Lanxess Aktie

Good morning, ladies and gentlemen, esteemed stockholders Welcome to this year's Annual Stockholders' Meeting. Thank you for taking the time to be here today. This Annual Stockholders Meeting is not a routine event. It is taking place at a time when the chemical industry in Europe is under immense pressure. It is taking place at a time when we, as a company, must provide clear answers, especially in areas where we can take countermeasures ourselves. My and our fundamental conviction at LANXESS is when the outside world is difficult, it does no good to wait for help from others. No, The key is to take matters into your own hands wherever you can make a difference. I would like to tell you more about that later in my speech today. about what we are doing and have done to cope as best as we can with the crisis bearing down on us from the outside.

Ladies and gentlemen, the European chemical industry, including LANXESS, is in the midst of a perfect storm. Multiple pressures are acting simultaneously. In some cases, these pressures reinforce one another. First, demand is weak in nearly all major customer industries, including building and construction, automotive and agriculture to name Just a few. And this is true in all relevant market regions. Even China, a long-time growth engine has not provided positive momentum for Europe in quite some time. Quite the contrary is true. We are seeing increasing competitive pressure from China, other Asian countries and the Middle East.

Over the past few years, massive overcapacities have been built up there. And now that the U.S. market is closed off by tariffs, they are being pushed into European markets and at rock bottom prices that often have very little to do with fair competition. Added to this are profound geopolitical tensions. These tensions have not diminished since our last Annual Stockholders' Meeting. In fact, with the conflict in the Middle East, they have reached a new level of escalation. And I will address the war in Iran and its consequences for us separately later. But one thing is certain.

These conflicts are weighing on global markets. They are unsettling our customers and our investors, and they are slowing global growth. This complex situation is particularly hard on the chemical industry in Europe and especially here in Germany. Local companies are suffering from anticompetitive conditions, high energy prices, ever-expanding bureaucracy and lengthy approval processes.

The figures show where this is leading. Since 2022, the number of chemical plant closures in Europe has increased sixfold. A total of 37 million tons of chemical production capacity has been lost. And this is equivalent to around 9% of Europe's total. And with it, around 40,000 jobs. These were well-paying jobs that will not return. Value creation and prosperity are thus being lost. Since these production capacities typically migrate to countries with weaker emissions controls, climate protection is suffering as well. everyone loses out. I must say that unfortunately, the framework conditions created by policymakers, particular in the European Commission, resemble a reckless ride into the wrong direction, ecologically and economically speaking. The realization of the state of our industry is only slowly gaining traction in the political decision-making centers in Berlin and above all in Brussels. Yes, some measures have already been launched to improve our industry's competitiveness. But overall, I must say there are too few and they are too slow.

However, policymakers must act now. They must enact major reforms without getting bogged down in the details. Otherwise, we risk more plant closures, job losses and a lack of investment in this country. Now let's review the financial figures from the previous fiscal year. In 2025, the group's sales were EUR 5.7 billion. This represents a decline of about 11% compared to the previous year. EBITDA pre-exceptionals decreased by 17%, reaching EUR 510 million. This decline is primarily due to the persisting weak demand in many of our customers' industries. We sold less and capacity utilization at our facilities was correspondingly low.

Additionally, the sale of our Urethane Systems Business reduced sales and earnings. A key focus in the past fiscal year was strengthening our balance sheet. We have made significant progress in this area. We reduced our net financial debt further. It stood at around EUR 2 billion at the end of 2025. That is nearly 50% less than in 2022. The sale of the Urethane Systems Business and our consistent cash and working capital management contributed significantly to this reduction. At the same time, we ended the year with cash reserves of about EUR 500 million and undrawn credit lines of about EUR 1.4 billion. Despite these successes, the earnings situation remained tight in 2025.

