Brenntag Aktie

Ladies and gentlemen, thank you for standing by. Welcome to the Brenntag SE Q1 2026 Results Call and Live Webcast. Please note that this call will be recorded. [Operator Instructions]

I would now like to turn the call over to Andre Simon, Senior Vice President, Corporate Investor Relations. Please go ahead.

Yes. Thank you, Dani. Good afternoon, ladies and gentlemen, and welcome to our earnings call for the first quarter '26 from my end as well. On the call with me are our CEO, Jens Birgersson; and our CFO, Thomas Reisten. They will walk you through the presentation, which is followed by the Q&A session.

All relevant documents have been published this morning on our website in the Investor Relations section, where the replay of today's call will be also available. Allow me also to point out our safe harbor statement, which can be found at the end of the slide deck.

With that, I now hand over to our CEO, Jens. Please go ahead.

Hello, everyone. Let's go to the first slide. To sum up -- I will start with summing up the whole quarter basically. And then I have a little bit more detail on Iran. Overall, I'm satisfied with this quarter. If we look at November, December, we had quite low market activity. We anticipated that we will step into 2026 against difficult comparables. Last year, Q1 was very strong, our strongest quarter. And the year started in that spirit, we had volumes down from 5% January, February, very slow moving, some winter effects in the U.S. in construction, a little bit of uptick due to our antifreeze business on airports, but generally a slow start.

And then 28th February, crisis in Iran or the war started. We observed that for about a week towards the end of the second week, we concluded this will impact the market. And I will come back to all the things going through the Strait of Hormuz a little bit later.

And with our now new flatter structure where all the business units and the regions report directly to me without the divisions in between from the mid-March of the month, we started actions to say, okay, we need to secure supplies to our customers. We need to price up. We need to pass through surcharges. We need to do a whole lot of things, but top priority basically not get caught between a rock and a hard place and also to keep our customers whole. And it took us about 3 days to ramp that up.

So the results you see reflect maybe 1.5 weeks of the Iran crisis in terms of market activity, maximum 2 weeks. So we're very, very quickly up and running. And then also had due to that on the customer side, many customers are used to falling prices, and that means you go minimum on your inventory as a customer, and you saw a certain shift also there that people -- there wasn't a huge pre-buying, but a little bit of prebuying to just have a bit of safety stock. And then we entered into growth territory. March landed on a growth and we increased prices immediately, and we managed to secure deliveries to everyone, and that was well done. And it's a good proof point to the new flatter organization. And here, we are using really quick communication tools and exchanging between the regions and shipments, and it just worked really, really nice.

And I should say, though, that you can discuss how quickly we will be able to do this. Agility is key in today's world. And here, we were extremely quick to get going, but the inherent capability of our business model to deal with this, our size often dual supply of material, connections everywhere in the industry, we proved again that kind of we thrive in times of volatility. And we knew that already. I think some of that was seen during the COVID happening. It has been shown time after time. But this was the first time I could see it, and I'm very happy how we dealt with it in essentials, in specialties, and also in the ingredients of the other deals and what have you. But the big happening was, of course, on the essential side.

We knew that already. While we were doing that, we also kept reminding ourselves, we still keep reminding ourselves that this is a good windfall. We see a good progression of this going forward into Q2. But our real job remains, and that is to get organic growth and the commercial machine going in Brenntag, leveraging the whole portfolio, to get structural cost down, productivity up, and demonstrate leverage of scale and generally improve competitiveness. And then in the front end of the company to be able to use all the products we have now where we are not at all going for a split, but we want to offer the full portfolio with a full -- different margin profiles without losing focus on the vertical business, the specialty business that requires the main competence to play both of those models.

So I -- we kept working on that, and Thomas will come to some of the cost reduction progress we made and -- but we have more than EUR 200 million goal for next year. And when we look at our internal plan to get to some EUR 150 million savings this year. We are tracking on that plan, and I'm happy with that because if we look at previous years, there's been plan made, constructed, but we haven't executed them. And here, I see that we are actually tracking to the plan we have put in place. We have a good structure to follow it up. And I tell you, in the whole company, we are below 3 management consultants, 2, 3 consultants in the company. We don't use consultants. We do it ourselves, and it's progressing. And I think that's a very important scale because if we structurally going to correct some of these cost developments and underutilization developments, we need to know this. It needs to be [indiscernible]. I'm happy that we could keep our eyes on that.

If I look at our outlook, I think -- I feel comfortable that we can confirm the outlook with a higher degree of certainty. Thomas will talk more about that. But I should also say that what we see now at the beginning of this crisis or this is the beginning, we don't know into Q2, that is the volatility we thrive in that type of environment, we still -- or we are not able to foresee what happens to end-user demand in H2 of the year. I'm sure there are going to be someone that got the forecast right, but we don't know who that person is. So we have taken some hit for that in our forecast and feel comfortable. But we don't know what the impact will be, and we don't know how long the crisis in the Middle East would go on.

On the negative, maybe it doesn't belong in an analyst call, but in -- after the end of April, we have sadly had 2 fatalities in the business. Both of them happened on customer sites. And for me, as a CEO, that's a very important one because this is not an Amazon business. This is a business that have inherent dangers. And we need to deal with that. And I feel we have made good progress of safety with good statistics. But these 2 incidents that have happened or something we look at really closely and see if there are actions we need to take to improve. We have improved, but here, 2 independent incidents happened in the quarter and into April, and I'm not at all happy with that, and I'm taking it very serious. And our new CEO is going to look into it.

At the same time, it serves as a reminder to -- this is not just any ordinary business we are running, it's serious chemicals, some of it that we are shipping and working with.

Okay. We move on to the 3 priorities. We set 3 priorities now. And we have now agreed we have set a date for the Capital Markets Day on the 12th of November, where we will go into more detail, share with you a bit more about how we work and also demonstrate by that time, have more proof points that we can move things in the company. But until then, we have put some very simple focus areas. And we have had this in the 2 previous calls, sales. And what are we doing on sales. What we are doing to make some progress. Yes, we are having feet on the ground a lot more at the moment. We have shifted from an internal to external focus. I'm happy with the step up in terms of time spent in front of the customer. And we have a fantastic culture at the front end of the company.

We have done now several drives to getting dormant customers back placing orders. So stale customers that have stopped ordering and that has been quite successful. And then we are also launching a couple of experiments on cross-selling. To best illustrate the strength of one Brenntag model is that we have the domain competence business with say Pharma. We have -- we count the people in Pharma a number of hundreds, but you have customers for pharma that are thousands. And it sets itself that if we can't leverage the Brenntag for account management and maybe the tail end, 4,000, 5,000 customers is very hard to cover in depth thousands of customers for, say, 300, 400 people.

So our domain competence businesses are specialty, they need to be really, really good at spending time in front of the customers of other big accounts. And then we are now starting to leverage that specialty customers. We are moving with essential products, specialty customers of one type of specialty. We move in with another specialty business, product portfolio and helping each other. So we're starting to work on some incentives, pricing, we are starting to work with pricing, and that came at a very good time, where we just kicked off a project on how we price and how pricing is done in this company. But for example, Latin America grew 8% to 9% in Q1. And there, we have -- compared to last year, we had made quite good progress on how we address the market, and it was very nice to see.

Then on the clarity of simplification, we have done an experiment with the supply chain. It was split and to bring it together and serve all the businesses out of one supply chain. In APAC, that's going really well. The Executive Committee is operational, getting comfortable with each other and tremendously helpful now in the time where we needed to be really agile on price, shipments working between regions to have the executive committee around the table, communicating very fast and working together. So happy with that.

New CEO is onboard, started to look into the whole productivity and the network of our supply chain. And in terms of starting at the top, the CEO functions relations with the Works Council, also -- and is not only Germany, but starting to reduce headcount, job reductions. I start to feel we have taken a little bit longer time than maybe I expected. But we are coming through of that, we start to work towards the same goal. And I feel that first CEO piece of it is done. We are working out in the region. Thomas is addressing his part of the organization. And so that's also moving forward. So I think that's good. I mean we haven't had any industrial action or anything of that.

Then on the execution, Thomas will come back to that. We acquired -- closed Airedale that integration goes fine, a nice addition in the U.K. And proven again in terms of execution when it's getting really turbulent that we can manage that. Cost reduction program, well structured. They are well followed up. Accountability, very clear for the different pieces. And I feel pretty confident that we now have learned how to deliver on our actions. And I think around EUR 150 million this year should be doable and Thomas again can go more into that.

If you move to Iran, I guess this is the novelty of the quarter. I mean, there will always be something nowadays, but this situation is new to us. It has not been so problematic, full of action, but just to give you a feeling, we have only about 150 people in the Middle East. So it's not a big impact on sales and gross profit, even though we are doing well there. But the sourcing into the chemical industry is, of course very substantial.

And some of you might not know, but if you look at -- we all know that the oil -- seaborne oil passes through the Hormuz is maybe 25% or 30% of the world and 20% of the LNG is crossing through. Everyone knows that. But if you look into some of our core essential chemicals, give some example, the monoethylene glycol 56% of the global trade is going through Hormuz. Sulfur, which is one of the other way, going a lot into fertilizers and agro, almost 50%; methanol, more than 40%; urea, more than 30%, ammonia, more than 23%; phosphoric rock more than 20%. Then again, that goes into fertilizer and other things and then different phosphates. So it's a very, very critical region in our field.

So how did this really impact us? So this slide sums it up. What happens, and you could read what it says there. But if we instead include the regions, what's happening in the different regions from energy price shock perspective, supply constraints, supply shock price of the product and the demand. Starting in the U.S., energy price shock. Yes, gas prices are up and the supply constraints, there the impact is quite low. But with the way the U.S. market works where U.S. have started to export oil, export chemicals, Exxon, Dow the big companies doing really, really well with windfall.

It's not that it protects the U.S. from seeing a lot of price increases on the chemicals, which where we have participated in that, of course. And I would also say from a market activity level in our segments, we don't see a market slowdown.

If you then move over to Asia, there, the energy price shock element or the supply shock element with constraints, a lot of Chinese suppliers that didn't call force majeure. They just doubled or tripled the price or said they won't supply, very high impact. Price has been very high, and you also had some drop in demand. But we somehow managed to navigate there. I think we reached almost ceiling prices in APAC on chemicals. And our customers are a bit cautious, I would say, should they be stocked, should they not. It's quite dynamic and it's coming down a bit, but the question is how we go forward. But again, not our biggest region. And we got through with -- we are getting through that, and we are managing, delivering and passing on prices.

Then we get to Latin America. There we have pretty low effect in every respect. And the big difference, Latin America get products from Asia, they get it from also in some respect, Europe and also from the U.S. And what we have seen is very hawkish buying behaviors and pricing up. Some of it helped that Chinese imports have disappeared or be reduced in some places. So we have done really, really well so far in Latin America.

And then in EMEA, we have the energy price impacts medium to high, also some constraints because some of the Chinese imports didn't arrive or they got delayed, Middle East and imports got delayed. We saw a very quick movement on solvents. And there, the pricing went up very quickly. Customers not prebuying, just taking up a bit of safety stock, driving some growth, but again, cautious. The big question out there, what will happen to demand in Europe. So that's a little bit of an overview on the Middle East.

And then if you look at our businesses, Essentials starting on the solvent side, that has been obviously in the middle of the action immediately. And that's where you see that our deliveries are in that business are essential for our customers. They are not commodities. They are super needed. And therefore, there is a pricing element to that and also worth some customers have run out. They haven't been our customers, and we are helping them, and it's almost at any cost to get the product if it's not an ongoing relation. So -- and we step in on all of that if we can.

And then on the specialty side, you see that their contracts are in place, smaller volumes, not a quick impact. You see a slight uptick. And I think more will happen but not that drama, not that action to the same extent, but it will come. Transport cost and all the materials will come up, but it's more gradual.

And then I think on Nutrition, our Nutrition business, if you look at that business, fertilizers, et cetera, for example, for Europe, they are already in place before the Iran crisis in most of the agricultural areas. So our prediction is that we will see food price inflation and that thing picking up. But the first planting now already had the fertilizers and the rest in place. But I think the impact can be quite substantial, but it's just later in the cycle and when it happens, we are ready for it. Okay.

Go to the next slide on the numbers. If we look at the top line sales, minus 5%, and that was supported. This is against a very good quarter last year. So I'm happy with this number. It was helped by the 2 weeks of March. In that business, we have some businesses growing. Most businesses are not growing at the beginning of the quarter. But Latin America, we had a high single-digit growth. Also our materials science business 6%, 7% growth, slightly different dynamics and that we saw already in Q4. Very happy about that.

So clearly, the top line and also the gross profit helped by the last 1.5, 2 weeks of the quarter. Gross profit, minus 1.3% or minus 5% top line, happy about that. And then also quite happy with that on sales, minus 5%, but we only lost operating EBITDA 8%. So that's a smaller gap there that we've seen, say, 2 quarters back. That's not only because of cost reduction, obviously, because some transport costs and other things went up very quickly. But to some extent, it's pricing elements and some volume elements on that. Mathematics will then improve the gross profit margin.

I think another aspect about the gross profit, I'm happy about this that we are moving away from -- we like to have price quality on the business, but we are moving away with -- we kind of accept that we have different businesses with different gross margin criteria. I think Brenntag in some corners of the business have been way too minimum gross profit per tonne and shield business. We have capacity and as long as taking low-margin product, and it doesn't reduce the price or the profitability of the mid and the high margin product, we have no problem with it. So looking at our total offering to customers with our whole portfolio and accepting a margin profile. And we are at the beginning of that. We will get better with that when we move on.

And as I said on the forecast, Q2, it's progressing. We know how to deal with it and we are not worried about Q2. What we look for is now what happens in second half of the year on the demand side.

Finally, the Capital Markets Day, 12th November, we will mix that up the people that will attend obviously medium and long-term, what we're going to work on the levers and then to meet several of the team members because we start to have a seriously good team here. And I think they are very much part of this executive committee to deliver on our strategy that we are working. And we are not done on every piece, obviously, we're going to use the time here, but we have the core all elements and we are working on them, and we are also making some real pilot testing in the business. And that's one of the reasons why I like to do this in the second half of the year so that we have tested, can we cope with this, can we do this?

Obviously, not every strategic initiative will be that way, but some of the core elements, I'd like to know what we have the capability to move things in the area we want to use as a lever. Over to Thomas.

Yes. Thanks a lot, Jens, and good afternoon from my side as well. So we now look at Slide #7 and review there the financial performance of the first quarter of 2026, a little bit more in detail. So as outlined earlier, first quarter results have proved the resilience of our business model, this after an expected muted start to the year. So March showed improved performance, especially when benchmarked against the high comparable base in the first quarter of 2025.

Operating gross profit amounted to EUR 950 million, which is down 1.3% year-on-year. At the same time, we achieved a gross margin of 25.9%. That's increased by 0.9 percentage points, which is reflecting strong pricing discipline and supply reliability. Also, this demonstrates our ability to protect and expand margins despite slightly weaker volumes in the first quarter.

Operating EBITDA came in at EUR 306 million, which is down 8.3% year-on-year, while operating EBITA reached EUR 217 million, which is down 12.6%. Decline in earnings is primarily volume driven with positive pricing trends in March, as Jens has outlined already and strongly contributing yet these positive pricing trends, but not fully offsetting the weak demand earlier in the quarter in January, February and until mid-March.

Operating expenses then remained a very much key focus area for us. In the first quarter, higher bonus provisions weighed on this cost base, and also higher energy and transportation costs due to the crisis in the Middle East had an impact. However, keep in mind, we are able to pass on these cost increases driven by higher oil prices within the gross profit. So while as Jens mentioned, actually fuel surcharges or other things actually as well. Overall, we successfully executed on our cost-out program, offsetting the before mentioned increases. And I'll talk a little bit more about that in a moment as well.

