Earnings Call: Q4 2011

Mar 14, 2012

Good afternoon, ladies and gentlemen, to the Symrise full year's results 2011. To this conference here in Frankfurt. We are happy about roughly 20 guests here in the Commerzbank Tower in Frankfurt, and I would say more than 40 guests on the phone. Thank you for being with us. Our management is represented by our CEO, Dr. Heinz-Jürgen Bertram, and our CFO, Bernd Hirsch. Also with us here is Bernhard Kott, Head of Corporate Communications. Traditionally, we will start with a presentation from the CEO and the CFO. Dr. Heinz-Jürgen Bertram will focus on the operating highlights, followed by Bernd Hirsch, who will go into the financial details before Dr. Bertram concludes with the outlook for 2012. The corresponding slides to our presentations have been published this morning on our webpage in the events section. After the presentation, you will have the opportunity to ask questions. We will start taking questions from our audience here in Frankfurt and later switch over to our audience on the phone. Please remember to use the microphone while asking questions to let our friends on the phones understand the questions. Let me now hand over to the CEO, Dr. Heinz-Jürgen Bertram. Please go ahead. Good afternoon to everyone here in the room and on our conference call. Welcome to the presentation of our full-year results. Our CFO, Bernd Hirsch, has joined me in today's conference, and we both look forward to talking about our performance in the past year, to giving you an outlook for 2012, and to answering your questions following the presentation. Let's start with last year's highlight on Chart 3. We had set ourselves three specific goals for 2011. First, we wanted to defend our best-in-class profitability. Second, we aimed at sales growth between 3% and 5%. Third, our gearing ratio should remain within the range of 2 to 2.5. So how did we perform? My most important message to you today is we have succeeded in maintaining our industry-leading profitability. Symrise has achieved its target EBITDA margin of 20% and continues to deliver best-in-class profitability despite challenges on the cost side and lower top-line growth. This was caused by the economic slowdown in 2011, during 2011, and careful portfolio streamlining. Our sales growth has reached 2%. This is below our original expectations, but in line with our revised outlook given in Q3. First, we saw the general market environment deteriorate following a strong first quarter. Market volatility throughout the year consistently increased due to a mix of global and local incidents. In particular, the sovereign debt crisis in Europe and the U.S., the Arab Spring, and natural disasters in Japan and other parts of the world. Second, we made it our main priority to protect our strong profitability in light of the weaker economic environment. We, therefore, decided to discontinue less profitable business, which would not make a sustainable margin contribution in the long run. Naturally, this selective portfolio streamlining resulted in lower top-line growth. Our priority is profitable growth and not growth at any price. With a sales increase of 2% and a 20% EBITDA margin, I believe this strategy has paid off. This is also confirmed by our bottom line. Earnings per share went up from EUR 1.13 to EUR 1.24. Net income increased by 10% to more than EUR 146 million and reflects our improved financing results following our successful refinancing in late 2010. We operate on the basis of a healthy balance sheet. Our gearing ratio, defined as net debt, including pension provisions to EBITDA, remained at 2.2. This is fully in line with our targeted range. In a nutshell, despite the somewhat lower sales growth, we had a successful year in which we defended our strong profitability. The management and supervisory board will therefore propose an increase of the dividend to EUR 0.62 for 2011. This equals 50% of the net profit, and we believe that this represents a strong signal for our confidence for the future. Symrise aims at creating value and at achieving sustained profitable growth. The overview of our historic growth rates and margins on Chart 4 demonstrate that we deliver. Since our IPO in 2006, we have steadily grown our business and expanded sales with a compounded annual growth rate of more than 5%. Our EBITDA CAGR has been 5.4% in the same period. With the exception of the recession in 2009, our robust business model has generated healthy margins of around 20% or more. I am not getting tired of saying it, what you see here are actual figures. No adjustments, no corrections, but real values. We are focused on top and bottom-line growth. As you can see, we have improved our earnings per share considerably since 2009. These results demonstrate we are able to bridge difficult times with our resilient business, and we are quite confident that we will be able to continue on this successful path. Let us turn to our sales development in 2011 on Chart 5. Compared to 2010, sales went up 2% at local currency and 1% at actual currency rates to more than EUR 1.58 billion. We benefited from a strong demand from our top 10 customers and in our application areas such as menthol, beverages, and savory. Following the significant catch-up effects in the previous year, sales growth in 2011 reflects both the economic slowdown and the selective portfolio streamlining across various business lines and regions. Let's take a look at the divisions. Sales in Scent & Care came in at EUR 801 million. In local currency, they slightly increased 1%. The division benefited from double-digit growth in the menthol business and new product launches in Life Essentials. On the other hand, demand for household applications declined in fine fragrance, which strongly grew in 2010, was affected by lower consumer confidence. Flavor & Nutrition grew sales moderately by 2% to EUR 791 million. In local currencies, sales went up by 3%. The division increased its sales with top 10 customers and saw strong demand in emerging markets. Chart 6 provides you with an overview of our regional sales split. As you can see from the left side, our number one growth engine was Latin America, with sales up 5% in local currencies. The region already delivered very dynamic growth in 2009 and 2010. Compared to the prior years, the development in 2011 was a bit slower, and the main reason was the selective portfolio streamlining in Mexico, as well as the exit from non-core activities. Both EMEA and Asia Pacific delivered sales growth of 2% each. EMEA was affected by the political instabilities in the Middle East and as well reduced demand for household and fine fragrance applications. On the other hand, the region saw good demand in oral care and menthols. The development in Asia Pacific reflects selective portfolio streamlining and a decline in beverages while cosmetic ingredients and UV filters performed very well. Following the recovery in 2010, North America saw sales increase by 1% with solid growth in consumer health and vanilla. Overall, we generated 46% of our total sales in emerging markets. We continued to systematically expand our footprint in those dynamic regions, and I just want to highlight two particular projects. First, our new site in Moscow. As you may remember, we started that project back in 2010, launched production in 2011. Since early 2012, our operations are fully up to speed. We are the first global flavor and fragrance supplier to manufacture products locally for Russia and the CIS markets. Second, we completed another phase of our 40 million SGD investment plan in Singapore. About one year ago, we opened a new facility with our unique encapsulation technology, EvoDry. It enables us to deliver specific solutions for the various dynamic markets in Asia. Chart 7 highlights that sales with our top 10 customers went up by 6.3% in Scent & Care and 7.6% in Flavor & Nutrition. At 7% group-wide, sales with our top 10 customers again exceeded our total sales growth of 2% by a considerable margin. We have made significant progress in this important customer segment since Symrise was created a decade ago. The share of sales with the global customers multiplied from 11% in 2002 when Symrise was formed to 31% per today. This expansion has been based on important call list wins and the exploitation of existing ones. Let me draw now your attention to our EBITDA on Chart 8. In absolute terms, EBITDA for the full year amounted to EUR 316 million compared to EUR 331 million in 2010. We defended our industry-leading EBITDA margin at the targeted level of 20%, despite slower top-line growth and pressure on raw material prices. Several initiatives helped us to sustain our profitability. The first was intelligent raw material sourcing. Our backward integration in strategic raw materials, as well as