Status Update

Mar 7, 2018

Slides

Good day, and welcome to the Johnson Mathew Efficient Natural Resources Sector Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Martin Dunwoody, Director of Investor Relations. Please go ahead, sir. Thank you. Good afternoon everyone. I'm Martin Dunwoody, the direct of Investor Relations here at Johnson Mathew. I'd like to welcome you to our call today. This is the second call in our series to give you more detail on our sectors. And our strategy to deliver sustained growth and value creation. As such, we will not be giving a trading update as part of this call. I'm pleased today to be able to welcome Jane Tougood, Chief Executive for our efficient Natural Resources Sector, which will be the subject of the call. With that, I'll hand over to Jane. Thank you, Martin. Good afternoon. Thanks for joining the call today. I'm excited to talk to you today about our efficient Natural Resources sector. I'll give a brief introduction and then provide an overview of our activities before talking through our strategy that will deliver out performance in targeted growth segments. Hopefully, you can see all the slides on the webcast and you can navigate through these yourselves as I talk. Then at the end, I'll open to Q And A. So if you'd like to move to Slide 2, and here you can see the cautionary statement. And now moving through to Slide 3. So for those of you I haven't met or spoken to before, I just want to take a moment to introduce myself and give you my background. I joined JM in February 2016. I've had about 30 years of experience in the chemicals industry, working my way across lots of different roles and running businesses in a broad variety of sectors ranging from automotive paints, fine chemicals, pharmaceutical excipients, and polymers. So I've covered many different value chains from specialty to more bulk materials. Many of my roles have been based outside the UK, including 8 years at Borealis based in Austria before I joined Johnson Maffi. I'm also currently a non executive director at Vitrex. As a former chemist, who's passionate about the impact science can have, I chose to move to JN because it's a company where science and technology are at the core of the business, giving competitive advantage and leadership and making significant impact in B2B markets and ultimately, of course, for consumers. Furthermore, J. M. Has a great reputation with customers. So I joined JN as the divisional director of the Precious Metal Products division and additionally took over the Process Technologies business from April last year when we created our efficient natural resources sector. Let me move to Slide 4. Here you can see that the sector accounts for around a quarter of the group's sales. It also accounts for around a third of the group's operating profit. This sector helps customers make more efficient use of scarce natural resources across a range of industries. So we're helping customers solve complex problems as they transform critical resources ranging from oil, gas, to biomass, and of course, platinum group metals. The move to a combined sector has allowed us to view the market at a wider sector level and given us a greater understanding of where our core competencies may open up new potential areas of sustainable growth for the business. It's also enabled us to run our business more effectively. Importantly, whilst we see exciting opportunities for growth in efficient natural resources, our technical expertise and competencies support growth across the rest of the group. This is not just in sourcing metal, But for example, because of our knowledge of materials and chemistry, we provide a starting point for many new technologies with that expertise transferred across the group. Our skills in project engineering also enable us to support scale up of various processes beating clean air, health or new markets. Now if you move to Slide 5, This shows the breakdown of our business. So we currently operate in 3 subsectors: CASIS Technologies, which comprises chemicals and oil and gas, advanced glass technologies, and PGM Services. Our catalyst Technologies business makes up 63 percent of sector sales and addresses both the chemicals and oil and gas markets. 40% of the sector sales come from serving chemicals markets. We sell our catalysts and license our technology to help customers process natural resources. For example, we sell both process licensing and catalyst to make methanol from coal gas or bio feedstocks. Methanol is a key chemical feedstock made from coal or gas, and we licensed both the technology and sell the catalyst to turn it into formaldehyde. 70% of formaldehyde is used to make resins which are used in the wood industry to make adhesives for chipboard and plywood. When we licensed technology, we work with customers to design a specific plant for them, integrated into their facilities, and also provide services to help them start the plant up once built. We get paid for our engineering work as we begin our work and then finally, when the plant starts up. When we sell catalysts, we work closely with our customers in choosing the right product and in optimizing its Houston service. So this can be the 1st fill of catalyst in a new plant or refill catalysts for existing plants, which typically occur every 3 to 5 years. 