Profit after tax amounted to EUR 98 million, and that's broadly in line with the overall development and operating performance. Free cash flow came in at EUR 91 million, and is impacted by higher working capital requirements. And that's obviously particularly driven by rising oil prices and increased inventory in that context as well.

In summary, quarter highlights Brenntag's margin resilience and the commercial agility while also underlining the continued need for strict cost discipline in the current environment.

On the next page, we're now going to talk about the divisional performance a bit more. Operating gross profit in Essentials amounted to EUR 666 million. It's down 1.1% year-on-year. The development continues to reflect the subdued demand environment across most regions, particularly North America and APAC in the first quarter. Regional performance was a bit mixed, we are showing modest growth in Latin America supported by underlying momentum, whilst APAC remained under pressure.

Since mid-March, we've seen solid improving trends driven by oil-linked pricing dynamics and increased market volatility. That's also reflected in gross margin expansion of 1.2 percentage points to 27%, supported by our pricing discipline and ability to supply in these environments. In addition, we're seeing some signs of customers rebuilding slightly higher stocks alongside selective product allocations in tighter markets.

Then turning to specialties, operating gross profit amounted to EUR 284 million, which is down 1.9% year-on-year. Performance continues to reflect weaker demand in life science, partly offset by positive momentum in Material Science. Despite these muted volumes, we delivered gross margin expansion of 0.4 percentage points to 23.7%. That's again underlining our continued pricing discipline and some mix effects in this context.

In Materials Science, we have seen improving volume gross profit trends, whilst Life Science remained more subdued overall. We also see some demand pull forward effects in response to heightened geopolitical uncertainty. And if I summarize, both divisions demonstrate margin resilience with essentials showing earlier signs of recovery and specialty saw a softer demand environment during the early months of the quarter with signs of healthy improvement towards quarter end.

So now I'll turn to Page #9 and provide there an update on our cost-out program. Just as a reminder, the program builds on the progress that we have achieved since its launch in 2023. Against the 2023 baseline, we had delivered EUR 165 million of gross savings in fiscal year 2025, which was demonstrating consistent execution and tangible results. Nevertheless, following the reset of the baseline to fiscal year 2025, we are now targeting additional savings of EUR 200 million to EUR 250 million by 2027. These savings will be driven by further efficiency improvements across the organization, including the simplification of structures and the reduction of organization layers, the optimization of personnel cost base and the continued discipline on nonpersonnel expenses actually as well.

In the first quarter of 2026, we delivered EUR 27 million in cost-out savings, which is reflecting a strong start into the year, obviously accelerating to the EUR 150-ish million that we achieved and planning to see this year. The program is designed to offset inflationary pressures on the one hand and to deliver structural cost improvement. That's quite important.

So looking a bit deeper on the next page into the operating expense development in the first quarter. The reported OpEx decreased by around EUR 20 million year-on-year. So on the one hand, it was supported by FX tailwinds of EUR 34 million. And as this has been partially offset by M&A effects and higher onetime effects such as bonus accruals and other cost categories. We delivered EUR 27 million in cost-out savings in the quarter. These were partly offset by higher transportation, logistics and energy costs linked to recent market disruptions in the Middle East. So I think that's quite important to reflect on, overall, the savings would have been higher without that.

Substantial wage inflation and prior year run rate effects, particularly in North America play a role as well alongside with some other inflationary effects.

Now we were able to pass on the higher energy costs, for example, via fuel surcharges being reflected in gross profit. On an underlying basis, OpEx declined by approximately EUR 6 million, reflecting continued cost discipline and consistent execution of our cost program. That does not include the costs that we are incurring for energy that would come on top. Remember, this is after indeed, actually then absorbing those. So overall, the development confirms that our cost-out program is delivering, while we continue to actively manage inflationary pressures across the whole of the cost base. Reducing structural costs remains for us the key priority in this, and we continue to drive efficiency and simplify the organization.

So in summary, OpEx trends in the first quarter underlying both improving business momentum and sustained cost discipline.

Let me turn now to the development of operating EBITDA year-on-year. As we've expected, operating EBITDA reflects a softer start into the year from January to mid-March with a clear improvement towards quarter end. Also note that high prior year comparables prevailed in the first quarter 2026 as prior year figures do not reflect the impacts following Liberation Day and the effects from U.S. tariff and trade policy. So compared to the first quarter 2025, FX translation had a negative impact of around EUR 21 million, while M&A contributions were broadly neutral.

Within the M&A contributions, acquisitions contributed around EUR 2 million to operating EBITDA in the quarter, of which Airedale and mcePharma had the largest impact. And then effects from divestitures decreased operating EBITDA by around EUR 2 million in the first quarter, largely reflecting the sale of the large business and some other country exits.

On the organic development, reduced EBITDA by approximately EUR 28 million. That primarily reflected weaker volume trends in January and February, as I said earlier. The underlying demand environment remained slightly subdued in early Q1 with limited customer activity and continued pressures on volumes. However, we saw a noticeable improvement in March driven by pricing momentum and stronger commercial execution.

From a divisional perspective, Specialties delivered a more resilient organic EBITDA trend, while Essentials benefited from improving pricing dynamics towards the quarter end already. As highlighted earlier, cost-out measures continue to mitigate part of the volume impact, while we remain very disciplined on the cost base.

In summary, first quarter reflects a mix picture with expected weak underlying demand early in the quarter, an encouraging signs of improvement towards the end, supported by pricing and execution.

So with this, let me close with our guidance slide. We confirm our guidance for fiscal year 2026 expecting operating EBITDA in the range of EUR 1.150 billion to EUR 1.350 billion. As we move forward, our trajectory for the remainder of the year will depend on the -- at this stage, difficult to predict the impact of the crisis in the Middle East on demand across our key global markets. Disruptions in supply chains may create further selective opportunities, while the duration and magnitude remain uncertain. We focus on managing volatility for our customers and securing supply.

Even in a scenario of sustained deescalation in the Middle East, the time frame needed to normalize supply chains is expected to be more than 6 months. It's important to notice that the current economic situation with high inflation could weigh on demand over time. So our full year outlook is based on the solid performance year-to-date, supported by most recent positive pricing dynamics while we continue to monitor macroeconomic and demand developments.

Irrespective of these, we believe in the resilience of our business model, and we remain fully focused on the areas within our control. These are further advancing our cost-out program, continuing to simplify and streamline the organization, maintaining cash discipline and strengthening customer and supplier proximity.

At the same time, as Jens already said, we are working on our strategic review, which we will present at our Capital Markets Day on 12th November. And with this, I would like to close the presentation, and we are now very much looking forward to your questions.

[Operator Instructions] Our first question today comes from Annelies Vermeulen at Morgan Stanley.

I have 2 questions, please. So firstly, you mentioned emerging product shortages. So how significant was that in March? And do you expect to see more supply issues and product shortages through the second quarter? And if you could talk a little bit about the differences between Essentials and Specialty in that regard, sort of where you're seeing the most significant impact in terms of shortages.

And then secondly, just on Asia. Putting together everything that you've said, you mentioned significant price increases from some of the Asia suppliers. So given that and given the geopolitical developments, how has the level of competitive intensity with regards to Asia evolved since we last spoke in March. Have you seen an improvement of that? Or how would you characterize the market in terms of that competition today?

Okay. I'll take that. So short to this, I think the initial shock is over, we have stock. We have built a suitable amount to stock in our business, and we feel confident that we can deliver. And then there could be other distributors that have shortages, but we have a solution to everything actually plus that we have our own stocks. And so I think we don't see any problems with deliveries. And then there are some shortages on some product still in APAC and selected areas getting feedstock, expensive feedstock. There are some things around. But the worst -- the worst of it is behind us. Between Specialty and Essential, I will say we have all of it under control.

On the price increases, we have moved on that. And we have some markets where we see further price increases and there are some places where there are kind of [ easing ] out and you might see it trickle down a little bit. So it's a mixed picture. But I think the ramp-up has been done. And then we need to see what progresses because everything change every week in Iran and there's also some expectations in the whole thing.

So I think prices have come up and the question is, and it's not creep up anymore, but who knows what happens. And also you talking maybe -- we don't have specific data, but there are some 20 operations that have been hit by something in Middle East, and that picture can, of course, change as we move forward.

And then in Asia, I think the initial stage of the crisis was very much with the competitive pressure that the Chinese really stopped the exports, and we felt that into several regions. That has started up again. It's not perfectly normalized and I would say the competitive pressures have been -- has been a shorter situation in Asia. And now I think it's getting a little bit better and people starting to find a way of covering the holes. Again, we have been successful at delivering at all times. So I would say our view on Asia is that maybe we are at the ceiling of the pricing. And then in some products now is dropping off a bit, but again, it will depend on end user demand. It would depend on how the crisis continue to unfold in the Middle East.

Our next question comes from David Symonds at BNP Paribas.

So 2 questions for me, please. So the first one, you talked about 2Q starting well and gave the detail that January and February were down 5% and then March was up, aided by the last few weeks of the quarter. Are you able to give similar detail on April? Or is there anything else you can say to help us size that you expect in the second quarter versus the first quarter?

And then secondly, I just wanted to come back on the comment that the worst of the scarcity might be behind us. Is that a comment because demand has dropped away? Or are you seeing more flow of products from SPR releases and other sort of alternative sources of molecules?

Okay. So I don't want to comment the details of Q2, and we have different comparables because Q1 was strong last year and Q2 less strong and Q3 even less. So it's a little bit hard to compare quarter-on-quarter. But what I'm saying is that from the very low level of January, February, the business came up and some of it was created demand because people want a little bit more safety stock, not extreme stock buildup, but you rather want a bit more if your prices come up.

And then I would say at the moment, we see activity that is better than the very low year-end beginning of the year. And that's as far as I can go at this stage because we want to comment Q2 on the whole quarter. But end of March numbers, no massive changes. Little bit up and down maybe in the order volume, but the comparable is slightly different. So the percentages is nothing I'm going to go up on.

Then on the scarcity, I think initial 2, 3 weeks, very dynamic, people worrying, people quoting to customers, they don't normally have, which means you also take up. So I wouldn't say that we see anything on demand at this stage, and it varies between the regions with Latin America and the U.S. We don't see a problem with demand. And then -- so I will say it's moving sideways on demand. And then the market is finding their channels, so to say now the network -- we have the network in place, but I think it settled in, people understand that there won't be many ships at this time coming through so we better look for something else, and that starts to be priced in, in the market.

The people that have the product, they know that, okay, I'm the one with the product and the price is up and it balances out. So I think customer stock slight buildup has probably flattened out also.

Our next question comes from Chetan Udeshi of JPMorgan.

I just wanted to go back to your comment previously that you're not worried about your second quarter, but much more about second half. I mean, that would suggest that you have a very good visibility on second quarter if you're saying you're not so worried about second quarter, but yet I see a bit of hesitation on your side to guide to second quarter. Can you give us some color on how do you think we should be modeling second quarter you did EUR 305 million, EUR 350 million, EUR 370 million in the right ballpark thinking about the second quarter EBITDA?

This is back to the tradition of the company and how we guide. So I'm very hesitant to guide second quarter give an indication that the crisis is still there. We are handling it. We have pricing in control and deliveries in control. So I tried to give a qualitative flavor to you, but I don't want to guide on the quarter level. Then I'm saying that between now and going forward, if this continues, a, if it stops today, if I discuss the topic with the big chemical companies, the big oil majors, the people that really understand the production footprint. Everyone, I mean to say that 100 to 200 days, 6 months to 12 months, whatever, so we work with assumption that oil pricing would stay pretty high in the rest of the year. And if it's a bit below 100 or up at 122 -- towards up 120 during the summer, it depends who you speak with. But we work with the assumption the whole year would have high oil prices.

And then we don't expect at this moment that pricing on the energy side and that would collapse and go south because you have the -- as you know well, the U.S. oil reserve has been tapped into, et cetera. So -- and there might be more damage to upstream assets also in the Middle East. So we work on the assumption that pricing might come down a bit, but that's not what I'm worried about. What I worry about is the end demand effect. And there, I'm simply saying that I cannot assess if this withdraw Europe into different demand pattern or a recession. We haven't seen anything of that in the U.S., but I'm simply not the right person to forecast it. And since I have no order book or anything for second half year, we are very short order delivery business. I don't know. I'll just point out normal macroeconomics would indicate that there could be a demand destruction effect of that.

And then Thomas and my approach with the forecast has been to say, okay, let's be a little bit careful on the run rate in the second half. We could be right, we could be wrong, but we have taken some debt, some hedge for it, okay?

Got it. The second question I had was you mentioned that prices or some of the prices in China are starting to fall. From your perspective in the past, I would typically see China as sort of a leading indicator of what happens in the rest of the world in terms of direction price -- sorry, direction of price changes. Do you sort of agree with that view? Or do you think this is more isolated sort of declines in China? Maybe this time it's different that you don't see the Chinese pressure spreading on to the rest of the world for whatever reason?

It's hard to say. I'm only like 7, 8 months into this particular industry, even I've been in adjacencies of it. So I think China definitely has -- they understand their own supply chain. And if they need whatever product for their own supply chain and production, they're going to make sure it stays and that's what they have done. And I definitely see China is maintaining the same export ambition.

And I think we will see that happening, but we also need to remember that China needs the feedstock. So the ambition is there, and there is a varying degree feedstock has probably improved a bit. But without the feedstock and also with feedstock that is massively more expensive at the moment, I see China at this stage, not out full blast on export and going everywhere. So it has an impact on competition in Latin America and Europe and other places at this stage, and it still has.

[Operator Instructions] Our next question comes from Suhasini Varanasi at Goldman Sachs.

Two for me as well, please. Just on the quarter itself, I think it was interesting to see the operating EBITDA down actually a lot more in Essentials versus Specialties. Given that you actually saw more price increases in Essentials, it was perhaps a little bit surprising. So could you help us understand what happened there? And how should we think about the evolution in the next quarter?

Secondly, I think you did have slightly higher bonus accruals in the quarter in 1Q. Do you anticipate for the step-up in that bonus accruals number in second quarter as well?

So I will hand that over to Thomas, but just in general. So when this is happening, more pricing actions happening on Essential -- the Essential side and that's normal for this stage in turbulent times. And the Specialty business, much slower, much more contracted and also smaller volumes that are impacted. So -- but it will percolate through because at the end, impacted by roughly the same factors. But over to Thomas, maybe Thomas, you could take that question.

Yes. So I mean, obviously, when we talk about the EBITDA effects. Actually, what we have seen is in January and February, still the muted demand coming through, and that has actually as well being on the pricing environment. So it's not only actually on the overall volume. So you see an effect of that, while this obviously has changed then in March in the Essential space relatively quickly. And that trend, as Jens has pointed out, continues into the future. So that's actually what you have seen in that space very much coming through, albeit and that's what we have been talking about, some of the cost increases on the Essentials side happens as well already because of transport and energy costs actually going up in the first quarter -- in basically March.

And on that note, though, please remember that we are able to pass on these costs via fuel surcharges or actually on the pricing itself. Nevertheless, that has a technical effect on to our cost base in the Essential space.

On the Specialty side then, as Jens pointed out, the effect on prices always takes a little bit longer to come through. There are some industry areas in which it does actually come through earlier and some others were like the Nutrition space, where this actually takes even longer actually to come through. Nevertheless, we are seeing those effects coming through, albeit they are slower and not to the same extent that on the Essentials side, pricing increases actually came through already within March.

On the bonus accrual side, then we're not giving explicit guidance what we're going to do in the second quarter on that one. But obviously, here, I think what is important to note is that compared to a scenario of the previous year where the likelihood of fulfilling actually, the target was reduced because of the trends that we have been very much discussing over the whole course of the last year. We are now facing a situation in which the achievement of targets. And you see that obviously with us confirming the guidance as well is much more likely. And that's the consequence we have to then take into the cost base as well. We have to obviously run those accruals as well on the bonus accrual.

Our final question today comes from Eric Wilmer at Kempen.

