Earnings Call: Q1 2021

Apr 29, 2021

Ladies and gentlemen, welcome to the Clariant First Quarter 2021 Reporting Conference Call. I am Paul, the Chorus Call operator. I would like to remind you that all participants will be in listen only mode and the conference is being recorded. The presentation will be followed by a Q and A session. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Andreas Schwarz Veldev, Head of Investor Relations. Please go ahead, sir. Thanks, Paolo, and ladies and gentlemen, good afternoon. My name is Andreas Schwarzwelder, and it's my pleasure to welcome you to Clarion's 1st quarter 2021 results conference call and live webcast. Joining me today are Konrad Kaisers, CEO and Stefan Lunen, CFO of Clarion. Konrad will start a review, followed by Stefan, who will guide you through the detailed results and provide a short term outlook for the group. Konrad will then conclude with comments on Clariant's full year 2021 outlook. There will be a Q and A session following our presentation. At this time, All participants are in listen only mode. The slides for today's presentation can be found on our website along with the Q1 2021 media release. I would like to remind all participants that the presentation includes forward looking statements, which are subject to risk and uncertainty. Listeners and readers are therefore encouraged to refer to the disclaimer on Slide 2 of today's presentation. As a reminder, the conference call is being recorded, and a replay of the call will be made available on the Clariant website. As a final housekeeping comment, please note that all figures discussed refer to continuing operations unless specifically noted otherwise. Let me now hand over to Konrad to begin our presentation. Thank you, Andreas. Good afternoon, everyone. I would like to welcome you to our Q1 2021 results conference call. In the Q1 of 2021, Clariant Delivered a strong performance improvement and returned to growth in terms of both sales and profitability. Sales increased by 2% in local currency and by 9%, excluding the continued weak oil and refinery business, Affecting our business area, Natural Resources. We saw a broad demand recovery Across all other businesses, particularly in Europe and in China. China was helped by a favorable year on year comparison due to the negative COVID-nineteen impact in Q1 2020. Our Q1 2021 results reflect the strengths of our core specialty chemicals portfolio As well as the disciplined execution of our performance improvement programs. Catalysis sales Rose by 10% in local currency, benefiting from strong refill activities in petrochemical and syngas. Air Chemicals expanded 7% in local currency. We saw a recovery in the industrial markets As well as continued good demand for Coatings, Home Care and Crop Solutions. Functional Minerals and Additives delivered robust sales growth within natural resources, benefiting from a recovery in automotive production And continued strong demand in electrical and electronics markets. Klaviyant reported an improved 1st quarter 2021 EBITDA margin of 16.4% compared to 15.4% in 2020, Driven by organic growth and the execution of performance programs, we generated a cost savings of CHF 6,000,000. Price increases were initiated in all of our business units And could partly offset higher raw material and logistics costs? Clariant continues to deliver on its strategic priorities. Key examples of our achievements include the joint venture with India Glycols to become a leading green ethylene oxide Derivatives supplier and the integration of our One Clariant campus, which strengthens the group's Ladies and gentlemen, we assume our key end markets will continue to We covered to pre COVID-nineteen pandemic levels, and we will continue to execute our strategy. We expect to generate moderate local currency top line growth and an EBITDA margin slightly above pre COVID-nineteen pandemic levels in 2021. We remain committed to our midterm targets. With that, I would like to now hand over to our CFO, Stefan Lune, who will provide further details on the quarterly results. Thank you, Konrad. Ladies and gentlemen, good afternoon, and welcome to today's call also from my side. Let me substantiate the strong quarterly results Konrad referred to with the financial performance details starting on Slide 4. In the Q1 of 'twenty one, Clariq generated group sales of CHF1 1,000,000,000, an increase of 2% in local currency. This development was attributable to growth in Care Chemicals and Catalysis as well as Functional Minerals and Additives Within Natural Resources, Oil and Mining Services business was negatively impacted by oil refinery production curtailments. Excluding the OMS business, actually grew sales by 9% in local currency. The positive pricing impact at +2% Help to propel growth, while in contrast, the currency depreciation against the strong Swiss francs impacted sales by a negative 4%. This was primarily attributable to the devaluation of Latin American currencies and the U. S. Dollar versus the Swiss francs, while the euro appreciated. In total, this resulted in a 2% sales decline in Swiss francs. On an absolute basis, the EBITDA reached CHF 164,000,000 compared to CHF 157,000,000 in the Q1 of 2020, An increase of 4% in Swiss francs despite weaker currencies. Operating leverage from sales growth, Continued cost discipline amid the COVID-nineteen pandemic and the successful execution of the efficiency programs were the main reasons for this improvement. In the Q1 of 2021, the efficiency program for continuing operations contributed CHF 6,000,000 of its total scope of CHF 50,000,000. Thereof, an increment of slightly above CHF 20,000,000 are expected to be contributed in the full year 2021. All