23% of sector sales come from the oil and gas market. Here, our 2 main activities are: firstly, supply of catalysts for the production of hydrogen, which is primarily used by our customers for the desulfurization of other process streams, Secondly, we supply additives that improve the yield and reduce emissions from the SCC unit in the refinery, which is used in processing crude oil into downstream product. For example, our range of Intercat SCC Additives And Addition Systems are used in more refineries globally than any other SCC additive products. Our additives also reduced SOX, NOx, and CO emissions from the SEC unit, making the refining process cleaner. So across Catalyst Technologies, we provide a range of products and services. As a result, different parts of our business move at different paces. Refill catalyst and additives are linked to ongoing plant activity. However, licensing and first fill catalyst a links to new plant builds. In the medium term, we see little by way of new builds in the major areas that we serve such as oxal alcohol and butane dial. Consequently, licensing income is at the trough with a limited contribution currently. And whilst we do not that we don't assume it's coming back near term, we're well positioned for recovery in this market. Our Advanced Glass Technologies business makes up 10% of sector sales and makes Advanced Glass Materials And Conducted Inks mainly for automotive use. For example, we supply the black obscuration enamel that's used in the edge of car wind screens. This is an attractive business with a leadership position and shared underlying technology across the group such as material characterization, testing, design and some engineering. Our PGM Services business makes up 27 percent of sector sales. This business is core to J. M. And exists primarily to support PGM requirements of other JN businesses. We manage platinum group metals through their lifecycle of refining, purification, product manufacturer and recycling under the largest secondary refiner of these metals globally. And now can we move on to Slide 6? And here, you can see we have strong market positions. We operate in markets which are highly fragmented where success requires technology excellence. Our leadership is based on our expertise in materials characterization, PGM Chemistry, material design and surface chemistry. We hold vast majority of our markets, accounting for over 90% of sector sales. We have number 1 positions in many, including methanol, hydrogen, gas processing, SCC Additives, PGM Services And Advanced Glass Technologies. Moving on to Slide 7, our strategy to deliver consistent market outperformance. There are 4 elements to our long term strategy as shown on this slide, and I'm going to take you through each of these in turn. Let's move to Slide 8, maximizing growth through deep understanding by segment and region. So here we have the 1st pillar of the strategy. There's a range of different growth rates for the markets we serve. The chart on Slide 8 shows the split of sector sales by these different market growth rates over 10 years. Over the medium term, we expect the average medium term growth rate in JMs market segments to grow between 2% to 3% in Catalyst Technologies And Advanced Glass Technologies, and low single digit growth in PGMs. We're selectively targeting our investments towards higher growth subsectors to enable us to grow our top line 1% faster than the average across our markets. For example, there's a shift in some geographies towards clean advantaged feedstocks such as natural gas but we have a niche but relatively fast growing position. We'll invest to reinforce this position and to add to our offer so we can leverage our growth in this attractive segment A further example would be growth in methanol in China, and we're ensuring that we're well positioned to benefit from this in time. On to Slide 9 now, focused investment in R&D to maintain and extend technology leadership. Technology And Chemistry is core to our success and continued investment in R&D is key to our future growth. We've analyzed our strategy by market segment, which included a review of our product pipeline. This review led to us stopping over 30 projects where the products were not aligned with our strategic growth. We've transferred these additional resources onto projects developing step change opportunities that align with our growth strategy. For example, we're putting more resource into zeolites, a technology platform that underpins not only our sector, but also other areas in JM such as Clean Air. We were also able to help support the development of JM's battery materials with our expertise in nickel chemistry Of course, our R and D spend is subject to our capital allocation strategy and returns driven criteria that JM has across the group. We're in a great position with our leading technology. We've many areas to explore here. So moving on to Slide 10, deliver additional value by focus on efficiency. And whilst we're cited about the medium term growth opportunities, we've also got a great opportunity to drive efficiency across the sector. We've identified a range of initiatives, which can be characterized into 3 areas as shown on this slide. The operational improvements, complexity reduction and organizational efficiencies. Operational improvements first. We continue to invest in improving our manufacturing and supply chain operations with detailed cost saving programs in execution, which were already yielding results. For example, in procurement, a single change of a specified quality in a required material used in catalyst R and D has led to sizeable savings. We have programs of work looking at the