I got 2 as well. I was wondering are you seeing a meaningful amount of your customers seeing the Middle East conflict as temporary and as such, not ordering at current elevated prices? And if so, could this support volumes in the next couple of months or weeks when they just simply has to go back when it depleted stock or maybe went past temporary shutdowns.

And then also a question on Latin America. I believe one of your bigger competitors has recently been under investigation due to a potential business with criminal organizations. To what extent could this be a tailwind for Brenntag, perhaps also beyond methanol, which I believe is in scope.

And then actually, finally, if I may actually squeeze this one in as well. And I believe you believe -- you alluded to it briefly, but to what extent are you seeing arbitrage opportunity for polyethylene and polypropylene with global demand moving into your European and U.S. strongholds perhaps away from Asia, Middle East where you are under-indexed in the latter. So moving over to your over-indexed regions.

Okay. So we have seen a cautious -- I mean we don't see any signs that this is stopping tomorrow. And if it does stop tomorrow, we believe that the effects are -- is not over the month after. So -- and we see certain caution and it varies, for example, the APAC customers are cautious and they buy minimum amounts. And in other cases, we see people buy a little bit extra because it's simply not worth the risk. So you have some betting going on where the prices will go up and down, and some caution. And it differs. In Latin America, we've seen people buy. In APAC, we've seen people cautious. In Europe, we've seen mixed pictures depending on how much is dependent on the product and -- but they are buying. And then in the U.S., kind of more of a normal behavior, the demand is there. So that's what I see.

On the arbitrage, they are certainly -- and I'm not talking about those 2 particular products you mentioned because I don't have the insight into the interregional flows like that because we haven't done any arbitrage, new arbitrage business. We are focused on making sure we have supplies. And there might be opportunities on doing some of that. But it's not the big thing, the way we are set up at the moment because we have a couple of, say, 2 or 3 suppliers for some of these big commodities, and we pick the best one, but the availability has cleared. But I'm sure there are some arbitrage opportunities, but I don't have specifics on that.

I mean, your last question on compliance. Actually, which in terms of actually other players appearing to get actually into investigations. I mean, first of all, we have none. That's the first thing. And we obviously continue to focus on actually compliance in general as well. We do have the right methodology in place. So we'll do our utmost best, actually, not to get in such issues.

I'm really not a friend. There has been a lot of work in Brenntag to clean that up. And I haven't found any tendency since I came. And if we find it, we are brutal on it, but we haven't found anything. And so I don't have any red flags or yellow flags in that area anywhere in the business. And but I read -- I saw the article, the press clipping and I don't see any tendencies in our company, and that's not how we work.

Thank you. This concludes the Q&A session. I will now hand back to management for closing remarks. Thank you.

Yes. Thank you, Dani. And this brings us at the end of the conference call. In case of further questions, please do not hesitate to contact us and the IR department. Our results for the second quarter of 2026 will be published on August 12. And now ladies and gentlemen, thank you very much for joining us today. Have a good day, and goodbye.

Ladies and gentlemen, thank you for standing by. Welcome to the Brenntag SE FY 2025 Results Call and Live Webcast. Please note that this call will be recorded. [Operator Instructions]

I'd now like to turn the call over to Andre Simon, Senior Vice President, Corporate Investor Relations. Please go ahead.

Thank you, Michael. Good afternoon, ladies and gentlemen, and a warm welcome to our earnings call for the fiscal year '25 from my end as well.

On the call with me today are our CEO, Jens Birgersson; and our CFO, Thomas Reisten. They will walk you through today's presentation with a followed by a Q&A session.

All relevant documents have been published this morning on our website in the Investor Relations section, and there will be a replay available. Allow me also to point out to our safe harbor statement, which will be found at the end of our slide deck.

With that, I will now hand over to our CEO, Jens, please go ahead.

Thank you. Good afternoon, ladies and gentlemen. Thank you for spending time with us here today. We're busy -- a lot of activity in the market and around the world. And now today, we are mostly talking about 2025, but let's wrap that up and do it properly today.

Reflecting on 2025, we had a very difficult year in the chemical industry. I think in 20 years, we haven't had this long period of suppressed market conditions. And we saw it worsen during the year. It was quite stable in Q1 and Q2. And then the volumes and the top line went further south and landed on a Q4 that was on a quite low level. That said, when you look at us and compare it to other industry players, not least the principles, the ones manufacturing, the year proved again that we sit in a very good place in the market in the value chain, and we have a very resilient business model. I'll come back to that soon.

I was only with the company four months. I did start to read up during the summer. But in those months, we took a couple of important decisions. One was to really going for being a full-line distributor and not to the hard split in that discussion. We removed the two division management layers and lifted the business units straight up. And we formed a new EC, I'll come back to that soon. But basically, the people running the P&Ls with a couple of functions. We formed a new executive committee team, and I'm happy with the progress. We have just -- we have recruited everyone, and there's only one to start.

But let me walk you through the main numbers. If you start in the top left, we came in on EUR 15 billion top line, 4% down versus last year with a trend, maybe not a percentage in Q4, we were down some organic 5%. But versus the beginning Q1 and Q2, that was quite a lot lower. On the operating gross profit, actually, the gross profit margin improved with 0.5 percentage point in both businesses. And we managed to keep it relatively stable. I mean, minus 2% is quite pleasing considering the market conditions and that it was hard to pass on prices because the whole industry has been in the sequence of -- there are segments that don't follow this, maybe energy and pharma. But in all the other segments, we have like a three-year decline of pricing on the principal side. So it's hard for us to reduce -- to increase the prices. And yet we managed to maintain the gross profit level.

Then what I'm not so happy with is not too bad. But if you then look at the decline on the bottom line and you could take either one of those measures, you see then a multiplier of 4x to even 6x bigger decline on the bottom line. And still quite a positive result. I mean, we didn't go into losses or anything like that, but I'm not happy with that the multiplier, the fixed cost loaded us down quite as much, and that's something we need to work on.

Going to the lowest row here on the left, the cash flow, good collection, good inventory management. And then -- so actually, the free cash flow increased with 5%. And that played a role in the dividend proposal that we are putting forward that we have added back noncash one-off. Thomas will explain the details for that. And the dividend is 10% lower, which it reflects how we see the market, but yet we keep it on an acceptable level because with that cash flow, we can afford it and we want to be a stock that is not too drastic in one step on the dividend.

We can go to the next one slide. The priorities that were set when I came in with these ones, sales really stopped the splitting internal focus, go out and sell. And at the moment, of course, that has also in the light of what's happening in the Middle East, we are navigating the current turbulence. And that means all hands are on deck, raising prices, managing supplies and adapting to the new situation. And then we have the clarity and simplification. I'll come back to that on next page, but we really try to make it simpler to be a leader in this group and more focus on the business and less on bureaucracy. I'll come back to that also.

And then on execution, we have started to move reducing the number of initiatives and put more force behind them, increasing the follow-up and generally sound management practice and rather focus through the termination of the wide and shallow the organization.

Let me briefly walk you through that on the next slide, I give some examples. On the sales side, we can see tangible results in terms of more days in the field, a reduced churn on customers and also quite a lot of dormant small and medium accounts that didn't buy that we have managed to reactivate. So that's really good to see.

On the clarity and simplification, and I come to the Easy chart, we have done the structural change. We have also changed the Management Board is under me and Thomas now. And both Thomas and I are seeing our main responsibility to be in the Executive Committee. And one example would be to get an approval if you had certain approvals in the old hierarchy, if you trace it straight through, some of those require 26 inputs and steps. And today, we try to keep that to three. That doesn't mean we want to make sloppy decisions. We want to make better decisions, but we involve the people that really have a stake in the decision, and we make them more accountable for it. And of course, that increases our agility and we have a much bigger probability of taking the right decision at the right time than being on the back foot all the time and to slow.

On the executions, I see some savings. Yes, headcount is down. We have made some progress. We are working hard here in Germany. And Germany is not a quick fix, but I'm happy with the progress we are making. I think the organization have realized that we need to change something and become leaner, and we are making progress. But if I had a wish, I would have liked that we could put that behind us even faster, but at least we are making progress, and we are ahead of what I expected. The basic logic for smaller overhead and a leaner center of the business doesn't mean that we want to let the whole business go into anarchy. We want to have small powerful functions. But we don't want to subscribe to this argument that this business is complex. This business is quite simple. What is it we do? What's the core value stream? That is to buy product, to sell it, to deliver it through the network efficiently and collect the cash.

And what you see in that top line to bottom line is that we have too much around that core function. We can -- the core value-added flow of the business also need to be optimized, but we simply have too much that have been added around it. And you see it in the numbers when volumes and the top line go down. And you have also seen it previously when the business is growing, but you don't have the full leverage on the bottom line. So we are working very hard on setting that right. And then when we move into this year, we're going to work more and more and more out in the businesses. It's not that we are not working out in the business. We have 25 streams where we are working on these issues that goes across the company. It's not just a German initiative this, but we have started and we are further ahead at the same.

If we then look at the new Executive Committee, if you go to the bottom row there, we have the three regional P&Ls, the Essential business, we merged North America and South America under one president. And then we have the global verticals, the businesses that requires domain competence. They are below there. It should also be said that our biggest vertical is the nutrition. Our second biggest vertical is actually oil and gas, but it's a regional one. So it's not represented here, but it's a very substantial and big business that is in North America into the oil and gas market. So we are very proud and happy about that one at this stage. But it's not visible here because it's not a global vertical that we are running.

And then on the functions, hinting towards the strategy, what we want to do, the CEO to optimize the supply chain network, 600-plus warehouses to make that really, really efficient and flexible and reliable. So that's one theme. That's the main job of the CEO to drive productivity through that and demonstrate that we can deliver scale effects. Then you have the central HR. And we have a lot of good people, and we have been a little bit thin on that. We have a smaller organization now, but we have increasing the competence, how we manage the HR side of things. Then we have the Chief Commercial Officer. And that basically from the flow of product to the customer here to build a commercial machine would be a big theme going forward. We are pretty good to react quickly, but there is a lot of improvements that can be done in how we go to the market and how the sales force works and how we link that up with customer service from the CEO. So, that is a theme, pricing approach, et cetera, structures to all that, contract management, we need to do quite a bit of that. And then we have the CIO, very happy that we onboarded Markus Sontheimer. He has been in four or five industries. But very importantly, he has been the CIO for a company that moves millions and millions of tonnes of goods. And I think that's quite a big change from where we were.

We did a lot of investment into digital and IT, but we didn't put the fact in front that we are moving tonnes. And now we have a CEO with experience from moving tonnes, logistics. And obviously, if you link that up with the supply chain network, with the selling and the business with the transaction every second or every second digitalization, automation, AI is super key to get productivity. So I'm happy with that. We are just now missing the CEO to join on 1st of April. He has already been in and been in some meetings, but to get a read on board. So this was an important milestone for me moving forward.

Then the last slide for me before I hand over to Thomas. I'll leave that cost reduction to him. But clear is that we need now to really find -- go from as much gross savings to net savings, and we need to put a substantial number through the P&L this year. I'll leave the details to Thomas, but it's really important that we work with it because I'm not happy with the link of the whole cost mass, the fixed cost mass around the core of the business.

Then on the right-hand side, immediate opportunities. With the dividend and our financing approach and cash flow, we have freedom. I'm sure you're going to ask questions on that later, but we have freedom to do M&A. And it's not like we enter this year without wanting to do M&A, but we hope we can pick up some good targets with lower multiples. But -- so I don't think the cash is going to be the limit to what we do. It's more going to be an issue of finding good targets that fit into our strategy. The two acquisitions that we closed Airedale now 28th of February. We closed Chem Tech already in December. They are looking good so far. So we are happy with those, but we need more of that.

And then finally, on navigating in the volatile environment, I just want to emphasize that we are incredibly fortunate to not be a big principal with a heavy asset manufacturing plant. We are light and we have a lot of experience in navigating these turbulences. So, at the moment, we have all hands on deck to get the pricing right and make sure we don't get caught between a rock and a hard place. And then obviously, a big role we have is with all these disturbances on transportation to work really, really hard to keep our customers whole. so that they get product from us. Okay.

With that, I hand over to Thomas. And during the Q&A, I'll come back a little bit on the impacts, if you ask. But for now, I hand over to Thomas.

Thanks a lot, Jens. And from my side as well, good afternoon to all of you. So, on this Slide 8, I now dive a bit deeper into the financial performance of Brenntag in 2025. So Jens had already outlined our results -- that our results reflect a persistently challenging market environment, as ongoing economic volatility, we end market demand and muted customer activity.

Operating gross profit amounted to EUR 3.8 billion in 2025. Our operating gross profit margin reached 25.3%, which is an improvement of 0.5 percentage points versus the prior year. And despite the market headwinds, we expanded our gross profit margin. That demonstrates the robustness of our business model and our strong commercial discipline in managing margins in a subdued economic setting. Operating EBITDA came in at EUR 1.288 billion, which is down 8.6% year-on-year on a constant currency basis. And operating EBITA stood at EUR 929 million, which is a decline of 12.6% versus the prior year as well on a constant currency basis. So the declines in earnings do primarily reflect the ongoing challenges in the chemical sector, and that includes the weak volume development and the muted pricing environment throughout the year. The developments were partially offset by the impacts from our cost containment program, and I'll talk a bit more into the details later on that.

Moving on to the building blocks of our bottom line results. So if I start below operating EBITA, the net expenses from special items totaled EUR 106 million compared with EUR 111 million in the prior year. 2025 saw a notable increase in noncash expenses further weighing on our bottom line. So one of that was the amortization of intangible assets, which rose to EUR 205 million. That's an increase of EUR 130 million versus 2024. Also, this reflects impairment losses on goodwill in Brenntag Essentials Latin America of EUR 83 million in Q2 2025 and in Brenntag Essentials APAC of EUR 59 million in Q4 2025. This is driven by reduced earnings expectations in these respective regions. Reflecting these onetime noncash effects, profit after tax attributable to Brenntag shareholders amounted to EUR 265 million, a decline of 52.3% on a constant currency basis compared with the prior year.

Notwithstanding these developments, we have delivered a strong free cash flow of EUR 941 million in 2025. This was supported by substantial cash inflows from the release of working capital and lower CapEx. Our ability to generate strong free cash flow remains a core pillar of Brenntag's business model and is a key contributor to the company's resilience, particularly in economically volatile times.

So, let me now turn to Page 9, where I'm going to review our Q4 2025 sequential performance a bit more. As in prior years, the fourth quarter is affected by fewer working days and typical seasonality, customer activity usually slowing down towards the holiday period. Beyond the seasonal pattern, Q4 was notably weaker, which was driven by a couple of factors compared with the third quarter 2025. First and most importantly, GP impacted by muted demand, which was particularly in December, while ASP and gross profit per tonne remained basically flat. OpEx reflects significant progress on cost-out efforts. However, the savings were actually compensated by several onetime effects in Q4. Amongst those, the buildup of some provisions and especially environmental provisions, an impairment on receivables and higher insurance costs in the end as well, the portfolio effect from the acquired entities.

On the next slide, I'm taking a closer look at our divisional performance. Operating gross profit for Brenntag Essentials amounted to EUR 2.733 billion in 2025, which is a decline of 1.2% year-on-year on a constant currency basis. With the exception of Latin America, which benefited from acquisition-related growth, all regions have recorded negative volume development compared to the previous year.

Reflecting these volume trends, operating gross profit decreased across all regions except Latin America. The key drivers of this development were weak end market demand, muted consumer sentiment and lastly, subdued industrial production in many of our core industries. In addition, competition from Chinese products, particularly in EMEA and LatAm continued to weigh on pricing. Despite this fragile macro environment, we expanded our operating gross profit margin from 25.9% in '24 to 26.4% in 2025 which is underscoring the resilience of the Brenntag Essentials business model.