performance programs, also the efficiency programs in discontinued operations and the rightsizing programs Very well on track. While we foresee a natural lagging effect in the Q2, we are confident of the positive impact of our pricing actions, which will facilitate our ability to pass on raw materials and logistics Cost increases. The global production network and the execution of the business continuity program helped to mitigate the impact of disruptions in supply chains in these turbulent times. As a consequence, the EBITDA margin increased by a notable 100 basis points to 16.4% in the Q1 of 2021 Versus 15.4% in the prior year. As anticipated, the profitability also improved over the Q4 2020 With 15.6 percent. Let's move on to Slide 5, which depicts The regional sales development for the Q1 of 2021. Sales in Europe grew by 17% with Germany keeping pace at 15%. This expansion was mainly due to the general economic recovery in Care Chemicals, Catalysis and Additives, plus a weather related improvement in the Aviation business. Sales in Middle East and Africa declined due to the project mix. Sales developed in Asia Pacific With an expansion of 9% in local currency. China, our strategic focus area, grew by a lofty 44%, Driven by the economic recovery across all business areas versus a more COVID-nineteen affected Q1 in 2020. The 27% lower sales in North America are largely attributable to the challenging environment in oil services and the effect from business disruptions in Texas in the Care Chemical business area due to the winter storm. The 4% sales expansion in Latin America results from an improvement in Care Chemicals, specifically Crop Solutions And in Additives, supported by strong development in Brazil. Let us review the business areas figures in more detail, starting with Care Chemicals On Slide 6. In the Q1 of 2021, Care Chemicals sales increased by a resounding 7% in local currency And by 4% in Swiss francs. The sales development in Consumer Care increased in a high single digit range, underpinned by strong expansion In Crop Solutions and also compelling growth in Home Care. Paints and Coatings again developed strongly, A trend which clients forced us throughout 2020. Industrial Applications sales recovered and developed favorably in the mid single digit range, primarily due to the aforementioned continued strong performance in Coatings. This trend was also supported by the recovery in industrial lubricants and the weather related demand improvement in the aviation business, Despite the unchanged restricted air traffic situation, negative effects from the disruptions in taxes We're overcompensated by the pre buying in anticipation of further price increases. The Care Chemicals EBITDA increased by an over proportionate 16%, which resulted in a significantly improved margin development to 19.8% from 17.8%. The improvement was attributable to higher sales and the subsequent operating leverage improvement. It was also fueled by the realization of efficiency program driven cost savings, while prices were adjusted to counteract increases Let's move on to Catalysis on Slide 7. In the Q1 of 2021, Sales in Business Area Catalysis progressed by a notable 10% in local currency versus a low comparison base in the previous year. Depreciating currency resulted in 6% increase in Swiss francs. Petrochemicals exhibited double digit growth, which was accelerated by demand for Cataphene Catalysts in China and Europe. Syngas Delivered double digit growth driven by Gas to Liquid Solutions. Demand for custom and refinery catalysts was lower, While the sales contribution from the opportunistic emission control catalyst business in India for use with motorized scooters continued to expand due to the COVID-nineteen pandemic. The Q1 2021 EBITDA margin rose significantly to 19.7% From a low 13.2% in the previous year as a result of a favorable product and product mix, Pricing as well as cost savings. On Slide 8, we See that the Q1 2021 sales in Natural Resources declined by 8% in local currency and by 10% in Swiss francs against the tough comparable Q1 2020. The sales erosion in local currency in this business area can be attributed to the soft economic environment in the oil and refinery industry. Oil and Mining Services Sales declined due to the continued weakness in oil and refinery against a particularly tough comparable base, Weaker in double digits versus the Q1 2020, but stabilizing versus the Q4 of 2020. The higher mining services sales were unable to compensate for this negative development. Foundry Minerals rose at a high single digit rate In local currency, due to strong growth in foundry, which benefited from the automotive recovery in Europe and China. The economic recovery also supported cargo and device protection solutions. Both these positive developments Offset the state development and purification. Additive sales increased at a strong high teen range In local currency, the resounding expansion resulted from a notable recovery in the relevant end markets, Such as the electrical and electronics markets, the automotive sector and fiber applications. In the Q1 of 2021, the EBITDA margin decreased to 16.8% from a record high 19.1% in Q1 twenty 20. As a result of lower volumes attributable to the weaker oil and refinery demand environment. However, the Natural Resources EBITDA margin improved versus the run rate of 2020 and the Q4 of 2020, which was at 15.4%. Functional Minerals almost reached last year's high margin levels and additively recorded an improvement. The previously announced efficiency programs generated the anticipated cost savings And prices continue to be adjusted to counteract increases in raw materials and logistics costs. Ladies and gentlemen, let me