performance of the PGM refineries, These address not only efficiency, but also the tightening regulatory landscape consistent with JM's commitment as a responsible supplier. This is important in running a global refining network with refineries in the U. S, UK, and China. Secondly, complexity reduction. So a detailed analysis of our product and customer portfolio is now complete. And based on this, we've produced a detailed roadmap to deliver a materially simplified product portfolio over the next 24 months that we believe will meet our key customer needs better than today, helping drive growth as well as improving efficiency. For example, in catalyst technologies, we've identified opportunities to reduce the numbers of small, slow turn products. This of course also allows us to review stock levels and destock across areas, helping us reduce non precious metal working capital. Another examples in gas reforming, new technology and catalyst manufacturer has allowed us to meet customer needs that previously required 16 products, with a portfolio of only We reduced headcount by looking at spands and layers in the organization, and this is part of the cost savings we're already delivering this year. This has also enabled faster decision making through a simpler and flatter organization, which has also increased our focus on our customers and R and D. And of course, as we've set out before, we expect cost savings of around 1,000,000 in the second half of this year related to our restructuring program, will give an annualized benefit of GBP 12,000,000. Summing all of this up, our focus on efficiency across the sector will help us deliver margin expansion over the medium term growing operating profit 1% ahead of sales growth each year. So if you move now on to Slide 11, exploring long term growth opportunities by extending our capabilities into adjacent markets, geographies and technologies. And the beauty of the creation of efficient natural resources is it opens up these wider opportunities for growth by looking at the nature and the value of what we're bringing to customers and markets. Our core competencies should enable us to expand our activities into adjacent market, geographies, and technologies. We win now because of our understanding of where the depths of our core science and technology In those areas such as materials, characterization and design, PGM chemistry, metallurgy and industrial engineering gives us a differentiated capability. And our ability to translate that capability into value for our customers and attractive market segment leadership positions for ourselves. And these are the reasons why I'm confident we'll be successful in the future. We have a list of opportunity areas that we're systematically working through and matching our fit to. Some of these are shown here on Slide 11, which I presented at the Capital Markets Day last year. But this process, of course, will take us some time. Having a good candidate list of opportunities, however, gives me confidence in the longer term growth trajectory. So moving to Slide 12 and to summarize then on what this means for you, what we'll deliver. Over the medium term, our strategy will deliver outperformance to our markets, specifically sales increasing 1% of growth in the markets in which we operate with the exception of PGMS, which we will grow its low single digit over the medium term. In addition to this, will grow operating profit 1 percentage point ahead of sales growth, driven by our focus on efficiency, as I set out earlier. We would expect to start opportunities for us to capture, and I look forward to discussing this in the future with you all. So to wrap up. Questions. We'll take our first question from Mr. Adam Collins from Liberum. Please go ahead, sir. Hello, Jane. Thank you for the presentation. I had a couple of questions, please. At the 2015 investor day, Jay Matt talked about the commercialization of new technologies in a process tech, and I mentioned BCM and MEG Technologies. And I just wonder if you could give us an update of what became of those. And then also you've been talking recently on the precious metal services side, the PG and Recycling, about a new plant in, China in due course for the processing of Spence Auto Catalyst. I wondered if you could update us on that. Okay, Adam. Let me start a little bit with the plant in China. So that new plant in China has now started up. And we've been commissioning that, of course, over time. And the volumes of material that have been processed in that refinery, it's in a place called Sanjangan, have been increasing as that phase startup completed. If you look at the market itself, the sort of secondary PGM recycling market in China is really very early stages, so I'd describe it as a nascent market. So it'd be some time before that refinery is planned to make a significant contribution to earnings. But of course, it's a very important part of supporting the whole JM group, with metal supply in China. Now then, I'm just coming back to your second question there. And just wanting to talk about those technologies, both of those are in well, this is in commercialization now, but these new technologies take time. And of course, 1st in customer wins take I think that's probably all I want to say about that now, if that's okay, quite commercially sensitive information as you'd understand. Okay. Thank you very much. Just on the first one, on the China recycling plant. Is it processing jewelry scrap at this stage or is its