Earnings Call: Q3 2018

Oct 31, 2018

Ladies and gentlemen, welcome to the Clarion 9 Month 2018 Figures Conference Call. I'm Sherry, 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 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 Ms. Anja Pomaren, Head of Investor Relations. Please go ahead, madam. Thank you. Ladies and gentlemen, good afternoon. My name is Anja Pomeran, and it's my pleasure to welcome you to Clarion's 9 months and Q3 2018 results conference call and live webcast. Joining me today is Patrick Jany, the CFO of Clariant. The slides for today's presentation may can be found on our website along with the media release. And I would like to remind the participants that the presentation includes forward looking statements, which are subject to risks and uncertainties. Listeners and readers are therefore strongly encouraged to refer to the disclaimer on Slide 2 of our presentation. The replay of this call will be available on the client website for around 30 days. And with that, I would like to hand over to Patrick to take us through the presentation. Thank you, Anja. Ladies and gentlemen, good afternoon. Let us begin with the highlights. As you can see on Slide 4, the 1st 9 months of this year, Clariant progressed again in sales and EBITDA before exceptional items. Sales rose by 6% in both local currency and Swiss francs to around CHF 5,000,000,000. EBITDA before exceptional items increased significantly by 7% in Swiss francs to CHF 765,000,000, driven by the positive development in Care Chemicals and Plastics and Coatings. The corresponding EBITDA margin remained robust at 15.3%. Slide 5 shows that in the 1st 9 months of 2018, organic sales rose by 6% in local currency with good growth across all business areas. Sales were driven by 3% volume growth and by 3% price increase. This resulted in sales of some CHF 5,000,000,000 for the group. In terms of regions, sales growth was most pronounced in Latin America and Asia. Sales in Latin America increased by 13% in local currency, in Asia by 9%, mainly driven by China and India. Sales in North America grew by 6% despite a strong expansion during the same time period in 2017. In Europe, sales advanced by a solid 4%, whereof Germany grew only by 1%, Europe Eastern Europe by 10% and France by 2%. Only the Middle East and Africa, the world's smallest geographic region, reported a slight sales increase of 3%. Looking at the figures in the individual business areas, starting with Care Chemicals on Slide 6. Care Chemicals reported a remarkable sales growth of 9% in local currency. Both Consumer Care and Industrial Applications delivered solid growth, which was partly supported by a strong aviation business in the Q1 of this year as well as by an excellent development in all consumer care segments during the 1st 9 months. From a geographic perspective, most regions contributed to the notable sales expansion. Asia as well as North America grew with double digit growth rates, while Latin America and Europe grew in the single digit range. The EBITDA margin before exceptional items in Care Chemicals increased to 19.4% from 18.1% a year ago, primarily as a result of an improved product mix. Sales in Catalysis rose by 12% in local currency. The organic sales growth of 8%, excluding the effect of the food consolidation of our joint venture in India, was primarily attributable to Syngas, but also due to specialty carriers. All regions except North America added to the robust sales momentum, especially Asia advanced strongly as a result of the good demand in China. The EBITDA margin before exceptional items, however, decreased to 20.6% from 24.6% in the previous year. The decline was attributable to the change in product mix with a higher proportion of Synga throughout the 1st 9 months as we have already indicated earlier this year. Continuing with Natural Resources on Slide 7. Natural Resources sales grew by 7% in local currency. Sales in the Oil and Mining Services business exhibited double digit sales growth, bolstered by a continuing demand improvement in the industry. Though all three business lines contributed to the growth, this increase was mainly driven by Oil Services and Refinery. Sales in Functional Minerals grew in the low single digit range in local currency. The growth in the foundry business compensated the temporary softness in the edible oil business. As you know, the purification business for edible oils is subject to the quality of the respective costs, which are dependent on the weather conditions. The EBITDA margin before exceptional items declined to 12.8%, largely as a result of the persisting price consciousness of the oil market as well as a lower contribution from the Functional Minerals Purification business in the first half of the year compared to the same period in 2017 when the high demand levels were lifted by the pure quality of the harvested crops. In Flushing Coating, sales increased by 3% in local currency in the 1st 9 months of the year. All three business units contributed to the sales advancement. Growth in Masterbatches and Pigments was supported