conclude my review of the short term outlook on Slide 10. In the Q2 of 2021, for the continuing operations of Clariant, we to generate moderate local currency sales growth in a year on year comparison. We also aim to improve the EBITDA margin On a year on year basis, while defending the Q1 2021 margin level with strong cost discipline and pricing measures Despite the rising raw material and logistics costs, the underlying assumptions for the business areas In the Q2 of 2021 are as follows. In Care Chemicals, we anticipate a continued rebound in industrial applications, In particular, due to the more attractive comparison base, which we expect to result in moderately higher local currency sales In Q2 2021 versus Q2 2020, mitigation measures are in place to improve the EBITDA margins level Year on year and to sequentially defend the strong margin level reached in Q1 'twenty one by offsetting the higher impact of rising raw material And logistic costs with further pricing actions. In Catalysis, we assume That we will see continued sales growth in local currencies, in particular, in petrochemicals versus Q2 2020, All by at a lower, more moderate pace than in Q1 2021. We expect this to translate into EBITDA margins somewhat Below the previous year's Q2 and the Q1 of 2021 due to the anticipated product and project mix. Given the complexities of forecasting quarterly Catalysis developments, especially in the current economic environment, it is important to note that the business fundamentals here remain positive based on the present order pipeline, our portfolio strength and innovation capability. And finally, we anticipate that Natural Resources We'll return to year on year local currency sales growth based on our assumptions for further stabilizing oil business, Together with continued growth in Additives and Functional Minerals, the EBITDA margin should improve on a year on year basis As we aim to defend the current Q1 'twenty one profitability level despite rising feedstock costs. With this positive Short term outlook, I close my remarks and hand back to you, Konrad. Thank you, Stefan. I would like to conclude with our outlook for the year. In the full year 2021, Clariant's continuing operations are expected to generate moderate local currency sales growth With the EBITDA margin to be slightly above pre COVID-nineteen pandemic levels. This outlook Assumes a continued economic recovery, while uncertainty remains high. It also takes into consideration Both internal as well as external factors. We will continue to successfully execute Our efficiency programs, while at the same time continuing with our effective margin management with pricing actions in all businesses. We will also continue to benefit from our innovation driven specialty portfolio and growth investments. We assume a broad based COVID-nineteen vaccination rollout, which will support economic recovery And a continued improvement in consumer and industrial facing applications. We further anticipate a stabilization of supply disruptions and the raw material and logistics costs easing in the second half. We see Clariant as being well positioned to come out stronger of the COVID-nineteen pandemic, and we are committed to take the next steps in improving our performance. The portfolio transformation is continuing with our planned Pigments business divestments, while the efficiency programs Are being implemented as planned to deliver the targeted cost savings. We remain committed to our midterm targets, though the timing depends on the economic environment and the further development of the COVID-nineteen pandemic. With that, I would like to turn the call back over to Andreas. Thank you, Konrad, and thank you, Stefan. Ladies and gentlemen, before we begin the Q and A session, we would like to ask you that you please limit the number of questions to 2, The first question comes from the line of Fijs Christian from Kepler Cheuvreux. Please go ahead. Yes. Thank you. Christian Pfeit here from Kepler Cheuvreux. Good afternoon, everybody. Two questions, please. Short ones. First of all, would you still see negative effects from the taxes freeze in Q2? And if so, Could you put a number on this? And then, Konrad, you just mentioned pigments. Any news on the pigment disposal in terms of timing? Thank you. Yes. Thank you, Christian. In terms of the Texas storm and in terms of Negative effects, as you are probably aware, we have actually a plant in the Texas area for our Care Chemicals business, our econciliation facility, indeed, in the Q1, we, as all of the most of the other Plants in that area have been affected by the freeze. There was actually a shutdown of 2 weeks for our facility. You do see some effect of that in our Q1 numbers for Care Chemicals, but we are up and running again and no further effects To be expected. In terms of the Pigments divestment, Stefan, perhaps you could talk a bit about timing and progress. Yes. Sure. So Christian, as we have updated also with the full year reports, we have guided that After we relaunched the divestment process for pigments back in autumn last year, Through the process, we are now exactly in the 2nd quarter in the negotiation phase. So we have funneled the interested parties to a very few. Those are now where we have the negotiations with. It's value over speed. So we, of course, want to see the appreciation Of the recovery as well as of the efficiency program, which is also taking place in pigments in the value. And I would say that latest with the Q2 results, we can give then a very precise update on the pigment divestment process. So fully in time. Okay, great. Thank you, Stefan, and thank you, Konrad. Thank you. The next question comes from the line of Andrew Stott from