects we are pursuing here on S1 and S2 are next to the laughing gas projects that now enters into the HPM joint venture that will be pursued and implemented. The investments for that have been done. Our existing portfolio, the biomass energy transition in India is clearly advancing well.
Of course, we will further strengthen our existing footprint in the asset base through electrification, green energy, and we'll implement respective measures here going forward. With this, we feel strong about reaching our targets as we have promised and as we have now delivered on year by year. Since communicating our S1, S2 targets, every year you could see that we reduced our CO2 emissions in the actuals by around 150,000, 200,000, 450,000 tons, which I think clearly shows that we are striving for a reduction in absolute terms, because only this helps. Specific improvements are nice, but eventually it needs to lead to absolute reductions, because only through this you can help the planet. If we benchmark ourselves versus industry curves, this tells a strong story. You see here four curves.
The upper one is the global curve, with all the actions currently being communicated, not implemented. The world still has an ambitious reduction plan in front of itself that we need to deliver on. If you go to the other two curves, above the red line, you see the European Union ambition. If you then go to the black line, you see German targets reduction curve. Please look at the red one. That's the reason why we are getting so strong ratings by sustainability agencies, because we clearly deliver here faster than others, and it's not only through our ambition. As a matter of fact, for the last three, four years, we clearly execute on an annual basis on CO2 reductions.
I think this is how it has to be, and that is why we feel comfortable to embed absolute reduction targets on an annual basis in our variable pay, and not only for the management board. We've cascaded that in all the individual contracts of the top leaders in our company worldwide. This is seen by external sustainability agencies and rating agencies. I've yesterday in our Q3 conference call clearly stated for the first time that MSCI, which is watched by the capital market quite intensively, we again scored double A. With this in the diversified camp worldwide, we are one of the top three companies globally, and I think this tells a story. We are also in other ratings like ISS, in the high rating and here under the top 10% achieving prime status.
CDP is known by many, and it's tracked rigorously and also here we qualify compared to industry peers with top-notch rating. The Dow Jones Sustainability Index, I mean, you can see here that was the first index we were applying for. You see our way up. Last year, we got the top slots in Europe, number one, and globally, number two. Dow Jones Sustainability Index is finalizing its rating process now, worldwide. The feedback we have received so far, we will be again in the top 10% globally, and how strong we score on the European level and so worldwide level is yet to be decided, but we are attentive and looking forward to the rating because we hope that we again achieve good ratings here as well. Our actions are seen and externally noticed and rewarded.
With this, ladies and gentlemen, I would like to sum up first part and now of course, sustainability part, of our presentation. The portfolio over the last years since the last Capital Markets Day, wow, how much has it been sharpened and champions have been created. Now, we need to deliver on financials, respectively on cash flow and margins. As far as other dimensions of the portfolio are concerned, resilience, North American footprint, industry exposure, Consumer Protection focus, I think you see where we are going to and what has happened. Definitely, now we would like with this portfolio that we've found, with this set of leaders, we would like to navigate through 2023 and then accelerate on financial performance.
As far as sustainability is concerned, as a license to operate, this will turn into a business case if you pursue it with verve, and eventually you're being judged on this by your children, so make a difference. This, ladies and gentlemen, is now the part of CFO and CEO. Now I'm delighted to pass on the ball to Flavors & Fragrances. Holger, take it on.
Thank you very much. Good afternoon, ladies and gentlemen. My name is Holger Hüppeler, and I'm the Business Unit Head for the newly formed business unit, Flavors and Fragrances. I'm also the representative of a couple of hundred highly committed and dedicated colleagues, experts that are thrilled by the opportunity given by the company to build a new global champion. If you allow me, in the next 15-20 minutes, I intend to give you a quick glance at our exciting product portfolio. I will explain the specialty characteristics of our markets and describe why these attractive markets are our targets, where we are acting as a green and nature identical player. After that, I will show you our clear path to growth in this segment.
If you look into aroma chemicals, there are various categories, and you can see them here described as floral, spicy, earthy, and fruity. As you can also see, we are represented in all of them. It is important because a perfumer building a new product is using between 100 and 120 different blending components. Here you can see we are active in all of them. What you see right here is not our entire portfolio, but it's the one which is publicly known. We are also developing a further segment under secrecy agreements with dedicated players which are well-known in our industry. What our customers are doing with this, I want to describe to you in a brief example. By the end of September, I found myself very early in the morning in the fields of southern France.
Near Grasse, I was standing in a field where the people were harvesting blossoms of jasmine. You can see in the upper right corner a product called benzyl bcetate. It's described as sweet, floral, fruity jasmine flavors. Those people were, with great effort, harvesting jasmine blossoms. You need 10,000 of them to get one kilo. From those one kilo, you then get 25 grams of jasmine oil. One kilo of jasmine oil is in the range of 60,000 EUR. If you would use this in a normal perfume, a bottle in a shop on the high street would cost approximately 1,000 EUR. In order to achieve the same effect, you can use those aroma chemicals which are shown here, which are sold at a much lower price. You can get benzyl acetate at something like 10 EUR rather than 50,000.
We are a very welcome partner if it comes to launch new products and develop new products and make them available for the global markets. Another segment of our portfolio are the benzoates. Here we're talking in particular about sodium and potassium benzoate. Preservatives that find their application in quite a number of fields. You can see on the left-hand side, food and beverage, with the biggest application being soft drinks. If you now think about four or five soft drinks that come to your mind, I can assure you that we are at least in three or four of them. In the area of personal care, applications are hair care, lotions, and shower gels. If you turn around the bottle of shower gel tomorrow morning, we might be there right with you.