Nevertheless, the Board of Management and the Supervisory Board are sticking to our dividend policy and are once again proposing a stable dividend of EUR 0.10 per share. This corresponds to a total payout of approximately EUR 9 million. This dividend is a deliberate signal. It stands for continuity and reliability. At the same time, it shows that we are exercising restraint during this phase.

In summary, this means our figures reflect the severe global crisis facing our industry. However, they also demonstrate LANXESS' strong financial position. We have reduced our debt last year. We are securing our financial flexibility. And in so doing, we are laying the groundwork to actively steer LANXESS, ladies and gentlemen, in an environment like the current one, minor adjustments are not enough. A clear strategic direction is needed. It also requires a willingness to break with the familiar. That is exactly what we have done at LANXESS in recent years. We essentially finished our realignment in 2025 when we sold our Urethane Systems division, our last polymer business.

As a result, LANXESS is now a specialty chemicals group with a clear focus on pure chemical value chains on businesses with higher value creation with greater stability and with a clear relevance to the key challenges of our time. Our group rests on three strong pillars. In the Consumer Protection segment, we develop products that protect people and improve their quality of life. Our second segment, the Specialty Additives segment provides additives that make our customers' products more efficient, durable and sustainable. In our third segment, Advanced Intermediates, we produce chemical intermediates that form the basis of many industrial value chains.

All three segments have one thing in common. We deliver solutions that help our customers overcome their own challenges. At the same time, we hold leading market positions in all areas, thereby strengthening our international competitiveness. Ladies and gentlemen, even in this setup, we just like our customer industries are facing increasing pressure, particularly from Chinese competition. Therefore, we must continue to work on improving our structure and our own competitiveness. We launched our Forward action program already in 2023. This program is working, and it is having a lasting impact. By the end of 2025, we will have achieved annual savings of around EUR 150 million. These savings come from more efficient processes, a leaner organization and an increased competitiveness. And they are not just having a onetime effect, but a lasting one.

However, the economic environment has continued to deteriorate since the launch of FORWARD! In particular, the escalation of tariffs has significantly worsened to the situation. Last year, we, therefore, introduced additional structural measures to counteract this trend. This includes further optimizing our production network. These measures will generate additional annual savings of around EUR 50 million starting in 2027. These measures affect sites and facilities where profitable production is no longer sustainable under current conditions. For example, our Hexane oxidation facility at Krefeld-Uerdingen was closed at the end of the second quarter in 2025. Our global network of Roma chemical facilities is also affected. We will close the Widnes site in the U.K. this year. And at the El Dorado site in the U.S., we will streamline the production of bromine products.

In the beginning of this year, finally, we have started a third package of measures that will enable us to save around EUR 100 million per year by the end of 2028 in addition. This addition to -- in addition to strict cost discipline at all levels of the group, this package also means reduction of approximately 550 positions across all levels of the group, particularly in administrative functions. Ladies and gentlemen, let me be very clear. These are not easy decisions. They affect jobs and consequently, people and their families.

Our goal is clear. We want to implement these measures in a socially responsible and in a decent manner. That is how we have always handled such situations at LANXESS, and that is how we intended to proceed this time as well. Ladies and gentlemen, in addition to our rigorous cost management, we are also working on new offerings to meet our customers' future needs.

Innovation is especially key to creating new opportunities in times of crisis. Let me give you a few examples. Let's take our ion exchange business, for example, which deals with water purification in a wide variety of contexts and across a broad range of industries. We have now further developed these products for use in carbon capture, which involves the capturing and sequestering of CO2 from the air. Our products thus actively contribute to climate protection. Another example is our iron oxides, which have so far been used primarily for coloring the construction industry. We have now developed iron oxides and iron phosphates that make batteries more durable and more powerful. These time-honored products are helping advance the energy transition and e-mobility.