by Latin America as well as the continued expansion in Greater China. The higher sales in additives were mainly driven by strong growth in North America, Europe and Asia. The EBITDA before exceptional items rose by 8% to CHF 341,000,000. This favorable progression was mainly attributable to pricing measures as well as increased volumes. Slide 8 provides a summary of the figures of the 1st 9 months we just discussed. Let us now move on to the Q3 figures on Slide 10. In the Q1, sales rose to around CHF 1,600,000,000, up 5% in local currency and 2% in Swiss francs. Care Chemicals and Natural Resources contributed most to this advancement. EBITDA before exceptional items increased by 3% to CHF 241 1,000,000, primarily due to the strong contribution from Care Chemicals and Coatings. The corresponding EBITDA margin before exceptional items remained at a solid 15%. On Slide 11, we can see in more detail the composition of the growth in the Q3. Organic sales grew by 5% in local currency, driven by 1% volume growth and 4% price increases. Sales growth in Swiss francs was 2% due to adverse currency impact of 3% in this quarter. This resulted in total sales of approximately CHF 1,600,000,000 in the 3rd quarter. On a regional level, most geographical regions added to the group. Latin America progressed by 14%, while North America and Europe both grew sales by 5%. Sales in Asia improved only 3% in local currency year on year. Though China softened in the Q3 of the current year, it continued to develop well against a strong comparable base year on year. Again, only the smallest region, Middle East and Africa reported a minor sales contraction of 1%. For the next few minutes, I will focus on the developments of the business areas in the 3rd quarter. Therefore, let us move to Slide 12. Business Care Chemicals increased by 8% in local currency. The strong development was mainly driven by double digit growth in Consumer Care, but was also supported by industrial applications. On a regional level, sales rose in almost all regions with double digit expansion in Asia as well as in North America and mid single digit growth in Latin America and Europe. EBITDA margin before exceptional items increased to a record high of 21.6% from 19.4%, largely because of operational leverage and a more favorable product mix. Sales in catalysis increased by 4% in local currency. This was realized against the backdrop of a stronger prior year as well as forward sales shift to the Q2 of the current year. However, a positive sales development was again achieved in Cigna. The EBITDA margin in Catalysis decreased to 18.1% from 26% due to a product mix effect with a proportionally much higher sales growth contribution from CINGA when compared to the same time period last year. In the business line, biofuels and derivatives, Clariant had a round baking event for the construction of the large scale commercial sun liquid plant for the production of cellulosic ethanol made from agricultural residues in Romania in September of this year. This plant will testify to the competitive viability and sustainability of the Sun Liquide technology on an industrial scale. At the same time, it will be a reference facility for the worldwide marketing of Sun Liquid licenses. By 2021, we expect Sun liquid sales of CHF 100,000,000, of which license sales and sales from Bioethanol will each amount to approximately CHF 50,000,000. Moving on to natural resources on Slide 13. In the Q3, sales in natural resources advanced by 14% in local currency. This growth was supported by a demand increase in the oil and mining services as well as by solid growth in Functional Minerals. The double digit sales growth in the oil and mining services business reflected the improving demand in the oil market. Both mining and refinery sales grew in the high single digit range despite the continued curtailed demand resulting from a customer's facility failure in mining. The sales progression from Schmerals exhibited an increased single digit growth in local currency. Both the foundry as well as the purification business contributed to this positive development. The price consciousness of the oil market has not yet abated and is reflected in the comparable EBITDA margin before exceptional items of 13.2% versus the prior year. Quarter on quarter, this represents a 3 20 basis point improvement to the EBITDA margin. Sales growth in Glasphem Coatings advanced by 2% in local currency in the Q3 against a strong comparable base. Growth was more pronounced in pigments and additives than in master batches. The pricing efforts in all three business units mainly supported this positive sales development. The EBITDA before exceptional items increased by a significant 11% to CHF105 1,000,000 despite strong comparable sales. Slide 14 provides a summary of the first discussed Q3 of 2018. I now come to the economic outlook for 2018 on Slide 16. For 2018, Glant expects the economic environment in mature markets, which represent a high comparable base, to remain solid, albeit to grow at a slower pace, while we expect emerging markets to