Home care, laundry care, household cleaning, wipes are a growing market in times where hygiene is becoming a more important factor around the world. Then there are other applications growing in niches like pharma and agriculture, which are also contributing to our growth. I will also explain to you the specialty characteristics of our market. As the first bullet point, you see the advanced technical activities. Here, we are talking about those colleagues we call the noses, people who have got a particularly fine smelling capability and who are able to translate the requests of our customers into chemistry. A rare talent, and we are happy to have quite a number of them on board. It also concludes a group of people who are formulators for creams that are also rare experts. Again, we are happy to have some of them on board.
There's also the aspect of regulatory expertise. I can give you one example. Our product, Kalaguard, is the only registered biocide in home care in Europe. This product is not only protected by the production methods and by the purity we achieve in our plants, it's also defended by a ring fence of 50 folders of documentation and file documents with the authorities that have not been breached yet. We have got a global positioning in attractive markets. Matthias has already said we have got five assets around the world. Five assets in three different regions, which assures our customers short-haul supply chains with less geopolitical stress than many others can offer. We've got the high-quality standards for safety and reliability. Here one core aspect for us is purity. Again, I want to give you one example.
We make in Kalama, in Washington state, North America, one particular grade of benzyl alcohol that is so pure that it is becoming a part of a pharmaceutical solution, which is then directly injected into your veins. I think you cannot be closer to your customers than that. On the sustainable portfolio which we are building, there is a great focus, and we are starting this at the basics. One of this is the raw material sourcing. Here, LANXESS is offering something which the Kalama colleagues did not have in the past. LANXESS is having a sourcing platform around the world. North America, Brazil, India and China are locations besides Europe, where we can look for bio-based raw materials that allow us then to make sustainable products which are highly valued by our customers.
This is then supported by certification of assets, which will take place twice before the end of the year and one further plant early in 2023. Now the attractive market I have been referring to. There's a clear preference in the world for healthy products. Natural ingredients are very high on the list. We've got the tightening product safety and environmental regulations topic around the world, wherever you go. There's an increased demand for sustainable products and an upcoming middle class with a clear will and commitment to buy those premium and upmarket products. We are very nicely positioned to do that. If we go back to the aroma chemicals, the combination of the LANXESS assets, heritage products from our portfolio, combined with the newly acquired Emerald Kalama Chemical assets, lead to a situation where we have got approximately 50% market share in Europe and America.
We're also serving the other regions, but these are our clear home markets and the clear focus of our activities. Also in the benzoates, a much larger market, we've got again 25% market share. With that one we are the leader because we are the only player who has got capabilities to manufacture these products in Europe and in America. We are doing this with an extremely high purity, which in the markets we are serving, which I have shown you before, are of the utmost importance. Therefore we are guaranteeing to our customers a global availability, short logistics lines, lower costs, and in these times, extremely important geopolitical safety. I was talking about the growing demand, the request from the markets for sustainable products.
As you can see on that slide, in the last 15 years, there has been an increasing number every year of products being launched with the classification of sustainability and green. That's a trend which is going to continue. The new generation is requesting it and is also driving their parents to buy them. As you can see on the right-hand side, LANXESS is serving the market with two preservatives that are regarded as green or nature identical, and the upper line are the benzoates I've shown you before. We are very well positioned to accompany this growth trend and to benefit from it, and we will continue to do so in the years to come.
We are currently holding labels and registration like the EU Ecolabel, the Blue Angel, the Nordic Swan Ecolabel, and with Kalaguard, I mentioned before, the only biocide for the home care market that is registered in Europe. We've got a very strong platform to start from and to build on. We are also following the company's direction for being green, and we want to be regarded as the green player in our industry. We are starting with the certification of our assets. As I said before, the end of this year, we want to certify two assets in Europe and then further one in India early next year. They find a high level of customer acceptance and we are building now on three pillars.
With the help of our procurement colleagues around the world, we are looking for bio-based raw materials that allow us in the certified world to pass on the benefits to our customers and support their claim of being green and sustainable. At the same time, we are working on our production processes. Here we've already been successful in the first 12 months, reducing our carbon footprint by 15%, and there is more to come. Circular economy. We are working with three different large names in the industry on recycling waste streams that are generated by various industries in order to make raw materials for our production. We are striving and we're making the commitment that by the end of next year, we have a portfolio where we can offer every product, either in a fossil traditional way or in a green way based on bio-based raw materials.
To give you one example, we have started with sustainable toluene. Traditionally, toluene is coming out of refineries as fossil-based. We have been developing products based on rapeseed oil, waste vegetable oil, pyrolysis oil, and all these opportunities have been converted in our pilot plant into samples which are currently tested by our customers. At the same time, we are working on the certification of our assets, and in line with the corporate initiative, we have started to source green energy. With this initiative, we are expecting to reduce our carbon footprint in the year 2023 by at least another 15%. We can sell products with certification to our customers, aroma chemicals and benzoates, and support our customers' marketing assets and product claim that they are offering sustainable products. Where are we today with our KPIs?
Our EBITDA margin is in the range of above 20%, and with normalized numbers, we are in the ballpark Matthias has targeted. We are regarded as an ESG forerunner in our industry. The cash conversion of more than 70% is our clear target and commitment, but we have to close the number of gaps from the time when Emerald Kalama was managed by private equity. Something we have been discussing with our colleagues in the central engineering department within LANXESS, and we've got a very clear path forward to manage this. We are a non-cyclical business. In order to give you evidence, the first nine months of this very challenging year, 2022, we have performed better than the first nine months of 2021.
Also supported by the synergies of more than EUR 25 million, which have been identified in the early days of the acquisition, which are now converted into a timeline and a roadmap for the years to come. We are benefiting from the secular growth in our industry. I have promised at the last point to talk about growth. In the year 2021 and 2022, we have been, first of all, working on the integration, setting up teams, setting up structures, becoming a solid member of the LANXESS family. We've also worked on the synergies which have been identified as low-hanging fruits. We have also worked very diligently on our assets, and we have identified a wide range of debottlenecking opportunities which are now in front of us like a menu in a restaurant.