We now turn the focus to Brenntag Specialties. We've generated EUR 1.98 billion in operating gross profit in 2025, which is a decrease of 3.6% year-on-year as well on a constant currency basis. So here, the weak macroeconomic backdrop significantly affected our results with lower volumes across both Life Science and Material Science. Despite these demand headwinds, our sales teams effectively managed pricing and margins, which was helping to maintain solid commercial performance. Now looking at the gross profit trends across the business units. Nutrition delivered a positive development in EMEA, while the Americas remained under pressure due to the lower demand for base ingredients in North America. Beauty & Care has recorded a decline in gross profit, which was mainly driven by intensified competition in the Americas and APAC. Pharma post a slight gross profit decline and Materials Science saw gross profit decreases due to a lower market sentiment across all of the sub industries. Amid these challenges, we have expanded our operating gross profit margin from 22.4% in 2024 to 22.9% in 2025. Again, this is a clear reflection of our commercial strength and pricing discipline.

Now looking at Page 11. I'd like to elaborate on our cost-out program. So, in 2025, we generated EUR 165 million in gross savings compared to the 2023 baseline. Exceeded our savings target for the year and delivered quite a strong level of underlying savings as indicated during our earnings calls throughout the year. Please note that all savings are measured against the 2023 baseline. In Q4 2025, we generated EUR 54 million in savings. And overall, the trajectory of the program has been highly encouraging, and we remain focused on identifying further levers to manage and optimize our cost base. Additional positive signals are emerging as well. When we look at our personnel cost base, it is trending below prior year levels in early 2026 already. Altogether, these developments underline our cost discipline remains a key priority for us, and it further reinforces Brenntag's ability and potential to execute effective self-help measures in a challenging operating environment.

So, looking ahead now, we will conclude the current cost-out program, which is based on a 2023 baseline, and we will recalibrate the baseline for our next cost-out phase towards basically measuring our savings against the 2025 operating expenses. This new approach ensures much greater accountability and comparability throughout the year and follows the rationale of clarity and simplification that we have introduced already with the third quarter results in 2025. On that new baseline, we are now targeting cost savings of EUR 200 million to EUR 250 million by 2027. Again, let me emphasize, that's against the new baseline of 2025.

So, now turning to Slide 12. I'd like to walk you through the development of our operating EBITA in 2025. Compare that to 2024, operating EBITA was shaped by the following effects. Firstly, the FX translation effects reduced our operating EBITA by EUR 38 million. Acquisitions have contributed EUR 23 million. And organically, operating EBITA declined by EUR 158 million year-on-year. These developments reflect the market dynamics that we have outlined earlier. Weaker volumes across many of our end markets, pricing pressure, particularly in industrial chemicals and a backdrop of muted consumer confidence and subdued industrial activity. As already underlined, our cost-out measures helped to partly mitigate these impacts.

On Slide 12 (sic) [ Slide 13 ], I would like to elaborate on our dividend proposal for 2025. The dividend is a cornerstone of our capital allocation framework. Our ambition is to provide reliable dividends across the economic cycle. At the same time, we have to take into account the current economic environment, the market backdrop and our earnings development. In 2025, profit after tax was significantly impacted by several one-off effects that weighed on our bottom line. Most importantly, the impairments in Brenntag Essentials in APAC and in Latin America. Furthermore, we had expenses relating to the impairment of deferred tax assets and other special items, which were reducing our earnings. Altogether, these one-off effects amounted to EUR 248 million. As a result of that, profit after tax for 2025 stands at EUR 265 million. However, this figure does not reflect the underlying earnings capacity of the company, and therefore, it's not an adequate basis for our dividend proposal.

For this reason, we are adjusting the basis for our dividend for the onetime impacts that I've just mentioned. If you exclude these one-off impacts, we arrive at earnings per share of EUR 3.55. And in developing our proposal, we also considered our strong dividend track record. So having consistently paid meaningful dividends even in challenging environments, whilst balancing the current economic reality. Based on these considerations, we propose a dividend of EUR 1.90 per share. Very important overall, this proposal reflects a balanced approach of safeguarding financial stability whilst maintaining a clear commitment to delivering attractive and sustainable returns to shareholders.

So let me close with the outlook for 2026. We decided to replace operating EBITA with operating EBITDA as our key performance indicator and guidance figure. This change is driven by the following considerations. The metric provides a more accurate view of the underlying operating performance and cash generation by eliminating noncash charges. And certainly, we believe in our assets as a differentiating factor. But this shift aligns with industry practices and makes us more comparable as well.

Last year was characterized by significant macroeconomic volatility, muted consumer confidence and low industrial activity, weak end market demand as well as pricing pressures, particularly in industrial chemicals. If we look forward at this point, we see no reversal of these trends. The market environment, therefore, remains highly challenging, and we are not expecting short-term improvements. Consequently, we have reflected these factors in our guidance for 2026. So, for the full year 2026, we expect our operating EBITDA to be in the range of EUR 1.150 billion to EUR 1.350 billion.

So a few notes on what this guidance is actually based on. The forecast includes contributions from acquisitions already closed, and it assumes stable exchange rates at the levels prevailing at the time of this publication. Please note also that any potential impacts from the currently evolving crisis in the Middle East are not reflected in our guidance. As we now look into early 2026, we are seeing a continuation of the trends that we have experienced towards the end of 2025. So notably, it's fragile consumer sentiments as well as ongoing demand and end market weakness across many regions and product categories. Potential effects of the geopolitical escalation in the Middle East remain quite difficult to predict at this stage. As such, prior year comparables in Q1 2026 remain fairly high based on these trends.

Against this backdrop, we remain fully focused on the areas within our control. So we will be advancing our cost-out initiatives. We will be continuing to streamline the organization. We maintain a disciplined focus on cash preservation. And lastly, we will certainly as well strengthening our proximity to customers across all markets. And at the same time, we are working on our strategic review, which we intend to present in the second half of 2026.

So, with this, I'd like to close the presentation now and look forward to your questions.

[Operator Instructions] Our first question comes from Suhasini Varanasi from Goldman Sachs.

Two from me, please. I appreciate that your guidance is based on the macroeconomic environment that you have laid out in your presentation. But clearly, it excludes what's happening in the Middle East at this point. Just wanted to get a sense, first, how early trading has evolved in Jan, Feb and whether that has changed because of the situation in the Middle East? Are you seeing any disruptions? Are you seeing any upward movement on chemical pricing? Are you making any changes to your inventory working capital? I think that would be good to have some color there.

And I think just a second one. If we think about the one-off costs that have -- sorry, the cost saving programs that have been announced, including the new one, how should we think about the one-off costs linked to both of these programs for 2026 and 2027, please?

Okay. So, on the pricing, we are 13 days into this. And the traditional way when you have the hydrocarbon side of things getting under pressure that we have here is that the solvents pricing move up in our -- that will impact the solvents. Those prices move up immediately. And then it moves on to transport cost. There it's starting to happen quickly. And here we have the combination of the people transporting due to fuel prices, but also the challenge of delays and longer routes, et cetera. So that starts to move.

And then since all chemicals are made with energy, you will see a pressure up on the other costs. So what we see now is clearly pricing moving up, and we are active to pass on the cost increases and working very intensively with this. It's too early to give overriding numbers, but you can see some of the principals stepping in very quickly and raising their prices, and we do what we normally do in this situation, make sure that we don't get caught between a rock and a hard place.

So on the -- your second question with regards to the cost-out program, obviously, I mean, the first thing that I want to mention here is we are looking at a broadening and an acceleration of the cost-out program. As you will have noticed when we are now rebaselining this on to the 2025 baseline, we are speaking about EUR 200 million to EUR 250 million additional cost out until 2027. In order to achieve that, we will continue to incur some one-off costs, which is the baseline of your question. And I would expect this to be in the range of previous special items actually that we have seen there as well. So we will continue on a similar run rate.

When you look at the run rate, please do exclude the other one-offs that you have seen in this current year where we have had impairments. That's not going to be repeated into the future. It's not part of this cost-out program obviously.

I think that was very helpful color. And just a quick follow-up, please. I appreciate the commentary on pricing, but have you seen any changes to volume trends? I mean, are your customers stocking up, anticipating any disruptions?

So, now it's very early day, the 13th day. But if you have a year-end, you would expect a lot of people destocking and make sure they don't cross the end of December with too much stock. So that's normal. And then when you have a situation where most experience player we know that pricing will go up because energy goes up, cost goes up, transport goes out, all the rest. You would expect prebuying.

What we have seen so far is -- and it's very short. I mean, it's still early. So it's hard to say it's different. The type of feedback we've gotten so far has been, do you have stock? Can you supply us? We get it that the prices will go up. And that has been the first six, seven days of that. And then whether they are increased buying, I think we are stepping into that stage now. And here, I think the situation is a little bit different compared to a normal case. And that is that there are quite a few users, people that buy from us often manufacture something with the chemicals, there is a worry in the market about the underlying demand.

Will this energy crisis or whatever we call it, result in a lower demand in Q2. That's what the mathematics that go through people's mind. So, therefore, I'm also curious to see in one, two weeks what's going to happen to the prebuying if people are moderate or whether they go all in for it. And if I were to compare the regions, if we take the pure energy bill, here in Europe, we're talking 5x at least for a manufacturer on the energy per kilowatt or megawatt hour price compared to China, the 4x versus the U.S. And you could expect that Europe is going to be impacted quite a lot by this energy increase. So you have this balance.

Will they shut down production? Will overall demand go down? Will there be uncertainty? Just very difficult to know. And I think -- so the volatility as such, we have -- I see no problem with that. We know how to do it. We were quick out to start working on it. And then I'm more curious to see what happens with overall demand because of this crisis. And obviously, there, we have the whole duration of the crisis that will impact, and I'm not the person to assess how long this will go on. We just do the best on the pricing now and then we see what happens to demand as we move forward.

[Operator Instructions] Our next question comes from Nicole Manion from UBS.

I've got two, please. The first is just on the comments in the presentation around some new business wins. There's a few mentions in North America, a decent number of supplier agreements that have been formed over the last year as well. And I think the reference as well to improving lead conversion. Obviously, this is all in a market where volumes are under a fair bit of pressure. Do you think this is a reflection of just the internal sort of changes that you've made? Or are you seeing kind of outsourcing kick up again in what is obviously a very difficult volume environment? That would be the first question. Sorry, I'll pause there.

Okay. So I'm pleased with the progress we've made. We obviously haven't reorganized sales in any massive way. But we removed the split -- we make sure people have incentives where they're also rewarded for the joint success and where we have a good account coverage that we think of all the businesses, all the products we can sell into an account and then sending the people back in the street. So that has led to -- you could look at a 15% to 20% more time out in the field, intensified sales effort. And then working harder with the customer. We can see that customer churn has been reduced. And then we have done campaigns where we take dormant accounts, customers that haven't bought for a year and said, let's go out and work with them. And there was one week effort where we walk up 70 accounts just in one market by doing that.

So I see a lot of positive signs of that. But obviously, the market is not great. But doing that hard work, especially on medium and small accounts and getting to agreements and start to get on track and grow with them again or getting a business with them, that has been a little bit neglected because people were too focused on splitting businesses and business definitions. So we are making good progress on reactivating that.

Then on the big accounts, here, pricing and everything else is more difficult, tough to deal with, they're very commercially good. I would say with the big, big accounts we have, and I'm talking accounts where we are doing total back and forth, upstream and downstream business, EUR 0.5 billion and up. We have had a lot of activity with them also because they are working strategically in these times with their asset, the players they're going to deal with. We have a lot of discussion about putting more over to us and maybe simplify the distribution structure. We also have some people that want to go the other way. But I would say the trend is with our big accounts that we are making growth plans with all of them.

Great. That's very helpful. I did have just a second quick question, please, on the cost savings. It looks like these are expected to be sort of fairly broad-based in terms of the areas you're targeting. But I did want to ask specifically about the opportunity that might still exist within your kind of other operating expenses. I think these did come down a little bit this year, but maybe not as much as you might have expected, particularly given that focus on sort of duplicate costs. I'm thinking about the expenses for advisory, auditing and so on, also quite elevated miscellaneous operating expenses, too, certainly compared to a couple of years ago. Is there still quite a big part of that to be sort of targeted in this next kind of wave of cost savings? I know you haven't broken it out specifically, but yes, any kind of view on how you view that kind of other operating expenses line and the buckets within it would be really helpful.

So I will hand that question to Thomas. But before we start, there is an operating expense of the whole network and the productivity, the footprint, the flows, the loading of the trucks and the sourcing of material indirect and direct spend. That's a big topic in this business. And we have done some work on it in some region, but we haven't -- hasn't been the primary focus. We will get more into that, and it will help that we have a CEO coming in that has the clear responsibility for the productivity of that whole piece. So that's a very general comment. But over to Thomas to give some flavor.

Yes, absolutely. So I mean, when you look at the cost program that we have started some time ago, this obviously has helped us as well already to get a clear direction in terms of cost savings being incorporated and at least managing actually inflationary trends in that context. So that was a very broad cost program to your question in terms of what are we covering in that context. And in that, we have already reduced quite a few of the other expenses compared to previous years. I mean you've mentioned advisory costs as an example as well. That has been reduced significantly over the last quarters already. And consequently, if you look forward, it continues to be a broad cost program covering all individual lines. But in terms of the potential for the self-help initiatives that we certainly have quite a bit of potential still today and that we will be running and accelerating. It is on the one hand, on all lines, but some of them more pronounced, as Jens has actually been talking about.

So, if you go through that, we have had quite a bit of impact already, and we see quite a lot of green shoots on the overhead costs in terms of people-related costs for the central resources. We do see as well that in that line, we continue to have then as well on the other expenses that are in these areas of the business, further reductions, and we will focus on all of that continuously to keep them at a lower level and further reduce. But then we will get as well into transport and warehouse costs where we will see more impact going forward. as these are definitely as well the larger cost blocks in order to continue to optimize the cost base. So making really good progress. And on the other hand, quite a bit of self-help opportunity still into the future.

Our next question comes from Anil Shenoy from Barclays.

Just one, please. I was trying to understand how is the -- how do you see the dynamic from China -- I mean, the competition from China in both your divisions, that is Essentials and Specialties. We have seen -- we have heard your competitors in the specialty distribution saying that they're seeing quite -- I mean, considerable Chinese competition, which has led to a decline in their gross profit and EBITA and especially in the semi-commodity kind of products. So, by that logic, is Essentials seeing a little more competition than Specialties? And this was -- this is before the war. So if you could give us some color on that, please?

So, I will say it hasn't changed. First of all, we have actually seen quite big price increases in China of product. So the Chinese principles, and we have a sourcing center in China have been very quick to raise prices. But the competition from China in APAC or South Asia, et cetera, is still there. And you see it also in Latin America, especially Brazil and some other places, a bit spotty, some market not, but some market very heavy and then less in Mexico and China and U.S. because we have the tariffs. And then we see it coming into Europe. And on the specialty side, sure you have a lot of specialty chemicals are coming up there. And some have been approved, some have been -- you can use in the market, some not.

So I would say nothing has really changed on that front, maybe one aspect that I've seen some big price increases from China just in this week on product due to the energy situation and the Iran or the Middle Eastern turbulence.

This concludes the Q&A session. I will now hand back to Andre for closing remarks.

Yes. Thank you, Michael. And this brings us to the end of the conference call. In case there are further questions, please do not hesitate to reach out to our IR team.

Our results for the first quarter '26 will be published on the 13th May. And ladies and gentlemen, thank you very much for joining us today. We are looking forward to see you on a roadshow or a conference, which we will rejoin in the next couple of weeks. And with that, I give you a good day, and goodbye.

This concludes today's call. Thank you, everyone, for joining. You may now disconnect.

Welcome to the Brenntag SE 9M 2025 Results Call and Live Webcast. Please note that the call will be recorded. [Operator Instructions]

I would now like to turn the call over to Thomas Altmann, Senior Vice President, Corporate Investor Relations. Please go ahead.

