Earnings Call: Q1 2020

Apr 30, 2020

Ladies and gentlemen, welcome to the Clariant First Quarter 2020 Reporting Conference Call. I'm Andre, the call to 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 now be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Ms. Maria Ydeck from Investor Relations. Please go ahead, madam. Ladies and gentlemen, good afternoon. My name is Maria Ivek, and I welcome you to Clarion's Q1 2020 results conference call and live webcast. Joining me are Harrios Kotman, Executive Chairman of Clariant and Stefan Lunen, CFO of Clariant. As a reminder, this conference call is being recorded. At this time, all participants are in a listen only mode. There will be a Q and A session following later. The slides for today's presentation can be found on our website along with our media release. 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. A replay of this call will be made available on the Clariant website. Stefan will initially go through the Q1 2020 results and Harjals will finish the presentation with Klaviyen's outlook going forward. Let me now hand over to Stefan to begin the presentation. Thank you, Maria. Ladies and gentlemen, good afternoon. It is my pleasure to welcome you to Clariant's 2020 Q1 results conference call. Please note that all figures discussed refer to continuing operations, unless specifically noted otherwise. Also, please be aware that the numbers, which we previously referred to as EBITDA after exceptional items, are now simply called EBITDA and will be always the first focus when discussing profitability. As you can see on Slide 3, in the Q1 of 2020, Clariant sales declined by 6% in local currency in a difficult environment. This development was due to a mild winter season, the timing of catalyst sales and a weaker global demand in the context of the COVID-nineteen pandemic. The sales development was supported by stronger sales in the business areas, natural resources, while Care Chemicals and Catalysis sales weakened in the Q1 of 2020. Looking at profitability, the EBITDA margin remains resilient at 15.4% due to our core portfolio and rapid and efficient cost control measures, and the absolute EBITDA reached CHF 157 1,000,000. Clariant, like the entire chemical industry, is facing an unprecedented situation with the COVID-nineteen pandemic. Yet I can confirm that all efforts to minimize the impact are fully in place at Clariant. These measures are backed by our strong balance sheet and liquidity position, which is based on our solid conservative financing approach. We continue to assure employees' safety first, while concurrently running business continuity programs and implementing cash measures. Let us take a closer look at the Q1 sales by moving on to Slide number 4. In the Q1 2020, Clariant generated group sales of CHF 1,000,000,000. Sales softened by 6% in local currency in a weaker global environment, amid the impact of the COVID-nineteen pandemic and versus a high comparison base in the previous year. Sales increased in the Natural Resources business area, while Care Chemicals was hampered by weak aviation conditions and the timing of catalysis sales, which weighed on the top line. The sales development in local currency was attributable to 1% higher prices and 7% lower volumes. In CHF5, the sales development was 12% lower as the very unfavorable foreign currency development negatively impacted clearance sales by 6%. Slide 5 reflects the regional sales development for the first quarter of the current year. The sales development in Asia was fundamentally robust despite a 1% contraction in local currency, which was driven by the COVID-nineteen impact to China and the prolonged Chinese New Year. In Latin America as well as in the Middle East and Africa, sales increased the most strongly at 10% each in local currency, a development which was also affected by the devaluation of major currencies in Latin America. Days in North America decreased only slightly by 5% in local currency. This was again due to the mild winter and the negative impact which COVID-nineteen had on aviation, while the other businesses grew. Europe weakened by 17% in local currency, also due to the substantially softer Aviation and Satellite business. Let's review the business area figures in more detail, beginning with Care Chemicals on Slide 6. In Care Chemicals, Q1 2020 sales declined by 14% in local currency. The development in Consumer Care reflected a slight low single digit decline with a progression in Personal Care but a small decline in Home Care and Crop Solutions. Industrial Applications sales developed less favorably, primarily due to the significantly softer aviation business, which was driven by the particularly mild winter and reduced air traffic amid the COVID-nineteen pandemic. The weak economic environment also resulted in lower base product demand, although Paints and Coatings sales grew. Excluding the seasonal and COVID-nineteen impact from the Aviation business, Care Chemicals sales were only very slightly weaker versus the strong Q1 in 2019. As a matter of fact, the aviation grounding made up for 80% of the decline in growth in local currency. The lower sales