the temporary buildup of inventories during the first half, mitigated raw material price pressure. Furthermore, we implemented selective price increases. We also enforced strict cost management across the group and reduced G&A, while keeping R&D expenditures at the prior year level. Finally, selective portfolio streamlining was a key step to protect our margins and to achieve our target level of 20%. Looking at the divisions, the EBITDA of Health and Care amounted to EUR 157.6 million with an EBITDA margin of 19.7%. Flavor & Nutrition reported an EBITDA of EUR 158 million and an EBITDA margin of 20.2%. Let's move on to a brief section on our strategy starting on Chart 10. The key to our long-term success is to understand and address major global trends which are underlying growth drivers of our business. We have therefore chosen natural and global needs as the main themes of our new annual report, which is available to all you here in the room and on our website. Let's start with economic progress and wealth. Already today, emerging markets stand for strong growth dynamics and increasing wealth. People in those regions adopt new ways of life and start using products such as processed foods and cosmetic articles. What we see today is just the beginning of a long-term development. The global population will also become more urban. By 2050, the number of people living in cities will have doubled from 3 billion today to 6 billion. Social life will change. Urbanization leads to more single households and a new way of family life. More families will have less time, which drives demand for convenience food products. A growing global population will need more clean water and food. Again, just a few numbers. By 2030, nearly 4 billion people will live in regions with water shortages. By 2050, we will need to produce 70% more food to feed the world's population. Sustainability will therefore become a decisive factor for consumer goods manufacturers and consumers. Already today, that is embedded in our innovation agenda as we focus on environmentally friendly technologies and sustainable product solutions. Finally, health and wellbeing. Over the past 50 years, average life expectancy has risen by about 20 years. Awareness for a balanced way of life is growing. Symrise is well positioned to address these trends. We have effective instruments in place to analyze and to respond to these different consumer trends. This is confirmed by Chart 11, which highlights our unique setup. We leverage experience, research platforms, and sales channels from various flavor and fragrance businesses with the relatively new areas of consumer health and Life Essentials. Our setup is a perfect example for efficiency, and most importantly, however, it also allows us to capitalize on global customer needs. Let's now have a look on some important initiatives and projects in Health and Care on Chart 12. Our focus here was on new segments and innovative technology. In the fast-growing air care market, we have recently seen a strong demand for nature-inspired product solutions. For example, in the area of reed diffusers. We are currently working on solutions with a water-based formulation which significantly reduces solvents being used. In addition, we expand our portfolio for functional ingredients, which are based on botanicals, grain, or vegetables. All those ingredients make use of individual botanical compounds, which support certain health functions. Chart 13 presents key initiatives from the Flavor & Nutrition division. We are the leading supplier of menthol, and our offering goes far beyond the pure manufacturing. Our platform, Think Mint, provides a range of proprietary cooling agents and mint flavors, which are used in confectionery, chewing gum, or toothpaste. Here we offer solutions with additional functional benefits such as long-lasting freshness, elimination of oral bacteria, and clean mouthfeel. As outlined before, consumers worldwide demand for healthier food which tastes good. Our consumer health unit thus puts great attention on the development of food solutions which bring taste and function together. The new strategic partnership with Indevex Biotech from Sweden will play a key role developing functional solutions containing 100% natural compounds with full scientific documentation. With this, ladies and gentlemen, let me now hand over to Bernd Hirsch for the detailed financial results. Bernd, over to you. Thank you. Yeah, thank you, Heinz-Jürgen, and good afternoon to everybody. Heinz-Jürgen has mentioned already the highlights of the fiscal year 2011. After all, I would say it was quite a challenging year for us, but in the end, again, a successful year for Symrise. One major topic in 2011 was, for obvious reasons, the increase in raw material prices and the related discussions we had with our customers for compensating price increases. Fortunately, and we mentioned that a couple of times in the quarterly calls, we started these negotiations early on, but it was, like always, a somehow lengthy process. However, we were able to achieve price increases, but certainly not enough to fully compensate for the price increase that we have seen and experienced in raw material prices. Let me now shed some more light on the financials. I will keep this relatively short, assuming that everybody has read through the materials, and to allow enough time for the Q&A session at the end of the presentation. We start at page 15 with the overview. With respect to top-line development, we talked about that already. We were able to achieve the lower end of our targeted range of 2%-3% in local currency. In the beginning of 2011, we had been slightly more optimistic in terms of growth and assumed 3%-5% in local currency, as you may remember. In the course of the year, we have made, however, a conscious, and I want to mention that again, it was a conscious decision to focus on margin protection instead of growth at any price, and thus adjusted our guidance accordingly. Our EBITDA margin slightly decreased versus the record year of 2010, but we were able to hit our targeted level of 20%, which I personally think is a great achievement given the conditions in 2011. On slide 16, our major challenge in 2011 becomes obvious, and as you can see, the increase in raw material prices caused a negative impact of more than EUR 38 million for us. The increase in sales and a restrictive management of our sales, marketing, and administration expenses counterbalanced a good part of this impact. Foreign exchange had a slightly negative impact, but due to our implemented hedging strategy, this component has been kept quite small, and I don't want to highlight that as a major pain point in 2011. I think we're on top of things here in the meantime. On slide 17, you see the development of our financial results. Here I would like to mention a few things. First, the new financing and its implications is much easier to understand, at least for me. I hope you share my point of view here. It is also more predictable compared to the situation we had until October 2010. Second, we have secured our long-term financing needs and diversified our risk from depending or dependency from individual financing channels and spread out our maturity profile. Last but not least, of course, we have achieved quite substantial savings, even when leaving aside that the prior year comparables were impacted by a one-time cost from prepayment penalties in the magnitude of about EUR 20 million. Still, I think, a great achievement and quite a substantial savings here in the financial result. Like shown on slide 18, a decrease of EUR 18 million in operating expenses. I mentioned that already. It has happened in selling, marketing, and predominantly in administration, was able to compensate of about two-thirds of the EUR 28 million decrease in gross profit. With a financial result that is up more than EUR 28 million versus prior year and a stable tax rate of about 25%, we were able to increase our earnings per share by 10% to EUR 1.24. The development, and that is an important point, of cash flow is shown on slide 19. The operating cash flow has reached a level of more than EUR 200 million, which is an improvement, I am sure some of you did that calculation, of more than EUR 70 million in the fourth quarter. Quite a substantial achievement towards the end of the year. Working capital has been temporarily impacted by the good sales performance in December, so that is a luxury problem. However, it has an impact, and you can see this in the increase in trade receivables. Other than that, we had an impact from payment of tax settlements for prior years, but this had no impact on the tax rate, and the net profit due to corresponding accruals we had been built in the respective years, so no impact on