Earnings Call: Q4 2020

Feb 11, 2021

Ladies and gentlemen, welcome to the Clariant Full Year 2020 Figures Conference Call. I am Sandra, 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 Schwartzwender, Head of Investor Relations. Please go ahead, sir. Thank you, Sandra, and ladies and gentlemen, good afternoon. My name is Andreas Schwabfel. It's my pleasure to welcome you to Clariant's full year 4th quarter 2020 results conference call and live webcast. I joined Calerio as Head of Investor Relations on February 1, And I look forward together with the entire IR team to supporting analysts as well as existing and potential investors in their information requirements regarding Clariant. Joining me today is Konrad Kaisers, CEO and Stefan Linen, CFO of Clariant. Konrad will start our review, followed by Stefan, who will guide you through the Konrad will then conclude with a comment on our strategy, sustainability objectives and the 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 our media release and financial review. I would like to remind all participants that the presentation includes forward looking statements, which are subject to risks and uncertainties. Listeners and readers are therefore encouraged to refer to the disclaimer on Slide 2 of today's presentation. As a reminder, this conference call is being recorded And a replay of the call will be made available on Clariant's 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 the presentation. Thank you, Andreas. Good afternoon, everyone. I would like to welcome you to our full year 2020 results conference call. This is my first set of results as Clariant's CEO. Since I started on the 1st January, I had the opportunity to have many video calls with my new Clariant colleagues, with our different stakeholders and with some of you already. These discussions have confirmed my view that by successfully executing our strategy With a continued focus on innovation, sustainability, completing our portfolio transformation, Growth and performance, we have the opportunity to create significant value for all of our stakeholders. I'm looking forward to working on this task together with my dedicated and committed colleagues. And I will report on our progress to you as open and transparent as possible. Now let me start by providing my comments on our full year 2020 results as shown on Slide number 3. Klaviyant delivered a robust performance in the full year 2020. We have successfully weathered the effects of the unprecedented COVID-nineteen pandemic, while assuring safety of our employees first and running business continuity programs across the value chain to keep serving our clients. The performance shows the resilient nature of our Specialty Chemicals portfolio and the successful execution of our performance improvement programs. Our sales in local currency declined by 5% as we saw a weakening in our markets, Most significantly in chemicals for oil production and for aviation. Our core Specialty Chemicals portfolio showed strength and resilience. Our full year Catalysis sales Increased by 1% in local currency, and our Care Chemicals business showed modest growth for the year Well corrected for the declines in aviation. The 4th quarter was our strongest quarter in the year. We saw a sequential improvement from the Q3 and a recovery in most of our markets, with positive developments In the industrial markets for Care, Specialty Catalysis, Coatings, Functional Minerals and Additives. Clariant reported a strong full year 2020 EBITDA margin of 15%, coming close to the underlying EBITDA margin of 15.7% in 2019. Clariant was able to preserve its profitability Due to strong cost management and successful execution of the performance improvement programs. In 2020, the efficiency programs contributed with around CHF 20,000,000 in continuing operations And around CHF 8,000,000 in discontinued operations. Our teams have done an excellent job In managing working capital and cash uses in 2020, which allowed us to achieve A strong operating cash flow of CHF 369,000,000 for the year. Excluding the payment of the EU fine, the operating cash flow was CHF535,000,000, Which is above the 2019 operating cash flow at CHF509 1,000,000. At the same time, Clariant continued to fund growth investments with our 2020 CapEx spend reaching CHF 288,000,000 Versus CHF 273,000,000 in 2019. Important projects Include our new 2nd generation bioethanol plant in Romania, our new catalyst plant in China, Jiaxing in Zhejiang Province and our Lycosene plant in Germany. Travian remains committed to reward its shareholders and our Board of Directors recommends a regular distribution of CHF0.70 per share to the Annual General Meeting of Shareholders on April 7, 2021. In the financial year 2020, Clarionz progressed well in reshaping its portfolio towards a higher specialty value. Our company continue to invest in gross CapEx and innovation, and we are taking a step up in our commitment to sustainability With our new sustainability targets. Ladies and gentlemen, we will continue to execute our strategy, And we remain committed to our mid term targets. With us, I would now like to hand over to our CFO, Stefan Noonan, who will provide further details on our quarterly results. Thank you, Konrad. Ladies and gentlemen, good afternoon, and welcome to today's call from my side. Let me substantiate the robust performance Konrad referred to with the financial performance starting on Slide 4. In an unprecedented economic environment, Clariant generated group sales of CHF 3,860,000,000, A decline of 5% in local currency. This development was attributable to an erosion in 2 segments. The COVID-nineteen pandemic impact on the aviation business in the business area Care Chemicals and the oversupply and low demand in the oil markets In the business area, Natural Resources contributed with a decline of approximately 4.50 basis points on the sales development. The positive impact from pricing and the resilient sales increase in Catalysis were not able to fully compensate The aforementioned effects. As expected, Q4 was the strongest quarter of 2020 with a sales decline of only 2% in local currency. This was driven by continued lower demand amid COVID-nineteen in aviation and oil, but growth in catalysis and some recovery in industrial applications Such as in additive for the final quarter 2020. The absolute EBITDA reached EUR578,000,000 Compared to EUR 692,000,000 in 2019, excluding the one off EUR 231,000,000 provision Booked in the Q2 of 2019. Weaker sales in COVID-nineteen exposed segments such as Industrials, But particularly the difficult environment in aviation and oil as well as adverse currency volatility led to this absolute EBITDA contraction. These effects could not be fully mitigated by our performance programs. Thus, EBITDA margin recorded at 15.0% We're the 15.7 percent in the previous year. Q4 was also the strongest quarter with regard to profitability in 2020, Both in absolute EBITDA of €159,000,000 and in the corresponding EBITDA margin of 15.6%. Despite comparing to a very high base in Q4 2019 of 19.2%, Q4 2020 Reflected the expected sequential margin improvement compared to the 9 month period in 2020 of 14.8%. Let us take a closer look at the sales bridge by moving on Slide number 5. Compared to full year 2019, Clariant reported 7% lower volume Attributable to the before mentioned effect, which was only partly offset by a slightly positive pricing impact at plus 2%. In contrast, the currency depreciation against the strong Swiss franc impacted sales by a negative 7%. This was primarily attributable