UBS. Please go ahead. Yes. Good afternoon, everybody. Just two questions. So first of all, Maybe I have a question to Konrad or Stefan or maybe both of you. On the margin comments you're making on Q2, and by the way, thank you for The clarity on Q2 and 2021 guidance. Is the optimism on defending the margin about The price initiatives you've made or is it about the fact that volumes in the industry are still so robust? So maybe just a bit of color around how you see that gross profit progression and why? Second question is on litigation, the news today that you've made with regards to PFAS. It's a simple question. When you sold your asset that's relevant to this situation in 2013, Did you agree at that point? I'm sorry, I realize neither of you were privy to that those signatures. But nevertheless, Did Clariant sign up to 100% liability for future litigation? Or will there be a shared liability if indeed there are any Financial implications. Thank you. Sure, Andrew. Thank you for the questions. The first question regarding Q2 and margin Development and our statements on that, I'll pass on actually to you, Stefan. The second question on TIFAS, I'll answer after that. Sure, Stav. Okay. So yes, let me stay stick with the Q2 margin. We had already announced I mean, we've seen dramatic price increases in the oilfield arena, it will be driven by the crude oil price increases. We've seen in the Eurozone, ethylene, propylene up by 30% to 40% versus November was when it started to hike, and that was actually also when we started with our price mechanism, either contractually indexed Or through our value based pricing steering. But you always have a certain lagging effect, And it depends really if you are also transiting to further regions or so you're talking about 0 to 12 weeks. And we are very confident that we can pass on the price increases through our 2 steering modes for price increases. But we do see that in the Q2, we do have certain lagging effects in the pricing. So if you heard about our margin Guidance for Q2, it was quite differentiated also by business area. And definitely, we see here also further volume growth, particularly also on year on year Comparison, but also the fact that we have a continuous buildup of the efficiency Contribution and the cost takeout. So this gives us in totality, we have a very high specialty portfolio, which is able to pass it on, As you've seen, plus 2% price in the Q1. Plus, we are running our transformation, which is independent of the market, including the cost takeout. And that gives us the margin confidence in Q2 despite a very challenging environment for Q2. And with that, maybe the second question back to you, Florent. Yes. Thank you, Stefan. Yes, Andrew, as far as your question on PFAS And liability, it is very early days. It is actually, at this point in time, not even Possible to say if there is any liability here. So just as a recap, we are named as a defendant. Klarion is named as a defendant amongst roughly 100 other defendants. We actually have been a relatively Small player in this in the past, and this dates back this chemistry, the polyfluoro, our Q substances, PFAS, It's back all the way to host. There are 100 other defendants. And actually, yes, at the moment, we have roughly 1,000 lawsuits. I think what is important in terms of the divestment of this business is that indeed, we no longer are in this business. This is a legacy. Indeed, in 2013, this business has been divested to SKA Capital. It's now called Akroma. But let me Go back to the first point. At this point in time, it is not possible to actually, yes, say if there is any liability here or not. And if I follow-up, Konrad, is there any way you can confirm or not whose liability might be if there were any? It's obviously partly yours, but is it partly or fully yours? That was really the question. I can understand that there's Lot of moving parts on the process, but ultimately, it's a separation agreement that I think the shareholders want to know about. Sure. Yes. So we have divested this business, but I'm not in a position to say right now if there are Specific liabilities, as I already mentioned, and I'm certainly not in a position to comment on the details of the SBA That at the time was actually negotiated with SK Capital. Okay. Thank you. Thank you. The next question comes from the line of Choudhry Mubasher from Citi. Please go ahead. Just one on Catalysis. You talked about the fact that the project The pipeline is a bit lumpy. Therefore, the 2nd quarter is a little bit weaker. Could you just provide some comments around the full year? How do you see sales and EBITDA margin progressing in that division for the full year? And then secondly, just to come back on the PFAS Disclosure. As well, my understanding is that the lawsuits have been around for a few quarters at least. So I'm just wondering if there's anything changed to cause you to disclose now as opposed to earlier. Just some comments on the timing of disclosure would be helpful. Thank you. Yes. Maybe I'll pass the second question on first to Stefan regarding the timing of the disclosure on PFAS. Yes. Let me start with this part. Literally, we have now very recently basically what has started is The so called representative trial cases, and that has started very recently, and we decided now To, at this stage, already announced it rather than later because we want to assure full transparency to the case. That's the trigger basically what happened to reported now is that the representation files I now just need to be started. But it will be a long process. And as Konrad said, we have Totally open about any potential impact or if any potential impact at this stage, but we decided So this communicated