Thank you, Abigail. Good afternoon, ladies and gentlemen, and welcome to our earnings call of the third quarter 2025. On the call with me today are CEO, Jens Birgersson; and our CFO, Thomas Reisten. They will walk you through today's presentation, which is followed by a Q&A session. Our relevant documents have been published this morning on our website in the Investor Relations section, where the replay of today's call will be available. Allow me also to point you to our safe harbor statement which can be found at the end of the slide deck.

With that, I will now hand over to our CEO. Jens, over to you.

Thank you, Thomas, and good morning to everyone out there. Just as a general remark out of experience is that getting the tech right can be difficult. So if you could help us by giving a feedback to Thomas and just give us a rating on how the sound quality is, it will be good because in the morning's call we did with the press, there were some corners where we were very hard to hear. So if you could get a status check on that from you after this call, and then we see if we need to change tech or do something to improve that.

It's a great pleasure to speak with you today for the first time as the CEO of Brenntag. The last 2 months, I've been more or less traveling constantly around the group, spending time with between 100 and 200 customers and our teams out in the region and also the supply partners. And I started during the summer, obviously, to read up on the market and look into the business model of the company and the way we operate. In the last 2 weeks, I've been a little bit more in the headquarter, but a lot of time spent out there and kind of building the understanding of the company starting from the outside. Obviously, I have still a lot to learn, but I'm very, very happy with what I've seen in the beginning and the potential. And so I'm going to share that in mainly 2 dimensions, the short-term priorities and we will not go too much into strategy now.

Maybe what -- obviously, it's very impressive to see the global scale and reach and the broad portfolio of the company. It is unknown when you step into a company like this to how much it actually touches everything around us. So that's impressive. But maybe even more impressive in this company, Brenntag, is the skill and commitment of our commercial teams around in the world and how they interact with our customers and supply partners. It is really great to see. And I think that perhaps that is the strongest -- the biggest strength of the company, actually, that we have this very unique culture in -- out in the markets in the front end. And I'm very pleased with that, and I'm very honored to join such a team. And it's great to see that we have that culture and not customer focus.

All that said, my initial observations confirm the company's fundamental strength and you see a lot of potential. And if you look at the market, there isn't anything in the market helping. I think we are in the longest trough in terms of chemicals from the downturn after COVID, and yet we haven't seen an upturn. And yet, we are, in some extent, performing. It's not great, but compared to many other players in the chemical industry, the difficult times prove the ability of Brenntag what was our position in the value chain with our market position and value proposition and the way we run the business that we can actually do relatively well even in difficult times like this. And one of the winning recipes is obviously that we stay very close to the customers and understand their needs and keep delivering every day even in a difficult market.

If we then look at the potential, for operational improvements and efficiency gains, I like -- I kind of stage a little bit of work in the company. My -- when you step into new business, which I've done before, I've been in the sector a bit before, but stepping into a new company, you need to separate a little bit strategy, changes to the strategy -- the company has a strategy, but changes to the strategy and what we do now, what are the immediate priorities to improve. And I put that on those slides, summed it up in the 3 bullets.

So -- and the first one is sales. With the market conditions we have, I haven't said growth, I said sales. We can't control the market turnaround, but we can control how much effort we make on sale. And in some of the changes that we have announced, we are anchoring the company to make us -- make it easier for us from the top to bottom to be even closer to the market and to empower our local sales teams and driving growth by being close to the customer. And there are 2 maybe changes. The first one started already in the summer was that up to now, there was a track where we would split the company in 2 or the disentanglement. And there was an awful amount of internal focus to do that being done on systems or moving assets, shifting businesses. And that has been going on. And we have stopped that work. I've stopped at work. I see synergy of having one company. I see benefit of having scale, but we need to find it. We need to develop that. We need to get better of it.

But shifting that internal focus to external is a sound step among other efforts to really make clear to the organization, but the core process of this company is to buy product and to sell it and all the things we do in between. And all the overheads and the support functions, we should all be geared towards supporting that sales. So that's the first priority.

The second is lumped it under the words clarity and simplification. We have 2 strong divisions that each have their own distinct role, a market strength and also slightly different business model. You have discussed that before, so it's clear to you. But having the company set up with an intermediate 2 executive committees, then you have the local business units, the regional business unit and a very big central team has also implied very long decision lines with lots of steps, and I will say a bit too much bureaucracy and loss of speed. And what we're doing, if you have read press release or the stock exchange release is that we are removing this one layer and are now putting quite a bit of focus into reducing the number of steps in decision-making.

And finally, we have execution. Top line is down, it's still down and the market is not good. And it's not a disaster at all the market, but it hasn't come around. But we need to execute in several ways. And one execution topic where we haven't done so well until now is to execute on cost reductions. There was a program announced 1.5 years ago, maybe a bit more. And we need to execute on a cost out because the mismatch between the cost structure and the increases we have had with these duplications of functions, management teams and the extra layer that has been introduced has come at a high price. And I think a time to reset that and start to work cost out and improve our competitiveness.

So if we then go into those kind of headline focus areas on the short term, will we turn to the next slide, so just outline some of the actions, starting from left to right. I've already covered sales, and it doesn't mean I don't want to grow. It's just that the immediate action is to get people out on the ground and get the organization to back up the sales effort on the customer proximity and the customer closeness. And the good thing with that is that we have a culture and a crew in this company that really want to do this. So this is more of unleashing them and getting them back and stop focusing on splitting and allocating businesses and internal transfer cost and what have you. We still do that, but it's not a focus, so that's the left box.

Second one on the simplification. We want to simplify how we make decisions, shorter change. I want smaller, more empowered teams, faster cycles and agility is an overriding goal with very clear ownership of the business. We don't run a matrix. I don't want to run a matrix. I want very straight lines out into the business. So what we are doing here is that we are putting together an executive committee where we will have all the business leaders. We will have 3 CEO, CFO, COO, HRO in there, so some functions that have consolidated. This might change over time. We will evolve this as nothing is static. And -- but it will mean that we have an executive team that has members in it, that are really sitting in the market, interfacing with customers every day.

The German Managing Board that traditionally is seen as the highest level of management in the company, we are detuning that a little bit. It will be only Thomas and I in that. Surely, there will be decisions that have to be taken on that. But as I see it, the management team, the executive team, as the Executive Committee. And that means that the distance from the front end to me is going to be very short because I have a direct report in every market, and I will oversee that myself. And I'm convinced that will improve the hands-on operational management.

And I think in the distribution business at the core is a very simple business. I mean we mustn't overcomplicate it. We need to roll up our sleeves and manage it and get things done with a minimum of overhead. And I think this structure will serve us better.

I made 2 additions or announced 2 additions. The one is CHRO, a new HR Director. We haven't really had that in Brenntag and distribution business is a people business. She -- Francis joined us 1st of November, which is already here.

And then on the operations, the goal we have is to build a world-class distribution company or distribution supply chain. And therefore, I've also recruited the COO, and he will report to me. He will be part of the EC, and he will join us latest 1st of April because I see a potential of the whole supply chain organization. And supply chain for us is basically from product into the system until it's delivered to the customer.

With regards to the 2 divisions, we have one company, but we have 2 businesses. We have the Essential division and Specialty division. No change to that. That was good. It was healthy. It's different drivers for success. So we maintain that. And I value both of them. I want to grow in both of them. So there's no change to that. But I see the backbone and the scale of what we have, Brenntag has a lot of assets. We have a lot of good assets in the company. I want to leverage that scale in those assets for both divisions. And that's the change -- that's a big change compared to the discussion in the last couple of years. So when you look at the numbers, I admit the scale effects hasn't really come out, but Brenntag has grown. And some of you have pointed that out. I agree with that, and that's something we need to work on. But when you look at the potential of getting scale effects, they are there. We have some of it, but we can do more of that.

So to sum up, I mean, we are not doing the split. And the reason is that the multiple differential between these 2, the value and the cost of doing it and the dissynergies, it doesn't make sense. I would also say on that note that, from an M&A perspective, I see a whole lot. I mean a key driver for top line, you have organic growth that we need to work hard on. But also acting as the consolidator of the industry, a lot of the targets. And I look just in these 2 months at 12 targets, very few targets are pure, pure, pure play. They have a little bit of both. And I think there is a risk with being too streamlined and too segmented that you lose a lot of M&A if you all the time have to divest one portion of the company you buy. And so I think that having both businesses in the company will also make it a little bit easier to find good targets, and we have a good pipeline of targets.

So to sum up, we want to operate 2 market-leading divisions within one group, respecting the 2 business model, commercial focus in both. And then going after growth, doing normal strategy and implementation for those within the strategic framework we already laid out, and we will review it, of course, but we continue with that, but we do that with one backbone in terms of supply chain. It doesn't mean that all assets will sit centrally, not at all. We keep the assets out in the businesses, and they're going to also be devoted assets assigned to each one of them. And some are shared, some are devoted.

And then third, on the execution. Execution is super important. And when I reviewed the historic initiatives that have been going on, I felt maybe we have done -- tried to do a little bit too much in parallel. So I want to move towards a more focused execution mode. And of course, with quicker and shorter decision-making changes, I'm going to keep our eyes on the execution, and that has already started. And I think that's incredibly important for us in order to deliver cost savings.

We are looking as we brought in the stock exchange release into short-term and medium-term cost out. And the philosophy here will be that we start close to me. We start at the top. I have headquarter staff, I have functions. I want to reshape that into a small, much smaller team. And so that's the first stage, and we're already starting that, reducing headquarters and support function overheads. And then we will move out through other functions. And then as the COO arrive, we will get more and more close to the supply chain and all the action there. But basically, that's the staging that first remove overheads and duplication and slim that down. And then after that, we get on to supply chain and operations. But I need to do a little bit more work on that before we start. The other aspect of it with overhead has already started and is starting to roll out and being quite detailed as we speak. So that's the short to medium term.

Then if we look at the long term, yes, we need to review the strategy. It doesn't mean we change all of it, but Brenntag has run in a certain way for more or less 150 years. And we have the 2 businesses now. We are doing a strategic review. It has started, and I will come back to that in the second half of 2026. One of the goals will obviously be to have the most competitive and scalable global distribution supply chain and to get back to growth, not only because it's a market that grows, but make us more capable of growing. But I will come back to that. Now the focus is on the immediate priorities that I outlined.

If we go to the numbers on Slide 9, it is -- you have seen those numbers. You have read them. And I think that there is nothing in the macro environment that has really changed. The tariffs are there. We have the Chinese overcapacity coming in, in Europe, Latin America, South Asia, almost -- in 2024, it was 33 billion Chinese imports into Europe of chemicals and probably increasing this year. I haven't seen the numbers. So that competitive complication is here for the principals, maybe less of a problem for us. And then you still have the instability in the Middle East. We have the Ukrainian war, we have the trade tariffs. And we only have some countries that have put in tariffs to protect themselves in Mexico and the U.S. And so we see really an overflow in Europe.

But again, we are relatively fortunate in the way we can handle that. It speaks to the business model of a distributor in this space. And if I were to look at the numbers, what numbers are -- yes, obviously, we are not overly happy with the numbers as such. We would like to get back to growth and have a better market. But I think some of the numbers worth emphasizing is that if we take the EBITDA margin that in -- with near 5% decline in the top line, that it only goes from 9.1% to 8.9% this year and that we have managed to get a bit more cost reductions into that to protect the gross profit decline and gross profit margin and most of all the EBITDA margin and EBITA margin. And when I compare that to the market, we have done maybe better than some other players that have maybe difficulties. So that's -- those are the positives, I would say, of those numbers.

If you move to the slide of sales development, basically the same decline in both businesses. And regionally, we have now maybe we can see a slightly better volume in Material Science, but still strong competitive pressures. But otherwise, I would pretty much say that more or less, the markets are subdued on both sides of the business, both businesses.

Going on to the regional development, Material Science here, volume-wise a little bit better maybe than some of the other businesses, but quite strong price pressure. And in Latin America, the growth is primarily due to the acquisition in Mexico. And apart from that, I would say anything is new on this. But if you take an example of Latin America to just give you a flavor, Brazil, Chile, Peru, Central America, Guatemala, heavily, heavily impacted by Chinese imports, Mexico not because they put tariffs and then you have other countries like Colombia, for example, that protect themselves a little bit more, the market more safe from Chinese import, and we see a better business. Argentina also doing a little bit better, but it varies a lot. But generally, you see all over in these regions, the impact of that. That said, we are navigating it, and we are handling it. And it's not a huge problem for us compared to some of the other players in our industry.

Over to you, Thomas.

Thank you, Jens. And as well from my side, I wish you a good afternoon. So I would like to now look at the development of our income statement and this was a particular focus on our operating expenses and bottom line results.

Our results are overall characterized by a persistently challenging market environment with muted customer sentiment and lower demand. We've generated an operating gross profit of EUR 947 million in the third quarter of 2025. Our operating expenses stood at EUR 617 million in total, which is a net cost decline of 1% compared to last year on a constant currency basis. This includes additional costs from newly acquired entities of EUR 10 million. Our cost containment program delivered EUR 45 million of savings this quarter, which is visibly reducing our underlying OpEx base. And this is EUR 30 million more than we delivered in the same period of last year.

The positive savings effect demonstrates our strong commitment to cost control, Brenntag's ability to maintain cost discipline. It's even in a challenging business environment. We generated an operating EBITDA of EUR 330 million. It's down 6.7% year-over-year. And then the depreciation amounted to EUR 87 million. That's leading to an operating EBITA of EUR 243 million, which is 9.2% below last year's figure. Compared to the third quarter 2024, our operating EBITA was impacted by the following developments.

First, FX effects reduced operating EBITA by EUR 14 million; second, acquisitions added EUR 5 million; and third, organically, the operating EBITA declined by EUR 29 million compared to the third quarter last year. The group EBITA conversion ratio stood at 25.7%. Looking at the EBITDA conversion ratio, that reached 34.9%.

I'll now briefly comment on the development of special items below operating EBITA. In the third quarter, special items had a negative impact of EUR 17 million. This includes costs for our strategic projects in the amount of EUR 8 million, which are mainly related to severance and advisory expenses that also helped to achieve the desired cost reduction target. Furthermore, we incurred expenses for legal risks, which mainly are arising from the sale of talc and similar products in North America in the amount of EUR 16 million. And then lastly, other special items had a positive effect of around EUR 7 million. That's mainly related to insurance reimbursements in connection with the major fire at a warehouse site in Canada in 2023.

Earnings per share were EUR 0.78 in the quarter, which is slightly lower than previous year's figure.

Let us now have a look at the free cash flow development. Third quarter of 2025, we've generated a free cash flow of EUR 316 million as compared to EUR 247 million in the same period of last year. The decline in earnings was offset by slightly lower CapEx and the cash inflow from working capital compared to the prior year period. In the prior year period, we saw a slight cash outflow for working capital.

Lease payments were also slightly lower compared to the prior period. And then our free cash flow demonstrates the resilience of our business and our countercyclical cash flow profile.

The working capital turnover stood at 7.3x as compared to 7.7 in the third quarter of 2024. Leverage ratio, net debt to operating EBITDA stood at 1.9x.

I would like to close now with the outlook for the remainder of the year. For the full year 2025, we specify our operating EBITA guidance towards the lower end of the range provided in July of this year. We expect the unfavorable euro-U.S. dollar FX trend continue, and we assume an average rate of EUR 1.16 for the fourth quarter of 2025.

As mentioned earlier, the overall market environment continued to be characterized by a high degree of economic uncertainty. That's driven by ongoing geopolitical tensions and global tariff discussions. The noticeable slowdown in demand continued throughout the third quarter, and we expect a similar environment in the fourth quarter of 2025. At the same time, our results in the third quarter showcase our ability to seize business opportunities and to realize cost savings, despite the persisting macroeconomic challenges and the continued economic volatility. To further address the challenges ahead and to improve our performance, we have taken action to enhance agility and execution discipline, driving sales and efficiencies. This includes an acceleration of our existing cost containment program, as Jens has pointed out. A key element here is organizational complexity as well as simplifying and streamlining administrative processes. Our decision not to consider a full separation of Brenntag any longer further enables us to eliminate buildup duplications and overlaps within the organization.