to devaluation of Latin American currencies, the euro and the U. S. Dollar versus the Swiss francs. The Q4 showed a similar development with less pronounced volume decline based on the growth in Catalysis and the recovery in industrial applications. Slide 60 6, the retail sales development for 2020. The sales development in Asia improved with an expansion of 4% in local currency. Our strategic focus area, China, grew by 6%, While also India reported notable growth. Sales in Latin America also increased by 7% in local currency. Sales in North America decreased by 14% in local currency. This was primarily due to the decline in aviation business in Care Chemicals As well as the decline in oil, especially Land Business in Natural Resources. Europe weakened by 8% In local currency, primarily due to the negative impact from the COVID-nineteen pandemic lockdown measures in the 2nd quarter. However, the region saw an upward trend in the 4th quarter with one of the most significant countries in Europe, Germany, also contributing positively. In the Middle East and Africa, sales declined by 13% in the full year 2020. Let's review the business area figures now in more detail, starting with Care Chemicals on Slide 7. In the full year 2020, Care Chemical sales weakened by 5% in local currency and by 12% in Swiss francs due to the low aviation demand and the Excluding the aviation effect, Care Chemicals would have recorded a low single digit growth In local currency in 2020. The sales development in Consumer Care reflected high single digit range expansion Attributable to double digit expansion in Crop Solutions and good growth in Personal Care as well as Home Care. As anticipated, except for strong development in Paints and Coatings, Industrial Applications sales were lower, Primarily due to the aforementioned sharp drop in the aviation business. The challenging economic environment also resulted in lower construction chemicals, Industrial Lubricants and Base Products Demand. Sales in the Q4 of 2020 decreased by 4% in local currency, Resulting from the sharp decline in aviation within industrial applications, while sales in construction chemicals and industrial lubricants Returns to growth. Consumer Care sales rose in the mid single digit range, supported by growth in Home Care as well as COS solutions. The Care Chemicals EBITDA margin showed significant progress in the full year 2020 with an increase to 18.9% From 17.6%. The weaker top line development was countered by stringent margin management and cost management As well as overproportionate and more accretive growth in Consumer Care. The EBITDA margin improvement at Care Chemicals was even more significant In the Q4, as the margin rose to 21.6% from 18% in the previous year. This development was driven by a more favorable product mix, stringent margin and cost management to offset the declining sales mainly caused by lower aviation demand. In terms of the short term outlook at Care Chemicals, we anticipate a continued difficult situation in aviation amidst the COVID-nineteen pandemic in Q1 2021, which we expect to result in a sales decline in local currency versus the Q1 2020 With low aviation impact. Mitigation measures remain in place to defend EBITDA margin levels year on year by offsetting the aviation outlook And the impact of rising material costs. Let's move on to Catalysis on Slide 8. In the full year 2020, sales in the business area Catalysis progressed by 1% in local currency, Whereas depreciating currencies led to a 5% decline in Swiss francs. Petrochemicals demonstrated resilience With low single digit growth, but the generally weak demand environment in the chemical industry negatively influenced syngas and specialty catalysts. In the second half of twenty twenty, the sales contribution from emission coal control catalysts in India For the use with motorized scooters increased significantly due to the COVID-nineteen pandemic. Sales in the Q4 of 2020 Exceeded previous year levels by 12% in local currency, primarily driven by the very strong momentum in India, driven by the booming mobility sector. Growth in Specialty Catalysis and Pretor Chemicals also contributed to this development. Clarus comprehensive Catalysis portfolio, Which makes it unique in the marketplace, successfully mitigated the negative influences attributable to the COVID-nineteen pandemic. The full year 2020 EBITDA margin weakened to 19.1% from 22.9% in the previous year As a result of product mix effects in the 1st and the Q4 of 2020, with a higher contribution from lower margin business And the efficiency program provision, which could not be fully offset by the sequential improvement in the margin run rate in the 4th quarter. As anticipated, the FSCA margin decreased in the 4th quarter to 20.7% versus a particularly high base Of 31.6% in the previous year. This is due to a proportionally higher sales contribution from the emission control catalysts in India And the accretive order shift from Q1 2020 into Q4 2019. In the Q1 of 2021, we expect growth In local currency and Catalysis versus the Q1 in 2020. We expect this to translate into EBITDA margins above previous year, Q1, But below the full year 2020 average due to continued mix effects. Given the complexities of forecasting quarterly Catalysis Development, 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 our innovation capabilities. On Slide 9, we see That in the full year 2020, sales in natural resources declined by 8% in local currency and by 60% in Swiss francs. More than half of the erosion in local currency in this business area can be attributed to the softer economic environment in the oil industry. Oil and Mining Services sales were hampered by lower oil production due to weakened demand in the 3rd Q4 in particular. As a result, oil services sales decreased in low double digits, while refinery weakened in high single digits. The positive expansion in Mining Solutions was not able to fully compensate. Functional Minerals sales declined at low single digit rate In local currency, primarily as a result of the weaker foundry business. Demand in the European Automotive Industry as well as in the construction sector Clearly, softened due to COVID-nineteen pandemic, which could not be offset by growth in purification's edible oil business. Additive sales decreased At a mid single digit rate in local currency in the full year 2020. This decline was largely due to the continually weak fiber market, While the Industrial Coatings and Automotive sector demand also remained under pressure in the COVID-nineteen pandemic. However, all business lines in Additives saw demand picking up in the 4th quarter. In the 4th quarter, sales in Natural Resources declined by 8% in local currency as strong double digit growth in additives, supported by slight growth in Functional Minerals, could not offset the decline in Oil and Mining Services. In the full year 2020, the EBITDA margin decreased to 13.9% from 16.3 year on year as a result of lower volumes attributable to the weaker demand environment and also the efficiency program provision, Which was booked in the Q2 of 2020. When excluding extraordinary items like the efficiency program provision, the underlying margins We're in the range of the previous year levels due to the strong cost reduction in all three business units in 2020. In the Q4, the EBITDA margin stabilized at 14.7%, yet much below a high previous year base of 18.2%. The decline is largely attributable to the continued difficult environment in oil services and refineries, particularly in North America and in the Land