also affected the Care Chemicals EBITDA margin in the Q1 of 2020. This declined to 17.8% from 19.6% in the same period of 2019. This development was mainly attributable to the explained weak aviation business in Europe as well as in North America amid the COVID-nineteen pandemic. The lower sales volume also had a negative impact on the cost coverage. In terms of the short term outlook, we anticipate a stronger negative COVID-nineteen impact in Care Chemicals in the Q2 of 2020 versus the Q2 of 2019, despite the resilience of the consumer care part of the portfolio in particular. This development is likely to result in lower sales and margins in the second quarter. Let's move on to Catalysis on Slide 7. Sales in the business area Catalysis decreased by 6% in local currency in the Q1 of 2020. This development is partially attributable to the previously communicated forward sales shift from the Q1 of 2020 into the Q4 of 2019. As also anticipated, sales in Synges were significantly lower in the Q1 of 2020 due to the large amount of project business in the Q1 of the previous year. This sales development was primarily observed in Europe, the Middle East and Africa, while which accounted a particularly difficult and previous year comparison days, while Asia and Latin America as well as North America demonstrated a resilient sales development. The Q1 2020 EBITDA margin of Catalysis declined by 13.2% declined to 13.2% from 21.7% in the previous year as a result of the lower demand, the shift to timing of sales and an unfavorable product mix effect. The mix effect made up for approximately 50% of the decline in EBITDA margin, while the other half was related to the timing of the sales. Though margins can fluctuate significantly over quarter of a calendar year, the fundamentals for Catalysis remain positive based on the present order pipeline, our portfolio strength and our innovation capabilities. In the Q2 of 2020, we anticipate improved sales at Catalysis versus the Q1 of 2020. While it would still be a little bit lower than the Q2 of 2019, as yet improved margins with a fading mix effect. On Slide 8, we see that the Q1 of 2020 sales in natural resources rose by 2% in local currency. Oil and Mining Services reported low double digit sales growth in local currency for the Q1 with higher sales in all three business lines and across all regions. Fangstrom Minerals sales declined slightly at low single digit rate in local currency due to the weakness in Foundry, primarily attributable to the shutdown of the European automotive industry in mid March as a result of the COVID-nineteen pandemic. The growth in purification was unable to entirely compensate for the weakness in foundry. Sales in the Additives business decreased at a high single digit rate in local currency. The softer demand resulted from a persistent weakness in electrical and electronic sectors as well as the lagging automotive market, which could not be compensated by new sustainability offerings. The EBITDA margin rose to 19.1% from 15.6% as Oil and Mining Services sales grew in accretive applications, while Functional Minerals and Additives successfully defended the EBITDA margins despite the weaker top line development. Looking forward in the Q2 of 2020, we expect natural resources sales to slow due to our expectations for a weaker economic environment amidst the COVID-nineteen pandemic paired with the low oil demand. Let us continue to discuss the financials on Slide 9. On an absolute basis, the group EBITDA decreased by 14% in Swiss francs to CHF 157 1,000,000 impacted by the sales evolution in the Q1 of 2020. I repeat especially by the weak Aviation Business and Care and the softer profitability in Catalysis due to sales timing and sales mix as well as particularly negative FX effects translating into Swiss francs. The group EBITDA though margin remained robust at 15.4% versus 15.7% in the Q1 of 2019. The EBITDA before exceptional items was reported at 16%. This resilience in EBITDA margin reflected by these results was underpinned by the strength of our core portfolio and the implementation of rapid and efficient cost control measures amid COVID-nineteen. With this, I would like to hand over to Harald to discuss Clariant's outlook. Thank you, Stefan. Ladies and gentlemen, after going through the Q1 2020 figures, I would now like to move to Slide 11 so that I can explain to you what we are doing to foster Clariant's performance going forward. Clariant's Q1 2020 results clearly reflect the resilience of our 3 core business areas in the current particularly difficult turbulent, I would say, environment, also in comparison to our peers. Although sales declined by 6% in local currency in the Q1. The EBITDA margin remained robust near last year's levels. We have fully implemented measures to mitigate the impact of the COVID-nineteen pandemic based on our strong balance sheet and our strong liquidity position. We continue to prioritize employee safety first, while currently running business continuity programs and implementing very hands on, let me say, cash measures. In terms of client outlook, looking at 2020, we anticipate a negative impact on sales and