Release Date: August 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sequential improvement in sales and profitability compared to Q1 2024.
- EBITDA increased by 69% year-over-year, indicating strong operational performance.
- Forward restructuring program is advancing well, contributing to cost savings.
- CapEx guidance for 2024 has been lowered to EUR 330 million, reflecting efficient asset utilization.
- Free cash flow is expected to improve significantly in the forthcoming years.
Negative Points
- Overall market remains soft, with no strong economic recovery in sight.
- Agro industry demand is weaker than anticipated, affecting Q3 and Q4 performance.
- Construction sector remains soft, impacting polymer additives and advanced intermediates.
- Q3 is expected to be at best at Q2 levels, with Q4 traditionally being the weakest quarter.
- High underutilized assets continue to be a challenge, affecting profitability.
Q & A Highlights
Q: Can you provide an update on the urethanes divestment and the pricing environment? Also, what are the expected impacts of cost-cutting in Q3 and Q4?
A: The urethanes divestment process is on track, and the business is performing better than expected. The European Union's decision is a game changer, and we are assessing its impact. Regarding cost-cutting, we have achieved 80-90% of the planned redundancies, with savings more front-loaded in the first half of the year. (Matthias Zachert, CEO; Oliver Stratmann, CFO)
Q: What is the current utilization rate, and how does it compare to last year?
A: Utilization rates have improved from the low to mid-50s last year to the low 70s now. This increase is helping with fixed cost absorption, but one quarter cannot balance the shortfall of an entire year. (Oliver Stratmann, CFO)
Q: Can you elaborate on the seasonality of the Agro business and its impact on Q3 and Q4?
A: The Agro business typically has a strong Q1 and Q2, with Q3 and Q4 being softer. This year, Q4 is expected to be the weakest due to reduced demand from Agro customers. (Matthias Zachert, CEO)
Q: How has the order book visibility changed recently?
A: Order book visibility has stabilized, with customers returning to regular quarterly ordering patterns, except in the Agro industry, where destocking continues. (Matthias Zachert, CEO)
Q: Which end markets are compensating for the weakness in Agro and construction?
A: While we see soft volume increases in most industries, profitability is improving due to higher utilization and the end of destocking. (Matthias Zachert, CEO)
Q: Can you provide a sequential picture of volumes and prices from Q1 to Q2?
A: Q3 is expected to be softer due to seasonal plant maintenance and lower demand in the Agro industry. We will provide more details in November. (Matthias Zachert, CEO)
Q: How is the consumer protection segment performing, and is it recovering faster than other segments?
A: Consumer protection is seeing a soft volume increase as destocking ends, but the Agro segment remains weak. (Matthias Zachert, CEO)
Q: What are the upcoming refinancing needs through 2025, and how should we think about interest costs for next year?
A: A EUR500 million bond is due in May 2025, which has already been pre-financed. The next maturity is in 2026. Current average interest cost is 1.0%, but future financing may be more expensive. (Oliver Stratmann, CFO)
Q: Are there any specific end markets showing a change in demand, particularly in Europe?
A: The Agro industry is weaker, and automotive is seeing planned shutdowns in August and December. Aromatics are rebounding due to higher utilization. (Matthias Zachert, CEO)
Q: What is the outlook for net working capital and free cash flow for the rest of the year?
A: The working capital to sales ratio is expected to come down in Q3 and Q4, but it is uncertain if it will reach 21% by year-end. The focus remains on improving cash flow. (Oliver Stratmann, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