principal target end of life auto catalysts and primary? So this is targeted really as an industrial refinery, okay? And more of probably wouldn't comment, but that's it's really targeted in industrial refinery. Right. So that includes chemical catalysts? So anything that's really industrial, but I don't think, we're thinking of that in the industrial space, really, in total. So anything that would be industrial. We'll now take our next question from Alexandra Thrum from Morgan Stanley. Please go ahead. Hi, Jane, and hi, Martin. Thanks for taking my questions. Just the first one is on the catalyst Technologies. Are there any catalyst technologies that you are not present in that you'd like to grow in either organically or inorganically? The second question is, a number of energy companies have pointed to increasing CapEx in the chemicals and refining space. So have you seen any evidence of this? And do you expect Jay Mart to benefit from this? Okay. So good question. Thanks, Ali. So growth are there areas where we are not where we might want grow. Well, we aren't operating in every subsegment across the whole of the Catalyst Technology space. And maybe there are some areas where we'd like to grow more And of course, one can do that through many ways. But I think, it's a we have very good positions in the segments that we're in, And I'm going to lead on to your next question there. When people have talked about CapEx, we have great positions, but in some of those segments at the moment, if you look at CapEx spend, some of those are currently oversupplied. So we don't expect the CapEx spend in those particular subsegments. So I think that answers both of those questions at once, but we don't expect huge CapEx in some of those segments where strong like Ocala alcohols, boosting Dial, for example, And if you look at the cost across that whole Cactus technology space, I think we're very pleased with the leadership positions we've got. And as I said, we're looking generally at growth opportunities where we can build adjacent technologies and build on our competencies. So we'll be looking at any opportunity that does that. Thanks. Just one more question, if I can. Has the refill cycle normalized in China? And if not, should we expect a pickup in Refill activity this year or next? So I think if you look at the Chinese markets again, if you look at specific some of the specific sub segments are quite oversupplied at the moment, And so you might expect that as the winter market is very oversupplied, I'd say there's a lot of capacity there. There's not so much pressure on the catalyst performance. As the demand picks up, then there's more pressure on the catalyst performance and they tend to refill slightly more frequent rate. Now if I look at what we're saying about what's going on with the markets, we're not yet expecting, the a bigger, a substantially bigger trend of growth at the moment in Refill Catalyst, they did grow quite well in the first half overall, but I don't think there's anything that's fundamental in terms of particular uptick in the market. Our next question comes from Neil Tyler from Redburn. Please go ahead. Quick one for me. Firstly, on the operating leverage you expect in the business, I understand that the falling away of the license income made a big difference, but when we look back, particularly on what was process technologies. The, sales declined sort of mid to high single digit. The operating profit fell more like 30% on a constant currency basis. And so given your outlook to grow operating profit at 1% faster than sales. I just wondered if you could expand on why there isn't more operating leverage in the business on the way back up. And more specifically, within Catalyst Technologies, it's my understanding that there's sort of made potentially major regulation on the horizon in the fuel oil industries and removing sulfur from fuel oil IMO 2020. And I wonder if you're able to sort of scope or scale that as an opportunity for the the Catalyst Technologies business, be it either directly via sale of catalysts or to the into FCCs or indirectly into the hydrogen industry. If you can sort of talk a little bit around that and whether what, if anything, is included in your sort of medium term growth projections around that regulation? Okay, Neil. So just in terms of what we've talked about and the strategy going forward, But the first thing to say, of course, the licensing businesses is flattered in the trough at the moment, as I said before, And what we've got here is a set of very structured robust plans that will improve our efficiency over the next couple of years So we'll lead to that operating profit increase. And I think it's important to know that those are structured planned and will be brought through in a non disruptive way to our customers. Our aim is to keep serving the car customers in the best possible way as we do today. If I do your comment on the regulation changes, and I won't say specifically about any specific regulation change and what it might do to our business. But what I can say is in the Catalyst Technologies area, what we're really good at is using our competence actually to design catalysts that solve problems. And environmental regulations or regulatory changes are things where we and have solutions that can help customers by pulling on different bits of expertise. Now I'm not going to comment on this particular piece of regulation. But generally speaking, I think it would be fair to say that environmental