remain broadly supportive. As to our outlook for the current year, please move to Slide 17. For the full year 2018, we will continue to focus on growing our businesses by means of innovation, seizing growth opportunities and cost efficiency. We are confident to be able to achieve growth in local currencies as well as progression in net operating cash flow, absolute EBITDA and EBITDA margin before exceptional items. Going forward, as announced in September, Clariant expects to improve its performance as a result of further operational progression and the accelerated reshaping of its portfolio through the divestment of pigments, Standard Masterbatches and medical specialties as well as the creation of the new business area, high performance material. I thank you for your attention and turn the call back to Anne. Thank you, Patrick, for walking us through the details of the 1st 9 months and the Q3 of this year, And we will open the line for questions now. We will now begin the question and answer The first question is from Christian Faiz, Kepler Cheuvreux. Please go ahead. Yes. Good afternoon, Anja. Good afternoon, Patrick. Two questions, if I may. First of all, yes, obviously, you saw an adverse mix effect in Catalysis and Energy. You mentioned this is due to higher sales in Syngas. Yet also your absolute development of EBITDA was on a relatively low level, which would suggest that you lost some customers in the higher margin segment of your business. Can you elucidate this a bit? And then second of all, can you talk a bit about the current demand situation in China? Your organic sales ever still a healthy 9% plus. Current market environment, at least in the financial markets, would suggest China is falling off the cliff. So what, from your point of view, is going on in China at this point in time in terms of demand for your products? Thank you. Thank you, Christian. Coming back to your first question on the mix in catalysts. I think what we have seen in Q3 in terms of sales is the forecasted evolution of the sales growth we have guided for. I think for just to go on sales, we have guided for our sales growth pretty much in line with our guidance of 6% to 7%, maybe a notch above. And therefore, having 21% average After 6 months, we had to come down a bit, right, to go to the 6% to 7% on a yearly basis that happened in Q3, mainly due to lower sales in petrochemicals, which typically are more Q4 oriented than Q3. So Q3 was really very much focused on Syngas, and that really reflects the product mix. So I would not say that we have lost any customers on the high end. You know that typically the sales we have in catalysts are very much or refill orders or contracts on the new build base. On the newly built base, we have good win rates of new contracts. So I would not expect us to lose market share on Roselleme. It's really just a mix. And as you know as well, obviously, a bit of oil facilities from our polypropylene plant, which we're still in London. Now on the second aspect on the current demand in China, we do show a healthy growth of 9% in Q3, and you have to divide it. It's actually pretty much the growth rate we would expect China to have. The growth we had at the beginning of the year and until mid year was very much pushed by the Syngas sales precisely we just talked about in Catalysis. Now this order backlog, which had been accumulated, you may remind that 2016 has been delivered. And therefore, we are receding to a normal level of growth in China, no more affected, I would say, or boosted by excesses of catalysis. So from an actual on the ground business distribution growth, we see a fairly stable development in China. Consumer markets like end markets for consumer care, for instance, are for Care Chemicals are still strong. You might have some slower demand in construction, but automotive sector is still strong. So it's maybe a little bit more patchy than it used to be, but still on a good level. And we don't see it falling off the cliff to take your words as such. But we do a softening of demand. And generally speaking, I would say that we have not seen the usual rebound in September as we normally see after the August holidays. And that typically indicates, based on previous year, that you do have a softening in the economy happening, particularly in some geographies. Okay. And if I may, just ask that add on question. Has that softer demand continued also into October in your observation? As you know, we don't guide on the current quarter, but I would not say that we have seen any specific development which would speak for worsening of the demand trend up to now. And therefore, we can confirm our guidance for the full year. Okay, great. Thank you, Patrick. You're welcome. Next question comes from the line of Patrick Lambert, Raymond James. Please go ahead. Hi, good afternoon, Patrick. Anja. Two main questions. The first one regards pricing at plus 4. If you could give us a bit more breakdown by divisional splits, especially on oil and gas where the growth was pretty spectacular. How much was pricing on especially on the oil