Ladies and gentlemen, this shows that we develop solutions that help address the key challenges of our time. And we actually also are vigorously pursuing the development of sustainable product portfolios. That's what you've seen. Scopeblue is a brand of [indiscernible] for our products that are either made of at least 50% circular raw materials or have a very low carbon footprint. Over the past 12 months, we have further expanded our offerings in this area and launched Scopeblue products for rubber additives and lubricants. Ladies and gentlemen, in the midst of a profound crisis, it goes without saying that we must redefine our priorities, but there are areas where we do not and must not compromise. For us, sustainability is clearly one of them. It is firmly anchored in our strategy and is nonnegotiable.

We have set clear and ambitious climate goals. By 2040, we aim to be climate neutral in terms of our Scope 1 and Scope 2 emissions. As you can see, we have improved year after year. By 2025, we have reached a figure of 1.7 million tons, representing a substantial 73% reduction compared to our baseline year, which was 2004. By 2050, we also aim to be climate neutral in terms of Scope 3 emissions along the value chain. Last year, our Scope 3 emissions fell to around 10 million metric tons of CO2 equivalents, a significant 62% decrease compared to the base year of 2015.

Our targets are scientifically sound and validated by the well-known science-based target initiative. They are aligned with the 1.5-degree target of the Paris Agreement. Our commitment is recognized. LANXESS is highly ranked in international ESG ratings. For example, EcoVadis, they have awarded us the gold status once again. And in May, we published the Dow Jones Best-in-class Index, where we rank first in Europe in the chemicals category and fifth worldwide. These rankings also in the chemicals categories are not an end in themselves for us, but they are proof that we are taking responsibility for the environment, for society and good corporate governance.

Ladies and gentlemen, let me conclude by looking ahead. The global political and economic environment remains extremely tense. Geopolitical risks have recently increased significantly once again. The current war in the Middle East is further destabilizing the already fragile global economy. It is increasing uncertainty for investments worldwide, weighing on energy and raw materials markets and disrupting supply chains. The direct impact of the conflict on LANXESS is currently minimal, luckily so. In fact, we can see that other regions of the world are more severely affected than we are. And this is creating at least temporarily a changed competitive environment for some products.

We are observing that the supply chains of many Asian competitors are disrupted and that customers are turning more strongly back to European suppliers such as LANXESS. Our ability to deliver is currently a significant competitive advantage. Accordingly, we have seen a slight positive momentum in demand since March. At the same time, immediately after the outbreak of the conflict, we raised prices for many of our products to pass on the increased costs of raw materials, energy and logistics.

However, we are aware that this could be a temporary market situation, the duration and financial impact of which are uncertain. Accordingly, in the second quarter of 2026 as compared to the first quarter, we expect EBITDA pre-exceptionals to rise significantly to between EUR 130 million and EUR 150 million. For the full year 2026, we expect EBITDA pre-exceptionals to be between EUR 450 million and EUR 550 million. We do not expect to see any sustained positive economic momentum, particularly in our home market of Europe until the second half of the year at the earliest, if at all.

Until then, our operating environment will remain challenging and marked by high uncertainty. For LANXESS, this means we remain realistic yet capable of taking action. We are consistently managing the factors we can influence. These include our costs, our liquidity and our strategic focus. LANXESS will be ready when demand recovers. LANXESS will be ready to seize opportunities and to grow profitably. And we are also ready to create sustainable value even in a world that will remain turbulent for the foreseeable future.

Ladies and gentlemen, in this challenging environment, I would like to extend my special thanks to our employees all over the world. They support change, they drive change, make difficult decisions every day and keep our company on course even during volatile times. This deserves respect and recognition. I would also like to thank you, our stockholders, for your trust and for your patience. Especially in a phase like this, that is not something to be taken for granted. Today, LANXESS is better positioned, more focused and more resilient than it was just a few years ago. We know where we want to go, and we have the strength to follow this path. Let us continue on this path together with responsibility, with a sense of proportion and with confidence.

[Statements in English on this transcript were spoken by an interpreter present on the live call]

Thank you for joining our LANXESS's Q1 Results 2026 Conference Call. [Operator Instructions]

First, we will hand over to Eva Husmann, Head of Investor Relations, for opening remarks.