So with this, I would like to close the presentation, and I'm now very much looking forward to your questions.

[Operator Instructions] Our first question will come from Annelies Vermeulen with Morgan Stanley.

I have 2 questions, please. So firstly, on the cost program. You've announced today that you're accelerating the cost containment program, including, I think, some additional headcount reduction. But overall, your cost containment target is unchanged for 2027. So could you quantify those headcount reductions? And will there be any additional restructuring costs as a result? And should we expect an acceleration in Q4 from the EUR 45 million of cost out that you did in Q3?

And then second question, just on the divisional split. The messaging has been a bit mixed here over the years. You've announced today that this is no longer under consideration. But in the past, Brenntag has said that there was limited overlap between the 2 divisions and a split would make sense over time following a targeted disentanglement. So in your first few months with the business, what have you seen so far that gives you the confidence that this is the right decision permanently for the group and that the synergies between the 2 divisions are material enough to take a split completely off the table?

Thank you. So I take the second question. I'll comment the first before I hand over to Thomas. So on the headcount numbers, we have nothing to announce now. I don't feel -- our top priority is selling, simplification and then execute the cost-out program. But -- and that program has been there for a while. But we don't put a number on it, and we will probably try to avoid having a number. You will see how the cost is being reduced, and we have initiated discussions with Works Council and all the rest. And along the way, we will update. But I want to avoid to say this is the big headcount number and talk about that now. It's about getting cost out, but there's going to be reductions in many places. So maybe Thomas can comment the other aspects of that question, and then I'll come back to the split.

Yes. So as you will remember that we have actually been announcing in the past was the EUR 300 million cost reduction program. If you look at the first quarter, second quarter, third quarter delivery on that, we're actually now fairly well on track in order to deliver actually the savings that we've announced for this year. So the EUR 30 million achievement in the first quarter, EUR 30 million in the second, EUR 45 million now as a run rate in the third quarter. Remember, that was started already in the year before. So there was EUR 15 million in the same quarter of last year actually already.

So firmly on track from that perspective, we had said as well that we will continue to incur restructuring costs. I mean overall, as one component of the costs that are actually one-off costs in order to realize that. We had said about EUR 300 million for the whole program to achieve the EUR 300 million run rate savings by fiscal year '27. So that's what we will continue to use in that context as well with headcount restructuring.

Now obviously, and Jens has already commented on that, and I've commented here in this quarter again on the fact that we are accelerating and broadening the overall program. So that's what we are really driving and we will start to reduce complexity. We'll start to deduct layers and the context of the split, not continuing in terms of further splitting this, that will actually avoid that we have further duplication of resources, and we'll roll back on that as well on some of those resources that are duplicated. So -- and that is then in the end, leading to us being able to accelerate this program. Jens?

Yes. I'll come back to the other one. I don't know if it has been said that there weren't any synergies between the businesses because that also been a misstatement in that case or because there are clearly synergies between the businesses. It goes from the operation, it goes from the infrastructure, warehouses and even market access. Even if you have global sales forces, we are selling to the same. And then you have the whole multiple differential of the 2 businesses and the nature of the businesses with a relatively small Specialty business and the difficulty and the cost of splitting them and the extreme effort that went into that.

And then finally, -- so if you're on top of that, would also get scale effects out of being an EUR 15 billion company with the overheads, the infrastructure, the assets and maybe having all these assets and utilizing them for both businesses, I at least couldn't see that it was a benefit to split. And it has been awfully difficult to try to make progress on it.

And then finally, I would also -- when I look at it, see that there is an M&A runway where you have a lot of targets, there are a lot of companies that do a bit of both businesses. And I think also it's more difficult to find to pursue your role as the role we have as a consolidator of the industry if you are split because if you make acquisitions of these companies, you can either pretend that it's a pure play or you have to split it all the times to become a permanent company to split.

So if we were only Essential company and we were acquired company, we keep finding Specialty businesses in there because most companies in the segment where we buy, they have naturally evolved into both businesses in the same as we did. So those would be my main arguments why it doesn't makes sense to split.

Then the other aspect is to shift the focus from internal to out. We need to be out selling. And on top of that in the strategic review, if we can do a better job of getting scale effects out of this business, and I don't want to go too deep in that today, then I think there's a very strong case to have 2 businesses along backbone.

That's clear. And just for clarity, my comment was referring to -- in the past, the company has said that there is limited overlap between the 2 divisions. I wasn't referring to synergies. I think you've said in the past that actually, not many of your customers buy from both divisions, and therefore, the split would make sense. So that's what that was referring to. But thank you for the detail. That was clear.

If you take -- you have -- we have this peculiar situation that we buy and sell, of course, to our customers. So almost every customer we both buy and sell to. So that's one dimension. But then we also have that, yes, there are pure-play Specialty customers and pure-play Essential customers, but we have a lot of customers that buy from both also.

And then just to build on this point, as Jens has said as well, from a commercial focus point of view, obviously, we like the 2 different divisions in that context. It is about, on the one hand, avoiding some more of the duplication and avoiding actually some of the dissynergies that even actually some time ago had been announced that further split there actually will be some dissynergies of about EUR 90 million to EUR 120 million. And that's the point where we actually believe that we can leverage a joint backbone much better in order to serve both of the different business models from a commercial point of view.

Yes. Then there is another aspect, the definition of a Specialty business. There has been discussions about that. But within the Essentials, we also have vertical businesses focused on a business segment. If you take, for example, oil and gas, that's a big vertical for us. It's somewhere in between -- it's regional in this case, but you have a lot of domain competence to serve that segment. So you have it like a slide in the grid that we have in Essentials. So you have pure Essential, then you have verticals, data centers, for example, it's a vertical. You have electronics manufacturing, where we have both businesses servicing an end market in a vertical.

And then you have the pure Specialty business, pharma or something like that. So it varies. But if you go into pharma, we are selling all the way out to commodity products into pharma too, but with different purities. So you have a lot of sliding definitions of Specialty and vertical. And I think to be really successful, you need to learn to master several of those models, if you want to keep wrong. Of course, there are some excellent pure plays out there, but I would expect if you open up the hood that you will see a lot of extras from the wrong business coming in through the acquisitions because that's what we found at least when we acquired companies.

Our next question will come from Tristan Lamotte with Deutsche Bank.

Two questions, please. First is, Jens, I'm curious, given you've just come in. EBITA is likely to be down about EUR 150 million this year or 14%. And that's despite a positive contribution from M&A. The negative FX impact there is large, but it's not the main driver. So in the organic decline portion, how would you kind of split that out? And how would you rank drivers like lower volumes versus lower pricing or the indirect effect of lower pricing?

And maybe kind of linked to that, what do you think is the risk that this is kind of the new run rate, the new structural norm? Is this a cyclical low? Or is it something that will improve?

Yes. So on the specific numbers, I'm going to hand over to Thomas in a bit. I think we are on a -- I don't dare to say structurally low. It's kind of staying low. But I think if you start to get some growth in the end markets and a bit more volatility into it, we will do better. And as soon as we have the volume growth -- we actually haven't suffered so much on pricing yet. If you look at the average sales price, relatively small changes in price, but it's still a high pressure due to the Chinese aspects. And we, of course, do business with that too. We distribute those products, too. But then you have an average lower sales price when -- if the mix goes over there and that impact us.

But I think if the market comes back to a bit of growth, then I think you're going to see a lot of good things. I don't think it's a permanent structure. Then, of course, you have some structural issues on top that we saw it overnight, Mexico put in tariffs. We have none of these issues. We have the massive difference of energy prices between Europe, maybe Germany, EUR 0.40, EUR 0.43 per kilowatt hour. China runs at maybe EUR 0.07 if you're a big principal and U.S. on EUR 0.12, EUR 0.13. You have these big competitive differences. But again, those differences, technically, it doesn't impact us so much because we are not a producer. So we are not suffering with this massive structural problem in the industry where we sit in the value chain.

Maybe I hand over to Thomas on some of those more margin-related questions.

Yes. So I mean, you were alluding to, obviously, the specification of our guidance in that context. And I mean that we are now saying that we go -- that we take the guidance towards the lower end of the EUR 950 million to EUR 1.050 billion range. And I mean, what's behind that is that we continue to have volume pressure in the market. So the 3.6% actually volume reduction that we have seen in the quarter. And overall, actually, when you look at that as well, there's some pricing pressure still affecting sales then as well. Having said that, our margin management, so focusing on to the topic of GP per tonne leads to us still being able to hold the margins. So overall, we have seen that pressure continuing, and that was actually leading to the lower end -- towards lower end of the EUR 950 million to EUR 1.050 billion.

If you think about the FX topic, so far, in the further quarter -- now in the third quarter, we have seen stabilizing towards what we have guided as well. So the EUR 1.16 is, as you will remember, the exact same number that we actually have seen as the basis for our guidance in the past. So the main differences are here on the commercial side of the business.

And maybe second question. I'm just wondering, I know it's early days, but I'm wondering how you think about the company's strategy in China, given I think around 80% of the growth in chemicals according to some forecast is set to come from that region in the next 10 years. Is China likely to be a focus of the new strategy? And is it somewhere that you could focus on to drive growth? Or are there limitations to that?

I mean if we look at what we have done in China, we have done quite some investments in Essentials. And it's a topic of profitability and see what space we can have in the market. On the Specialty side, China is a very interesting market and the whole of Asia fundamentally is a majority Specialty market for us now. And then the strategy that one needs to figure out is what should be done on the Essentials in, for example, India and China going forward? In China, you have an underlying challenge when you get into that game with profitability in Essentials and you need to decide whether you're going to play that or not, challenging market.

And then India is another one where you will, of course, have massive growth over the coming years, and you need to figure out what is the stake you're going to have in India. In almost any business, you would have liked to start quite far into India. We are not so far yet. So definitely, we need to look at that and decide what we do about it. But that said, we are in India. We are doing business in India. But we haven't done maybe a thrust into India yet, but that needs to be decided.

And then I'm talking Essential. On the Specialty, we keep growing the business that we have done for several years.

Our next question comes from Gaurav Jain with Barclays.

This is actually Anil Shenoy on behalf of Gaurav Jain from Barclays. Just one question from me, please. I was just wondering how are you thinking about the outsourcing trend of principals to distributors. I think previously, the previous management, of course, and even your competitors have mentioned that during a macro slowdown, principals tend to increase their outsourcing to a distributor. And are you seeing anything like that right now? Have you benefited from it by any chance?

And sort of like a follow-up question to that. I saw that one of the companies Tate & Lyle, which is ingredients company, they acquired CP Kelco. And they mentioned that they are migrating some distributor -- distribution relationships to a direct service customer model as a part of its integration strategy. And apparently, they are increasing their revenue by 10% because of changing that. So how do we look at this? I mean is this a trend that can continue? And if so, would that be negative for the distributor companies?

Yes. So I'll start, and obviously, then I'll invite Jens to add up on that. But I mean, the overall trend that you're describing of outsourcing distribution by a chemical producer or a principal towards actually distribution, we see continuing actually to happen. So we have a number of sales agreements or distribution agreements where this continues as well and where we are actually winning those distribution deals overall. And as a consequence, that's actually where we do see the business continuing to grow as well.

Now obviously, this is overshadowed, if you like, at this point in time by the weakness of the demand overall. But nonetheless, this trend continues to happen, and we are successful in winning such agreements actually on a continuous basis. So the reverse trend of that, you sometimes see, but the general strategy that actually we will win these games will continue.

And here, I can say, I've been -- on your question on outsourcing or in-sourcing going direct or not, with our biggest accounts, I'm talking like the 3 or 4 biggest ones, and it's a downturn. And we're talking here accounts that are multi-hundreds of millions. And I've been in those meetings. The team is growing together both ways. So that means we're selling more and they're putting more through us. And I think the philosophy we often see is taking the tail end, big accounts I want to have, and then they move up the tail end limit. I want to put more complete packages out to us. And we have a lot of work discussing these issues.

So I will say you have both trends and then, of course, if they have big accounts where they can go direct, they like to do that and then leave the tail end to us. So we see both. But on average, the discussions I've been in has been putting more over to us. And there, my position has been -- let's do it in structured good steps so that we do it well because the biggest danger we have here is that when you take over a number of customers from one of these suppliers, if you make a bad job out of it, you don't manage to grow them. And so what we are sitting with now, where we have done some of these deals -- in spite of a declining market, we have almost made a point of trying to grow the volume so that they are happy with our performance. But it's super important that you take it with good structure, good team on it and make it a success. And I think as long as you do those shifts with success, you would get more. And if you miss it up, it stops. So that's what I see.

And then you have really, really big principals that are looking into very big moves, and then you never know will it happen. And you also see quite a few principals that might not had it before, but now they have a global responsible person, a regional responsible person, but I meet mostly global responsible people for distribution, where you have much more strategic discussions. So that's certainly ongoing now, and it's due to the downturn, a lot more is on the table to deal with.

Our next question comes from Chetan Udeshi at JPMorgan.

My first question was just going back to the guidance. So you're saying lower end. Are you then happy with the consensus EUR 971 million? Or would you rather have people at lower end meaning EUR 950 million? Just curious on that.

The second question was just on these cost savings. You've shown us this EUR 45 million of cost out. Is there some temporary nature within that? So I'm just curious if you've actually taken out bonus provisions that were taken in H1 and that's sort of amplifying, if you will, the cost takeout number in Q3 by any chance? Because I saw your personnel expenses, we were sort of run rating at something like EUR 365 million to EUR 370 million per quarter in H1, and now they are more like EUR 350 million. So I'm just curious if there is a bonus provision takeout, which is one-off in nature in Q3?

And the last question was, can you remind us, you talked about no longer doing the split. How much duplication of cost do you have in the system today that can go away in the next 12 months as you no longer continue on that path of splitting the businesses into 2?

Okay. So 3 questions. First question on that was actually towards the guidance. Where would we then see this? Overall, if you look at it, what we have been guiding now, what we've been clarifying or specifying is that we see the range between EUR 950 million to EUR 1.050 billion coming in towards the lower end. That word is quite important. So it is not at the lower end. It is towards the lower end. Having said that, we do expect it probably more in the lower side of it. So towards the lower end, I think, captures it quite well in terms of number. There's a couple of things that obviously still are variable. So how is the demand going to develop? We will continue to take costs out, and that will actually take us to exactly that expectation that I've just been mentioning. So that's on the first question.

On the second question, do we incur temporary reductions in costs because of adjusting the bonus provision? That is correct. So we do have bonus provision releases actually in our overall accounts. However, we do not count them towards the program of cost reduction. So when I am quoting EUR 30 million in the first quarter, EUR 30 million in the second quarter, EUR 45 million in the third quarter, this does not include one-off effects. That's in the element where we actually -- where I am talking about inflationary trends already in there as a counterbalance. So the inflation would be higher if we actually would not have actually such elements. So to summarize on that question, when we are looking at cost takeout, we are counting only topics that give us persistent and continuous cost reductions and not one-offs. So that's on the second question.

On the split costs, overall, so as you will see that we have already across the business, actually, we continue to take out costs there. What has been announced in 2024 was actually that there are dissynergies to be expected between EUR 90 million and EUR 120 million. So that's a guideline for you to think about what costs would occur if you would have done the entire split. Not all of that has been now created in terms of duplication of costs because we have obviously not done the complete separation. So I think that gives you some good numbers actually to think about what -- in which direction this will evolve.

Our next question comes from David Symonds with BNP Paribas.

So the first question that I have, so Life Sciences gross profit per unit was described as meaningfully up for the first half, but only moderately up for the 9 months. Material Science moved from slightly up to slightly down. So could you talk about what changed quarter-on-quarter? Was it an intensification of Chinese competition? And are you seeing pricing pressure also in North America and EMEA? Or is it limited more to Lat Am and APAC?

Second question, could you comment on the split of cost savings across the divisions? Because it looks like Essentials did a pretty good job on cost. I'm just wondering if it took a more than proportional split, i.e., more than 2/3 of the total.