For whatever opportunity comes up, we have got the matching opportunity in expanding our capacities with a more than reasonable amount of CapEx. There are a number of opportunities in that pillar. We also have got volume growth from cross-selling, where in the past, Emerald was lacking parts in the portfolio, which now LANXESS brings and the other way around. It is highly welcomed by our customers, and we are seeing initial benefits already now. We are well-positioned to talk with our partners about their projects, about their future plans. There are a number of opportunities coming up. Beyond that, in 2027, we are expecting significant contribution from the pipeline, where we are developing new products to enlarge our portfolio and give perfumers in the world new opportunities to develop new products.
There is quite a lot of things to come, and I'm excited to be in that team to build that. When we talk about the technical expertise of LANXESS together with the global components, we're talking about the global footprint, which Matthias has already shown in his presentation. We have got a very competitive product portfolio with various grades that allow our customers to tailor-make their products with our product range. We've got the highest product quality, and there are new products coming. The technical know-how based on long-lasting experience with customers in development and on stable relationship with a global R&D team are a solid foundation for us to grow a global champion. Thank you very much for your attention. I pass it back.
Thank you, Holger. With this, ladies and gentlemen, I would like to sum up and finish our presentation. Clearly, what should have been visible through what we've said, we will navigate through this crisis, but moreover, we want to drive the performance of this improved portfolio. To go for one and the other additional value drivers for us is a clear opportunity. Of course, sustainability is dear to our heart. The priorities for the next 12 and following two years is clearly set, agreed by everybody in my leadership team, because before I came to you, I discussed that internally. We are ready to execute and deliver. All good? The questions are now in your hands, Eva.
We will now open the floor for your questions. If you would like to ask a question, please raise your hand using the icon on the bottom of your screen or press star nine on your telephone. I will announce your name once it is your turn, and please remember to unmute yourself. Please be aware that this call is being recorded and the replay will be available on our website. If you do not wish to be recorded, I unfortunately have to ask you to refrain from asking any questions. I already see some hands going up, so let's start with the first question that comes from Andrew Stott of UBS.
Yes, good afternoon. Hopefully, you can hear me loud and clear.
Loud and clear. Yep.
Excellent. Thank you for the presentations. Really interesting stuff. I just had a couple of things. First one was on IFF Microbial Control. Matthias, you used the word undermanaged. There's various ways, I guess, to describe an undermanaged asset. I wonder if you could describe in detail what you think you can do better with that asset, beyond pricing. I think that was clear in your presentation. The second one was more of a... It's definitely an ignorant question. There was a comment when you were talking about the consumer protection business, about consumer demand for milder solutions, and I had no idea what that really meant, and I was very keen to understand what LANXESS can do in that regard. Thank you.
Andrew. Well, let me address that in a very simple way through giving an example. The IFF undermanaged business, what was for me one of the most obvious explanations when I talked to one person in the lab in one of the laboratories for IFF, I was basically asking him, "Why do you still have a box in your room?" And he basically said, "Well, in the last two years, I've changed my office space three times. I relocated, and instead of filing data, instead of registering new applications or instead of finding solution to our customer with new applications, I was packing, unpacking my stuff in order to find a new office, to find a new laboratory, then relocate, wait for the truckers to come to deliver my boxes to the next office.
Once I had settled in this laboratory and office, I was told that I have a new owner, so I was packing and unpacking again. Basically, that was the work of highly paid, highly trained, very smart chemists in the labs of this business, who were not doing their core competencies, but basically packing, unpacking their devices and documents that they normally use for work. This is not what the people normally would like to do. I think this makes it crystal clear on what unmanaged means. The second one, I think I alluded to that in previous conference calls.
The team had, because of system changes and being transferred from one legal entity to the other, one company to the other, they didn't have any data on what kind of raw material escalation you have, what kind of logistic cost escalation you have. This is something we in our company have put to work over the last 12-18 months, everywhere in all business units, so that everybody has transparency, what incremental costs are coming and when they are coming, because some of these contracts, like ocean freights, et cetera, are negotiated centrally. You need to break that down by business. This wasn't information that the teams in IFF Microbial Control simply didn't have.
Therefore, instead of going for 10%-20% price increases like done by the peers, IFF basically did 1.9 percentage points on pricing, which of course did not suffice in order to keep profitability up. Just to name a few of clearly examples of what means undermanaged. Now, Consumer Protection, milder solutions, I give you one example. Again, here in a different business of ours, Holger has given some indications already before on aromatics, F&F. You benzoates, for instance, is a milder solution compared to other preservatives. So benzoates is considered a really. I mean, even for soft drinks, you can use it, and therefore this is a very mild solution that gets the green label.
I give you a different explanation where we offer both. The heavy solution, but also the milder solution, and here I'm talking about biocides. We have both. We have a product called Preventol. This is a disinfectant also for animal health. Preventol is based on phenolics chemistry, so this is heavy chemistry. Preventol you use when you really have a massive problem in your stall. If you have a massive problem, you have to have heavy solutions, so you use Preventol. If you only try to disinfect your stall and you don't have a severe issue, you use a milder solution, Virkon. If you offer both, I mean, you have everything for your customer. You start with a milder. If it doesn't cure the pain, you come with the heavy hitters. Milder solution is clearly the trend globally.
You want to have lowest toxicity, highest efficacy. That is where you need regulation, regulatory departments. You need to have data. If you have data, you can have studies. Once you have studies, you have everything that it takes to satisfy European Commission, to satisfy Chinese regulatory authorities, EPAs, and FDAs in the United States. Data we have. These are two examples, product examples in our portfolio, where all of that is there in terms of milder solutions, data, studies, what have you. I hope that makes it clear on the first and also on the second questions. If not, speak up, Andrew.