profitability. A final comment on the balance sheet. Without going into details here, you see there is not much fluctuation or change in the structure of the balance sheet, with one exception, which is the equity ratio. This equity ratio or our equity ratio has been improved to now slightly above 44%, and I think that is a very sound and solid balance sheet structure. I think it is fair to say we have been able to steer the company through a rough year with the result that margins have been protected, the cash flow is strong again, and the balance sheet has been further strengthened. That is it for the moment on the financials. I would now like hand back to Heinz-Jürgen. Thank you, Bernd. That was quick. Okay, let's now move on to our outlook starting on chart 22. We have proven in 2011 that we are able to make good use of business opportunities and at the same time address challenges in the market environment. We expect many of these challenges to play a role in 2012 as well. We are, however, well-positioned to successfully deal with them. The first two challenges are closely linked: economic volatility and the sovereign debt crisis. For most parts of the world, growth prospects are not significantly better than the rates which we have seen in 2011. In addition, international capital markets are expected to remain sensitive. However, we are well prepared to deal with these uncertainties. We will benefit from our strong position in emerging markets, our good product mix, our mix of global and local customers, and the unique setup of our businesses. This protects us against volatility and limits our exposure to developments in individual regions. On the financial side, we are in a comfortable position due to the refinancing in 2010, our strong equity ratio, and our adequate net debt position. Overall, we have a very solid financial base. High raw material prices will remain a challenge throughout the current year. It is important to have an intelligent sourcing strategy in place. Our backward integration is part of it. It gives us a high degree of planning security and access to four particular important ingredients: onion, citrus, menthol, and vanilla. Finally, efficiency is an underlying fundamental principle of our strategy and our organization. We operate on the basis of a disciplined cost management and a lean setup. These steps protect us against cost inflation and contribute to our profitability. Our proven strategy remains fully in place in 2012. Chart 23 confirms that we will continue to enhance our global reach and maintain our profitability through efficiency and a focus on high-margin business. In addition, we will further strengthen our innovation portfolio. How do these strategic elements translate into action? Chart 24 presents some key operational initiatives of this year. One key project will be our new research center in Holzminden. Those of you who have been at our Capital Markets Day have already seen the shell of the construction. In the second half of this year, the building will then be really ready for occupancy. Another major part will be the opening of our new menthol facility in Holzminden. It will allow us to double our menthol capacities, and it will put us in an even better position to meet the high demand for menthol, which has seen double-digit growth rates over the past year. The expansion is a major project, which due to its size, has an important impact on our infrastructure. It is fully on schedule, and we are moving to the final stages of conclusion. In conjunction with pilot and trial phases, we have to deal with ramp-up costs, especially in the first half of this year. Positive top and bottom line effects will kick in over the course of the second half of 2012. As we strengthen our position as a leading supplier of menthol worldwide, we expect additional strong benefits from there going forward. We also will focus on our footprint in Brazil. In the second quarter, we expect to open a new center of expertise in Cotia, which will bundle the complete knowhow of our divisions on the Brazilian and Latin American markets. In addition to our recently acquired activities from Belmay, which will be integrated in our facilities in Sorocaba and allow for accelerated growth in the region. In our consumer health business, we will share our expertise on functional food solutions with Indevex Biotech. This will allow us to expand our R&D activities in this growing area. As organic products become more and more relevant for consumers, we are expanding our offerings for natural products. Therefore, we just acquired Trilogy Fragrances in the U.S. During 2012, we will fully integrate these activities. I want to finish my remarks with a look on our financial targets for 2012. We have entered the year with confidence, but also with a healthy portion of cautiousness. As outlined, we see growth opportunities in both established and emerging markets. At the same time, we expect macroeconomic uncertainties to continue. Symrise is well prepared, and we see ourselves in a strong position to realize profitable growth in 2012. For the current financial year, we estimate our sales growth at 2%-4%. Please note at this stage that it is very early to provide estimates and that many other sector peers are even reluctant to give any guidance at all. We remain committed to maintain our industry-leading market and profitability under the assumption that raw material prices stay on the level of 2011, and we aim an EBITDA margin of around 20%. Symrise has a proven strategy and a very effective setup. Let us therefore assure you, our leadership team and all our people are fully committed to go the extra mile to achieve our targets. Ladies and gentlemen, thank you for your attention. We now would like to open the floor for your questions. Thank you. Thank you, Dr. Bertram. If you have a question, please press star and 1. At the moment, there are more than 60 participants on the phone, so I hope we make all the questions today. Who wants to start? Please give me a sign. Thomas from MainFirst. Thank you for the guidance. I would still like to understand it a little bit what you have included in there. Guiding for 2%-4% top-line growth, I assume this is organic. You guide for more or less the same growth the fast-moving consumer goods industry has given us on the volume side. I am asking myself what happened to price increases and how the menthol ramp-up is playing in there. If I just make a quick calculation, 2%-4%, this is the volume guidance from the consumer goods industry so far. Then 1% from prices, give or take, and something from menthol, like 1%-2%. I am coming up with a potential growth of 5%-6%. You are guiding for 2%-4%. What risks are you seeing and what is making you more cautious than this simple calculation? Maybe I am just wrong with my assumptions. The margin, around 20%, as good as this sounds. When you started the portfolio optimization program, the aim was to return to 21%. I am missing a little bit the aim to return to the margin of 21%. Is there something we are really missing here? Why shouldn't you be approaching 21% again, a 21% EBITDA margin in 2012? Last but not least, input costs. Oil prices are coming up. Aroma chemicals usually are geared to oil prices. How do you see the development here? Do you have any inventories which would provide your margins going forward? Do you have to buy on the open market? Thank you. I start with the guidance, 2%-4%. As we have said. First, I am happy that you see us even more successful than we guided the market. Let me reconfirm, we are very early in the year. There is a lot of uncertainty in the market there. As we have said as well, there are some factors which we have to consider to be effective, in particular, in the first half of the year. You have added menthol on top of what is possible. I have said in the first half of the year, we will see some ramp-up costs, some things to come in. We have built also some inventory for a certain period where we have to stop production in menthol, as we have to switch over to a new process, and we have to build up inventory for that. In that period of time, we will have no production. That's the countermeasure. This is all on schedule, this is all planned. This is to be fully in line with a project like this and to make sure we're running on safe ground. This is how you have to do it. This assumption is already not coming in in the first half of the year. It's a counter effect. For the full year, as we said, we will even out all that out. Also, what we don't know is other effects in other areas. Let's see the Near East, for example, this crisis still going on. If we are to sell something to Iran, you will have difficulties to collect the money. This is not in there. Last investors meeting, which we had together with