profitability from the pandemic. In fact, the pandemic impact is expected to more strongly affect the Q2 of 2020, which is more than logic. Yet the uncertainty regarding the impact of this unparalleled crisis remains high. Varian has prepared different scenarios to generate resilient performance and continue its transformation program. Let me give you 2 examples. To generate resilient performance, we have shifted our focus on short and mid term cash generation. The efficiency program and corresponding workforce reduction, which we announced together with the full year 2019 results in February, has been put on hold to a large extent given our social responsibility and at the COVID-nineteen pandemic. Thus, the previously communicated CHF 50,000,000 cost base reduction will be delayed for a few months, although we are still targeting to maximize the positive impact in 2021. There's no change in principle so far. In terms of transformation, let me comment on the Masterbatches divestment to PolyOne. As you know, the sales agreement was signed in December 2019. Together with Poli ONE, we continue working together constructively on all working levels towards the closing of this transaction, which is expected by the Q3 of 2020 at the end of the Q2 at the earliest. The closing is subject to customary closing conditions and regulatory approvals, which are progressing very well. At Klaviyant, we continue to focus on the 3 core business areas: chemicals, catalysis and Natural Resources. In the midterm, and we really do hope that there is a life after the pandemic. Glarian expects its continuing businesses to achieve above market growth, higher profitability and stronger cash generation based on our focused high value specialty portfolio, the ongoing implementation of our corporate transformation process as well as the ongoing implementation of our corporate strategy. With that, I turn the call back over to Maria. Thank you, Harjo. Thank you, Stefan, for taking us through the achievements and progression achieved in the Q1 of 2020, as well as for providing us with some insights into Clariant's outlook. Before we go to the Q and A session, we would kindly ask that you limit the number of questions to 2, thus providing more participants with the opportunity to ask a question. Thank you for your understanding. We will now open the line for questions. We will now begin the question and answer The first question comes from the line of Christian Faitz from Kepler Cheuvreux. Please go ahead. Yes, thanks. Hello from my side. Hello from Frankfurt. Two short questions, please. Thanks for your comments on Q2 performance, Stefan. Just a bit of clarity on Catalysis, please. Given that lots of your customers must have their plants in downtime, is that actually helping demand for refilling the catalyst? Or do you not see that yet? And then second of all, can you remind us of your dependence on U. S. Shale oil in natural resources? Thank you. Okay. Let me start with your question on the Catalysis business. What we said with the Q4 results is that we have seen a peaking of the syngas refilling cycle in 2019. We've seen also a preponement, as I said, from Q1 to Q4 on certain orders, And we've seen a certain rollover of some orders. But our outlook for Q2, as I said, versus Q1 is definitely higher, and we have a very good visibility on the order pipeline from Catalysis. So those opportunities you referred to, we definitely see going forward in Q2, Q3, Q4 as well as the fading mix effect if you come to the profitability. On the oil business shale, we have today in the oil business basically a split between offshore and land business of fifty-fifty, 50% land and 50% offshore. And of course, what we see is now with the current oil situation, the demand or the warehouses filling and the demand declining. But this affects less the offshore business where we are quite strongly positioned compared to competition. Okay. Thank you very much. Very helpful. Thank you. The next question comes from the line of Patrick Rafaisz from UBS. Please go ahead. Thank you and good afternoon everyone. My two questions would be, firstly, can you update us on Clariant's liquidity position as at quarter end? I'm thinking here about the undrawn credit facilities and cash on hand. And then secondly, on natural resources, a follow-up. Given the contract structure is 1 to 3 years and given your production related exposure in this area, how much of a lag should we assume for natural resources and especially all the mining to see the full extent of the oil price related downturn in oil production. Do we already see a big hit in the second quarter? Or could that actually drag out into Q3, Q4 maybe? Thank you, Patrick. So I'll start with the liquidity, which is obviously, in these times, a core strength for us because we have been very conservatively financing over years in the past and continue to do so. So we do not disclose the details of balance sheet and cash flow statements in the Q1. But if you take it from the year end where we have published a very strong balance sheet with gearing approximately around 50%. And you've also seen that in March, then it appears repeated. It's