No, that's clear. Thank you.
Next question is from Andreas Heine of Stifel.
Can you hear me now?
Loud and clear.
Okay. I have three questions for Michael, please. The first is on the free cash flow levers you have mentioned, so exceptional tax rate, CapEx, net working capital and so on. I would expect all of them to kick in in 2023, so not kind of midterm, but 2023. Can you confirm that. Then secondly, on accounting, we will not see the EUR 2.5 billion value you were mentioning from this joint venture for HPM. But what exactly will we see? If I look at that in the current reaccounting, the book value, if I just take asset minus liabilities, was EUR 900 million. You will receive EUR 1.1 billion if the deal is closed. What exactly will we see in, I guess, financial assets going forward?
Lastly, on the energy, you have—I think it was half a year ago that you have mentioned that you put that into contracts, the energy transfer formulas, and it was mentioned that it was now at 50% at that time. Are you at a higher percentage level now? Is there any progress? Last, also on the energy, the EUR 1 billion energy costs or gas costs you have mentioned for this year, is that after you have cut production and used other fuels and other efficiency measures, or is that just extrapolating what the prices meant to the bill rather than a combination of price and reduced volume? These are my questions. Thanks.
Well, thank you very much, Andreas. Michael will take the first two. I will touch base on energy and contracts. Michael.
Hi, Andreas. First question, free cash flow improvement in 2023. Indeed, we're working on the different levers. Working capital, I was discussing, we were discussing. Clearly, we should see the first improvement in Q4 already and then in course of 2023. Same holds true for CapEx. With regards to exceptional, same holds true. We're not getting to, let's say, the target at around EUR 30 million, but you should see a further reduction into 2023 versus 2022, like you see a reduction in 2022 versus 2021. Taxes, as of today, we have a tax rate of give or take 28% in the P&L. That will be knocked down, and I assume that the first move will be made next year already. I can't tell you to what extent, but you should see, I don't know, 50 to 100 basis points.
Yes, already next year, you should not only on CapEx and working capital, but as well on the other levers see an improvement. With regards to the accounting of the EUR 2.5 billion which we negotiated for HPM, that will to some extent depend on the different structures which we have. We are still in the process of discussing or determining whether what are the amounts of debt in the different companies which we are selling to the or bringing into the joint venture. There will be asset deals, there will be share deals. At this point in time, what you will clearly see is the EUR 1.1 billion of cash we will get. The question is the amount of book value which you will recognize.
There it's too early to say, but you should as well see the good book value in terms of the, when the closing will take place, most probably in the first quarter. Matthias?
Yes. I mean, and.
Very clearly, value at the end of the day always materializes if the cash is flowing and it's in the bank. I think you are going to see that first time in, most likely Q1 next year, and then we will see when the second value creation will happen in due course. On the energy side and contracts, we stated at the beginning of the year that we are majority-wise through with the relevant key contracts that are having energy intensity. So at that point in time, we said more than 50%, and we are striving for 60%-80%. We worked our way up. We are now above 60%, but in third quarter, of course, getting agreements in the third quarter with a huge escalation on energy was pretty tough.
Here we advanced very, very slowly. We are addressing that again to increase further, but we are definitely still in the 60s% and not in the 80s%. Now as Q4 is energy-wise getting softer again, I hope that we further advance. Please take into consideration, I think this is the best approach. It's a natural hedge or a contractual hedge. This is better than any financial derivative. Of course, with this, you have a natural hedge on the way up. Of course, the customers also have a kind of natural hedge on the way down. This is something that we consider should be put in place because it takes volatility out of the business. Of course, you cannot have your cake and eat it.
It comes back to, at the end of the day, a better set up long-term wise for both sides, customer and also for the company. With this, I think we've addressed your questions.
Next question is from Martin Rödiger, Kepler Cheuvreux.
Okay. Hope you can hear me now.
Loud and clear. Yes.
I have three questions. First is to you, Mr. Zachert, on Rhein Chemie. One is operational, the other is strategic. You have shifted accelerators and antioxidants to Rhein Chemie some time ago with the hope of improving the profitability. Have your hopes realized that? And same with Rhein Chemie, I understood that profitability is not really high. It has cyclical exposure what you don't really like, and the technological position is not super great. Why do you think Rhein Chemie is core business?
That was your first question or were there all three questions?
No, this was my first question. The second one are for the other two gentlemen. Maybe I can continue with the other two.
Let's address all three questions and then we take them in a block. Thank you.
Yeah. Regarding, this is from Martin Rödiger , the reduction tax rate you intend from 28% to 26%, and maybe next year it is 27%. How do you wanna manage that? Is that financial engineering? Maybe you can provide some background here. The final question is for Mr. Hüppeler. How much of your portfolio is based on exclusive contracts with key clients because you have developed the product together with this customer? How much of your exposure to products where you have the opportunity to leverage it to many other clients?
Martin Rödiger, thank you very much. On the third one, we will be very humble because we like to discuss contracts and exclusive or general contracts with our customers and keep that solely restricted to them. Please understand this comment. Let me start with Rhein Chemie. As far as accelerators and antioxidants are concerned, we are technology-wise in a solid setup. We have also world-scale plants here. Of course, the two businesses, accelerators as well as antioxidants, are quite energy-intensive businesses. Here we stand in global competition. Whilst we are on these two product lines in Europe, definitely the last man standing, and even in the United States, one of the few strong players here, these two product lines are in competition with Chinese players. Now you need to have that on the radar.
I mean, our view is the configuration where you produce might be an advantage to the Western world. If you assume that this is long-term wise, strategically interesting, you should basically manage the current energy concerns. If you think that long-term, the Western producers will make sure to have regional supply and potentially are getting prepared for trade barriers, you should stay in this business. It can be very juicy. The pain point is currently energy, and with high energy costs, you do see competitors from China coming in. This is the strategic discussion you have to think about, and we will have to answer this. How we look at this, how we develop our thoughts going forward.