you in Holzminden, we shared with you the special incidents which we faced last year. I hope you still recall, we have seen special incidents each month. Each month, there was no reason for us to come back to you and complain while this was a special incident. There is no big reason for us to believe that volatility of markets and uncertainties will not have an impact. That's why we felt at this point in time, at this early stage of the year, this guidance fulfills the need. Please let me again remind you, our peers, most of our peers have even been reluctant on giving a number out. But we felt it fair enough to give you, at this early stage of the year, at least a ballpark number. Margin, same thing. We feel in this period, a 20% margin is ambitious. Please bear in mind, as far as I can see in our industry, as we're sitting here today, we are the only ones having delivered 20% EBITDA margin without any adjustments, corrections, or something like that. So it's not that easy. Nevertheless, we have high confidence in our business also that we aim to a strong 20% margin also for the year to come. This confidence is based on our business model, which I just outlined, and the good customer base. But on the other side, we have challenges, and you just made the next question, and that leads me to question three, the input cost, raw material cost. They keep being a challenge. Last time we talked, we said, "Well, we think raw material prices will be stable and remain stable on a high level. They will not come down." But we have seen most of the sales, the raw material price increases. Looking back on the predictions of last year, I'm happy to realize that fortunately, the overall assessment, I think we have been one of the very few ones to give you very early, a clear and correct assessment. Raw materials price increases came in at a high single-digit number. So that was correct. It was also correct that for oil-based prices, raw material prices remain high on a high level, and the increase of raw material prices has become slower or even become stable on a high level. However, from today's view, I have to modify my statement on natural-based products. We continue to see increases on natural-based products, and we can see a high volatility and nervousness on certain natural materials. Like, for example, menthol is one of them. That's also a factor which we have to take into account while making predictions. All this together, I think at this point in time, this is one of the most precise guidances which you can get at the moment with all the uncertainties at the moment, and we feel for this point in time of the year, it's not only precise, it's also ambitious. Thank you. Two quick follow-ups, if I may. Do you carry any inventory in raw materials? That was the case in the past. Are you protected for 2-3 months, give or take, as you were in the past? Second, again, on this margin guidance, saying around 20% does not exclude that you would even fear that your margin goes down below 20%. Is this the case, or are you just being cautious at this stage? I think at this stage, we are as realistic and we're on top of things as good as we can be. Let me restate. So far, as far as I can see, you haven't yet gotten a clear guidance for most of our peers. They just gave some descriptions. We gave you a number. We feel it is ambitious, and it shows the confidence in our business. Reflecting to the inventory level, yes, we have built up inventory, in particular for menthol and to prepare for the period where we have to switch over to the new process. I think that's a natural thing, and that's a natural part of the process. If you plan and if you schedule the switch to an improved process, improved equipment, to make sure that you are able to deliver and business goes on. Thanks. Arne. Yes. Thanks for taking my question. The first one is on your global customers. You mentioned that you grew 7% in 2011. If I calculated correctly, then your business with your local regional customers decreased during 2011. Is that correct? Should we expect that going forward, or was there any special event on that? Do you expect that you outperformed the market with this customer group? Was it in line? Do you win market share against your direct competitors? Second one is on admin costs. That was massively down. Is that run rate going forward? Or was there any special event on that? The last one is on China. We heard from several companies that the consume in China is back on more historical high-growing level. Do you see similar case for your business? Thanks. Okay. Thanks for the question. I'm going to pick it up. Global customers first. We saw a strong growth in that segment. The first message I would like to re-emphasize is the growth drivers, which we have identified, clearly work. We have clearly outperformed our own business in that segment. That is correct. Second statement is, this is a new effect which we see since three quarters, I would say, for both divisions, in flavors and in fragrances. Steadily, both divisions now continue to outperform the other customer segments within Symrise. The question is, do we gain market share from other competitors in that segment? While that is clearly for your assessment, for here today, I would like to just realize to state, obviously, our strategy, getting access to the global accounts, works. If the market likes us or not, we made our way into these global accounts. That's clearly a fact. Clearly, you can see it in 2002, when we were formed, 11% of our business was with those customers, which was a typical pattern of a tier 2 company. When we went public in 2006, it was about 22%. Today, it is nearly one-third of our business. That works. On cost, yes, of some local business, obviously, where we have put our focus on regional and also on global business. Arne, that's a fair fact to think about. In the past, our priority was clearly to make our way as one of the big four global companies. With what we have shared with you here today, I think there's no question we are there. We are one of the big global competitors, one of the global suppliers. From a certain point on, we have to look in, we have clearly managed that phase of our development. Is it necessary to increase the share of wallet with the global customers, or is it from a certain point on advantages to make sure that the balance of our product and customer mix stays where it is? That is the point which we are at the moment intensely thinking about. Let's put it this way. At this point in time, we have, if we talk about balanced portfolio, balanced business, we're in a good point. We have one-third of our business with global customers, one-third of our business with regional customers, one-third with local customers, half of our business in Flavor & Nutrition, half of our business in Scent & Care, and half of our business in emerging markets, half of our business in mature markets. If we talk about balanced business portfolio, this certainly is balanced, and we have to clearly think carefully what the next good steps will be in that point. I think that was the direction your question was heading. Administration costs, I think Bernd will pick that up for your Bill as well. Let me pick up China. China, in our company last year, had some challenges. Challenges in that respect, first, intentionally, we streamlined our portfolio in China, and we informed you about that in Q2 of last year, where we said, "We're going to make this step." Secondly, we had been facing a packaging problem, which we also disclosed to you. We had some exceptional items in China which overlaid our business performance and business development. Overall, I have no reason to believe that our outperformance in China, which we have seen over the past few years, will not continue for this year and the years to come. The dynamics are fully in effect, and what we dealt with in last year in China were exceptional effects, which we informed you about. I think I answered my part. Bernd, do you want to take admin cost? Yeah, that's a quick one. I think administration expenses, you can take that roughly as a run rate. There are no one-time effects, no big one-time events. Administration is always an area where you can spend more or less, depending on your confidence on the business and how you manage that. I think what is an important part, and there we did not make any savings in the area of administration expenses, is our investments into IT. An integrated ERP system and an integrated IT landscape is really crucial for a business with this level of complexity. But back to your question, I think, yeah, in the magnitude of 5%, that's at least a good long-term perspective. Individual deviations never excluded. Thank you, Arne. Next question from Sven Erik Schipanski, Berenberg