services business? Question number 1. And question number 2 on again on Catalysis. Is there anything to flag for Q4 in terms of margins development? It's a very strong quarter, usually typically Q4. Is there any mix? Are you worried about the mix still lagging a bit Q4 versus Q4 2017 or nothing special to mention there? So looking at the price increases, we had a good quarter in terms of price increase. You have seen that the price increase at group level have been ramping up during the year. We were at percent versus in Q2. We had 4% in Q3. So I think we are definitely, this year, able to offset the raw material cost increase by having a good pace on price increases across the board in all businesses, which, as you might remember, last year, we had some difficulties in a couple of businesses. This year, we are pretty much on track, and that's the good news looking forward in terms of gross margin. To your specific question in terms of oil, yes, we have increased prices in some area of oil. However, you know that the main element there is more than the contracts that we have. And therefore, we are still in a phase of having to serve contracts, which were done at a time where profitability levels in the industry were low, and we need to service those contracts and replace them with new ones. The new contracts are absolutely okay in terms of margin, which is why I would say pricing dynamics are finally sound. They need to continue to be able to offset the raw material cost increase, but at least we have a good pace and also in oil. In terms of Catalysis guidance for Q4, I think we can reiterate our guidance that we will probably in sales growth be very much in line with the 6% to 7% cheaper growth we guide for, maybe a notch above depending on the last couple of weeks in December. You know the catalyst is always a bit lumpy. And in terms of profitability, given the fact that now we have a strong Syngas mix during the year, we'd probably not be at the high end of the EBITDA range we guide for, but probably more at the low end of the range, right? That is typically, given the product mix this year, a year where we do have good growth. But the profitability, given the mix, is not the highest that it can be. As you know, if you take our guidance for 2020, 2021, we have in the order books an improved mix going on. And therefore, you'll see just by mix effect an improved profitability in the years to come as well when you consider 2018 as a base. Just a quick follow-up. The oil and the natural resources price increases are above the group level or at par? Well, I would say in terms of price increases, we are pretty much online. We probably see a more dynamic evolution in oil, yes, because there's a certain dynamic there. And functional aerials typically is a more stable market. Perfect. Thanks, Patrick. Thank you. Next question comes from the line of Patrick Rafaisz, UBS. Please go ahead. Thank you and good afternoon. And can I follow-up on Catalysis? Can you maybe add some color on because the sheer size of the margin decline quarter on quarter seemed quite high given that overall sales were still pretty solid. And we've already had this adverse mix in the first half of the year, right? But the decline in margins wasn't that pronounced. Then secondly, can you quickly comment on copper costs? The €29,000,000 is that related also to one off charges or unusual charges due to the SABIC deal? And would you assume that we remain at this run rate until the transaction is closed? And then lastly, can you talk a bit more about the mix effect in Care Chemicals and how you expect that to develop into Q4 and into 2019? Thanks. Thanks, Patrick, for your questions. So taking them in there by the order. In Catalysis, I wouldn't be too concerned by the absolute evolution of the EBITDA. It is at the end of quarter with an 18% margin, which is below the 26% which is exceptionally high last year. You may remember last year, we had a strong rebound in demand after having 1.5 years of crisis in 2016, early part of 2017. We started to see some demand in the Q2 and then really strong demand, mainly driven by petrochemicals in Q3 2017. So I'm just saying that the comparable base is actually quite high. If you look back for a few years, if you are really focused on Q3, you will see that 3, 4 years ago, we had basically 18%, 19% EBITDA margin in, I think, 2014 or something. So it's 18% to 22% margin range for Q3 is not unusual. Last year was just a high comparable day. So and as you know, I mean, the business is lumpy. It's a business which is done particularly at the end of Q4, right? So that is really what drives the whole year. So the mix this year is what it is. It is not particularly good. We do have some idle costs of the new propylene plant both ways in the results. I think that typically, you need a Q4, which has much higher sales volumes to then lift the margin up. And that's what we would guide for within the guidance I gave already to Patrick before, meaning that for the full year, we expect the sales growth in the range of our guidance, we are not sure