rather earlier than later because of the representative's trial case. Yes. In terms of the Catalysis business, we saw indeed a very strong Q1. This was actually petrochemical syngas, But also a continuation of the strong business in India, as we discussed at our last call, for the 2 wheelers, for business, the new emission control standards in India as well as the impacts, quite frankly, from the COVID situation right now In terms of the order pipeline, and we actually expect continued good momentum sales momentum in Catalysis also in the quarters The next question comes from the line of Nicola Tang from Exane BNP Paribas. Please go ahead. Thanks very much. Hi, everyone. Could I ask a question on the discontinued items on the Pigments side? Would you say that the adjusted margin performance that you delivered in Q1, the 13% is reflective of the longer term sort of historic profitability of the Pigments business. Obviously, it's before the full effect The cost initiatives that you're mentioning, but I just wanted to check on that. And the second was a bit of a boring one. There weren't many sort of one offs This quarter, and I was wondering if that's the new norm going forward or we should stick to your usual guidance of the 1% of sales on a full year basis. Thanks. All right. Nicolas, I really appreciate the question number 2, but I will answer both with full passion, of course. So the 13% margin, which we disclosed at or 13.4% underlying margin in Q1 21 for discontinued operations is not directly attributable to just pigments because there's a lot of other movements in the discontinuation. There is still I'm closing accounts from MasterVetch TSAs, etcetera. So you cannot conclude easily to a margin here. And Unfortunately, even not to a stand alone margin, which is then always the case for the valuation. So unfortunately, you cannot bridge that. However, as I said before, We do see a pickup. The growth figure here is relating to Pigment. So 4% local currency growth is what we have seen in the Q1. You See that positive momentum from an economic standpoint. And yes, we have a €20,000,000 plus program in the pigment business, which is has contributed €8,000,000 last year and will take a significant portion also in this year from the run rate point of So unfortunately, not able to bridge to you, but yes, we see very positive momentum in the pigment business. And to your second question, absolutely, yes, The new normal for Clariant is, and I think you're at Konrad. And me, just speaking about reported EBITDA, till now, till you asked for pigments, I didn't use one time The EBITDA before exceptional items, and that should be the new normal because we want to close that chapter. All right. So just to clarify in terms of for the rest of the year, this kind of we should take what you did in Q1 for the exceptionals and drag that forward? Okay. So from a guidance point of view, we said that on an underlying basis, between underlying and exceptions, You're looking mid- to long term at 50 basis points, 0.5 percentage points. Might still be a little bit higher this year as we're concluding there might be adjustments The provision, but nothing serious in that manner. Okay. Thank you. You're welcome. The next question comes from the line of Alex Stewart from Barclays. Please go ahead. Hello. Good afternoon. Hopefully, two simple questions. Could you confirm whether the de icing revenue in the Q1 was Up year on year, it was the weather was supportive, I know, but obviously airline travel was well down. So if you could just give us a firm guidance I don't think it's in the release, but it's possible I missed it. And then secondly, on your efficiency program, I think I might have been saying you did €20,000,000 last year and it was €30,000,000 Come this year and you've done €6,000,000 in the Q1. Firstly, is that right? And secondly, could you give us any sense, even qualitatively, about which division is likely Benefit disproportionately from the CHF 30,000,000 benefit this year would be very helpful. Thanks. Yes. Alex, thanks for the two questions. I'll take the first one actually on the icing business, and I can comment with more detail on the efficiency your question around the efficiency programs. Yes, the icing business was actually very strong this quarter. We saw, believe it or not, a double digit increase from prior year, Even though passenger traffic is obviously still down significantly, perhaps a bit of explanation here. Our deicing business is It's not just the de icing chemicals that we put on the wings of airplanes, but it's also actually the de icing chemicals that we put on runways At airports, so the moment that actually an airport is open then and there's snow and ice, You actually do need our deicing chemicals. So even though, again, passenger traffic down significantly Due to the strong weather in Europe, snow, icy conditions, we, in fact, saw a double digit increase in the Chemicals year on year in Q1. I thought perhaps you could comment on the efficiency program. Yes. Sure, Alex. So on the efficiency program, So we're talking about the continuous or the effect of the efficiency program on the continuous or core business. That is exactly the CHF 50,000,000 or even in excess of CHF 50,000,000. We still expect a bit more, a little bit more. We had a contribution in the last year of €20,000,000 We had a contribution in the Q1 of €6,000,000 And we assume for this year In excess of €20,000,000 So that means the residual of, yes, €20,000,000 last and then maybe €20,000,000 plus this year It's going to be minor effect than in 2022. And the run rate is building up very fastly because We have basically most of the positions have already been reduced, right? So it's just