Bank. Yes, hello. Actually, the question is regarding acquisitions and the firepower that you may have. If you were to decide to go up to 3x leverage, then you should have around about EUR 300 million-EUR 350 million of firepower. Is that sufficient to acquire the targets that you desire, or would you increase leverage even more on a short-term basis? Also, towards the targets that you may acquire, it seems you are quite happy with your backward integration path and given the increasing pressure on your gross margin, are you planning to do more there as well? Yeah, on the volume or financial firepower, like you called it, I would say yes for what we have currently on the agenda, I do not see that we are maxed out, so to say. EUR 350 million is the number you calculated. That brings us to roughly 3x EBITDA. I would never exclude that we, for a short period of time, go above that level, but certainly not sustainably higher. In case of a bigger acquisition, that is something that we then would have to discuss also with the equity owners of the company. Nevertheless, I think even that volume, and we will continue to produce strong cash flows also in 2012. So that number will increase on a weekly basis. But for the moment, it seems to be that we are well-equipped in that respect. With respect to the backward integration, I think it is also fair to say that we constantly work on further backward integrations, but not all raw materials and not all components are suited for that. That means it has to have a substantial or a critical mass. We can certainly not do that for all of the 10,000 raw materials we have in the portfolio. These are always long-term investments, so no big single shots, no EUR 50 million investment that will come tomorrow and is done in 4 weeks from now. All of what we have as of now has a history of 5-10 years to implement it. So to your question, yes, we will continue to do that also in other areas, but it is a long-term time horizon. If you look at your P&L, and I think we all saw in the past that your operating costs are quite well controlled. Is the only headache you have the gross margin? Because obviously, price increases are probably tough to push through, and the gross margin has come down quite a bit in the previous years. Is it a sustainably lower gross margin that we have to expect for the business going forward? Maybe I take that on. Of course, the gross margin and the attention to the gross margin is an issue. It is not a sustainable and long-term trend. The challenge is more if the input prices, and we discussed it, increase. The challenge is to pass it on at the same point in time. You only can pass something on in a partnership once you have been receiving the higher input cost. If you want to pass it on, you have automatically a time delay in passing it on. If you manage it well, the delay is shorter and the impact will be smaller. I know last time, Yasmin, you have written, "Hopefully, this time they got the message if you have been quicker." It's a question how quick you pass it on, not if, but how quick you pass it on. If the raw material prices remain on a high level but stable, in a while, all these prices will be passed through. If they continue to increase, well, that is always a catch-up to pass prices on. What you have passed on was good yesterday. Today, there is another price increase which you face, so you have to go back to your partners as well, and we need another price round. That is the challenge. I don't see the challenge of a long-term margin erosion in our industry. If you do the business and you manage the business well, and you do it right, then it should be doable. It's a stable, it's a solid, it's a good business. The question we have is the moment the volatility in raw materials. That is a fact. Just to give you some meat about this menthol, big product we talked about last year. The average price last year was about, say, $20 to $25 per kilogram. About three weeks ago, $75 per kilogram. Two weeks later, 30% less. You see, highly nervous, highly volatile. From one point in time, you have to make a conscious business decision and say, "You know what? I think this is a good deal, and I put in inventory." That is good management in our industry to have the best balance between industry inventory, suffering a bit on working capital, but on the other side, manage input cost, and on the other side, deal with the volatility. Back to your question. If input prices are more reliable and stable, this business should, if it's managed well, permit a margin of 20%, and to your point, and more. Thank you. Actually, just two follow-ups, very quick ones. Or actually, housekeeping questions. The first one, you mentioned ramp-up costs for the new projects in H1. Can you quantify those? The second one is regarding the tax rate. Is it going to be on the same level as in 2011? Thank you. The tax rate, yes. Same level. We have no indications that there will be a significant change. Of course, we have always a little bit fluctuation from quarter to quarter, depending on where we make profits, where we implement tax models, things like that, but 25%. The quantification of the ramp-up cost, the question doesn't hit us unprepared, as you can imagine, is a tough thing. However, I think it's fair that we give you at least an indication also in terms of numbers. If we finally or in the end will need it or not, we will see, but it could have an impact in the first half of the year between EUR 5 million and EUR 10 million. It's quite substantial from our perspective. However, we are still confident that there will be compensation in the second half of the year, no matter what the ramp-up cost is. Net net for the year, we don't expect any negative impact. But for those of you who are keen on quarterly numbers, be prepared that the first half of the year could have an impact from that. Thank you. Next question from Annette Weber, please. Annette Weber, BHF Bank. I have got two questions. The first one relates to the Q4 local currency growth rate of 3.5%. Can you give us a breakdown of the price and volume component in Q4? The second question relates to the Scent & Care business in Q4. It seems as if you had seen a significant acceleration in the North American business in Scent & Care in Q4. Is there anything specific behind that number or any new business wins and customer picking up business again? Anything? Thanks first for the question. I think I start with this. You are right. You have seen an acceleration in our business in general in Q4. Your calculation is about what we have calculated as well. It does not hit us unsurprised and unprepared. Remember, we have given you the whole year a pretty detailed indication and said, "Well, we target for 2% growth at least." The one or the other whom I talked to at the Investors Day had some doubts, say, "How are you going to make that one as you are already far behind?" We had a pretty good idea that something must be coming in there. It is clearly and also links to North America. We knew some wins on call lists, which we had in. As we kept telling you, we are getting on call lists, and it takes a while to materialize, and sometimes it takes a while when you are new on a call list to have the first nice big wins. In this case, we knew this would come in, and that is why we have not been revising, despite challenging and effects and environment since mid of this year, our guidance. That is what you just referred to, Annette. That is what is behind the numbers in Q4. Okay. He handed the price volume question to me. Thank you. I would say, of course, it is always difficult to give a precise calculation on that. I think what we see in the business or what we have seen in the business throughout the year is that towards the end of the fiscal year, the volume picked up a little bit. More higher contribution from volume than what we have seen in the prior quarters. If you take the whole Q4 numbers, I would say about maybe 50/50. 