regulation is something that actually one should welcome anyway for the world in general, but it's actually a good thing for a business like ours, which relies on science expertise to solve problems. So where there are problems that might be being posed for customers who have to meet those, then we can also help. And I think if you I think that's probably hope that's answered your question. Is that clear enough? Yes, well, perhaps I mean, how obviously, but perhaps I can ask in the in terms of the catalysts that you actually sell, do you and that helped what you refer on your website to the ability to help with desulfurization. Is that referring specifically to the sales of catalyst into the hydrogen industry? Or is that, talking about the the SOX reduction that you mentioned in your introductory comments, I. E, do you sell catalysts that remove sulfur actually within the FCC? Oh, yes. Yes. Yes. Yes. So yes. So we can help with sulfur removal in various different, processes and so in both of those. So yeah. Okay. That's helpful. Thank you. Our next question comes from Andrew Stott from UBS. Please go ahead, sir. Yes, good afternoon, Jane and Martin. Thanks for the presentation. There's a couple of things I wanted to come back to. Slide 11, and I think it was a slide you also put up in September, but, it's the comment around new natural resource landscape and specifically the tagline exploring new market spaces. Can you just sort of dive into that a bit more in a bit more detail? And I'm trying to understand whether that means organic or M and A or perhaps either. So any flavor of perhaps things you're looking at, you may or may not want to reveal. And the second question was sort of more looking at current, the current trading environment. I just wonder if you'd shed any light on why platinum has done so well considering what diesel data looks like. Thank you. Okay. So, thanks Andrew. I think I'm not going to surprise you actually by not giving you too much detail on the bits of places where we're looking. But I think we've got lots of opportunities of places we can look at in that natural resource landscape to take, you know, to take our various competencies to other places. I mean, we gave, for example, at the Capital Markets Day, we gave one of the examples, which was looking at waste to liquids effectively, a particular piece of technology where we recently won a prize, actually, and it's due to chemical engineers, we worked jointly with BP on this and the technology, taking waste in the face of liquid. It's a brilliant piece of technology. And this is one way of using a new, now you could say if that's a natural resource, but I would argue that that's a resource that could be extremely useful for the world if it were used properly. So that's an example of something that we have been looking at, which is in the public domain. Now there is quite a long list of things where we could apply our technology to do more. But I don't really feel able to talk about those at the moment, which I'm sure you'll understand, it's also true to say that whilst we've got lots things we can do in terms of the existing business and area to look for growth there, of course, we will continue to assess M and A opportunities. And we consider those against the usual capital allocation and returns criteria. And those of M and A would probably be bolt on type of type of things. So I hope you have enough color for that without being able to say too much detail because of the commercial sensitivity. And then you come to, platinum trends. I'm just wondering what trends specifically you're wanting Well, I suppose the observation that the observation that pricing has held up very well, more than held up, it's done very well. And yet, we've already seen, a pretty much 800 to 900 basis point drop in diesel market share. So just wondering what you were seeing on the ground on the the market. Okay. So platinum well platinum prices remain pretty flat actually. Palladium prices have increased a lot. I'm sure you'll know, we published a piece of market research regularly. I think we last published in February. And so we do give some external information about what we see here in terms of trends. And I think the thing about it is, you know, Plastics and Pladen, they used the industrial context, and they're not they're not a bulk material, clearly they're using very small quantities in catalytic converters and in other other processes. And so if you look at the sort of supply demand story, there are some very fundamental supply demand dynamics that are going on there that means the prices are where they are. And I think there's quite a good piece of information on that on the website. In this February review, if you have a little look at that, okay? So I think you can't take a growth look at this. They are very precious materials, in fact. And they need to be treated as such. And therefore, it's a very different supply demand picture for those materials to the overall diesel picture. There's been quite limited investment a new primary PGM production in the last few years. And so recycle PGMs will become increasingly important, I think, as a raw material source, but I don't know about comments particularly on the past, but I think that's what the dynamics are. You can't translate that growth dynamic over to a material like platinum. Okay. Thank you. We'll take our next question from Ketan Udeshi from JP Morgan. Please go ahead. Yeah, hi. Thanks for the presentation. A couple of