And then finally, one for Jens. Could you comment on the split of the sales force that you have at the moment in the Specialty division? Do you think it makes sense to -- I think the sales force was reorganized to be vertically aligned rather than regionally aligned. Do you think that split still makes sense? Or with the sort of reversal of the split of the company, could you look to merge things a little bit back towards salespeople covering both Essentials and Specialties by region?

So David, maybe I'll take the last one and then I'll hand over the first 2 ones. And I have maybe something to add on Material Science. But anyhow, no, so on the sales force, I mean, I must submit I never almost been in a company where you don't have verticals and regionals and where you have different sales forces. So how we want to run it? I think we have a pretty good setup. We have domain competence vertical sales forces in the Specialty businesses. But we also have that in some of the verticals where we specialize Essential people on the vertical. So that will remain. No reason to do that. And most of all, we don't want to do cost savings on that piece. We want to really make sure we invest in the sales. It's not increases. But when we reduce these costs, as I said, we take overheads. We want to keep that intact. And it's a good setup.

But of course, we want to make sure that they stay focused on their job, but never forget that they have a sister and a brother that very often actually sell to the same logo so that we don't close that. On top of that, what we are running is that we have a global team that we can regionalize depending on the customer what they want for key account selling and then also buying the principals. So when we have our vertical business, the Specialty businesses, they take care of that. But there are some accounts where we have so big engagements that we need to set up global teams.

And I would say those -- the 2 specialized -- the Essential regional sales force and the Specialty sales force, then we have the key account for the really big customers that we both buy and sell. And then the really big ones we buy from, they demand that we have global organizations. And whenever we step into that global organization, we end up having around the table both businesses with almost all of those logos. So you need to play all of those for, I would say, to sell. And we're going to keep that and refine it more. At the same time, as we get more team play between them without losing focus on the individual business.

And I think that domain competence in the Specialty business is really one of the core things. You need to really nurture and build that. Otherwise, you won't sell anything. And of course, you need the mandate, which requires a massive amount of competence to secure the mandate. So we just keep building on what has been built in the last year.

Over to Thomas on the other one.

So in general, if you look at the North America situation, and this is actually impacting as well Material Science and to a large extent, I mean -- but in the BES side, first, what we've seen is quite a bit of weakness in overall volumes. We have seen actually sales benefiting from slightly more stable prices in that context in the third quarter in North America. But overall, really the volume decrease has been affecting the gross profit overall.

What we've seen as well is, and I've been commenting earlier actually on that, that the margin management has continued to help us. So on the gross profit per tonne, we actually see this slightly up across the North America region in BES.

If you think about Material Science as a whole, then as well there, so gross profit per tonne in the second quarter has been slightly up. And whereas in the third quarter, it actually is slightly down. So that's the directional changes actually that we are seeing in that context. Overall, volumes remain actually; down in both the second and the third quarter.

Talking about cost savings, overall, the cost saving initiatives are benefiting both divisions. So we see in both divisions that actually cost savings are being realized. We do need to continue to accelerate this, and that's what we have obviously committed to where we do see the potential to it. And then worthwhile mentioning too that on the BBS cost, so the central costs of the headquarter, we actually have seen quite a bit of progress and reductions on that already. And we will, as Jens has very much pointed out, continue to intensify that and actually create more savings in that space. So that's a rough direction of how the cost savings are actually affecting the different divisions.

That's very clear. If I could just ask a quick follow-up to the last one on cost saves in specialties or sort of margin progression in specialties. What's the reason for the sort of worse margin progression in Specialty? Is there more pricing pressure on that side? Is it with the contract structures in that business? Is it harder to pass through some of this margin management action? Or what's -- what can you say on that, please?

So when you look at the overall development in the third quarter for BSP, then the volumes in BSP have actually reduced harsher than they have actually reduced in the U.S. That for sure is one of the drivers in that context. If you look at the overall margin management, they're actually doing quite well on this. So from a gross profit per tonne, we actually see a further improvement in that. But where we do see the main pressure in BSP is really on the volume side.

Our last question comes from Nicole Manion with UBS.

Just one on the change to the CapEx guide, please, July versus now, EUR 100 million difference. Can you walk us through the moving parts there? Apologies if I've missed something, but just given your existing CapEx up to this point in the year and the magnitude of that change, just any extra detail there would be great.

Yes, so what's important to understand there is that our general capital allocation guideline that we gave out, we obviously say that this is about EUR 300 million a year in terms of CapEx. Now what we have done as well is we wanted to specify towards the end of the year where we will likely end up. And this is just a general trend for the end of the year that at this point in time, we are seeing reductions in the overall CapEx spend, and we are expecting, as a consequence to come in around the EUR 200 million.

Now important is the around. So it can go slightly above still at this point in time, but it's not a specific initiative that we are not executing. This is the overall just -- trend of just not having spent as much. Now we do, obviously, across the board, ensure that we are spending the money on the right projects. And that might have actually here and there as well slowed down some of the CapEx spend so that we are ensuring that we spend it on the right returning projects.

This concludes the Q&A session. I will now hand back to Thomas Altmann for closing remarks.

Thank you very much, Abigail. So if there have been any issues from the sound quality, please let us know. Also after the call, you can just send me an e-mail or just send me a text message, then we'll make sure that we take consideration for the next call. And with that, we are coming to the end of the conference call. If you have further questions, please do not hesitate to reach out to the IR team. Our next interaction with the market will be with the full year '25 results, which will be published on March 12 next year.

And with that, ladies and gentlemen, thank you very much for joining us today. Have a good day and good one. Thank you.

This concludes today's call. Thank you, everyone, for joining. You may now disconnect.

Ladies and gentlemen, thank you for standing by. Welcome to the Brenntag SE HY 2025 Results Call and Live Webcast. Please note that the call will be recorded. [Operator Instructions].

I would now like to hand the call over to Thomas Altmann, Senior Vice President, Corporate Investor Relations. Please go ahead.

Thank you, Alice. Good afternoon, ladies and gentlemen, and welcome to the earnings call for the second quarter of 2025. On the call with me today are our CEO, Dr. Christian Kohlpaintner; and our CFO, Thomas Reisten. They will walk you through today's presentation, which is followed by a Q&A session. All relevant documents have been published this morning on our website in the Investor Relations section, where the replay of today's call will be available.

Allow me also to point you to our safe harbor statement, which you'll find at the end of the slide deck. With that, I will now hand over to our CEO, Christian, over to you.

Yes. Thank you, Thomas, and good afternoon, ladies and gentlemen. I will start with the highlights of the second quarter 2025, and Thomas Reisten will then walk you through the details of our financial performance. Our second quarter was characterized by a high degree of economic uncertainty in light of ongoing geopolitical tensions and unresolved global tariff discussions. This led to a noticeable slowdown in demand and increased pricing pressure across different end markets, which we expect to continue throughout the second half of 2025.

The slowdown in demand impacted both divisions, whereas the pricing pressure had a strong effect in our Essentials business. At the same time, the further depreciation of the U.S. dollar against the euro since the beginning of the second quarter had a negative effect on our earnings development.

Sales for the second quarter amounted to EUR 3.9 billion, which is 4% below the prior year period. Operating gross profit decreased by 2% and stood at EUR 974 million. Our operating EBITA amounted to EUR 246 million, which is 14% below the prior year period. We generated a free cash flow of EUR 153 million. Earnings per share stood at EUR 0.30 compared to EUR 1.03 last year. The decline is largely driven by special items and impairments on goodwill and other intangible assets in our Essentials business, particularly in Latin America. Our cost containment measures supported our underlying cost development in the second quarter with EUR 30 million of savings.

Let me say a few words on the outlook for 2025. As a result of the aforementioned economic and geopolitical circumstances as well as the impact from unfavorable changes in euro-U.S. dollar exchange rates, we adjusted our operating EBITA guidance for the full year 2025 and now expect our operating EBITA to be in the range of EUR 950 million to EUR 1.050 billion, as already communicated on July 11.

Let us take a look at the overall market environment in more detail. Both divisions were impacted by muted customer sentiment leading to an overall slowdown in demand across different end markets. Ongoing geopolitical tensions and further escalations in the Middle East as well as unresolved global tariff discussions, created a high degree of economic uncertainty. Although the direct impact of tariffs on our business is rather limited since the vast majority of our products are stored and sold within the same region, we must acknowledge that we are not immune to secondary or tertiary effects. These effects are significantly larger, and the impacts are already evident.

In this challenging environment, both Brenntag divisions continue to focus on leveraging business opportunities, realizing cost savings and executing their strategic initiatives. Brenntag Specialties continues to focus on improving its performance through a combination of short-term and long-term levers. The division saw a significant gross profit per unit improvement compared to the prior year period due to ongoing price and margin management initiatives. At the same time, Brenntag Specialties is on track to deliver the cost-out plan for 2025.

In Brenntag Essentials, we are executing our triple strategy, focusing particularly on improving efficiencies, processes and infrastructure in our last mile service operations and our regional and global sourcing activities.

In addition to our divisional strategies, we continued our M&A activities in the second quarter 2025. We acquired MCE Pharma in the Czech Republic setting the foundation for entering the rapidly growing biopharma market in EMEA. Furthermore, we signed and closed the acquisition of GSZ Kaiserslautern, acquiring a state-of-the-art facility for hazardous substance storage in Germany. The site's solid and liquid mixing and blending capabilities significantly expand and complement our Brenntag Essentials service offerings in Central Europe.

Let me briefly address our progress on our sustainability efforts, which is recognized and regularly rewarded by external ratings. For example, Brenntag was recently awarded the Gold rating in the comprehensive 2025 EcoVadis Sustainability Assessment and was placed among the top 3% of all rated companies worldwide. In the latest CDP climate change rating, Brenntag was ranked among the top-rated companies globally, achieving a leadership A- rating for the first time. The CDP assessment underlines our progress made in recent years, including the validation of our Scope 1, 2 and 3 emission reduction targets by the Science Based Targets initiatives, SBTi.

Let me now hand over to Thomas Reisten, who will explain our financial results in more detail. Thomas?

Thank you, Christian, and good afternoon also from my side. I will start with the key figures from our income statement in the second quarter of 2025. As a reminder, when talking about growth rates, we generally talk about FX adjusted rates. Sales amounted to EUR 3.9 billion, which is 4% below the prior year period. Operating gross profit decreased by 2% and stood at EUR 974 million. Gross profit as a percentage of sales stood at 25.2%, and increased slightly compared to last year, which indicates that we managed gross profit to our advantage despite increased pricing pressure from industrial chemicals. To provide more details on our OpEx development, we showed a bridge in the top right corner of the slide.

In the second quarter of 2024, we reported operating expenses of EUR 642 million. Additional costs from newly acquired entities led to an increase of around EUR 15 million. The translation of foreign exchange effect in the second quarter 2025 decreased our costs by EUR 20 million. Underlying OpEx increased by around EUR 35 million particularly driven by wage inflation. At the same time, we continue to reduce our absolute head count number.

The cost containment program contributed around EUR 30 million of savings in the second quarter. Therefore, on an organic basis, our operating expenses remained almost stable. As a result, operating expenses for the group stood at EUR 640 million in the second quarter of 2025. Our top line performance in combination with our OpEx development translated into an operating EBITDA of EUR 334 million, a decline of 10% year-over-year. Our operating EBITA amounted to EUR 246 million, which is 14% below the prior year period, respectively.

Let me briefly comment on the development of special items below operating EBITA. In the second quarter, special items had a negative impact of EUR 38 million. This includes costs for our strategic projects in the amount of EUR 8 million, which are mainly related to severance and advisory expenses, which will help to achieve the desired cost reduction targets and drive the targets of disentanglement of our 2 divisions. Furthermore, we incurred expenses for legal risks, mainly arising from the sale of talc and similar products in North America in the amount of EUR 10 million. Another EUR 10 million of costs were booked in connection with the sale of Raj Petro Specialties in India, which we initiated already in 2024. And lastly, EUR 9 million are associated to impairment losses related to the optimization of our site network.

In addition to the special items, I would like to highlight another onetime nonoperating effect, which impacted our net profit negatively. We had to book impairments on goodwill and other intangible assets of the Brenntag Essentials Latin America segment in the amount of EUR 83 million. The impairment losses are related to lower earnings expectations in combination with the reduction in the long-term growth rate for this region. As a consequence, earnings per share stood at EUR 0.30 compared to EUR 1.03 last year.

Let us take a closer look at the EBITA development on Page 5. In the second quarter of last year, we reported an operating EBITA of EUR 297 million. The translational foreign exchange effect in the second quarter of 2025 had a negative impact of EUR 11 million. Acquisitions contributed EUR 6 million to the operating EBITA development. In the second quarter of 2025, we reported an operating EBITA of EUR 246 million for the group, which was 14% below the prior year figure. Organically, the operating EBITA declined by EUR 46 million compared to the second quarter of 2024. The EBITA conversion ratio for the group came in at 25.3%.

Our results were overall characterized by a continuously challenging market environment and increased economic uncertainty, which led to a slowdown in demand across different end markets, leading to lower volumes and increased pricing pressure.

On the next slide, we will discuss our divisional performance in more detail. Brenntag Essentials reported an operating gross profit of EUR 696 million, which is 1% below the second quarter of 2024, driven by lower performances in EMEA and North America. The gross profit margin in relation to sales stood at 26.3%, which is slightly higher compared to the prior year period, reflecting our ability to manage margins in a challenging business environment. Brenntag Essentials achieved a positive volume development in EMEA, Latin America and APAC, whereas North America was challenging. Unfortunately, this volume development was not able to offset a lower gross profit per unit was impacted by increased pricing pressure in the second quarter of 2025, leading to a decline in absolute gross profit of around 1% for the division.

Operating expenses for Brenntag Essentials increased year-over-year, mainly driven by our acquisitions. On an organic basis, expenses remained more or less stable. Inflationary cost increases were mitigated by our cost containment measures. Operating EBITA of Brenntag Essentials stood at EUR 177 million, this is 13% below the second quarter of last year. The EBITA conversion ratio for the division came in at 25.4%.

Let us now look at Brenntag Specialties. Brenntag Specialties reported an operating gross profit of EUR 278 million, which is 3% below the second quarter of 2024. Although we achieved a significant improvement in gross profit per unit compared to the prior year quarter, the increase was not sufficient to compensate for the overall slowdown in demand, which Christian already commented on. The gross profit margin in relation to sales stood at 22.8%, which is slightly higher compared to last year.

Operating expenses for Brenntag Specialties also increased slightly year-over-year, which is partly driven by acquisitions. On an organic basis, higher personnel costs, general inflation-related cost increases and costs from strategic investments could not be fully offset by our cost containment measures. Overall, operating EBITA declined by 11% and reached EUR 99 million.

Segment Life Science reported a year-on-year operating EBITA decline of 8%, whereas the operating EBITA in Material Science declined by 17%. The EBITA conversion ratio for Brenntag Specialties was 35.5%.

We briefly comment on the gross profit development of our business units within the segments. In our Life Science segment, only the business unit Pharma was able to deliver a positive performance compared to the prior year period. Whereas our business units, Nutrition and Beauty & Care were down year-on-year. In Nutrition, we saw a continuation of the positive performance in EMEA with a strong gross profit per unit development. However, Americas continued to be under pressure, mainly driven by lower demand for base ingredients in our North American business. Beauty & Care saw a slight decline in operating gross profit. The performance was mainly driven by market challenges and intense competition in Americas and APAC, while EMEA achieved a positive performance compared to last year.

In Pharma, our operating gross profit increased compared to the second quarter of 2024, driven by solid business development in EMEA and Americas. The operating gross profit in Material Science lower compared to the prior year period and continues to be impacted by the higher interest rate environment, which keeps housing construction and public investments at lower levels. In addition, demand was negatively affected by global tariff discussions.