very positive investment grade rating for Clariant on BBB- long term and even better on short term. Of course, the crisis will take its impact, but we have an extremely and definitely over better than average industry start into that crisis from the liquidity and also balance sheet, cash on hand and headroom position. And we had no major change or no change to that position as such in the course of Q3. If I come to your second question, the natural resources, yes, I would say we're looking, of course, in the situation which is not so typical when you look at oil prices and forward prices turning into negatives now for the second time. But maybe let me start to answer your question by saying that our improvement of the oil business was particularly homemade. So we have an excellent team management team with an excellent program, which is an excellent execution. And this was the main driver for growth and for profitability. And I would say more than the contracts, this gives us the fundamental belief that we will steer very well through the crisis. But definitely, we will see also on the oil business a negative impact already in the Q2. Okay, thanks. The next question comes from the line of David Simmons from JPMorgan. Please go ahead. Hi, guys. Thanks for taking the question. So my 2. The drop through of the Catalysis sales decline into EBITDA was 90% in Catalysis, and margins of those have been in a few years. I know you said 50% of that was mix, but you also talked about lower Syngas contracts, which obviously would normally be margin accretive. So are you seeing any kind of pricing or raw materials pressure in that division? And what is the business that's so dilutive to margins to broaden margins down to this level? Secondly, just any update on the timing of the special dividend? I know you said after the master purchase sale had closed, but given the current sort of drive for conserving liquidity, is there any change around the messaging on that? Thank you. Let me start with your first question on the Catalyst margin. No, we do not see any specific squeeze from raw material costs or pricing. Actually, the pricing performance also of catalyst. As you saw and this is still, I think, an expression or it is an expression of the strength of our portfolio that we had even in these times the positive price increase in the first quarter by 1%. And also in the Catalysis, you saw a positive impact. So the erosion came really for mix effect. And the mix effect came mainly and this is quarter over quarter, sometimes a little bit different, by a higher demand on catalysts with a bigger share of precious metals, which just have, by the nature of how we provide them then, have a dilutive effect on the margin. It doesn't change anything on the cash generation also. But again, it has a dilutive margin effect, and that's something which can happen from 1 quarter to another from a mixed position. For the specialty dividend, I would hand over to Harriss. Yes. In principle, you can approach your question from 2 sides. Number 1, we had planned an AGM for April, and we decided to shift it to June. Now the new day is June 29. The recommendations and decisions our Board took for the first AGM will now be, let me say, rediscussed in a board meeting mid of May to prepare usually the agenda and recommendations and decisions for the AGM end of June. Therefore, I don't know how the Board will decide in May regarding the dividend. In the dividend, specifically, we had 2 kinds of dividends to discuss. Number 1 is the regular dividend for the year 2019, and there is a decision and recommendation made by the Board for the shareholders meeting needed. And in addition, the extra dividend we defined at CHF 3 per share after successfully closing the divestment of Masterbatch. And this is also up to the Board to make this decision. I'm pretty sure that we do not challenge this decision in principle, but it could well be and this is now really theoretically spoken, it could well be that the Board decides to pay out in 2020 just CHF 2 and reserve CHF 1 for the AGM in 2021. But in principle, we stick to the total amount of CHF 3 extra dividend based on the successful closing of the transaction. The next question comes from the line of Markus Mayer from Baudelaire. Please go ahead. Yes, good afternoon. I have two questions as well. First one is on the Catalyst business as well. There have been already cancellations of refill orders. So as I remember correctly, that was the business in the last financial crisis that saw the impact first. And also in the first two business, have you already seen delay of projects? And then the second question would be on the pigments divestment. Should we expect a delay of this divestment as this COVID might be not that easy to do the diligence and then all the other stuff which is needed for the divestment? Let me Markus, let me start with your second question, and Stefan then will respond to the catalyst related question. When it comes to dividend, I think all of you know the entire story. We announced divestment many years ago. We successfully carved out everything and put it up for sale. We sent out the prospect