a question of the pro rata occurrence by quarter. And so could you possibly give us some steer of which division is likely to benefit from that more And which will get disproportionately lower contribution from the efficiency program. It really helps us to be able to split that €20,000,000 or €30,000,000 out of other divisions. Well, absolutely. I mean an indication you can see because still in the backup, we have a split of the restructuring provision By business area, so this gives you an indication. But let me answer it to you in a summarized way. The biggest impact Actually in natural resources and there particularly in oil and mining. And that is why you remember this was the only one in Q1 year on year Which went down in margin that we compared to super high base 90%, that is actually mid term target range in Q1 2020. And the reason how we compensated that was because we have The positive impact here from the efficiency program being actually more pronounced in oil and mining particularly, but also in additive and functional minerals. So This business area is the one which is most pronounced, followed by KEA and then the last one being Catalysis. That's The next question comes from the line of Markus Mayer from Badar Helvea. Please go ahead. Good afternoon. I have two questions, one on the outlook and another one, again, on the raw materials environment. Firstly, on the outlook, I'm still struggling of this definition, moderate local currency growth. You had growth high growth rates in the first quarter, Guide for model growth rates in the Q2 and have a very low base effect for the Q3. Does this guidance imply a Significant declining momentum for the Q4. Or how can I understand this moderate growth assumption and also what means moderate for you? That would be my first question. And my second question would be on the raw material cost effect. Do you expect this to spoil then the 2nd quarter margins, in particular, in Care Chemicals and Oil and Mining Services, so the ethane oxide related chain? And do you think you have the pricing power to pass on, in particular, in Oil and Mining Services? Thank you. Yes. Thanks for the question. On guidance as well as the Care Chemicals Margins. Just a brief word on what does it mean, the moderate outlook. We're sort of pointing at Mid single digit range, up to mid single digit range. Perhaps, Stefan, you could, yes, provide a bit more color here. Yes. So moderate can translate, as Carlos said, to up to mid single digit range. And I would see, If you look at the growth rate, and I think the question was there before, we had in the Q1 10% in Catalysis. I don't think that this is the underlying rate for the full year because we had a very low project base, refill cycle. And you remember, I talked about this, even an order shift at a time from Q1 2020 into Q4 2019. And therefore, you will see in that case, Catalysis is a little bit of a normalization, but still good growth rate. Principally also, we are a bit stronger in Q1, Q4, when you think about aviation or certain segments, that also needs to be considered when you just extrapolate based on Q1. And that's why we are guiding here, as Conor said, for the mid up to mid single digit Yes. And then there was a question on margins. I think I can make a few comments about it actually. But Yes. So on margins, what you see is and particularly actually Care Chemicals has been affected by that. We see ethylene, Propylene derivatives pricing up substantially in the recent months. So you're talking about increases Roughly 40% compared to November. What is happening overall in terms of the raw material cost That you see in Q1 low single digit increase, and we expect that in Q2 To go even to a mid single digit increase, there are still some increases coming through. But then we actually do Expect an easing in the second half of our raw material costs. All of our BUs are actually raising prices, Care Chemicals as well. And at the moment, we've actually partly offset the raw material increases That we are facing right now in Q1, but the price increases are still in the process of being implemented. And the The issue for the year is that we fully recover the raw material inflation also in the Care Chemicals business. Thank you. Okay. Thank you. The next question comes from the line of Jaydeep Pandya. Please go ahead. Thank you. Just firstly on apologies to come back to this really, but it's a very simple question on the PFAS. Is this really related to paper chemicals? Or can you give us some idea really of what has been flagged as the Sort of chemical mentioned for you in this regard. And then just really on pigments. I mean there's a lot of press articles citing you're in discussions with SK Group, And it's sort of a bilateral discussion. So could you just like remind us or refresh our memory in terms of how is the interest For this asset right now, and when do you expect really the closing to happen? And if you don't really get the right price for it, Is there a plan B here to actually not divest Pigments and reintegrate it back into Clarit? Thank you so much. Sure. Jaydeep, let me pass the last question on to Stefan on pigments, and then after that, I'll answer your question on PFAS. Yes, Jadeep. As I said, we had a normal process, which started in autumn with the re Launch in the market and then going through the diligence management presentations and so on and so forth and now on the negotiation phase. And it's a very selective view which we have that review of the final bids With and I will make no comment whatsoever on who and at which value range because we want to ensure that we get maximum value for us and our shareholders. That also will define the timing. So whether we close