The combination that we took round about two years ago between the former Rhein Chemie business and accelerators, antioxidants contributed value because eventually we had both are kind of rubber additives. Ones are niche rubber additives, one are more general standardized volume-based rubber additives. But at the end of the day, we could go, we could find a one go-to-market approach. With one sales force, we had cost benefits. The business returned very nicely after the pandemic crisis 2020, so the business did well in 2021, but of course, was hard hit in the automotive industry, but also then through energy. Now in 2022, now we have to steer through 2023 and then, of course, move the profitability upwards. With this, Michael, take the tax rates.
Martin, thanks for the question. Yeah, in fact, as we all know, we have to tax or we are taxed on a local basis. Local basis means that depends first, where your assets are and second, where your earnings are. As we were just displaying and discussing, there were so many changes in our asset set up in the past, we're in the integration. On the other hand, we have HPM, which will, at one point in time, in Q1 next year, most probably part of a joint venture. If you do your homework as well on the tax base, the effects then will be reflected as well in the P&L and the tax rate. Therefore, I wouldn't call it tax engineering.
It's just doing the homework of the new setup from an asset and earnings basis, and that will shine through in the next couple of years.
Thank you, Michael. I alluded already to our answer on the contractual side. Next question, please.
Next question is from Mubasher Chaudhry of Citi.
Hi, I hope you can hear me. Just a couple of questions, please. On slide 31, where you highlighted the potential margin uplift from each one of the three businesses, I think it was 16%, 20%, and 16%-18% from memory. Those are significantly higher to compare to where we are today. Are you able to break down how much of that margin improvement is potentially to come through from self-help or just things that you can control, versus how much is from a normalized business operating environment and therefore, or I guess, energy side of things? That's the first question.
The second question is, I think at the previous management meeting, you talked at length about the opportunities in benzoates and with the EKC know-how and the portfolio, and LANXESS know-how, that there was potential significant synergy opportunities. Are you able to provide any tangible examples of leveraging that know-how from both sides and provide some examples of how that's played out now that you've had EKC for a little while? I think there was a phase of EKC start-up as well that was mentioned in 2019. I tell you, just a final quick one. Can you please provide any thoughts on your Standard Lithium? I think you've taken down your potential interest percentage from what was previously announced.
Just your thoughts on that and, if the NSP thing was to go ahead, what the CapEx potential could be, please, under the new inflation scenario.
Thank you so much for your questions, Mubasher. Let me take the questions one by one, and Holger Hüppeler should step in should I not have covered the benzoate completely. I think it's a high-level question that should be addressed at that level. Let's come to margin. This is how we look at our underlying business in a normal economic environment. I could now basically say this is 10 basis points A and 20 basis points C. I think that goes too far. My feedback to you is in a normal economic environment, no super inflation, no wars, no energy crisis, et cetera, the normal pattern of this business should be the margin profile that we indicated to you. Give and take. This is an orientation.
If you now try to blend that down to pricing power X, cost Y, et cetera, I think this would not be serious, and we like to give guidance on a serious basis. As far as benzoate is concerned, Holger has a presentation with that's the final but one slide, where he clearly rolls out when what is coming. The benzoate, sodium benzoate, natrium benzoate, these capacities we are currently adjusting. We are building them in Kalama, Rotterdam. We are enlarging our base as we speak. Capacities here will come in the next 12-24 months. Then basically, we should also get further volume growth because currently we are sold out. On Standard Lithium, nothing has changed. We made a clear communication, basically nine-12 months ago. I think beginning of the year, we completed here the new setup based also on market requests.
We clearly went on an agreement with Standard Lithium where we have no obligation to invest. We can invest if we want to, but we don't have to. This we will decide once the feasibility study has been finished. If we don't invest, without investments, we have the rights. If we call our option, we have the rights. We call our option to get the lithium carbonate at market minus. Market minus still needs to be finalized, but this can be up to 20% minus, and then sell it to the market globally. That's the current plan A assumption. Plan B assumption is that we decide to invest in the extraction plants, and our possibility is to invest up to 49% into the extraction plants at CapEx value, not at market technology value. Also, this is, I think, a level of interest.
This is plan B. We have designed currently everything in order to be CapEx-lite, but margin opportunity, value opportunity, going forward. If you don't invest and you have a margin of, let's say up to 20% EBITDA, run your NPV, run your DCF analysis, you come to the conclusion that this can be highly attractive and change the value streams of our company. I think with this, all three questions have been answered.
Thank you.
Next question, please.
Next question comes from Charlie Webb, Morgan Stanley.
Afternoon, everyone. Thank you for taking my question or questions, I should say. First, maybe just around the portfolio measures. You didn't mention urethanes today in the presentation slide. I know it was something you discussed earlier in the year. Just, you know, has the macro environment changed your view or kind of expectations of how you're thinking about urethanes as a business and whether it's still an exit candidate or not? That's the first question. The second one, perhaps Michael, just around cash exceptional. When do you expect, just given obviously integration still ongoing, probably there are still some cash exceptional into next year, but when do you expect those to start to abate? 'Cause obviously that's part of the free cash flow story.
Just finally on the CapEx side, obviously, you know, a normalized level of EUR 400 million is quite obviously a step lower. When you account for inflation, that feels like a you know, possibly even a more meaningful one. Just understanding that, is any of this delaying stuff, or is that just, you know, what you think is the right level in this inflation environment for the business now going forward?