Let's now have a look at the free cash flow development. In the second quarter of 2025, we generated a free cash flow of EUR 153 million, compared to EUR 158 million in the same period last year. The decline in earnings was partly compensated by slightly lower CapEx and lower cash outflow for working capital compared to the prior year period. Our working capital turnover in the second quarter stood at 7.4x compared to 7.8x in the second quarter of 2024. Leverage ratio, net debt to operating EBITDA stood at 2.1x.

Let me close the outlook for the remainder of the year. As already communicated on July 11, we adjusted our operating EBITA guidance for the full year 2025 and now expect our operating EBITA to be in the range of EUR 950 million to EUR 1.050 billion. Adjustment is to a large degree, driven by unfavorable developments of euro-U.S. dollar exchange rates since the beginning of the year, which have had a significantly negative impact on our earnings and which we expect to continue throughout the second half.

Our adjusted guidance assumes an average euro-U.S. dollar FX rate of EUR 1.13 for 2025, which assumes a second half run rate of EUR 1.16. This compares to an average euro-U.S. dollar FX rate of EUR 1.05, with the basis for our initial guidance provided in March.

In addition, the overall market environment has been characterized by a high degree of economic uncertainty in light of ongoing geopolitical tensions and unresolved global tariff discussions. This led to a noticeable slowdown in demand and increased pricing pressure across different end markets, which we also expect to continue in the second half of this year.

With this, I would like to close the presentation and hand back to Christian.

Yes. Thank you, Thomas, and ladies and gentlemen, and dear valued shareholders and analysts. As this will be my last earnings call as CEO of Brenntag, I would like to sincerely thank you for the valuable exchanges we have had over the last 6 years and for your interest and trust on the strategic path we have taken. I'm firmly convinced that Brenntag is exceptionally well positioned to continue to shape the future of our industry. On this note, I wish the incoming CEO, Jens Birgersson, and his team as well as all of you the very best for the future.

Thank you for participating in today's call, and we now look forward to your questions. Thank you.

[Operator Instructions] Our first question comes from Suhasini Varanasi at Goldman Sachs.

I have a couple, please. Can you please discuss how trends were in July? And did you see any improvement versus what you saw in June? And if there was any differences by region or by verticals? And just to clarify, the new guidance -- the second question is on the guidance for the full year. Very helpful to hear the FX comments. But can you maybe discuss how -- what have you factored in on the underlying performance of the business? And therefore, how should we think about quarterly performance on EBITA going into second half of the year?

Suhasini, thank you so much for the questions. I'll take the first one and Thomas will talk about the guidance. On the trends of July versus June, I think we had a rather decent and good start into the third quarter. But again, we have seen this kind of pattern before that we actually start well into the quarter and then the decisive months are actually the last month of a quarter like this time, September once the holiday season is over. But overall, we had a good start into Q3, with July showing a substantially better performance than June. Thomas?

Sure. So on the guidance overall, I mean, to first talk about FX rates and to really be clear on that one. So the average FX rate that we've assumed is 1.13. This obviously assumes the whole movements in the first half. And in the second half, this then implies an FX rate of 1.16 for the second half. So that then again, comes to the average of 1.13 across the whole year.

In terms of overall underlying performance, we expect a continuation of current market environment. So meaning actually the current economic uncertainty, the uncertainty of being still unresolved elements of the global tariff discussions to continue in that context. And this leading to actually a continuation of the weakness of demand and the pricing pressure at similar levels, actually that we have seen most recently then as well.

If you think about this then in terms of potential upside factors, obviously, if we see an adjustment on the volume growth, i.e., the demand is increasing. This would have actually a positive impact on to our results. And the other element is actually related then if pricing would actually come back to higher levels, albeit we haven't seen the recovery in the chemical cycle actually gaining traction at this point in time.

The downside factors on the adjusted guidance would be the opposite, i.e., actually, we see even more pricing pressure coming into markets, in particular on the BES side. So if that would increase further compared to what we are seeing actually today that could actually have a negative impact on to our overall guidance. And then the same -- just obviously, if you look at the volume growth, if there's further demand, weakness coming in on top of what we are seeing today that would as well be a negative impact. And then quite logically, FX rates, 1.16, we've seen that fluctuating most recently around that 1.16. So I think we are okay on that. But if this actually increases in the wrong direction, then there could be some weakness anticipated from them.

Our next question comes from Annelies Vermeulen at Morgan Stanley.

I have 2 questions, please. So firstly, on the impairments. Could you talk a little bit about what changed in LatAm in terms of what these lowered growth assumptions look like? How much lower are they relative to your previous assumptions? And whether you have conducted this exercise for all your regions, i.e., should we expect any further impairments as a result of lowering growth and cash expectations?

And then secondly, you mentioned some intense competition in Beauty & Care, and we've heard from other players in the industry regarding increased competition from Chinese distributors. Are you seeing this in your business? And if so, in which geographies?

I think Thomas will talk about the impairment, and then I can add a few words on the Beauty & Care competition landscape. Thomas?

Yes. So on the impairment point, so what has changed in LatAm. You were asking actually what has triggered that? Well, the headroom in the past has been actually limited on this -- in any case. So it's a region in which we obviously have seen pressure on to the overall business development. And ultimately, this has now triggered in the regular reviews that we do every half year in terms of impairment reviews across all regions, across all cash-generating units. The LatAm region was obviously not -- we couldn't actually hold the goodwill on the LatAm region and had to overall write down that goodwill, which is the main factor of the EUR 83.3 million write-down of goodwill and intangible assets.

What we are seeing as well is that these overall -- it's the general business sentiment we are seeing in LatAm plus actually growth projections into the future. So it's current economic climate that is affecting that, the sluggishness in demand that is affecting as well, in particular LatAm. You can expect the tariff environment for the LatAm region to affect this significantly in the current environment. And then as I said, forward-looking growth projections actually have been reduced as well. And that's the reason why we had to take that technical step of writing down the goodwill of the LatAm region.

We continue to do as well to the second part of your question to review all areas across the business, so all so-called cash-generating units and make sure that we are actually up-to-date on potential impairments if they actually would happen. Obviously, we haven't taken a step on that in this quarter and this half yearly review, so you can assume that there's a -- that there's no need to write down further cash generating units at this point in time. This cannot exclude that in the future, if the business environment worsens, there might be some aspects. But as I mentioned to the previous question, in terms of guidance, all of this has been factored in, and we've significantly derisked the bottom end of the guidance.

And Annelies on the Beauty & Care, yes, indeed, we saw the strongest competition pattern in the Americas and in APAC, different reasons. I would not clearly say that these are distributors out of China, which are causing in APAC. The competition, I think, is just the general fight for volumes at this moment because, again, we talk about strongly underutilized assets everywhere in the world. It's not only in Asia, it's not only in China, it's also in Europe and North America, so I don't see that necessarily in the same way. But it is currently overall, I would say, highly competitive in Beauty & Care. And we only had also a slight decline in the operating gross profit to be fair.

EMEA was actually performing quite well we have to say, but that was skewed by the worse -- as I said, the underperformance of Americas and APAC out of different reasons.

Our next question comes from Tristan Lamotte at Deutsche Bank.

The first one is kind of related. I'm just wondering, taking a step back, it feels a bit like chemicals has felt the second order impact of tariffs more than other industries. I'm wondering if you think there's been some destocking, which has increased the impact? And do you think that, that kind of weak Q2 for chemicals is kind of a temporary blip? Or are there some shifts in global trade flows that are -- could be the sort of structural trends and that are concerning?

Yes, Tristan, thanks for the question. I think the second order tariffs, as I said, are something which we -- actually create the higher impact. I think it was clear that towards the end of the quarter, everybody being in supply or being in customers have managed their inventories very carefully. Everything was around cash preservation given the uncertainties which are there. So there could be an element of destocking in the numbers where maybe also a fresh start into July could be a further indicator to that, that we actually saw good development while we entered into Q3. So that could be a temporary in its nature. So I'm still far away from saying this is no structural.

The shift in the global trade flows, of course, I mean, there are emerging and picking up as we speak. I mean this is -- sometimes I'm a little bit surprised to hear when people say, well, we don't see anything, we don't see anything, well just wait. At some point of time, these trade flows will adjust to the tariff scenarios in one way or another. And what we need is now clarity, and that clarity is lacking. And postponement of China-U.S. trade agreement for another 90 days, again, is not helpful for anybody.

So I think let's wait and see. We do see, of course, in particular, European overcapacity is getting even worse based on that, also the strong competition out of China, which comes because that volumes produced in China will seek a market, and that market for the time being appears to be predominantly Asia Pacific and Europe. And so let's wait and see how that plays out over the next months and quarters. But it is a very delicate and fragile situation at this moment.

That's helpful. And then second question is on pricing pressure. I'm just wondering, obviously, there has been pressure in Essentials. But I'm wondering to what extent there has been pressure in Specialties? And if there are particular product lines or geographies where there's been more pressure in the Specialty side or if it's mainly just Essentials?

I would say the majority of the effect is Essentials. This is where we could clearly see also, by the way, seasonality plays into role because we sell typically lower margin and lower priced products during the pool seasons, Q2 and Q3. So this is not unusual that you actually see a slight decline from Q1 into Q2 on the sales price. But it's clear that the selling prices, the average selling prices, for instance, for the products which we sell across all value chains, across all products continue to decline, in particular in Essentials and here, in particular, in Europe. This is very clear reflection of the pressure coming out of Asia, out of China into the European markets pursued being it real, but that's the way it is at this moment.

This has been significantly less pronounced in Specialties. Here we talk about more stable average selling prices, still slightly eroding, but by far not to the extent like our Industrial Chemicals business, which you would expect in such a situation. So from a pattern, I would say everything appears to be intact, given the competitive environment we're operating in at this moment.

Our next question comes from Carl Raynsford at Berenberg.

Three questions from me, please. I'm tempted to take these one by one. I think I'll do that. But the first, what degree of spare capacity have you currently got in the cost base despite these cost-saving measures because clearly, Q2 suffered from operating deleverage as we expected. So I'm just intrigued by if you'd expect a significantly higher drop-through and incremental volume improvement whenever that may come versus what you're used to in the past?

Carl, you were a little bit difficult to understand. So the -- I don't know if Thomas has got the cost containment topic -- cost-out program?

So when we -- so if we've understood your question correctly, you were asking actually about spare capacity that we have in our cost base.

Yes, Thomas.

If volume actually would pick up again? And I mean, overall, I mean, this is obviously a question in terms of what we do in all of our locations. Do we have actual spare warehousing capacity that we could actually use? Do we have empty spare transport capacity as well? And could we scale up in terms of actually our delivery to our customers? And I think it's really fair to assume that we can actually. So we do have that potential to benefit very well from a situation in which capacity would increase.

So at the same time, we will continue our cost-out initiatives, not affecting our ability to deliver, obviously, to our customers or for our suppliers. So cost containment program continues to deliver actually the expected results. We have delivered EUR 30 million in the second quarter. You will remember that we had actually EUR 30 million in the first quarter as well. So we are well on track to deliver what we've committed for this year to double our cost containment effect and generate another EUR 50 million run rate savings, adding up to about EUR 100 million.

Overall, I will emphasize as well on what I've emphasized last time because of the economic situation and the way that actually we are facing demand pressure, we will continue to intensify our cost efforts in both scale and scope and speed actually as well. So -- but having said that, this is not going to affect our ability to scale up when actually demand will come back.

You've answered my second question as well. I'll move on just to the final question, if that's okay. But it's sort of open ended, and I guess it's probably directed to you, Christian, given our sort of conversations over the years. But you talked about oversupply in Latin America and APAC and utilization for manufacturers continues to go lower in Europe. So how far off are we, in your opinion, from some of these manufacturing facilities being sort of decommissioned, whether temporary or permanent. But presumably, at some stage, lower supply in the current environment should be useful for Brenntag in a recovery cycle as we saw in the past?

So I think it comes back to capacity utilization. I think in previous earnings call, I was very explicit about that we were on a good trajectory to see the cyclical recovery in the chemical cycle, in particular, Q4 and Q1, where we could see a pickup in utilization rates across the globe almost, but in most value chains, particularly petrochemical value chains as well. And that was stopped or muted or paused by Liberation Day, which was April 1. Then all of a sudden, this total uncertainty impacted the whole industry, and that led to a stagnation or actually to drop in utilization rates or stagnation at best, I must say. And that, of course, is leaving a gap before you reach a certain level where the capacity utilization rate would be in a region where producers are also then milling to actually increase prices.

So with this logic, first comes utilization rate goes up and then pricing a couple of quarters later kicks in that has been paused and broken by the Liberation Day events and everything what we have seen over the last couple of months. And that leaves, I would say, a gap of several percentage points of utilization rates where the industry is away from actually running at decent levels. You can argue, is it 70% versus 80% I would say the current operating level is around 70%. You need to go, well, in the region of 80%, 82%, 85% to have decently filled capacities. So we have still some way to go. But let's be also clear, once clarity is there, once consumer sentiment is improving again, and once also, everybody has digested the new framework on which we have to operate, I believe the cyclical recovery of the industry cycle will kick in again and that can offer quite good pricing opportunities for the industry going forward.

We don't expect this in 2025 to be honest. I think we need to be patient until that cyclical recovery really materializes as it would have materialized this year already in the absence of that debate we have around tariffs.

[Operator Instructions] Our last question comes from Chetan Udeshi at JPMorgan.

The first question I had was just to clarify, I read somewhere in the report that you had some change in the accounting for DiDEX costs. So I'm just curious has there been any change in terms of moving some of these costs now to below the line or below the adjusted numbers, just to clarify that.

The second question was, Christian, you talked about recovery in July or at least a good July. Maybe can you talk about where is that improvement versus what you might have seen in Q2 coming from? Is it Americas, maybe not so bad? Is it any particular end market that you saw looks better because in general, it seems like the environment from at least what I see in terms of pricing, demand still looks quite depressing overall, especially in Europe?

So thank you for these questions.

Thomas will take the first question. I will talk about the second one.

So have we changed actually the way that we are accounting for the DiDEX costs to below the line or -- any changes actually in that? No, is the answer. So we will still obviously account for that in the same way that we have been doing that in the past. So overall cost savings contribute to our EUR 300 million cost saving target in that context and whatever investments we have in the context of DiDEX and the spend comes into our operating results.

And on the July momentum, as I said, we have a decent starting into Q3 with July showing better performance than June. Again, it's too early for me to call out that this will be a positive Q3. I think we all know that September will be decisive for the quarter as usual. Also, we could have seen the restocking to some extent out of really, really strong inventory management towards the end of the second quarter, which could have an impact. But what we saw, which was encouraging for me at this moment is especially a recovery on the Essentials side and also a recovery on the Essentials gross profit per unit, which we can see sequentially coming from Q2 into Q3.

Whether this holds up, let's wait and see. That's a little bit too early to call. But at least, July was an encouraging month to start the third quarter.

Our last question comes from Carl Raynsford at Berenberg.

So I thought I'd jump in with one more if that's okay [indiscernible] got a bit of time. A very quick follow-up on the LatAm impairment, if that's okay, Thomas. But could you maybe explain just exactly where that -- the sort of lower growth projections are coming from, please? I mean is it commodities or specialties mainly, and if there are any end markets in particular? I don't know if it just goes back to sort of China oversupply and if that's a structural change or if we should be thinking about it slightly differently?

No. I mean it's not really a structural change. It's the business environment having actually an impact on to the so-called cash-generating unit of Essentials in LatAm. So it's the Essentials business to be very, very precise on that one that we actually had to correct the goodwill -- write down the goodwill in LatAm. So I guess that answers your question or...

This concludes the Q&A session. I will now hand back to Thomas Altmann for closing remarks.

Thank you, Alice. This brings us to the end of the conference call. In case of further questions, please do not hesitate to reach out to the IR team. Our results for the third quarter of 2025 will be published on November 12. Ladies and gentlemen, thank you very much for joining us today. Have a good day, and goodbye.

This concludes today's call. Thank you, everyone, for joining. You may now disconnect.