Business. Looking forward in the Q1 of 2021, we expect Natural Resources to see continued top line weakness Due to soft oil business compared to a high previous year base, recovery in additives and foundry will not compensate for the decline in oil versus the strong Q1 2020. This will also affect EBITDA margin, which are expected in the range of 2020 averages, But below Q1 2020 levels despite the strong cost takeout. Let us continue the discussion of the EBITDA development For the full year 2020 on Slide 10. On an absolute basis, the EBITDA reached DKK578,000,000 due to the weaker currencies And low sales in COVID-nineteen exposed segments, but particularly the difficult environment in aviation and oil. From group level, The provision for the efficiency program was offset by the reversal of the new funds. The positive impact from spend avoidance to mitigate the COVID-nineteen Impact and from the efficiency program, which contributed approximately EUR 20,000,000 of total EUR 50,000,000 in 2020, could not fully compensate for the impact of this environment. This led to a decline in underlying EBITDA margin of to 15.0% from 15 point 7 percent in the previous year when excluding the one off CHF 231 million provision, which was booked in 2019. Yes, as anticipated, the run rate improved with the full year 2020 margin being slightly above the 9 months of 40.8%. Slide 11 reflects that in the Q4 of 2020, the EBITDA decreased to €159,000,000 including the currency effect With a corresponding margin of 15.6% versus a high comparison base of 18.5% in the previous year. EBITDA margin advanced in Care Chemicals, while it declined in Catalysis and in Natural Resources versus high comparison days. Nevertheless, the margin run rate improved with the 4th quarter being the strongest quarter in 2020. Let us move to Slide 12. The full year 2020 net result increased to EUR 799,000,000 Positively impacted by the after tax gain of CHF 723,000,000 on the disposal of the Masterbatch business As well as the partial reversal of the U. S. €65,000,000 Negative impact came from the volume driven weaker absolute profit, Negative currency translation effects as well as expenses for the efficiency and rightsizing program. The expenses of these Performance programs amount to approximately CHF 141,000,000 in 2020, Which breaks down as €49,000,000 for efficiency in the continuing €92,000,000 in the discontinued operations. The letter including €68,000,000 for rightsizing and €24,000,000 for efficiency. The operating cash flow for the total group declined to CHF 369,000,000 from CHF509,000,000 in 20 19 Due to the payment of the EUR 166,000,000 issued, the absolute contraction from adverse currency A demand decline and the restructuring cash out of €25,000,000 Excluding the payment of this fine, The operating cash flow for the group rose to €535,000,000 based on a high cash conversion of 74% Driven by the execution of our performance measures and our active working capital management. I will now conclude with some comments regarding the recommended distribution to be paid in 2021 on Slide 13. Although we were confronted with an unprecedented economic environment in 2020, we nevertheless achieved a very robust performance. In addition, we stand to our commitment to sustainably sharing success with our shareholders based on improved financial performance. As disclosed on February 1, the Board of Directors decided, based on the proposals of the Executive Committee, to propose a regular distribution of CHF0.70 per share. This proposal should Not be interpreted as a recurring distribution as the proposed amount takes into consideration the group's performance of the combined past 2 fiscal years of 2019 2020 after withholding of the distribution in 2020 As a caution in the outbreak of the pandemic, the distribution is proposed to be made from share capital decrease by way of par value reduction. Ladies and gentlemen, let me conclude. Our 2020 results clearly reflect the superiority of our core specialty portfolio as well as stringent execution of our performance programs. We see Clariant as being very well positioned heading into 2021, and we remain committed to taking the next step in improving our performance. With this, I would like to close my remarks and hand back to Conrad. Thank you, Stefan. I would like to take this opportunity to share my view on our strategy and the next steps on our journey. Clariant has developed Five pillars that will drive the company to become a leading specialty chemicals company. Research and innovation will remain important as it enables us to develop and offer differentiated products That deliver true value to our customers. Sustainability becomes even more important And Klaviyant rightfully has positioned sustainability as a key driver for innovation. It is our objective to develop differentiated products that make our customers more sustainable. Clariant has been successfully repositioning itself towards a true specialty chemicals company. The divestment of our pigments business is important as this allows us to focus even stronger On our 3 remaining core business areas, strengthening our existing market positions Helped by bolt on acquisitions will drive leadership economics and will enable Our business to outgrow their markets. We will further continue to focus on growth in Asia, Local capability building, especially in China, will remain a high priority. Our leading market positions should indeed deliver leading financial performance In terms of growth and profitability, our midterm targets for our business Reflect our ambition to achieve this leading performance when compared with our best in class competitors In the relevant market segments. Clariant has been one of the early adapters of sustainability with its commitment to contribute to the UN Sustainable Development Goals. It is important and nice to see that sustainability is becoming a true global priority With the European Green Deal, the China Green Dream initiative and the return of the U. S. To the Paris Climate treaty. As shown on the next slide, Klarion has adopted a clear ESG framework. We have defined environmental, social and governance targets, and we'll continue to drive progress in all three areas. Today, I'm pleased to announce that we increased and expanded our ambitions With regards to climate change, we have increased our existing scope 1 and 2 targets To reduction of 40% for absolute emissions by 20.70 compared to the base year 2019. For Scope 3, we have introduced a new target aiming at a reduction of emissions of 14% by 2,030 Compared to the base year 2019. To achieve this, we will change our raw material base To low carbon alternatives, and we will seek to switch our feedstocks to bio renewable materials. Now I would like to conclude with our outlook on Slide number 19. Overall, 2021 is expected to continue to be volatile with continued headwinds In markets like oil production and aviation, we are currently seeing more restrictive lockdowns in some countries, And we're also experiencing the elevation of raw material costs, particularly for ethylene and propylene based materials. While these issues create some uncertainties in the Q1, we continue to be optimistic about the further recovery of our markets. In 2021, we will be realizing the bulk of our efficiency program savings, and we will continue to invest in growth, sustainability and innovation. We therefore remain committed to our midterm targets, while timing depends on the economic environment And the further developments of the COVID-nineteen pandemic. With that, I would like to turn