Thank you, Charlie. I would take first and third because the third a little bit is more portfolio strategically related, and Michael will address cash exceptional. Let me address number one and three. As far as portfolio urethanes question, what will happen? Has our view on this business changed? Not at all. It's a solid business. It's a very attractive business. We have been approached on this business over the last two years. Even in the last three months at strategic level, because here strategic players are very, very interested, and not private equity companies. Here we know that many of the companies that are on the isocyanates. As a matter of fact, here, I think I have been approached nearly by all of them.
Companies being very focused on technology innovation drivers in polymers that are not in the isocyanates have contacted us. I've been contacted now by many CEOs running polymers and isocyanates, and therefore we know that this is a pearl in our portfolio. We are not backward integrated. In times like 2022, 2021, and even 2020, we saw that backward integration is good. If you have from the sales muscle a technical application muscle, sales force muscle, then you can really unleash also market synergies. We are a solitaire now in the polymer space once HPM is gone. Therefore, from a portfolio standpoint, there is no hurry. It's a pearl. In the current setup that we are pursuing, I said no big M&A next year. Why is that so?
Now we want to prove, we want to focus. There are still two portfolio projects where we need full force, full power, to get them up and running. One is internal IFF integration that will still need time next year. The second, too, help the new joint venture that we will basically support with our group structure for the next two to three years, help the joint venture to fully develop its earning potential. This is the focus for 2023, and therefore on the portfolio side, we are completely busy and active. Once 2023 is over, then in 2024, 2025, we will revisit. Strategically, nothing has changed. Now with the third point on CapEx, indeed. 400 is completely different ballgame than 500 that we had in the past.
This is one proof to the pudding that the company configuration is now going to change from the financial matrix as well. I stress at the outset, this new configuration is asset lighter, CO2 lighter, higher end cash conversion, et cetera. It will take us some time to get to unlock the full potential that you see next year already. CapEx. You see that CapEx also on closing the gap is going to shrink. CapEx will be one element. Cash conversion, asset light structure, higher improvements also on the CO2 footprint. All of it is going to come once we have fully found the right operational level. That strategically, you now more and more see the new foundation of LANXESS with its new characteristics.
You will see unfolding now in the years to come, and CapEx envelope EUR 400 million next year is just the first proof in the pudding. It has nothing to do with the fact that we delayed projects, not the case. This is the new setup. With this, Michael, please address cash and exceptional.
Charlie, thanks for the question. Yeah, with regards to the cash exceptional, as I mentioned earlier, when Andreas was asking the same question. Next year, there should be already a relief because if you take a look at the different buckets which we're spending on the exceptional on cash, it's M&A. This year we did again a lot of M&A things and transactions, which cost a good amount of money. That is something which most likely will not happen next year because as Matthias said earlier, don't expect a large M&A transaction next year. The second element, we were discussing as well the big ERP implementation here in Germany, which costs a lot of money. That will no longer be true next year. Still, we have to integrate the businesses which we acquired.
All those business, for example, we have to get on our ERP landscape. We have to get the IFF Microbial Control on our ERP landscape. That will still be an envelope which we have to pay next year. We spend as well money on digitization, and that we will set forth as well. Next year, 2023, there will not be a huge reduction over 2022. That is my expectation as we speak as of now. Once we integrated then the IFF and EKC business into our landscape in 2024 onwards, you should see a good reduction in the spending. What you will most likely not see next year is the exceptional gain which we were recording. It's not on EBITDA level, but it is in the financial result.
As we discussed it yesterday, we fixed the interest rate on a bond which we intended to initiate this month. We stepped back, we will finance the bond through liquidity, which is at hand. The market value of the hedge was worth EUR 83 million, which we cashed in in Q3. That is of course something which you should not expect next year again. Yes.
Very helpful. Thank you very much.
Welcome, Charlie.
Next question, please.
Next question comes from Constantin Rigaud, Baader Helvea.
Yeah, hi. Thank you very much, ladies and gentlemen, for taking my question. Also, thank you very much for all the insights that you provided and also for the fact book. That's very helpful. Maybe also 3 questions from my side. The first one on CheMondis. I think, in 2021, you generated around EUR 1 billion in gross merchandise volume on this platform. Maybe you can give some insights how 2022 developed so far. Then, even though I think I will risk getting a short answer from you, I would also be interested in the HPM joint venture deal, if you could give any insights in the timeline in which you would expect synergies to be lifted. Also, when I look at it, you talked about high synergistic potentials in the assets.
Do you think, assuming a three-digit million synergies, maybe in the range of EUR 120-150 million is something that could be fair to assume, or is that too much? Maybe the third question. Regarding the Consumer Protection unit and especially the acquisition of Emerald Kalama Chemical, how much of this EUR 25 million synergy potential have you already lifted, let's assume from a now third quarter basis, run rate on? Thank you.
Well, thank you, Constantin, for all three questions. Let me take them one by one. Gross merchandise value. We have on a current basis, the year is not finished, increased the GMV again in CheMondis on the parameters that we are looking for. We have this year make the following adjustments to further clean the platform. Cleaning means we only want to have or we want to optimize the suppliers and buyers on the platform. We have seen that some suppliers were not really, in terms of data, the most accurate, and therefore, we wanted to have data availability on the platform. Data availability means that we need to know if products can really be delivered in time. If you go for Amazon, for instance, you see if products are on storage or not.
We didn't have this, and we tried to improve on this because that was the feedback from the customer base. We put that in place. Therefore, we've lost some tail on suppliers because the data accuracy was not good enough. This has been put in place, fortunately, with high support from the suppliers we now have on the platform. The same thing we are now trying to put in place for the buyers. This year is a kind of transitioning year to now after we have a lot of liquidity, biggest liquidity on the chemical platform here in the Western Hemisphere. This is in short. Now we bring it to the higher quality level.