up and in terms of profitability rather towards the end of the margin range because there's not too much more you can do when you have so much Syngas in the sales mix. Now looking at corporate costs. We have had a bit of high corporate costs now in Q3. These are also temporary charges, which typically at the end we probably by the end of the year end up in some business units for some projects. So I wouldn't be too concerned about that on the yearly view. I think that we have had €109,000,000 last year. We have guided for a lower number in 2018 as we have some costs of bioethanol, which are now borne by the business, which is reported on Tech Catalysis. So we'll be well below the previous year number by year end. But there is no specific, I would say, project cost now what you were saying referring to the project of high performance materials with percent. But this is a bit of volatility in the numbers on a quarterly basis. But on a yearly basis, I don't see a reason for volume. If you look at the mix in Care Chemicals, while indeed it was actually pretty good quarter in Care Chemicals, I must say. We had a very nice mix with a strong growth in Personal Care and Home Care, rather weaker Crop solution quarter, not the best quarter for Crop. Nevertheless, the whole consumer care, high value part had a very nice development, which was above the growth of the Care Chemicals fees, so above the 8% we reported was double digit in Q3, and that lifted the margin up as well. So now looking at your second part of the question on was it something to be guided for in Q4 next year, I would say, well, you know that in 2017, we had a bit of a lower margin because we had capacities. We filled them up to avoid idle facilities on the with products at the lower end of the margin. We're now replacing those products with higher end products, actually the products the plants were made for. This is a continuous progress. And therefore, I would expect profitability in TI Chemicals to remain solid as we continue to improve in the mix. Very helpful. Thank you. You're welcome. Next question comes from the line of Jodhara Liossas, Goldman Sachs. Please go ahead. Hello. Hi, Patrick. Thank you for taking my question. My first was actually in Natural Resources where you had very strong growth in the Q3. So I was just wondering if you could give some color as to whether within OA services, how much of that was actually driven by U. Onshore compared to some of the offshore regions like Brazil where we know that you've got quite a good attractive position there and it seems that production is ramping up there. And then the second question is on the profitability improvement in Natural Resources. How much of that have you actually seen contract new contracts that you have negotiated kind of coming through into the Q3? And then my last question is actually on Catalysis. I just wanted to confirm the 24% to 26% margin guidance, which you have reaffirmed kind of towards the bottom end for the full year. Does that include the corporate costs, some of the corporate cost that you've transferred in that division kind of earlier this year? Thanks. All right. So if you look at Natural Resources from the growth point of view, we are in online with the guidance we gave at midyear that you will see a good growth in the second half. I think Q3 already shows that. You'll continue to see a good growth in Q4 for that business as we are seeing new contracts. And in principle, there is a recovery of the market there. It's very similar to what you can see from our peers, I believe. So overall, the market is progressing in terms of sales, particularly driven in terms of geographies by the U. S, which is mainly shale driven. And also, in our case, through new contracts we secured in Mexico for that matter, not so much to our traditional position in Brazil, which remains rather sluggish. So for now, we haven't seen too much of an offtake increase in Brazil. So very skewed towards U. S. If you look at profitability, we are still in the phase where we do not have a good profitability and not satisfactory profitability in our oil business. As you know, we are signing nice contracts, so you'll see a progressive improvement of the margin as we go into 2019. But we also have to tackle a bit our costs in the U. S. As we were left after the integration of the 2 businesses, we bought with still too high a cost structure, which we are addressing. So from that point of view, there's a bit of work both on the cost side and on the new contract side to do until we see a significant sustainable improvement in the profitability in oil, which is why we just confirm our guidance of saying that while you see in the second half of twenty eighteen a good sales growth, financial resources, the profitability improvement will take more time. It's probably more 2019 than 2018. Now coming to catalysts in terms of profitability. Yes, I think there would not be too much more to do this year than targeting the low end of the margin given the mix. We have not transferred corporate costs. We have actually transferred cost