the call back over to you, Andreas. Thank you, Konrad, and thank you, Stefan. Ladies and gentlemen, before we begin the Q and A session, we would kindly ask That you please limit the number of questions to 2, thus providing more participants with the opportunity to ask questions. Thank you for your understanding. And we will now open the line for questions. Operator, please go ahead. We will now begin the question and answer session. Participants are requested to use only handsets while asking a question. The first question comes from Christian Faitz from Kepler Cheuvreux. Please go ahead. Mr. Freight, your line is open. Maybe you are on mute, sir. We will take the next question. The next question comes from Alex Stewart from Barclays. Please go ahead. Hi, good morning. Good afternoon. Can you hear me? Yes, we hear you. Yes. Hi there. Hi. Sorry, I've had a lot of problems with phones today. Anyway, thanks for taking my question. Can I explore a little bit the Care In the Q4, your revenue was down €40,000,000 Year on year, EBITDA was up €10,000,000 adjusted EBITDA? Even with Consumer Care growing at a mid single digit or high single digit rate in the 4th And the high margin that you get in that division, I'm finding it extremely difficult to reconcile that results. Could you possibly help bridge the gap? Thank you. Thank you, Alex. Yes, I'll sort of give a high level view and then I'll hand it over Actually, Stefan, to you to provide some more detail. If you look at Consumer Care in the Q4, what we saw It's a bit of a change in mix where in the beginning of the year the consumer care chemicals, so let's say the products into crop protection, Personal Care, Home Care actually stayed positive. We actually did see declines in our industrial segments, Most significantly, obviously, the icing, but also our lubricants business. Paints and Coatings actually was quite positive. In the Q4, we saw a general recovery of the industrial markets. For Consumer Care, that means that the mix Became more towards the historic mix, which is more like sort of fifty-fifty between the 2. Yes. Maybe, Stefan, you can add some more detail here. Sure. So as Konrad said, number one effect is clearly The accretion of higher margin growth, Consumer Care Versus aviation or certain industrial areas. And number 2 is definitely also the reduced cost line because there's a strong Traction also from the implementation of the efficiency program in Care Chemicals. Number 3, but that is a minor effect, we also had A small credit on an energy discount for the full year. So that is a little bit over proportion in Q4, but it's Definitely a recurring item for the full year. Okay. So there's nothing else in there which may have distorted the profitability. You're saying it's just because of the product mix and small amounts of cost savings? Only the three sectors which I mentioned. Okay. Is there any way you can quantify the energy credit that you talked about? Yes, mid single digit million. Thank you very much. That's really helpful. The next question comes from Andreas Heine from Stifel. Please go ahead. Yes, Thanks. I would like to understand a little bit more on the catalyst business. You mentioned the Indian emission catalyst. Sorry for my ignorance, but I didn't even know that you have them. Maybe you can outline what the background of this growth is and whether that was something special that are continuing And how the underlying trend in the more profitable business is and what we can expect here for 2022. As you said that your order books looks quite good. And the other question is on The oil business in Oil and Mining Services, yes, of course, you had a high base in Q1 2020 and that's We are not able to achieve that level. But can you explain a little bit more the underlying trend and what Except this high base in Q1, we can expect from the underlying trend for the year 2020, one for this business, please. Sure. Thanks for the question. Maybe first on the India business. This is actually through a joint venture That we run a catalyst operation in India. The big increase here is actually for the emission control catalyst, Primarily for 2 wheelers. There's 2 effects here. 1st, people spend less time in public transports with the whole And secondly, India has actually adopted last year much more stringent emission Control legislation. You do see this in the mix, a strong effect actually for the mix in Catalysts In the Q4 because this is indeed lower margin business. More generally speaking, we actually do see a pickup in catalyst In the Q4, in some of the underlying markets, you see obviously better run rates in chemicals, Better run rates in petrochemicals. And for Syngas, we didn't see this yet, but we are expecting that, and that is more or less the timing Of orders. I'll make 1 or 2 comments about OMS as well, but then Stefan, I would appreciate if you could Maybe also talk a bit more about segmentation in Catalysts and particularly underlying trends. If you look at the OMS business, Clearly, this has been hit severely by the very significant drop in oil production last year. Unfortunately, here we do not see a pickup yet. We see continued low run rates, particularly with our land Drilling Business in the U. S. If you well, you've probably seen the announcements by Companies like Halliburton, Schlumberger, some of the companies who are very active in the same segment Who reports revenue drops of 20% to 30% on their business. We see not an improvement yet. It is good to see that for this business actually that the oil price is a bit recovering towards $60 which means the rig counts are increasing. But for the time being, we do not see an improvement in O and S. This continues to be a headwind. Maybe you could comment a bit further on both of these segments, Stefan. Sure. Let's start with Catalyx. You're right. Emission Control in India is not the strategic focus field historically, but it was an opportunity which came up, as Konrad alluded to from the COVID-nineteen move public transportation to scooter 2 wheelers and also from the upgrade to EU norms in India in that regard. Now important also looking forward is this is still also continuing a little bit into the Q1, and this is the mix effect which we will see. The mix effect comes because this is from a percentage margin below the average of the Catalysts portfolio. And that's why it's from a margin percentage point Diluted, but it's a very good cash business. And secondly, when we started or entered this business, which has us, by the way, also with utilization of plants, Which were a little bit more emptied maybe for other markets which were weaker. We also We have the opportunity going forward to replace this catalyst, which has a high content of a precious metal, With a 2nd generation, which will have a much lower cost base. And therefore, we will also be able, just for this business, To in future shape that also more accretive from a margin standpoint. Now from a and from a total outlook, As Conrad said, refinery is definitely not for strong rebalancing in 2021. Syngas is definitely seeing growth momentum because remember we said that was really peaking in 2019, weak in 2020, But we've seen some robust order pipeline now for 2021. And petrol is definitely also a horse for growth in 2021. Now on the natural resource side, that's what the whole guidance about Q1 is about. It's about oil and aviation. And it's about an endurance of the impact of those two items in Q1, as we would have been probably talking about growth now in Q1 2021. And in oil, as Konrad said, we have, I think, in