Once this quality level is ensured in the next six months, nine months, we will then start again the monetization model and test it how well it is perceived by suppliers and by buyers. That is the current approach. As you see, we are learning and optimizing on our way to the digital chemical platform. This is, I would say a broader update than just answering your question on GMV. Now on HPM, I mean, if we would be the sole party in this transaction, I would nail down numbers. Not all parties do this, and therefore I stick to the agreements that we have among the parties and shareholders. What I've always stressed very clearly, this is highly synergistic.
It is highly synergistic more than other transactions because you have top-line synergies. Please understand that the product gamut that both parties offer are very complementary, and therefore your sales muscle has more to offer. You have top-line synergies. As you are on the same value chain, i.e. the chemical value chain is the same, both compounds start with the same chemical synthesis, and upstream, which is caprolactam production. It starts with the same raw materials, cyclohexane, cyclohexanone, which is all benzene-based. We have the entire chemical value chain as far as LANXESS is concerned, the upstream part as well, that can feed the high-performance engineering materials, the compounds. And therefore we have synergies everywhere. Top line, procurement, SG&A, you name it.
In normal chemical transactions that we did as company, where your value chains are not fully integrated, we always, as LANXESS, could report something like five, six, seven percentage points. These were cases when we did not have fully integrated value chains. The DSM LANXESS setup is a fully integrated value chain. That's what I mean with highly synergistic. I think I've tried to give you some clarity qualitative-wise. I mean, you are an analyst. I know that you can nail that down by the last 50 basis points. Now let's come to Consumer Protection and EKC. We've communicated last year when we announced the transaction in February 2021. We clearly gave a game plan on what synergies will be implemented by when.
If you look into the tableau that we've conveyed at that point in time, we said that round about one-third of the synergies will be implemented in the first 12 months. When I look at what Holger Höpeler has done, I'm impressed what he delivered. He definitely delivered according to plan, with a little schnapps on top. Therefore, we are fully on track on executing and implementing synergies here. I hope that clarifies all your questions.
Great. Thank you very much.
Next question is then from Jaideep Pandya of Field Research.
Thanks a lot. I have, if I may, four questions. The first question is really on the governance side. How are you guys paid at the management level, given you haven't given any longer-term targets today? Just wanna understand the top management, is it really on a year-by-year basis, or do you have, you know, longer term targets? And if you could share how is the compensation? That's the first question. The second question is on Tinci. If I understand correctly, they have shelved their Czech Republic plant, so really, you know, LANXESS is the only live project they have for entering the European market, and obviously, they are the biggest show in town on electrolytes.
You know, what is the probability of a world-scale plant here on the table, and what is the timeline, given the impact of COVID, but this negotiation has been going on for a while. That's my second question. The third question really is around your portfolio with regards to, you know, you guys have done a lot of cleanup with regards to asset divestments, restructuring, et cetera, and we've stayed sort of in the EUR 1 billion corridor. Are we sort of done now and, you know, can we, from here on, see material EBITDA growth? I mean, it's sort of linked to my first question, but if you can sort of highlight that.
If you can just talk about IFF a little bit more in detail now that you have it under, you know, your nose. You know, do we go back to the original plan of going to EUR 120 million-EUR 130 million EBITDA, you know, once you fix pricing, once you fix raw material contracts, et cetera? Thanks a lot.
Okay. Let's take them one by one. As far as longer term incentives are concerned, we are very transparent on also long-term incentive scheme. Here you see that more than 35% of our pay, absolute pay is long-term focused. This is being precise in a detailed way in our annual report. It has been put to shareholders this year, was supported by around about 86%-87%. Therefore, we are, I think, showing all documents. They just need to be read. To be very crisp, long-term wise, our incentive schemes are linked to shareholder performance, TSR, notably share price performance versus index. Here clearly, the performance goes for outperformance.
We have in all our plans, we benchmark them, and they are more stricter, tighter and more demanding than all of our peers because we need clear outperformance to have them in the money, and they can fall apart based on decision of a supervisory board if we underperform market performance. You don't see any share price plans that are similarly demanding. A second long-term goal on long-term performance is definitely also safety and sustainability. In absolute terms, not in specific terms, I always allude that because only this helps the planet. Therefore, we are not communicating on long-term plans today because we are adjusting our presentations to your feedback. Buy-side investors and sell-side investors told us in the last three months, "We want to know what portfolio-wise has changed.
We want to know how you address cash, profitability, and the potential recession." I haven't had anybody in the roadshow in the last 3-6 months that stated, "Tell me about financial performance, margin, quarterly performance, et cetera." Everybody is now looking at what is the portfolio? Is this stable? What do you do on cash? What do you do in profitability? That's what we are doing. We listen to the customer, we listen to investors, we listen to analysts. We have worked on this and try to give you as much color as possible. Internally, I can tell you, I'm not only thinking about the next 12 months. That is never what I had on my radar. I want to deliver in the next 12 months, but execute clearly already for 2024, 2025, and 2026.
That we are able to announce this year the HPM joint venture is work that I started two years ago. Guess what I'm doing right now? The crisis 2023, we prepared in the last six months. Everything is prepared. What I'm looking at right now is making sure that 2024 and 2025, we have things to communicate like we did this year, but they are being started right now. This company will accelerate, and that is what we are up to. That's why we are energized. Tinci. This is a different culture. It's a privately held, owned company. They're different. They have different ideas, and they are very strong in China. This is the big ship in town in China. It's the worldwide market leader. They've never done a joint venture globally. They've never done a joint venture before. This is new.
I can tell you normal joint ventures, when I do a joint venture with a different company. Let's look at the joint venture with Advent. We negotiated six-12 months. Advent is same culture. I mean, the executive president that I'm talking to who's running the global business, he is a German. He speaks my language, but it takes 12 months. On Tinci, I mean, this is just 18 months that we are negotiating in a digital way, different language, different culture. This is not Excel spreadsheets, this is reality. We both see as partners that this is an opportunity. Both partners believe there will be a world-scale plant on electrolytes in Europe and eventually also in the United States. This is the strategic view of both partners.