on Monday or sign, sorry, sign on Monday or in weeks So months from now isn't decisive. And that's why we'll take the time for that negotiation to assure that We get the best value as a return for the business, which is improving. And this dictates the timing of signing and closing and nothing else. There is no interest from us to reintegrate the business. We are still fully bullish and interested to go forward with our portfolio transformation, But not at any given price, as simple as that. And therefore, the best I can say today is that We should actually conclude these negotiations in the Q2, like I said before, and then we should come out. And if it's a positive value, then yes, signing is very quick Also and closing is then depending on the regulatory processes, as I've guided before, so that takes Maybe 6 to 9 months depending whatever the regulators require. Okay. Then as far as your question on PFAS and the chemicals and the products that are involved here, so the chemical is actually there and Polyfluoroalkyl substances, abbreviated as PFAS, the products here that are that these lawsuits are about Are actually the is actually the foam that is being used in fire extinguishers. And once again, let me emphasize this is a legacy from the past, and this business actually has been divested by Clariant in 2013. All right. If I can just ask you, Conrad, one follow-up. I know it's been early days for you, but when you look at Clariant's portfolio And compare it to your previous role in AkzoNobel and think about specialty chemicals, Are you currently sort of satisfied with the margin level of sort of whether it's 15%, whether it's 16%, whether it's 17%, at least in my humble opinion, this is not Specialty Chemicals So do you think that in the sort of the medium term or the long term, Clarion, if it wants to be called Specialty Chemicals, should have a margin of North of 20%. Or are we actually not looking at it in a right way from what you've seen so far? Thanks. Yes. Thanks for the question. I think it's a great question and a very important question. So first of all, on the portfolio, Based also on my past experience in Akzo, I can confirm that the portfolio that Clarion right now has, The different positions in Care Chemicals, in Catalysis, but also in Natural Resources with the functional minerals and the additives, These are truly specialty chemicals. Actually, they should indeed command the margins That are associated with Specialty Chemicals. A bit more specific, a bit more granular, if you look at our businesses and where they currently are versus their potential. Care Chemicals, you saw the EBITDA margin in Q1, 19.8%. There is an upside here, and you see that also reflected in the midterm target, where which is, I believe, a range of 19% to 21%. That is a very realistic target setting as far as the midterm targets. And definitely, certainly, the more Consumer side of Care Chemicals, the consumer applications, crop chemicals, personal care, cosmetics, they definitely Are able those businesses to get margins in the 20% EBITDA range. Catalysis, today, Also approaching 20% in EBITDA margin for the Q1. Here, the let's say, the midterm target ambition It's more in the high 20s. That is a combination of the Catalysis business with very profitable and leading positions In Petrochem, in Syngas, but added to that needs to be the Sun Liquids business. So this is definitely going to be accretive, and this is a big part, I think, of bridging towards these midterm targets. Finally, Natural Resources. If you look at our current performance there, Q1, 16.8 percent EBITDA margin. Midterm targets, let's say, towards 20%. Here, again, I think the company It's on its way, and it's a realistic target setting in terms of the midterm targets. And here, the key thing is a recovery in the oil chemicals. When you see that recovery sort of kicking in, which we see later than the other businesses indeed, But somewhere in the second half, when you actually see the oil chemicals recovering, we should actually see a pickup in the EBITDA margins there as well. Thanks a lot for the clarity. Thank you. Thank you. The next question comes from the line of Rob Hales from Morningstar. Please go ahead. Yes, thanks. Good afternoon. I'm just wondering about the Indian scooter catalysts and how sustainable is this business and is there an opportunity to perhaps replicate this in another country? Yes, Rob. Let's the Indian scooter business. First of all, what you See is that which is very positive that India is actually has actually brought its emission standards To the European norms, and what you see there is a significant pickup in demand for these catalysts that actually bring down The emissions. How sustainable, how long term is it? I think in all fairness, these are Not electrical scooters. What you have seen in other markets, like for example China, is a shift Towards complete electrical 2 wheelers. So at some point in time, India is going to follow that, Fortunately for the environment, but not so good for this emission control business where we see definitely right now a strong momentum, but longer term, This is not a sustainable sort of business. We take it opportunistically. We enjoy it as it comes. We've improved the margins on it. It's very accretive right now, but this is not sort of a strategic area long term for the company to invest in. Okay. Thank you very much. Thank you. The next question comes from the line of Chetan Udeshi from JPMorgan. Please go ahead. Yes, hi, thanks. A couple of questions from my side. The first question was, historically, we've always had Clariant, In a rising raw material environment in Care Chemicals, revaluation benefit of raw materials, wanted to confirm