the last year, around 40% of rigs oil rig closures Internationally, globally, mainly in U. S, mainly in land, and that is just taking its use. And our oil crisis landed in our P and L and in our business Really by mid of last year. And that's why on a year on year comparison, automatically, plus certain recovery, which we also see, I mean, in the midterm, you could see still an erosive comparison In the Q1 and also in the Q2 when you look at oil. Now as we said, you see a recovery in Addisys In Q4 and also in the foundry part of Functional Minerals. So that is a positive signal, But that will not be able to overcompensate, particularly the oil comparison, where in Q1 2020, we still had Double digit growth, and that's basically the net effect of it. But the fundamentals would be that oil should could recover by mid of the year And that Additives and Functional Minerals could continue the positive trend of Q4 2020. Thank you. The next question comes from Andrew Stott from UBS. Please go ahead. Yes, thanks. Good afternoon. Congrats, Stefan and Andres. Yes, a couple of things I wanted to tackle. One was the Scope 3 reduction Target and really, really good to see these numbers. They're pretty aggressive. The Scope 3 one is interesting because It's such an exact number. So can you just walk me through how you got to 14%? And when you look at the balance of recycling versus bio based raw material, how do you think that balance will come through Roughly, I guess it's difficult to be exact. So that's the first question. And second one was much more straightforward. I might have missed it, but I haven't seen a CapEx guidance for 2021. And also if you do have So the general viewpoint on CapEx for 2022 while that's it. Thank you. Sure. Thank you, Andrew. Yes, so maybe a few comments about SCORP 1, SCORP 2, SCORP 3, and I'll obviously focus on SCORP 3 as you That was what your question was about. So SCORP 1, SCORP 2, actually, Klarion increased its target. We but we already, As a reminder, head of target for SCORP 1, SCORP 2, we made it a bit more aggressive to be really leading if you compare Ourselves versus peers in the chemical industry in terms of target setting. As a reminder, Skorp 1 is the energy efficiency. So it is really the let's say, the energy efficiency in our own operations. For example, you install a more energy efficient pump, That counts as a scope one saving. Scope 2 is very much about the energy transition. So this is about, let's say, green electricity, for example. That would come to your scope 2. Scope 3 is an interesting one because here, what we What you really do is you take a look at the raw materials and you basically lower the carbon footprint on those. You mentioned recycled materials. For us, it's definitely also an area of interest, but what we want to focus on is, Let's say, bio renewables. Just to give you an example, if we were to use the bioethanol In our new Romania plant, and we basically derive bioethylene from that. And then we basically feed Our ethylene oxide plant in Gandorf with that bio based ethylene, then you actually have a renewable Feedstock for your surfactants portfolio. That will be a large part of the surfactants. Inclariant, as you know, are EO based and are detox related products. That's an example where you really, yes, redesign your products And that would really count towards Gulf 3. So for us, the Gulf 3 is actually a very important one. I think yes, Stefan. Yes. Let me take the second part on the CapEx guidance, Alex. So You saw that we came out this year with around EUR 288,000,000. So that was already a bit higher because we had a certain part of the investment The biofuel plants just mentioned in Romania and the new PP catalyst plant in China. Now but we have also proved a little bit in For 2021, we forecast CapEx up to the amount of CHF 400,000,000, which is what I also said was the 3rd quarter Because of the heavy investments here also again for completion of the sun liquid plant in biofuel for biofuel in Romania As well as for completion of the cut off in plant in China, and that makes it to that amount. But it's directly correlated also The midterm target, remember that the biofuel plant in Romania has a very strong contribution on the catalyst Midterm target delivery when it comes to growth and also to the high EBITDA margin. And commissioning that then by end 2021 requires us Complete the investment and to commercialize and start commercializing in 2022. Now for the long term guidance, I remain with the guidance. I said that On a let's say, on a continuing basis, you can plan clearance with €250,000,000 to €280,000,000 CapEx roughly, which includes certain investment projects, that's basically the guidance in a normal year after this heavier investment year 20 21 2020. Can I just follow-up quickly, just go back to that Fine? On Romania, Konrad, you mentioned that was a big part of the displacement of the toxics using the OEI. But What does that do in numbers terms? Let's assume you fully load that. What percentage then of your raw materials are natural? Could you repeat the last sentence, Andrew? We didn't hear you here. Yes, sure. What percentage of the raw material base would be fully natural It's fully loaded, Romania. Sure. Well, let me just be, first of all, clear that this is not a number you asked Earlier on, why do you get to exactly 40%. So this is not a sort of bottom up calculated number with the impact of Romania. Romania, I just gave as an example, so this could be actually one of the components. But as you can understand, there is many components. Anytime that in surfactants you basically introduce a bio based or plant based material, That would actually count. You've probably heard about, for instance, the products where we do root milking, Which is then an active ingredient in H cream, because it does something to sort of reenergize the cells In your skin, that would also be an example which counts to this scope 3 targets. So I certainly don't want to leave you with the impression That this is tomorrow the case that we convert our entire sort of epoxylated product line to bio renewable. It would be nice, but this is a plant that first needs to start up, which is planned somewhere towards the end of this year. And then there's still quite a lot of work that needs to be done in terms of product development and sort of process development as well for If we were to go in the direction of this bio renewable based ethylene, that's certainly not a decision or sort of a complete green light at It was just meant as an example. Okay. Thank you very much. You're welcome. The next question comes from Nicola Tang from Exane BNP Paribas. Please go ahead. Hi, everyone. Thanks for taking my questions. The first was on the dividend. I wanted to ask a little bit about what was the rationale of you and the Board around The decision to propose the 15, wrapping for 2020. I know you sort of combined it with the 2019 2020, but With the changes at a management level and at executive board level, I was wondering if that signaled any change in the dividend Away from your stable to rising dividend. Or is the sort of 20 nineteen-twenty twenty thinking really one off? And if so, what should we see as the base for your policy from 2021? And then the second question was around your Outlook comments saying you plan to actively defend profitability. I was wondering if you could talk a little bit about what initiatives you're So are you announcing price hikes in specific areas? Or are you more focused on ways to manage costs? Yes. So let me start with the dividend. And