How we come to terms, and eventually, if we come to terms on a joint venture, we will see. Here my clear learning curve is in order to come to terms and to get two signatures, you need to come physically together, get bonding on characters, personalities, beliefs, strategic vision. Trust is very important in a joint venture, and once you have trust, then you sign, and then you go. The market is there. Portfolio, you stressed the EUR 1 billion. I think we upgraded the quality of earnings visible through the resilience in our earnings that we've reported in 2020. The EUR 1 billion, I mean, don't blend out the profitability of the joint venture. We own up to 40% of something where DSM is adding EUR 300 million on the 2021 results. We are adding EUR 200 million on the 2021 results.
We are owning EUR 400 million without synergies. If you add synergies, we own 40 up to 40% of something that could one day be clearly far bigger. This is a value pocket, of course, that no longer is reported in our P&L. We focus on the quality of earnings of what we have in the reporting structure, but don't blend out the rest. It's value that exists. On the EUR 1 billion we now want to improve through organic means, through synergies, through integration, and of course, through benefiting from the underlying market growth that we clearly see in the businesses. That is definitely that we would like to go for. And then of course, not even mentioning potential other projects like the ones that you have referred to, Tinci, Electromobility, et cetera.
Now, IFF, in summer, we said. Let's start with last year. In August, we said that we start with an $80 million base, and we said that normalized, this business should be at hundreds, and the business used to be at 120, 113. The $80 million that were handed over to us at the time of the signature diminished because no pricing initiative was done within 12 months. The 80 rather went to 60. For next year, I think we will make the first step in terms of pricing to close the gap to what we assume to be there. Synergies will come, and I expressed it, I think, in second quarter. We shoot for bringing this business by 2025, 2026.
To levels above the originally assumed normalized level, i.e., getting beyond EUR 100 million of EBITDA profitability. We clearly see that this should be achievable if we fully deliver on synergies and have our hands around the entire business, having the transparency, having moved all people where they have to be. We think this business will be a strong performer and a strong champion, as I have conveyed before. With this, I think all four questions have been answered.
Good to see you so energized and congrats to Eva.
We have never lost the power and energy for our business despite all volatility. Thank you.
Thank you. The last question is from Sebastian Satz, Barclays.
Yeah, thanks very much. I also got three questions, please. First, I was wondering if you could share your views on the German gas price break and the proposals that have been made by the expert commission, what that potentially could mean to profitability in your Advanced Intermediates business in particular. Second question would be again on free cash flow and 60% cash conversion target. Does that still stand? Is that still in place? If so, when do you think you could get there? Lastly, a quick clarification question on the EUR 50-100 million EBITDA mitigation measures that you mentioned. Did I hear correctly that they have not been implemented yet? If so, what would need to happen for you to basically trigger it? Thank you very much.
Well, thank you, Sebastian. As far as gas price brake is concerned, I would be delighted if I can nail you down this and explain you all details, but they haven't been finally decided. Second, they still need to go through the approval process. Finally, also being supported by the European Commission. We had a slide on this prepared, but it had so many caveats that we eventually decided, let's wait until everything is finalized. The current direction that the government is conveying is definitely a positive. I mean, what is mentioned on gas per megawatts and on electricity for megawatt, kilowatts, it's definitely a benefit. It's a support.
Before I applaud and speak out loudly, hooray, I basically wait until the thing is really carved in stone, and this is not carved in stone yet. I basically expect from the politicians in Berlin, but also in Brussels, to get their act together for the industry, and then I will precise all implications as you are used to by our company. 60% cash conversion it stands. First of all, let's navigate through 2023, and then we would like to. Once we navigate through 2023, what we had as planned for this capital markets day originally was to give a financial framework, and clearly for the next few years in all aspects.
We stepped away because we listened to our customers, which were analysts, sell side analysts and buy side analysts and fund managers. The clear feedback we got from 90%-95% of our customers was, "Don't waste your time on 25. Nobody believes you anyhow because nobody has a clue what the Ukrainian war inflation, what have you, is going to lead to. So be serious and focus on what you see," which we have done. Cash conversion of more than 60% is clearly the target we are striving for. Now, on the EUR 50-100 million, I mean, this includes also personal measures. It also includes pay, variable pay, et cetera. All of these instruments we've used before, so we know how to do that.
We pull these levers once we basically see that the hard recession really unfolds. Right now, as you see with Q3 trading, volumes are still okay-ish with the -5 -, - 6 percentage points. We are not seeing that it suddenly falls apart. We've seen that before in financial crisis, where suddenly from one day to the other, the telephone doesn't ring. We've seen that in 2013 when suddenly prices and volumes collapsed. We are simply prepared, and we know that these measures when the hit eventually comes for the worldwide economy, European economy, we are prepared to implement that swiftly. So far we haven't done that. The clear feedback to you is we know what we have to do when we have to do it.
Yeah. As there are no further questions, I'd like to thank you all for joining us today. As always, we look forward to seeing you on the road. With that, I hand back to Matthias because I'm sure he has some final words for you.
Well, ladies and gentlemen, dear investors, I hope today we gave you a clarity on what we have done in the last three years. If you look back to November 2019 in our last physical capital markets day event, I think you can see that in three years, a lot has changed. The company has changed. We have delivered a lot on our strategic ambitions. Name it sustainability, name it industry balance, name it the international footprint. Yet we have to deliver on what we are striving for in the next few years. This is navigating through the crisis that is likely to come, but also, to clearly set the scene for higher cash conversion and profitability. I hope that we could convey that we have all ingredients it takes to make that happen.
Join us in this journey and give us a little bit of trust. Thank you so much. Bye-bye from LANXESS. Bye-bye from Cologne.