of the buyers and the activity as we establish it on its own feet, so to say, within Catalysis, a separate business line. And that indeed includes those costs. Okay, great. Thanks, Patrick. Next question is from Andreas Heine, MainFirst. Please go ahead. Yes. Thanks for taking my question. Basically, I have only one left, and that is going to the group split between volume and price, which I do not really get together with what the trends in the segments are. So on volume level, you have 1% increase, price fall. But looking on what you have said on the strong sales growth in natural resources, good growth in Care Chemicals, a little bit down in Catalysis, but the local currency decline in Catalysis is probably partly also to the mix effect versus the price component. Could we to help a little bit why the volume growth is all your positive comments is just 1% in this particular quarter? Well, we've seen certainly a decrease in the growth rate, right, typically coming even if you take Care Chemicals with a good business evolution to start in their order. I think we certainly have seen a good price dynamic in Care Chemicals as well, which extends to both sides of the portfolio, both in Industrial Care and in Consumer Care. So from that point of view, our good sales development comes from, I would say, both price and volumes, yes? So solid evolution and above, let's say, our 1% volume growth that we report on a corporate level. On Catalysis, we have certainly seen a volume reduction as well, clearly, which we're using in terms of sales in the quarter. We have not given up too much on pricing, right? So it is really more volume reduction there because we had also, as you may remember in Q2, some sales being shifted into Q2 from Q3. So Q3 was a bit artificially low. That is fine. Q2 was a little bit high, part of its normal game quarter on quarter lumpiness in catalysis. In terms of natural resources, we certainly have an improved pricing dynamic and some volume. The bigger we report, 14% growth covers, I would say, both the volume and the price increase. And to come to the last one, it is certainly in Plastics and Coatings where we have much more pricing than we have volumes. I would say, as we were hinting before, I think to answer another question, we have certainly seen after the holiday period in August not too much of a rebound, which particularly is more pronounced in master badges and in pigments, which do have a good pricing effort, but have not seen a rebound in volume in the last couple of months of Q3, which goes in line on the comments on the economic environment we were discussing. Absolutely. Is it unfair to assume that in Plastics and Coatings both volume wise down in this quarter with weaker September, which usually is the strongest month? I wouldn't deny. And then the last point, only for clarification. If you have more Zynga sales, which has a negative margin effect, is this something what is a mix effect you would put into this price component? Or is that just everything like this in the volume? No. The difference in mix would be reflected in the price deviation that we have. So then these minus 4% is both just the mix where you have something negative on this product mix to Syngas, whereas the prices of the individual products were absolutely flat and the partners and the volume component from the very high base of the year before. Absolutely. Okay. Thanks a lot. You're right. Next question comes from the line of Markus Mayer, Baader Helvea. Please go ahead. Good afternoon, Anja and Patrick. I have three questions, if I may. Coming back to Catalyst, can you give us an update on the development of the order backlog for first film and visual business? And then again on Catalyst, you had this large finger startup in China and also this startup of the construction of some liquid plant that we had significantly higher one off costs due to these two large events. And then lastly, the CEO of Saliq spoke on a conference in Vienna beginning of October, and he stated that he sees additional synergies between Clariant and Zabbix, which might be announced in the Q1 of next year. Is this something you would underwrite? Thank you so much. All right. Taking the question in the order market. Yes, so from the Catalyst order backlog, I think we are confident to see good growth in 2019 and forward. I think when we came out a month ago for 2021 guidance, we guided on good business development for Catalyst. And currently, we see quite a good entry, both in Refill and in new orders, new build on the 2021, 2022 horizon looks interesting. So from that point of view, I think we will see an improvement in the mix over the coming years with a good level of activity also in newbuild. So it looks absolutely in line with our guidance over a month ago. As far as syngas and some liquid costs are concerned, I think it's the some liquid per se has ongoing costs, yes? So they're not a one off, but it's basically pilot plant and the activities to market the licenses, which are in the P and L with not too much sales. It always depends whether you sell a