so the rationale is that we Usually, our season starts in Q4 when we start to model what kind of dividend scenarios we can run To share the success with our shareholders, which we are committed to. And as you remember, when we entered into the AGM of last year, You already had a proposal for 2019 of an ordinary dividend of CHF0.55 per share, which was based on a Distribution of the 2019 recurring net result. We have suspended that or withheld it Because we were just at the brink of enter into COVID-nineteen and the uncertainty. We stood tall at the time to our extraordinary dividend CHF 3,000,000 which we paid out mid of last year when we very successfully completed the Mastovech divestment. But we said that we're going to review this ordinary dividend from 2019 into 2020 once again when we complete 2020 And have a better outlook on, yes, the world. And this is what we did now. If you look, we there is no reason that the financial results 2019 changed. So we said from a financial standpoint, that's the other dimension then. Are we able to stand tall and commit to our investment rating for our liquidity to also do the things which we need to do in our strategy to transform the company, which is a massive transformation right now, as you know. And with that confirmation, we could confirm the CHF 55 from 'nineteen. And then we looked at 2020 for 2021, And you saw that we also had a good improvement in earnings per share on a continuing basis, which gives you the base That the recurring net result was there to be able also to distribute the dividend based on 2020 net result, And that was then leading to the 15, Raffenot 0.15, this range. In totality for 2019 2020, It's a bit higher than our usual payout, which was basically around 40% -ish of the recurrent net result. Now it's more in the dimension of 50 percentage. So we looked at what we could do. We made the proposal to the Board, and they discussed it. They They unanimously approved it, and then we responded to the SABIC letter. And well, I think the arguments are very clear. Also, remember that the surplus from the Masterbatch cash in which we had, which was a bit more than €200,000,000, we always said we need that to Finance the U. S. Line in the last year to finance and liquid investments and the restructuring program, which is the biggest restructuring which we have since 12 years. So very consistent in that regard. And then SABIC also supported our proposal and withdrawn From the initial proposal, and that's where we came up now with the 17 RAPEN. They are, of course, nonrecurring, and it's Very difficult to make figure models for the future, I understand that. But it's referring to 2 years and it's an increased payout ratio. So therefore, there is no base to use this for future ongoing calculation. And on the outlook, let me just quickly Mentioned the efficiency program, which we mentioned, but there is much more than that, which Konrad is happy to Yes. Yes, yes. I mean, we have actually obviously quite some discussions before coming up with our outlook. So the outlook is very much targeting to preserve Our EBITDA margins, which basically refers to the Q1 EBITDA margins that we had in 2020. So indeed, it is our target to end At levels very close to or around those levels in Q1 this year. Two comments how we're going to do that. So first of all, as As Stefan mentioned in his prepared remarks, if you look at volumes, some of our core segments Clearly trading well below the levels from a year ago, particularly in oil that is a very big gap that we're facing. Oil production down substantially from what actually was a high level at this point in time a year ago. De icing is another example. So our volumes have not recovered. Here, it is very much about cost. It's not that we're going to initiate new programs. It is very much about the execution of the Fusion of the existing programs. What was announced last year already is a program which actually affected 600 positions In the businesses, yes, this is something that is part of the sort of the efficiency improvement in the lowering of our cost. There is a separate program actually affecting 200 positions in our pigments business. And finally, there is the big program, Clarion 2021, Affecting 1,000 positions, this is very much about bringing the cost in alignment with the New scope of the business without actually master batches and pigments moving forward. So that's as far as cost Those are the key initiatives there. Then secondly, pricing. As mentioned already, we do see Raw material inflation right now, it is in the low single digit area. But clearly, we are working on pricing programs in all of the businesses right now and are actually reviewing that biweekly. So we do need to more than offset What is coming through right now in terms of raw material increases. Okay. Thank you. Next question comes from Pandya Yandi from On Field Research. Please go ahead. Thank you. I want to start with Pigments, if I can. Can you just I arrive at roughly €560,000,000 book value for this now. So just want to understand if this is correct or not. And secondly, Could you just give us some sense of what is the current sort of annualized profitability of this business? Because I just want to understand really because what is the sales scope and what is the profitability scope of this business? And then sort of tying that in, in terms of timing of the divestment, are you very confident that You will be able to execute this this year or is this really contingent on getting the right value for the asset? The second question is more on Catalyst. I appreciate the comments made, but I just wanted to double check a couple of things. Propane has gone up a lot in recent months and so has coal. So are you seeing any Sort of short term negative headwinds because your customers are reducing utilization because profitability is sort of under pressure in those two areas. And sorry, apologies if I may just squeeze one more. Konrad, like I did not have the opportunity in the previous call to say, but welcome and good luck. Just from your AXA experience, when you think about Specialty Chemicals and then look at the Clarion portfolio, Are you happy with the size of the portfolio as is today? Or is actually getting to the sort of top tier, especially chemicals, requires An increase in size in the Clariant portfolio. Thanks a lot. Yes. So perhaps Stefan could Comment on your first two questions around pigments and catalysts, then I'll come back on the my observations on the portfolio. Yes, Jadip. Pleasure to do so. Let me start with catalyst. So you're right, we've seen certain changes there. But on the other side, We also see an increase of oil price and following naphtha oilfins export over the last weeks. So you have trends in all directions. And the increases of prices here are, of course, for maybe Care Chemicals, a higher feedstock price, Which we have to mitigate, but for our catalysts, it's again another lever to see even higher orders In the petrochemical side. And on the coal side, we are not so strongly exposed. So that means For us, it's still in total positive when we look at Petro and Syngas as opposed to Again, we definitely don't see that which is smaller in weight for us that refinery catalysts will have any Kind of upswing in 2021. On the pigment side, You definitely can understand that I will not comment on the detailed book values of pigments, Neither the underlying margin or the sales, but what I can tell you is, you know that we've been guiding that Cygma is looking at a top line in High three digit million base. And