questions. First one is, you mentioned that you don't see of an immediate recovery in some of your segments that you operate in, but would you say on a more broader sense there is some sort of recovery in the market, because few of your catalyst competitors or peers, like Larry and W. R. Grace seem to be seeing some sort of inflection in demand from second half of last year. Is that something consistent with what you guys see in your order book or in terms of discussion with customers as well? And 2nd, it would be useful to just remind us the whole dynamic around why the licensing income had a sort of a tail off over the last few years and where do we go from here? So is the business model more to sell direct catalyst versus licensing or that can change in the future? Thank you. Thanks, Chetan. Right. So let's start with the beginning of that where you ask about uptake in the market and so on. So I mean, you were talking about comparisons, you were talking about some other market peers. Actually, if you look at the markets, they're quite fragmented. If you go into the subsegments, it's quite fragmented. And we don't operate in the same subsegments, as the people that you mentioned there. So it's quite difficult to compare. Remember, some of our peers also don't have a licensing business, I can obviously, we are maintaining our leadership positions in all the markets which we operate. We don't expect at the moment an uptick in the medium term in our licensing business. And that's really because of the areas that we're operating in where there is a large over capacity, and that was being built over the last over the previous few years. And until that capacity is used up, we won't expects then there to be new plants built. And if you so then I think that that really deals with that. So basically that's why we're saying, if you look at our overall demand projection, we're saying 2% to 3% over the medium term, and that's what's behind that. Yes, it was particularly if you look at that overhang of capacity, again, it was particularly oxal alcohols butane diol area, and that overcapacity is actually historically high levels, you know, if you look back over the past, it's historically high levels. So it'll take some time to work through that. Does that help? Yes. And on licensing, is the business model changing or is just a reflection of, as you said, overcapacity in some of your segments, which is resulting in a lower licensing income? Or are you proactively moving away from licensing as a sort of a business model just structurally speaking into the mid to long term? Yes, no, there's no change there. And actually, I mean, really, when you look at our total portfolio sector licensing is really only a very small part of the portfolio. And so in terms of impact there, it's not massive. If you look at the overall sector performance. So as a slot, there's no change in the way we're going about the business in that sense, and we continue to offer those same services technology insights to our customers, but fundamentally, it's actually really a relatively small part of the portfolio. Understood. And maybe a separate question around just if I remember correctly, you had almost a 150,000,000 pound of working capital increase in your PGM business. I think in first half of the current fiscal year, and none of your peers seem to have seen that level of increase. So can you just maybe I don't know whether it was related primarily to PGM or was that increase associated with some of the auto cat side as well. But just in terms of understanding the reasoning behind that working capital and And how competitively in terms of competitive dynamics, how does it help you if at all? Thank you. Okay. Let me try and explain that. So, when you look at the precious metal inventory, so pressure metal inventory can vary significantly because it's a function really of the whole dynamics of the precious metal market, our customer choices and the demand from the JM businesses, okay? And we offer our customers a unique set of services. So we include that including that is sourcing metal, storing metal as well as refining the metal. Now when metal prices are higher and if the market gets tight with a lower liquidity basically. We carry more inventory and we have to carry more inventory so we can service our customers effectively and also the JM Group effectively. And as we are the world's largest refiner of PGMs, so Plastics And Group Metals, This will affect us more acutely than some of the other players around. So hopefully that That answers that question. Will take a question from Sebastian Bray from Berenberg. Please go ahead. Good afternoon and thank you for taking my questions. I would have three please. The first is on the longer term commercial terms and margins that can be made platinum refineries. Have you seen any potential pressure on margins from, in particular, in more readily available areas, jewelry scrap and also end of life auto cap list and how do you see this developing in the long term? The second question is, if you could give perhaps a bit more granularity on what exactly the faster areas of growth are? And in particular, what areas are going to enable you to grow operating profit, faster than sales I think if I look at the structure of the catalyst sector as a whole, generally speaking, the W. R. Grace, so those exposed to the refining sector 10 make the highest margins? Is this an area that you're looking to get into, maybe make refinery catalysts as well