license or not. We sold a license back in Q4 2017. We haven't sold a license in 2018. But we have some ongoing projects where typically the multiple clients, which have leads, also reimburse some costs, but it's obviously not in the same proportion as the cost we have. So you have a slight negative impact right now on the P and L given the solid liquid running costs. But I wouldn't call them one off. It's just that we have created a business line, which as we don't have a plant running right now, totally relies on the sale of licenses, which is obviously a single event, the binary event. And the ongoing project costs and reimbursement are very, very small. So don't cover the cost of that activity. So I would expect for the year to have indeed a bit of a negative valuation effect coming from the Sun liquid activity unless we sign a license until year end. That is still, I would say, a business which will be a bit lumpy in its infancy until we have a base load of a new plant in 2020, which then covers all those costs and generates a base profitability, Like in the new business. And third, to your comment on SABIC mentioning additional synergies, I think we're certainly working on a lot of commercial additional ideas, as we have mentioned a month ago, whether it's in catalyst, whether it's in ethylene oxide. We do have some projects there, but I would not comment on timing. I think we will come out as soon as we have something which makes sense to talk about. Okay. Thank you. Next question comes from the line of Daniel Buchta from Doebel. Please go ahead. Yes. Thank you very much for taking my three questions. The first one on Natural Resources. If I remember correctly, in Q3 last year, you had some kind of one off headwinds from Hurricane Harvey. I meant with that, I would say this quarter this year was running against a relatively low comparison base. Could you just share some light if you would exclude these one off effects from last year, how the margins would have progressed and whether there would be already an improvement compared to what we have seen in Q2 where the margin was down 270 basis points. Would it be already better now on a fair comparison basis, so to say, for Natural Resources? Then the second one on Care Chemicals, just to quickly come back again on this very nice margin progression. Is there something going forward that would make you a bit more cautious that also in the next quarters than in 2019, we can expect a margin improvement also close to that magnitude we have seen in Q3 now? And then the third one quickly on functional minerals. You were mentioning already before that the first half was seeing a rather difficult period because of a good harvesting quality. Do you have already insights how that is going to develop now in the second half? Any indications on how the weather was already in the past and what that means for crop quality and everything, just to check how the function minerals business probably going to develop in the second half now? Thank you very much. All right, Dan, thanks for your questions. Going to Natural Resources on Q3, you're absolutely right. You forget those hurricanes coming through one way after the other. We actually had a negative effect this year as well in catalyst as well, so delayed deliveries and so on. But we didn't mention it, but there is certainly anything there as well. Natural Resources, they always tend to go through Houston on this area. You always get a bit of disruption. But so I wouldn't over emphasize here the improvement year on year. We are not happy about the profitability of Natural Resources. We have been very, I would say, blunt about it. We need to do some work there. We need to service the contracts we have signed, but we need to secure new contracts with higher profitability. And we need to reduce the cost base. I think those are the 2 main drivers. And I would really, yes, not be too detailed on finding excuses on the run rate. I think we have a good business there. We have a good market position. We are gaining market share, but we need to get this profitability up. And as we've guided, it is more 2019 event than 2018 event. Yes. Looking at Altria Chemicals, yes, great margin. It's always difficult when you have this level to maintain that level. Okay. That's point of view. It works very well. I think we are progressing at giving mediums. We have a great growth in Personal Care. Actually, it's that historically, we have a 7% growth over the last now probably 5 years. This year, it will probably be higher. The Q3 was really, really good in Personal Care. It's a bit low end crop. It wasn't the best quarter, as I mentioned before. But overall, I think we will progress in the quality of the business in 2018, which is in line with the long term evolution of that business. We have guided for 2021 targets, which forecasted further improvement in margin after exceptionals. And so they are in line to progress. And there will always be a bit of Q4, Q1 debate about Aviation Business, right? But if you should take that one out, I think we have a good progression