50 volume, 50 price, something like that. Whereas it has been in earlier quarters more two-third of price and one-third of volume. Volume was down also due to the cleanup exercises in the portfolio. Are there any more questions from the audience? Yes, please. Yes. Thank you. I have got a few questions. One is concerning the Flavor & Nutrition, where you mentioned that customers in North America delayed orders towards the end of the year, which suggests. Do you see that there is some kind of catch-up in the first quarter? The other question concerns the acquisitions you made. Could you give us some kind of indication what effect they would have on sales performance in this year? Another one, what was it? CapEx for 2012 guidance, please. Thank you. Okay. Thank you for the question. I am going to handle the first two ones, and as our CFO made a very short presentation today, he is going to get the third one. Customers delayed order in North America, you rightfully remarked. Coming back to the point of Annette, we knew they would come in. We knew they would be there. The question was only when, and I agree, we also almost got nervous when the hell will this come in? No, but finally it did. Catch-up effect in Q1, I would not say so. The business is healthy. The business develops nicely. But in the Q1, as far as I see it at the moment, healthy, nothing to report in particular. Nothing to be concerned of. Acquisitions effect, same thing. We think what we acquired makes a lot of sense. The Belmay fragrance part shows that we continue to pursue what we did in the past, expansion of our business in emerging markets. The business volume of all the acquisitions is not impacting the overall, so do not expect from these acquisitions a big exceptional. Otherwise, we would report that. I would still consider that done as organic growth. It is more a strategic move. The Belmay part, same Trilogy, strategically done as just was reporting the trend towards natural and organic fragrances is a big one. It is a long-term trend, and we believe this opens up some potential for us as it opens us the way to new customers with different products. So strategically also in line with what we have said. Last but not least, the Indevex part, that is an innovative small startup company in Sweden, but in an area with a technology which we do not have. In these things, we even behave like an investor who thinks strategically. We are not the majority shareholder. We are just a major shareholder. We are interested in having a strong influence on the technology, and we want to see an influence and an influx of the know-how and technology into our products. These three projects have been done under the umbrella on beefing up our top line, but they have been done on giving us access to business opportunities which we will benefit from in the future. Okay. Yeah, the last question. CapEx guidance remains unchanged between 4% and 5% of top line. Last year it was slightly below 4.5%. I do not expect any significant one-time CapEx projects. Everything is pretty much in line with the history. Yeah, two short follow-ups. The first one is on menthol. You mentioned that you expect that the second half you increase your sales and earnings with the menthol. Is it the case that you currently run on a capacity maximum and with the investment, you are able to sell more menthol due to that? The second one is on your outlook. You mentioned in your press release that you expect a rather modest start into the year. Bearing this in mind that we win good call positions and that you have good momentum in all regions, in all business units, why should we expect a rather modest start into 2012? Okay. Thanks for the question, and I am going to pick them up. Menthol expansion, yes. This was a yes/no question. Yes. We are on the capacity thing. I keep saying that is like renovating your apartment. From a certain time, it is not enough to just renovate and to optimize and continue to optimize. From a certain point on, you are optimized out. If the business opportunity is there, then we would be stupid not to fetch them. Actually, I see that as a positive sign. I see it as a sign of confidence we have in our business. And opportunities we have in our business. We have been discussing acquisition opportunities. We have been discussing targets we are looking at. I have been sharing with you our view that we are looking to do this if it makes sense, but if the prices for such things are too expensive, we do something which makes sense as well. In this case, an organic acquisition, if you will so, and we expand and invest in something which obviously has beautiful perspective in the future. With this one, we have opened up then the floor for further optimizations, again, with a different and new equipment, which opens us perspective. Outlook on the market start. As we said, we believe in a healthy year, although we believe also it will be challenging due to environment effects. The first quarter of the year, in particular January, to put it clear, is always a bit distorted and abnormal, like December is as well. We have Christmas and mid of the year in December, most companies start factoring the numbers. January as well, and it becomes even more important. January and February, you have Chinese New Year, for example. Depending how Chinese New Year is positioned in the year, it can put already considerably abnormalities in your business. At this point in time, we don't see any reason to believe that we will have difficulties or something to be concerned of. We will have a strong and a good year, but we will see some challenges in the beginning, not only because of Chinese New Year's Day. We said also for our biggest product, we will build inventories. We have to stop the production for a certain point in time, and that will have an impact on working capital level. It will have an impact on the output we do have. But the message which we give you here also crystal clear is we have full confidence in our business. That's why we dared to give you even a guidance for the year. I see one more question from Annette Weber, and then I would like to switch over to the conference call on the telephone. There are many questions on the phone, so maybe- It's just a quick follow-up question on the Flavor & Nutrition division. In Q3, I think you had a couple of problems with one Chinese customer in the beverage segment. Has this customer returned in Q4 in terms of business volumes? The second question relates to the portfolio pruning impacts. Was the 3.5% local currency growth in Q4 still impacted by business that was lost as a result of these measures in the past few quarters? Yeah. Thank you, Annette. I think I picked that up. First one, they're straightforward, and the answer is also straightforward. Yes, in Q3, this packaging issue where we got pulled into, that customer was still doing business and some of the business returned, not all of it yet, but we have good confidence that it will. Second point is portfolio streamlining. We informed you that we did that in the beginning of the year. It impacted our business through the quarters of the year, but we cannot talk about effects of portfolio streamlining. They must phase out during the year. We cannot use that as an excuse. Certainly, they still have been around in Q3 and Q4, but certainly getting smaller. Otherwise, if this effect would be always there, it wouldn't make sense to cut off the business. Can you quantify the impact, possibly? I would say at the end of Q4, it was close to zero. Negligible. Okay, thanks. If my technology works, I would like to hand over to the operator in this conference call. Thank you. Our first question comes from the line of Laurent Forest from Bank of America, Merrill Lynch. Yes. Good afternoon, gentlemen, and thank you for taking my two questions. The first one is on the guidance. You have mentioned that it was ambitious to get to that 20% again this year. You have mentioned that gross margin was still a challenge and that you had done a lot on cost control. Should we assume that there might be more pruning done through 2012 so that you get out of some of the lower margin businesses to again achieve the 20%? That is the first question. The second question is on menthol. You mentioned that you are doubling your capacity. If I am right, I think another German company is going to add significant capacity in Ludwigshafen in 2012. I was just wondering if you could talk about the environment for pricing in the second half and going forward as there is significant capacity addition on a product that, as you've said, has been quite tight in terms of supply and demand recently. Okay. Thanks for the question. I'm happy to pick it up. First is portfolio streamlining. Is there more to be expected in 2012? Nope. Not at this time, any issues. We would do it if it makes sense, but at this point in time, we have streamlined all that out what we think has or does not fulfill two criteria. First criteria is an expectation to a sufficient margin, and the second one, a good future perspective. If all this is not there, then it would be subject for portfolio streamlining. But for today and for this year, no. We have no intentions to do that. I think we did a pretty clear job last year, and we should not get that habit and cleaning project up. For this year, no effects to be expected as far as we can see it today. Then double capacity menthol. We see this as a clear sign of our confidence in our capabilities and our business. Yes, there's another company entering that business. But again, let me put it clear. We are market leader in this segment, and in that