they were actually it's reported in our reports in Q4, they were down by minus 3 At local currency in totality on top line, they were quite resilient in 2020. And then on the absolute EBITDA margin, they even improved to the prior year because we have here also a high contribution from The efficiency program which runs in Switzerland, which contributed €8,000,000 last year and has another upside than the 20,000,000 run rate in 2021 2022. So the process as such, we are now We've completed the funneling of the interested parties. So there is still strategic and financial interest to parties, which are now going through the Due diligence, virtual or physical, if possible, site visits and the negotiation rounds. And as said also with the 3rd quarter, We are very confident that we can conclude these negotiations to the 3rd within the second quarter so that we will be able to give an update then or an announcement, whatever is the outcome then in the Q2 or by mid of the year. And to your other question, I also said there was the Q3. We do not have any time pressure to close it tomorrow or so. We go here for value over speed, for sure. And We have a significant increase of the run rate of the EBITDA of pigments, and we want to have that considered in the valuation. Therefore, We definitely look at a very good value offer if we then go into the signing in the second quarter. Okay. Thank you. Okay, Jadip. So some observations on the portfolio of Clariant, and I'll try to keep it short. If you look at what Clariant has done very successfully in the last decade is reposition itself from a company that We had positions also in sort of more commodity chemicals towards a company with clear positions in Specialty Chemicals. So if you look at the 3 business areas Care Chemicals, Catalysis, Natural Resources, these All can be seen as specialty chemicals. Perhaps the exception, if you look at Natural Resources, our Functional Minerals business, This is more a specialty material, but I can tell you from my IMO's experience, actually this is the bentonite is a very attractive business, It is really a specialty material in and by itself. So if you look at the portfolio, these are yes, A portfolio this is a portfolio of specialty chemicals. If you then look at your question around size, What really matters is market share in the individual segments. So your strengths visavis your At a segment level, then if you look at the portfolio, typically Clariant has number 1, number 2 positions, Which means the portfolio as it is, is actually very sustainable and is not lacking scale, so to speak. If I reflect back on my AgSo experience and how we looked at our chemicals portfolio, in AgSo, we always refer to it as big fishes in small comps, and I can tell you that is a very profitable and attractive situation to be in as a company. Great. Thanks a lot. Thank you. The next question comes from Markus Mayer from Baader Helvea. Please go ahead. Good afternoon, gentlemen. Two questions from my side as well. Again, on this Sustainability target, how fast do you think could you switch your molecule So it's clear here, for example, Care Chemicals and also in the oil and mining field. Is this something We should expect over the medium term, say, 3 to 5 years or is this more kind of a vision for the next 5 to 7 or 10 years? That's my first question. And the second question is on innovations. Could you update us, are there any Important innovation, product launches coming up soon. Yes, so the next line to question, please. Sure. So as to the first question on how quickly can you actually convert Your raw materials towards more recycling use as well as bio based raw materials. Yes. This is not something that is done overnight. As a reminder, these targets are for 2,030. So that's actually when we Now I will say, if you compare Clarion to some of its competitors in terms of the product line, it is already Very much future oriented, particularly if you look at, for instance, in Care Chemicals, a number of products that are already bio based. If you look at our IP, if you look at our technical know how, when it comes To bio renewables, it is actually leading. Just as a reminder, if you look at the bioethanol plant, This is actually 2nd generation technology. So most of the people are practicing 1st Generation technology or 1.5 generation technology, which basically means you're competing with the food chain. What Clariant has is unique Technology that actually allows us to use waste streams in agro to then actually convert that to So just I hope that, that gives you some confidence that we are actually quite ahead here Of a lot of competitors already. In terms of new innovation, it is a constant pipeline, I would say. So this is certainly in Catalysis, a constant introduction of new and more efficient catalyst Together with our clients. But as well in Care Chemicals, you do see a constant turnout of new products. Natural Resources in some areas perhaps a bit lower heartbeat. But I think across the portfolio, innovation remains a core priority. We mentioned it earlier today, the R and D spend 4% of sales. It is actually at or above our competitors, and We do want to maintain that as a core differentiator for the company. Okay. Thank you. The next question comes from Chetan Udeshi from JPMorgan. Please go ahead. Yes, hi. Thanks. I had first question I had was, is it possible for you to give us any color on how much was the contribution from this Continued operations in your full year 2020 cash flow because I think my understanding is that, that number is Including both continued and discontinued operations. So if you can give us some sense of how much of the cash operations and CapEx was allocated to discontinued operations. That would be useful. And the second question was, given all these efficiency programs running, should we Expect a much bigger restructuring gas outs in 2021 compared to what you had in 2020? Yes, Chetan, of course. Let me take the question. So I'll start from the last, and I remember it faster. So when it comes to restructuring cash out, you're right. We expect higher restructuring cash out in 2021. We had €25,000,000 or €26,000,000 in 2020. And we're going to see more in 2021. As we said, we have booked provisions and direct costs for cash out of CHF 141,000,000 for all these 3 programs. And from a P and L side, we are totally covered now with 2020 recordings. And from a cash point of view, there is probably the most significant Then in 2021 and then some parts still in 2022. And for the rightsizing might still have some effect even in 2023 cash out. But I said, the majority will be in 2021 for 2020, 2021 and 2022. That in that regard and if you look on the Again, on the operating cash flow, there is not so much yes, I can't obviously fully differentiate into a Discontinuing and continuing cash flow. Of course, the big effect from the Masterbench sale, they are not affecting The operating cash flow too much. That's more on the then divestment part on the lower part of the operating cash flow. And if you look on the EBITDA contribution from discontinued operations, which we did disclose, You're looking at around by normalized €140,000,000 where you have, of course, then still a lot of cash out cost again, Which still take a significant impact, and therefore, the effect of discontinued business on operating cash flow is there, but it's not A major effect. Understood. And sorry, I sort of didn't fully Get the response to one of the previous questions on I think there was a mention of some one off in Care Chemicals and I think there are