year on year. And we need it to reach our guidance in 20 21, but it looks rather solid from today's point of view. If we look at Functional Minerals, yes, we had a bit of a slower demand in the first half, beginning of the year because of too good a crop quality. I haven't really a final view now from the business on the current year, but it looks that it is more of a normal year, which means that we should have a more normal business development for Functional Minerals in the coming quarters ahead. Okay, great. Thank you very much. That's very helpful. You're welcome. Next question is from Charlie Webb, Morgan Stanley. Please go ahead. Hi, Patrick. Just a few for me. Around cash flow, I know you didn't report cash flow for Q3, but perhaps you could give us a little update as we think about the end of the year, perhaps things around where are you in relation to CapEx, remind us of what you're suggesting or guiding for the full year, Likewise, working capital. And then maybe just touching on cash exceptionals, where you expect that to come out now for the end of the year, that would be helpful. But I can only confirm that we do not take guide on or report on cash, right, in Q3. But to your point, I think interesting points to mention nevertheless. I think the CapEx, we have guided on a figure below €300,000,000 You know that we typically are around €300,000,000 for the year. That's our existing guidance on the normal year, pushing higher when we have big projects. So we have just started now a 1 big project, which is the some liquid plant. We're also doubling our capacity in the Lycosine Racks, which is the project we announced a few months back. So we will start to ramp up in big projects looking at 2019. For 2018, I think we're totally online with the guidance. We are obviously always cost and cash conscious. I would really not expect us to be above the guidance, but rather, if at all, a bit lower. But it will depend on those big projects when it's fully under control. In terms of working capital, we did have a bad year end last year at above 20 percentage working capital. I would not expect this to be repeated. As you know, we have been working very strongly with the clogged views, a couple of views, which had some issues by end of last year. I think they are working on it, and then the last few weeks are always decisive. But I think we do have this under better control than last year. One element on the exceptional cash items, which is already in our actions by half year, we do have this €84,000,000 tax payment, which is already in the books by June. So just don't forget this one when you will make your own cash extrapolations for year end. If we were to kind of exclude that tax exceptional that you flagged already, where roughly do you think cash exceptions would be this year? I mean, you talked obviously to get below the 1% of sales. Are we are you on track for that? Well, I think I'll refrain from commenting on that one. Okay. Just one moment on the working capital. Given obviously the growth we're seeing in certain parts of the business, is your suggestion and then how weak it was at the end of last year, is this suggestion that we would see inflows this year on a year on year comparison at the end of the year? Is that the expectation? Or do you think given the growth, it was just a smaller outflow would be the right kind of expectation? I was more guiding on the percentage of sales, right, if that's working capital. Okay. Fine. I can find those numbers. Understood. Thank you. Next question is from Chetan Udeshi, JPMorgan. Please go ahead. Hi, it's David Simmons from JPMorgan. We've seen towards the end of Q3 some oil services companies talking about slowing activity, particularly in the Permian and bottlenecks. I was just curious to see if you've had any sign of that? Yes, sure. So I think we have seen actually a good growth in as you were mentioning before in Q3, in the whole U. S. Oil and particularly in the shale business, which ultimately comes back to the Permian being the biggest region. We are aware of limitations, which are mainly, I believe, pipeline limitations, But they have not really affected our business. They're probably more affecting the drilling part of it because it just doesn't make too much sense to drill anymore when you cannot actually get the oil out of the permanent mine. But as far as we are concerned, we have solid activity there. As we said, we have the profitability topic we talked about in previous questions and which is obviously in our results. But I would say from the level of activity, we look forward to a good growth as well in Q4. There are no more questions at this time. Excellent. Okay. Ladies and gentlemen, this then concludes today's conference call. The Investor Relations team of Garant is, of course, still available should you have any additional questions. So once again, thank you for joining the call. Have a good day, and bye bye. Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call and thank you for participating in the conference. You may now disconnect your lines. Goodbye.