segment, we behave like a market leader. So we put up our capabilities because we know and we believe we have superior knowledge and market access there. As I said as well, we are sold out for the next five years anyway, so why should we be concerned? The next one is, and that is also important to mention, what distinguishes us from all other menthol suppliers, the ones which are existing and the ones which have the intention to join the market. We're not only the largest producer of menthol, we're also the world's largest customer of menthol. We have a strong foothold in that business, and I think that makes the difference, and that shows, again, that at least from what we can see, we have thought this through and we are in a healthy and a strong position. Let's put it this way. This shows that the business we're in opens a lot of opportunities, a lot of perspective for further growth. Does that answer your question? Absolutely. Thank you. Thank you. Next question is from Dominik Schraundienst of Citigroup Investment Research. Yes, good afternoon. Dominik Schraundienst here from Citigroup. I've got a couple of questions. First of all, the weakness in Asia, you mentioned that in flavor. Is that worrying? Is that something new that popped up during the fourth quarter? What's the business environment there like at the moment? Looking at the organic growth, I calculate about volume growth of about 0.5% for 2011. Given that you've got 46% emerging market exposure, I found that quite disappointing to see given the mega trends that are happening there. What is your take on this? Would you have expected stronger growth overall, given your exposure there? Also on raw material costs. Looking at the EBITDA bridge, it seems that you were only able to pass on about 44% of the raw material cost increase in 2011. Given that you said that natural-based raw materials continue to go up, it seems that you have to play a bit of catch up this year. Would you agree? Where are you in your price negotiations? Lastly, on menthol, clearly a key product for you. Can you quantify the potential impact given that you're doubling the capacity, but this will only contribute about six months this year. Can you quantify the impact of this on the top line this year? Thank you. I think I start, Bernd, and if I forget to answer a question, just let me know. Asia weakness, I think we discussed it. Annette Weber had already asked a similar question. It was in flavors in China, the packaging issue which hit us in Q3. We informed you. We are over with this, and we still are doing business with that customer, but we still face some of the impact of this incident in Q4. No question about that. As we're moving on, we expect this effect to get smaller and smaller, but clearly Q3 was a big impact and you could see it also in Q4. At the end of the day, as I said, we expect that business to come back. But here today, it's not fully there yet. Organic growth, you said in emerging markets and last year we had a growth of 0.5%. No, overall. Sorry, overall. Volume, yeah. You hope for more. We did as well. On the other side, as I said, there were a lot of incidents, in particular in the emerging markets, which affected us and our business. It was what it was. We hoped for more, of course. That's why we had to correct our guidance from 3%-5% in the very beginning of the year to about 2% over the course of the year. The question should be, do we see changes in the mega trends? Do we see less business opportunities and growth rates for us for the time to come? Clear no. What has affected us was one-time incidents, so we're still optimistic for the future of that business when we expect emerging markets business to gain share of our wallet in our business. Raw material prices and status price negotiations. As we already discussed, we are happy to say we gave you, as one of the few, definitely a precise lookout on the magnitude of the raw material price increases already at the very beginning of last year. We said we expect raw materials prices to increase for the whole year in high single digits. Regardless what other ones said, this is what came in, high single digits. Then we discussed altogether the raw material price development, depending on what the origin was. Was it oil-based or natural based? By Q3, I said, "Well, we expect raw material prices to come in overall at high single digits, and we expect them to remain for the year's end and from there to remain on a high, stable level. If everything goes well, selectively, we might even see reductions in natural raw materials." That was, from today's point of view, a little bit too optimistic. What we see today is oil-based prices high and stable on a high level or with a slight increase, but definitely the big increase and jump in prices was not materializing in Q4 and not in the beginning of this year. Different view on natural raw materials. They keep increasing, and that may be due to volatility in the market. I gave you the example of menthol, where you have a high volatility and high nervousness in the market. These price issues may increase in natural raw materials. In that respect, yes, we have to go back and increase raw material product prices again, which we are doing. We keep increasing the prices, and we are in the mid of price negotiation. Your assumption in that respect was right, and we are in the mid of doing this. Some product prices we have negotiated, depending on the customer, where the price negotiations are in January or February. We have customers where price negotiations are in March or April. We have them throughout the year, depending what the nature of the contract was. We may even have contracts with variable conditions, depending on the raw material prices. We are in the middle of this process. Are you seeing pushback from clients, or how is the negotiation going? Of course. You expect pushback, and you can expect pushback of pushback from us. At the end, that is the nature of a negotiation. If raw material prices increase, our purchasing agents of the customer typically have a pretty good idea if our sales rep calls in and wants to discuss what's coming. No one is happy to accept a price increase. Let me put it this way, that's the nature of the business. We're talking about a customer and a relationship and a kind of partnership. At the end of the day, you will find a reasonable agreement. Also what we have been discussing, if raw material prices remain high and stable on a high level, we should be able to push the prices through. But in some cases, it'll take a while. That's the part of the negotiation. Impact on menthol, that's a quick one, on top line. You will see an impact on the top line probably this year over 2013, because we're in the middle of this. The total number I, of course, will not disclose, but I'm sure you're going to see it. Right. Thank you. You're welcome. Next question from Martin Flückiger from Helvea. May we have your question, please? I'm sorry. The next question is from Evgenia Molotova of UBS. Hello. Good afternoon. Just two clarifying questions, if I may. One is on growth guidance and what do you expect in terms of volume and pricing? Because as far as I understand from the comments, the raw material price inflation probably will still be there, so you will be increasing prices. Then if we look at 2%-4%, and if you imply 2% for price, it gives us either zero growth or very little volume growth, basically. So if you could comment on the volume growth that you expect in 2012. The second question is on inventory levels and raw materials. As far as I remember, at the end of 2010, you had quite high inventory levels, and it helped you a bit at the beginning of 2011 when we had very strong raw material price inflation. At the moment, as you said with your cash flow comment, your sales were very strong in Q4, so the raw materials inventory level is probably somewhat lower than normal and lower than you had at the end of 2010. On the other side, the oil price in Q1 definitely increased. So do you expect stronger inflation in terms of raw materials in Q1 2012 than you had in Q1 2011? Thank you. Okay. This is Bemther speaking. So on the volume growth and on the question about volume and pricing, and hopefully that's now not too disappointing. I think we're not that sophisticated and not as good in predicting as you may require that for your calculation models. What we do expect at the moment, and again, we talked many times about that we have a real hard numbers forecast for one quarter. So for this quarter, I can precisely say this is the volume and this is the price, and this is the raw materials that we need. The rest is more or less an estimate. So we do not expect, I would say, in these 2% to 4%, it's by far not the case that we assume 0% or 1% volume