as additives? And my third question is on the best lead indicators for potentially looking at the top line development of this segment. When I think of this, I think methanol, and then there's a bit of a gap I was wondering if you could perhaps indicate any other key chemicals, which we could follow to track top line development. Okay. Right. Let's try and take those off 1 by 1 if I've I hope I've gotten down properly. So longer term commercial terms and margins in the refinery, I mean, I can talk a bit about where I see the demand for platinum palladium going in the future, which may give a little bit of a clue. I think Palladium is going to continue as an area of strong demand and probably no end in sight for that deficit supply compared to demand and our market research is showing that. And again, that's I would refer you back to the website for that. Platinum, probably a little bit less buoyant, although still rising demand from the HDD sector, which should compensate for the fall in demand LDD. And so that gives you maybe a little bit of backdrop and market context to what's going what might go on there. I can't get details, of course, on the specific margins that we take in our business because we don't publish those. When you talk about you asked about areas that have faster growth and other areas. And of course, some of those areas are in early stage, so I don't want to share those thoughts. I'm going to have to give you one example. I referred a little bit earlier to bringing different feedstock chemical solutions to the market. And we've got some growth areas there, which is so for example, I think we have this example of waste to liquid is quite interesting, using a different feedstock targeting different products. And that's in that situation, we're looking at both technology and the catalyst. In fact, we have developed with BP's technology and the catalyst. So that would be a good example of that. FCC Additives have been growing very well, so that's quite clear. I can't really say other higher growth targets of areas that we're targeting because I think you understand that is quite commercially sensitive. Then in terms of best lead indicators to give to yourself, really can't think of anything I could give to you there. Let me just I may have to reflect a little bit further. I mean, If you could look at what's going on, obviously, methanol will be 1. You can look at what's going on in hydrogen and mono market formaldehyde markets we want to stand about J. M, I don't know if that's giving you necessarily what you might want in terms of an overall chemicals piece, if that's what you're asking. But of course, there is also plenty of market research and there are some great market research houses that will give you an overview of the total market. So I hope that answered the question. I hope I've understood it properly. That's helpful. Thank you. If I could just ask a quick follow-up on Advanced Glass Technologies. Who are the J Mat's competitive in this segment? So in that area, the gas the competitor would be people like Ferro. Did I answer that correctly? Yes. We'll now take a question from Adam Collins from Liberum. Please go ahead, sir. Jane, hi. I had just three sort of quick follow ups in relation to cash flow and working capital. So could you tell us what the midterm R and D to sales and CapEx to sales and lights would be in this area. I think in the past, you said R and D around 5%, but we're not sure on CapEx. Second one was on cash flow generation, given that you're saying that licensing is likely to remain subdued. Historically, that's been a source of cash because of advanced payments. So wondered if you could just comment on that. And then the third thing is, You are in the midst, I think, of a sort of global SAP rollouts in your enterprise system. And I think in the past, There had been sort of expectation in the group that could provide some potential around the PMP activities. Now I know they've been split into 2 divisions now. But I wondered if that offers some potential around the manufacturing side of your business looking forward. Okay. So the R and D, percentage, so you're absolutely right. We've talked before about 5% of our sales to R&D spend, and that's indeed the sort of level we'd expect to spend. I think what I trying to explain a little bit in the presentation is that we've been taking a really good hard look at the portfolio and making sure we're really investing there as step change growth there and making sure it meets with our strategy. And I mean, the beauty is we're not short of ideas to to do there. And so we've been making some quite careful investment decisions about where we're putting that. We follow a very structured MPI process as well. So we have a whole bunch of stage gates that things need to pass through before they move to the next stage and get the next transfer funding. So that's the way we deal with the R and D. I think for the CapEx ratio, we don't normally publish that. But what I can say is, of course, we do have a set of criteria that we need to fulfill for any CapEx spend. And they're naturally the group will look at the best places to place capital across JM for the best returns for investors. So, I mean, I don't think that will surprise you the answer, but that's the whole that's what we do with the CapEx. So we don't have an allocated percentage in that sense. It's our best investment that we can make for the group. Now then the global SAP rollout, I think, I mean, it's an SAP