to strategic buyers as well as to private equity firms. We had a very strong response to that. We thought about having the first meetings with interested parties in May, and now we are in the middle of COVID-nineteen. And as you rightly said, this is really not the ideal time for make divestments and acquisitions. And therefore, we decided to slow down the process. We are not in a rush. We will slow down it a few months. We wait until August, September so that we better understand the total environment in the market, the interest of the strategic or private equity buyers, and then we continue with the regular process in full. Okay. Thank you. Right. So Markus, on Catalyst business, the answer is we have no not seen any cancellation of refill orders in the Q1 or as of today. Let's keep in mind that the refill business is around 70 2019 and a little bit of a shift into the Q4, which was exceptional and really good. And we've seen or we are preparing that we would see a certain rollover of orders into Q2, Q3, Q4. That is something which I would not be surprised to see. But as I said, from our today's outlook, we already will see a stronger Q2 on the top line versus the Q1 this year. Thank you. You're welcome. The next question comes from the line of Theodora Lee Joseph from Goldman Sachs. Please go ahead. Just two questions. The first one is, I was wondering if you're able to quantify kind of the net raw material tailwind you saw in the business for the Q1, because I know that the pricing was actually positive 1% on a group level. But obviously, there is a the majority of the raw materials must have come off year to date. The second question relates more to Care Chems. Can you remind us what percentage of Care Chems is the aviation business? And if you're able to give any color around the magnitude of decline that you saw this quarter? Also, if you're able to comment on the exit rate you saw for CareCamps in March and what you're seeing in April, that would be super helpful. Thank you. All right. So let me start with the raw material piece. Actually, in the Q1 of 2020, we did not have yet a huge impact from raw material deflation. It takes a little bit of a time till crude oil prices to naphtha, into olefins, ethylene, propylene have translated and impacted then also the pricing for our feedstock. But we do expect that. And as much as we have discussed already that the oil price and oil market situation has a little bit of a negative effect on the outlook on oil and mining businesses in the next two quarters. But we will see, of course, an advantage by the lowering raw material prices on olefins, ethylene, propylene. Now forward looking into Q2 and Q3, particularly in the main offtakers of those olefins in Care Chemicals as well as in additives part of the natural resource. They use quite a bit of those olefins. The second part of your question on the Aviation business. I mean, if you ask me about the weight, it could not be lower than in the Q1. I think this is really with grounded airplanes worldwide. And I mean, I guess you've seen in different geographies outside of the window and not seen too much snow. So if you take Q1, the ratio would be extremely low. But the deviation to already not I mean, lower Q1 in the last year was still in the magnitude of minus 60%. And as I said, that contributed to 80% of the decline of the whole Care business. And so it was really an think it's a really grounded bottom business in the Q1 2020 and taking a major effect on the Care business. The next question comes from the line of Alex Stewart from Barclays. Please go ahead. Can I come back on your comment on the fifty-fifty mix between onshore and offshore in OMF? Could you confirm where the onshore business is? And is that the legacy, the Remanin shale exposure you had with the 2 acquisitions in 2016? Because I was under the impression you had impression you shifted a lot of that into more challenging, more difficult wells. And then secondly, your Crop Care business declined, albeit slightly, for the first time in a while. And you also said that Home Care, which was slightly negative in the Q4 of last year, we shouldn't read into that, but it's negative again in the Q1. Is there something going on in the Home and Crop Care business that implies or the suggested growth in demand is going to be now structurally slower than it was in the past because that's been a very important growth driver for you? Thanks. Thank you, Alex. So that was 3 questions. I'll take them. The first question on the offshore ownership. You're totally right. Not only to the acquisitions, but the part of the management team's execution and strategy and improving the results is, of course, shifting more to value accretive businesses, and that means a shift from onshore to offshore. And that is in progress, and that is deleveraging the fracking business, if you may. And that's part of the results which you see already in the profitability in the Q1 of 2020. If I come to the crop business, yes, this was slightly below. And basically the whole deviation or the majority deviation in crop came from Europe. And if you see also coming out of a mild winter, also very