growth. It's definitely higher. I think the big unknown as of today is the pricing component as we are in a constant negotiation process. The pricing component has an impact on the top line, and it can be substantial. It has an impact on gross profit depending on the interaction between price increases or correlation between price increases and raw material price increases. I think there's not a simple answer to your question. However, if you're concerned about us being too conservative or too pessimistic about volume growth you shouldn't be. I think we're planning for quite some volume growth in all product categories, and that's why we're also expanding capacity, leaving aside the menthol thing. On the inventory levels, that's also not easy to answer because I would not say that our raw material levels are significantly below 2010 and we're sold out or we have sold out everything in the fourth quarter of 2011. I would say it's still a reasonably convenient level in anticipation specifically for certain natural raw materials that prices are volatile. I'm not that fundamental about prices will go up all the time. I think the big problem that we face at the moment, and that's a real-life problem, is short-term volatility is extremely high. Heinz-Jürgen made that example with natural menthol. I can give you also the four weeks fluctuation, and this is by the way, now the time we're taking into consideration. We're not measuring fluctuation on a three-month or six-month basis. We're measuring that now on a weekly basis because it can have a significant impact whether you buy on Monday or on Friday. That's the challenge at the moment, but not only for us, but for the whole industry. As a matter of fact, also for the consumer goods industry. Does that answer the question? Yes. Thanks a lot. Thank you. You are welcome. Thank you. Next question is from Martin Flückiger of Helvea. Yes, good afternoon, gentlemen. Thanks for taking the question. I only have one left. Most of them have been answered. I would like to come back to the fourth quarter EBITDA margin in Health and Care, which appears to be much higher than usual in the fourth quarter. I estimate around 400 basis points higher than what we have seen historically. Can you give me or can you give us the reasons for that? Is it possibly related to one-off items in other operating income? Thanks very much. I think the answer is quite simple. It is a pure cut-off issue, I would say. There is no one-off items. There is no big release of accruals. Towards the end of the year, we have always this more in-depth analysis of the numbers to prepare the year-end audit process. But we have not released any significant amount of accruals or anything like that. I know the impact, of course, because we obviously have seen that also in our internal analysis, but there is no specific reason for that. They had a very strong quarter. They shipped a lot. We did not close our health and care facilities over the Christmas period, what we usually do. So that is in essence the big secret behind that. And of course, a favorable product mix, good Life Essentials business, for example, which has a high margin, but nothing that indicates any kind of, let's say, one-time effect or any structural changes. Question answered? Thanks a lot. Thank you. Next question comes from the line of Heidi Vesterinen from Exane. Yes, good afternoon. I have two questions. First, I wondered if you have any thoughts on P&G's big cost-cutting program. They appear to be focusing on reducing their cost of inputs. What do you think will be the potential impact of this on you and your peers? Secondly, going back to your recent acquisitions, is it possible for you to comment if the businesses you bought are over EUR 10 million in sales, please? Thank you. Yeah, Heidi. I am happy to pick up the question. Thanks for them. The P&G cost-cutting program, first question, that is not what we are not used to. Yes, that is a business partner for us, but we do not expect that to influence our business over proportionally as things like cost-cutting programs on the one end or the other end are something which are daily business in our industry, and we will deal with this and will have to deal with this. The other point is, it is beyond what I can tell you how our competitors are affected by this, but as far as I can see, there is no reason for excuse if this is daily business that certain business partners are looking more carefully on their costs. For us, you should not expect any impact. That is what I can see, at least not any exceptional impact. The recent acquisitions, the overall turnover, it is fair to say that it is certainly not far beyond EUR 10 million in turnover, total turnover. That is as far as I go. As I said, and that is in line with what I said. We consider that part of our organic growth, and it is more done because of strategic opportunities which that opens for us in some areas which have an interesting potential. Heidi, does that answer your questions? Yes. Thank you very much. You are welcome. Next question comes from Jesko Mayer-Wegelin of HSBC. Thanks. Just one quick question on the Flavor & Nutrition division, on their margin, EBITDA margin. Was the decline in the margin due to the seasonality and due to the higher natural raw material costs, or was there anything specific in this segment in Q4? Thanks for the question, Jesco. I pick it up. You answered it already. I think, in that respect, yes, flavors was impacted in the margin deterioration more than Scent & Care. The fact, as far as we see it, yes, the reason was the natural raw materials and the influence of them because the effect of increasing prices continued to go there. Further on in Scent & Care, as I said, there's at least a certain portion of the raw materials, oil based, and they found some relief towards the end of the year. So your assumption is correct. Thanks. You're welcome. The last question comes from Martin Evans of JP Morgan. Yes, thanks very much. Just returning again to your EBITDA margin target of 20%. On slide 4, you give the last, since the IPO, you give the last five years, and we can see basically that there's obviously been sort of slight movements, but basically the margin hasn't moved for you at all in those five years. You're stuck at this sort of 20-odd percent level. Just to help us understand that, is it simply because the barriers to you putting up your prices in excess of inflation are sufficiently high that customers can resist your price attempts and thus boost your margin? Is there some structural problem in terms of pricing power for these products that you have? Or would you hope over time to have a quantum leap upwards in the margin? Because it's quite unusual for a company in a growth phase to see stable to flat margins over a five-year period. Thanks. Martin, thank you for that question. For you, the glass is obviously always half empty. For me, it's half full. I think it's a good sign that we are able to keep our margin on a level. Let's put it, what's on the table? Yes, you're right, the margin has been stable over five years. Yes, it is in line with what we always have said. Our industry is healthy. Is pretty resistant to crisis. Over the last five years, we have seen certain crises. We have been able to manage our margin at a stable and a high level. One more point, regardless what the one or the other competitor may have told you, our industry, there is a certain ceiling in what the margin on the industry permits you, and we always have said, there is a ceiling. It's certainly not at 20%, but there is a ceiling. From a certain point, you have to explain to your business partners what margin you're doing. Absolutely. The question is, which we have to answer, is 20% enough? Is there more possible? We can discuss that. Is there 30% possible? Clear answer is no. That is clearly overdone. There is a certain ceiling. Let's return back to what you have been pointing on. I think it is a strong sign and a strong signal, what we're sending. We have been able to maintain our margin. I think that is pretty unique in our industry. We have not suffering on margin deterioration. While growing our business, the margin has been kept stable. Can it be more? Yes, always. At the moment, from what we see, it's the highest in our industry. We're always striving to achieve more. For the moment, I think it's ambitious, it's healthy, it's good. Okay? Okay. Thanks very much. You're welcome. Okay. There are no more questions on the phone. Ladies and gentlemen, this brings us to the end of the conference. Thanks for coming here to Frankfurt. Thanks for being on the phone. If you have some time here in Frankfurt for one coffee with us, we stay here for the next half an hour. Thanks a lot for everybody, and see you next time. Thank you.