whether that was the case in Q1 Care Chemicals margin, any Sort of inventory valuation gain at all? And second question was this Indian JV Bioethylene oxide, maybe can you throw some more light in terms of financials? What is the cost for Clariant? And also whether that's part of the guidance for Q2 or full year? Yes. So in terms of the rising raw materials, the inventory gains, I would appreciate if Stefan could comment on it, then I'll give some background on the Indian JV. Yes. So Of course, when raw material go up, you have certain positive revaluation effects, but you also have to allocate them over the turns of the inventory. And therefore, the margins of Care Chemicals have not a significant impact from any such of an item As you might have alluded to in the past. Okay. In terms of the Indian JV, let me remind you that we still, obviously, need to close this transaction, Which still actually takes a bit of time and that is towards more towards the end of this year. So you would see an impact here A significant impact in our results. In terms of the financials, This is actually going to be on a full year run rate, let's say, close to €100,000,000 in terms of a revenue addition to our business. In terms of margins, yes, initially not immediately accretive, but over time, definitely, this is actually a very attractive Business, it's green, etoxylated products, surfactants, Where clearly, we can command a premium in the various applications. And what is the purchase price? Is there a way to about the purchase price for you guys? No. You have to see that this is a joint venture with our with giving us a majority Position as well as certain options to increase our stake over the time. How it is set up is really, I think, The right and fantastic way because we contribute to that joint venture also with certain businesses because we're a small player in India today. We take that business and it contributes it, and then they contribute their leading position in the business into the JV for the specialty part, which we can better commercialize. Plus, they contribute, of course, this GreenEO access, which gives us a global lead position. And therefore, you have basically contributions on both sides. There will be a net equalization payment on our side, but nothing to disclose today. Thank you. Thank you. The next question comes from the line of Matthew Yates from Bank of America. Please go ahead. Hi, good afternoon, everyone. I just sorry, I'd like to ask Couple of questions just about the Q2 guidance to just clarify in my own mind that I understand what you're saying. So firstly, on Care Chemicals, I think you said in your introductory remarks that you thought there was some pre buying from customers In anticipation of the price increases, are you able to elaborate a little bit more in whether you've seen any change in Trend in April or the order book for May in terms of the volume growth versus, say, Q1? And then on the Catalyst business, So I'm struggling to understand a little bit why there would be less momentum in Q2 given there's no Particular difference in the comp. So is that principally a comment about the Indian order Perhaps ending rather than anything on the petrochemical side. Thank you. Happy Matthew to take both. So I'll explain both, but they have absolutely no fundamental concern on growth, robust growth or moderate growth In the coming quarters. If we come to the Care Chemicals question of prebuying, yes, there was a prebuying effect, as Konrad explained, in the Q1. But at the same time, we had kind of a negative impact from the shutdown basically of the Texas zone with the winter storms, and that almost compensated each other. We do not see that, therefore, as a continuation effect into the 2nd or third quarter because we're running in Texas And the prebuying has been done and the stocking has been done. So we're seeing much more of a normalization then in growth. But both effects, as I said, netted each other out in the Q1, more or less. And when it comes to Catalysts, as I said Well, first of all, I could give the general statement. You're looking at Refill or First Fill cycles. So in any given time, Catalysts might look from 1 quarter to the other very, very different because that's the nature of a project business. And here, in particularly, The 10% growth in the Q1 is against a very low base in 2020 Q1 because there were order shifts from Q1 2020 into Q4 2019. That's why the growth rate 10% in the Q1 was actually a little bit higher. We when we look at Q2, we are comparing now against a bit more normalized Q2 in the prior year, which means that we would still see growth but not at the same pace because of this Year on year comparison changes. You would actually even see that we could be in the Q2 and catalyst slightly higher than the Q1. And the margins, again, they are a little bit dependent on the mix. There we were saying, okay, that is going to be a little bit weaker, and that's Just the nature of the business, but fundamentally, it's all set for growth for the full year 'twenty one and also for its step up in margin. Thanks very much for clarifying. So thank you, ladies and gentlemen. We have answered all All your questions. So therefore, we conclude today's conference call. The Investor Relations team obviously remains available in case of any further questions. We look forward to continuing the dialogue with you guys in the coming conferences and then later with the disclosure of our Half year Q2 results on July 29. Once again, thank you for participating, and have a good day. Bye bye. Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call and thank you for participating in the conference. You may now disconnect your lines. Goodbye.