dry season in the Q1 of this year, we don't see any fundamental change to our growth potential in Crop solutions, absolutely not. But yes, a weak start in Europe particularly, which led to a little bit decline on a Q1, Q1 comparison. Nothing fundamental. And on the Home Care business, yes, also there, we have seen a small decline. This has to do also with customer product mixes. And in principle, it's a business where you're totally right, we see also ongoing growth potential in the future, specifically also as it addresses, of course, aspects like hygiene, which are of high importance these days. Sorry, can I just clarify on your on that onshore, the 50% onshore exposure, can you confirm that that's U? S. Shale still? Or is there other parts of the world where they feed into that? I'm just trying to get trying to gauge your exposure to the short cycle oil producers. There is a few parts of the world, but by far, the biggest is, of course, the U. S. Thank you. You're welcome. The next question comes from the line of Daniel Buchta from Stobel. Please go ahead. Yes. Thank you very much. Two questions also from my side. Maybe the first one on your master batches disposal. And you commented a little bit on this. Also earlier today, I read that you are not concerned that PolyOne may stop this disposal or may renegotiate it. I mean, if I read what the CEO of PollyOne in the Q1 conference call said and also before, I mean, he said they stick to the strategic idea or rationale behind this deal. But nonetheless, they confirmed that there is a breakup fee of USD 75,000,000 And they also said that, yes, they have would have to look at it because the markets are as they are. And between the lines, they also said that, as of today, they probably could get this asset cheaper than what they have agreed with you late last year. So could you please clarify a little bit, Mr. Kotman, what makes you so sure that PolyOne is not maybe renegotiating the deal or is maybe even terminating it? And then the second one on your efficiency program. And in the call, you confirmed that the €50,000,000 savings target with €500,000,000 to €600,000,000 people being laid off. Is this still the case and maybe a little bit delayed, which is fair in this current difficult environment? But on the other side, you mentioned in the transcript or in the presentation, rapid and efficient implementation of cost control measures. I mean, what kind of cost control measures were there if these lay offs are at the moment delayed? So and you also, Mr. Kotman, stated today that the redundancy program is on hold. Maybe you can clarify in that regard a little bit on what you have done on the cost side so far. Thank you very much. Yes. Thank you, Daniel. Let us start with the second question. You have to distinguish between the, let's call it, fitness program for the Varian business unit, which was started in the Q4 2019 and prepared for implementation in the first, second and third quarter 2020. And we announced it at our press conference, I think, February 14, 2020. It's only focusing on headcount reduction and efficiency increased measurements in our business units. And here, we are talking about these CHF 60,000,000 savings and roundabout, let me say, CHF 500,000, CHF 600 positions worldwide. This program was put on hold 4 weeks ago, and we decided that we discuss again about the further implementation in September when we hopefully better understand what kind of impact the pandemic had on our businesses and will have on our businesses in Q4 and maybe also in 2021. And what situation we are in, in the 3rd quarter regarding the overall COVID-nineteen development in principle. That's a separating issue. What we are talking now about short term cost measures and cash management measures is that we have already started mid of January until end of January when we recognize that we do have a Chinese problem. And I think the entire industry in January recognized Corona as a Chinese problem in Wuhan with the double digit New Year and the shutdown of many factories. And there were only a few guys thinking about the possibility that this could go to Japan or to Korea or to the rest of Asia. Then suddenly, we saw, like all other colleagues, this coming up to Europe and to the U. S. And this then generates on our side the continuation of weekly cash and cost control calls of my 3 EC colleagues with all business people in the company, the business unit that's the members of the management committees in order to reduce costs in any form and shape and to generate additional cash by very traditional hands on top down networking cash management. That's what we are talking with short term and mid term cost and cash measures. And this is ongoing, and this will generate a significant additional contribution to the cash flow of the company and the reduction of the cost base now in the second and the third quarter. Regarding Masterbatch, I can only repeat what I mentioned in the beginning of this call and what I said this morning to a few journalists, it is difficult for me to comment on the statements of Bob Patterson, but Klariont and closing happen. And we have zero indication