some quantification given, mid single digit, was that for full year or was that for Q4 alone? That was for Q4, but that refers for the full year. So it's not a one off, it's a recurring item that you get certain Energy discounts and sometimes they fall in Q4 and another year they fall in Q3 or Q1, but they are analyzed always the same. So that means This is not a nonrecurring item, but it had a little bit of a peaking effect in Q4 because we got only the credit note in Q4. But it's normalized for the full year results. It doesn't matter for Q4, it was a bit single digit. I said mid single digit higher. Okay, understood. Okay, thank you. The next question comes from Rob Hales from Morningstar. Please go ahead. Good afternoon. Thanks for taking my question. Now that you've signed several Sun Liquid licenses, has anything changed in your And I think the previous target was $100,000,000 sales with 40 percent EBITDA margins. Is that still valid? Yes. So maybe I'll make it for the sort of general statement on how pleased we are with the progress from a commercial point of view and then Stefan can answer that, including the financials. So if you look at the commercialization of this, We actually are very pleased with what we're seeing. We've signed 5 licensees already. Now the plant is to still be start up later in this year. So we're actually well on track there. What is particularly of interest for us We actually finished the 2nd Chinese contract here. And I mentioned briefly the Chinese Green Dream initiative. This is actually a very significant thing in China right now. Just as the Paris Climate Treaty targets Europe to be carbon And now actually the U. S. Joined back in as well. Targets actually to be carbon neutral in the year 2,050. China has actually signed a similar arrangement and committed themselves to be carbon neutral in 20 60. As you can imagine, This means a lot of innovation that is needed. Bio renewables do play a significant role there. So we're pleased overall with the progress in terms of the number of licensees signed. We're particularly pleased to have 2 out of the 5 being signed with Chinese customers. That is actually more than we expected. Maybe, Stefan, you could allude further on it, including the financials. Yes. Just remind yourself that there are 3 revenue streams from SunLinked. 1 is the licensing of our technology to Parties who signed such a license agreement and built in their own plant. And second is then by providing the enzymes which we produce. And the third one is then, let's say, by our step to which is an unusual step, not specifically way which we would do, but To accelerate the penetration of our technology, we invested in the plant in Romania and built a biofuel plant by ourselves. So these are the 3 revenue streams. And from a license income, this is only starting to be more significant when the customer Commissioned his plant and not at the signing date. That is not the huge part. And the enzyme production sales, they also The enzyme sales, they also, of course, float once the commissioning of customers has been completed. But Romania is the one is, of Big in the top line, also accretive in the margin. And that is, of course, more in our own hands when we invest and commission that by end of this year To start commercialization in 2020. So these sorry, 2022. So these are the 3 revenue streams, and I can confirm that those add up to a total dimension No, euros 100,000,000 from coming today from a very low base, yes. Okay. Thank you. The last question comes from Peter Clark from Societe Generale. Please go ahead. Yes, thank you. Afternoon, everyone. I think it's for you, Stefan. There were some comments on the wires this morning about turning the page With the Sabik relationship, and I think they were yours, and it normalizing, obviously, when the share was taken over, and I'm not talking about the Sabik deal So we were told there were a lot of initiatives underway. There were a lot of potential growth synergies, potential for raw And then of course, everything went radio silent. Just wondering on your thoughts and also Conrad's thoughts on the potential for that, Because obviously, we've heard nothing and we were promised that there would be something. Thank you. Sure, Peter. Let me start a little bit coming from the history and then Conor can surely give a little bit more of the future. I mean, you're right. I mean, let's not forget how they came in when we were under activist effects once The Huntsman deal did not process the way we supposed it to do. At that time, we were also thinking, of course, about a A couple of very big projects. The biggest one was then the HPM. We announced that even on MOU basis, and then that fell apart In mid-twenty 19, because of yes, we didn't couldn't confirm the exact valuation thoughts, which both parties had in mind. And then we had to depart. And that was, as I said, the stress test of the relation, maybe the lowest at the time because, of course, A good project, which, but for good reasons didn't mature. There were then also a lot of media discussions about the relationship, more in the More in the media actually than in real life. There is a couple of very good progress. They are a big customer for us on side, they're also good customer. On the additive side for us, in that regard, we have a lot of collaborations going on. So commercially, on that side, then being the customer, it's progressing well. Commercially, on us being a customer For ethylene propylene from their cracker in Germany, it's also progressing well. But you're right, I mean, there is not today the big Nevertheless, we have, again, a couple of good progress. And they are interested, of course, That with us, we also developed in a very positive sense from a financial standpoint and a performance review. And that's why it's so important that we not just to SABIC, but to all shareholders' proof what we have Announced back in 2018 about our midterm targets and the achievement as such. So this is, I would say, the recap. And again, if you go to the more recent Times and their request in December. Obviously, this we had to publish it immediately, and it's a professional thing. And You heard how much the oil business did affect us in 2020, and it definitely also affects the kingdom. And therefore, I don't find the dividend call so unusual, to be honest. But in the magnitude of discussions, The most important thing is that we have had an enormous decision in the board to support our dividend proposal and aligned ourselves. And we have those issues We're up on the table by end of December, off the table and resolved now. And maybe this is a good translation to Konrad, who gives Can you give some prospect into the future development of the relation? Sure. Well, yes, so I like to keep it short. So clearly, there have been some issues in Past, I'm extremely pleased, 1st of all, that these issues have been resolved. I'm also very pleased that our Board is actually Fully aligned, including the 4 board members representing SABIC. So I from here, I very much like to look at the future and move forward from here. Sorry, thank you. Thank you. So thank you, ladies and gentlemen. That was the final question. This concludes today's conference call. The Investor Relations team obviously remains available for any questions you might have. We look forward to continuing the dialogue during the upcoming roadshows and conferences or latest with our Q1 disclosure on April 29. Once again, thank you for joining, and have a good day. Bye bye. Ladies and gentlemen, the conference is now over.