rollout that will come in terms of efficiencies for the manufacturing. Actually, the efficiencies in our manufacturing comes a lot from our science, to be honest. So what we're doing in our manufacturing space, it's quite complicated chemistry. Particularly in that whole refinery area, we're doing some quite complicated chemistry in there. And so an SAP system isn't something that really helps you with the complicated chemistry. Lots of that efficiency comes from deep science and the deep understanding of how the different processes can interact with each other and how you might want to flow materials through. So the SAP system isn't really a way to get to the chemistry in that sense. And then I think the last question you asked there was I may have lost one of those questions there. Yes, the cash flow issues given that licensing has generated cash through advance payments historically. Should we remain cautious around the cash flow generation of the division because of that? So I think I mean, we can't comment really about what I would say is cash remains a focus for the whole group. So think that's really what we do. And I can't really I can't give anything to give any further indication that might amount a trading update. I think we'll talk a bit more about that at the year end probably. We'll now take a question from Andrew Stout from UBS. Please go ahead. Sorry, just a follow-up. To actually back to Neil's question on operating leverage, I'm just still not clear why we wouldn't get a bit more or whether it's just conservative guidance. You know, because I think you said Jane 12,000,000 of cost savings So first of all, I wanted to check on the chronology of that, please. I missed when that will be completed by. And then if you bear in mind, you're going to have volume growth 3% to 4% as per your September comments. You've got those 12,000,000 in cost savings. Plus the efficiencies you're doing across your 3 refineries, as you mentioned earlier. Sort of thinking you can do a lot better than 1% above your volumes. So is it fair to say you're naturally being conservative, not that that's a bad thing? Well, so let's go through it. So firstly, I mean, the licensing, we're not projecting to come back. Alright. The cost savings But, but, sorry, just interrupting. You're not expecting to get worse either, are you, or are you? No, no, we're expecting, as I say, it feels like it's pretty much in the trough. So to come back midterm. In terms of cost savings and this whole basically, I mean, cost savings is one way of putting it. We've got a whole efficiency program here going on. And this is something that you do. One thing we don't want to do is to disrupt our customers and to have any impact on the way that we do business in the market because with these sorts of leadership positions, you need to take good care of the customers. Now That means we've got a very planned, very structured approach, and we've got a couple of years of cost saving program work going on. It's not something where you push a button and bingo outcome for money. So in terms of chronology, if you like, the sort of cost savings programs and efficiency programs we've got will last over a couple of years. And what we also have to make sure that we're doing is we have to make sure we then invest as well for our future and invest in growth and also invest in sustaining our position to make sure that we're meeting ourselves all the new regulatory things that will come up as they indeed will. So there's also an element of reinvestment back into the business. So I think that's important to take into account when you look at the holding perspective, and that's what most of the guidance is is. So it's based on a very structured plan, taking into account the needs of the business, the needs of our customers and making sure we can do this in a way that is is not disruptive, but indeed very positive and builds a strong sustainable business. We'll take a question from Charles Greg from Citi. Please go ahead. Hi, Jen. Just one quick question. In the past, coal to chemicals was trumpeted as a source of growth and obviously we've seen a downturn in expansion in that segment. But last year, we saw some, or some some resumption and activity. And we were just wondering if you still had exposure or positive exposure, to growth and capacity there. Specifically Chinese coal's chemicals? Yes. I mean, as you know, I mean, we do have leading technology in that coal's chemical space. And we do we do therefore we are therefore positioned in that. It's one part of the total business in the whole portfolio of things. So it's not something that's going to make a massive difference on the scale of the whole business. But yes, we have leading technology in that area. And coal remains an important feedstock in China. It appears there are no further questions at this time. Mr. Bud, I'd like to turn the conference back to you for any additional or closing remarks. Okay. Well, in that case then, I guess that will bring us to the end of the call. If you've got any further questions that we haven't had time to cover, please do get in touch with the Investor Relations team, with Martin and the team, and a transcript of the call will be available to download from the website at some point tomorrow. So with that, I thank you all for your time and look forward to speaking to many of you in the future. Thank you. Ladies and gentlemen, this concludes today's call. Thank you for your participation. You may now disconnect.