that PolyOne is looking for any easy way out or renegotiating of price and conditions and what kind of details at the end. For the time being, it is a regular project and there is absolutely nothing today at the horizon that we can assume that there is any disturbance until we finally then close this transaction. Okay. Thank you, Marci. That's very helpful. Yes. The next question comes from the line of Andreas Heine from MainFirst. Please go ahead. Yes. Thanks for the opportunity. Two questions I have. The first is on Oil Mining Services again. Going back to 2014, 2015, what we have seen there is that it was quite robust in the first place as the volume was not affected. And that was explained in those days as the business not being linked to the exploration, but only to the production. But with the delay of 1 to 1.5 years, there was price pressure with the renegotiations of the contract. And now I learned that most of the recovery in earnings was homemade and rather from the price driven renegotiation of the contracts. But anyhow, do you see the risk as you have these contracts running out and have to be renegotiated and as the profitability of your customers is very depressed that what we have seen in 2016, 'seventeen will happen again? Or do you see this as highly unlikely due to the shift to offshore and due to the homemade work you did? That's the first. 2nd, on Care Chemicals. Going into the second quarter, I would assume that Personal Care, Home Care should do reasonably well. Crop, you said, is more seasonal impact. And that leaves you then with the industrial business where you said that the overall the main impact was from Aviation, which basically doesn't do any business anyhow in the Q2. And we should see the impact of lower raw materials. In the sequential trend from Q1 to Q2, how do you see there the business developing? Okay, Andreas, thank you for the question. So I'll take all that first. You're right. We will we are now coming into that momentum, which you described a couple of years ago, 5, 6 years ago, completely different. We come in with a strength, and we have a strength of having a more cost adjusted organization, focused organization with more accretive contracts and a higher value proposition in our sales. And that's why I do believe and see that we have a different starting position when it comes to potential renegotiation of the contract. And that has to do with our higher share in offshore. That has today to do that we have selected contracts, which are particularly value driven, where the exploration is particularly difficult, and we are particularly good in the way we do business and really improve efficiency and effectiveness, have also actually a lot of innovation launched over the last couple of quarters in the way we explore. So I would say due to the demand drop and also the full warehouses, for sure, you will see an impact from the volume side. But I see us much more robust or much more prepared going into that phase than years ago. To Care Chemicals, yes, you're right. Our expectation on Personal Care remains high also for throughout the whole year. But what we will see is that in the Q2, we have a higher impact on the industrial side of the business. And that's not the aviation business, which I'm talking about because there is hardly any comparison basis in the Q2, so there is no deviation possibility. But we have construction business, we have in lubricant business, we have some base products and so on and so forth. And with certain industries being in a lockdown and you have delay effects, I mean, look at the unemployment rate or the registration for unemployment in certain geographies like the U. Industries, which affect Care Chemicals. So from that side, we do see definitely a weaker second quarter in a Q2, Q2 comparison and even in a Q1 comparison in a way given those factors. Yes, the raw material gives us some chance to improve the direct gross margins. But again, the volume and the effect on utilization in the surfactant business will make its mark also in the Q2. So that's why we do not see a significant opportunity in the Q2 but more a still sales decline effect in the Q2 given from the COVID-nineteen pandemic, of course, taking away the aviation effect. Thanks, Hedren. Welcome, Andreas. The next question comes from the line of Flavio Schuster from Credit Suisse. Please go ahead. Yes. Hi. Thank you for taking my question. I just have one. I know you said you want to strengthen your balance sheet and also support organic growth with the proceeds. But could you imagine to distribute maybe a share of the proceeds from the potential pigments disposal to shareholders as well? Or is this completely ruled out? We always said when we described our intention regarding the divestment of pigments and the divestment of Masterbatch that with the successful closing of the Masterbatch divestment, we pay out an extra dividend of Thank you. There are no more questions. Ladies and gentlemen, this concludes today's conference call. The Investor Relations team remains available Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call and thank you for participating in the conference.