Yes. Thank you, and welcome to our Q1 call. Before we start, please take note of our safe harbor statement. And as always, we have our CEO, Matthias Zachert here; as well as Oliver Stratmann, our CFO. Matthias will start with a quick presentation before we answer your questions.

Matthias, please go ahead.

Thank you, Eva, and welcome all of you to our conference call on first quarter '26. I start the presentation straight on Page 4, where we comment on the key financial indicators.

So as far as Q1 is concerned, we guided in March already that it will be a soft start to the year. We've seen lower volumes, especially in January, February, a positive tone on March where business started to improve from the volume side, and was clearly a difference compared to the previous months and also towards the fourth quarter.

Please take note of the fact that, in the comparison base last year, we have a relatively strong dollar and still the contribution from our urethanes business units, both has changed.

In first quarter this year, urethanes is no longer consolidated and the dollar has visibly weakened. That we put a lot of attention on cash flow and financial balance sheet strength is something that we have reinforced over the last few quarters, and you can clearly see that also in Q1.

Cash flow is still negative, but that's the normal seasonality. We start off with negative cash normally in first and second quarter and then improve afterwards. And as far as net working capital is concerned, we clearly manage that pretty tightly. So compared to previous year, it's lower.

I do expect a gradual increase now in Q2, also driven by the fact that the precursors in energy will move up. But nevertheless, we will continue running it tightly.

Net debt beginning of the year normally sees an increase of EUR 100 million to EUR 200 million. And in light of the good cash management, you see that we, by and large, keep net debt at comparable level.

Now, let's turn the attention to Middle East. Middle East escalation or conflict has swiftly changed market conditions. We clearly see that value chains are under pressure. We clearly see that customers have concern on delivery security. And therefore, let me give you the following color on what we would like to shed light on.

And here, I clearly would like to stress that the conflict that we have seen, the war that we have seen in the Ukraine area, in the Ukraine situation massively impacted Europe and definitely led to a disadvantage as far as the European chemical industry is concerned.

The Iran conflict is different. Whilst true Ukraine, Russian gas and oil was reduced in Europe. The Iranian gas and oil is primarily being a supply source to Asia. So while we were suffering in Europe through the Ukraine war implications, in the current Middle East conflict, we clearly stress it will put pressure on the worldwide economy, definitely as far as energy price inflation is concerned, but the region that suffers most is going to be Asia according to our analysis.

Now logistical chains are definitely under pressure as well, but here, I can give you comfort. We have agreed contracts in place on ocean freight, on other logistical chains that are needed. And for that very reason, we had until now, no negative impact through supply that was being shipped to us or to our customers.

Of course, we took note of the fact that prices were on the rise as far as chemical precursors and energy costs are concerned. So we saw the reaction on the oil markets, gas markets beginning of March. And that was the reason why we swiftly analyzed our market situation.

And I think we were one of the first chemical companies that went out with a series of price increases in order to at least mitigate the current input cost inflation.

On working capital, I alluded to the fact that we expect an increase in Q2, but it will be tightly managed. You can bet on this.

Now let's turn the attention to Page 6. What we try to do here is simply to give you some facts on hand so that you can better understand how we look into our segments into current trading vis-a-vis Q1 and the last 2 quarters of 2025.

When we look at the current conflict in Middle East, our assumption is that the Consumer Protection segment will, by and large, not be really affected. There will be some precursors on the rise, but the Consumer Protection segment is not so much impacted through oil derivatives.

Here, basically, consumer demand is essential. And we do have some precursors coming here from China, so that is a watch out. But all in all, I don't expect that this will change the current trading vis-a-vis the past 2 to 3 quarters.

On additives, we see a moderate upside potential. Of course, you need to take into consideration that flame retardants or bromine, for instance, is also coming and is shipped from Middle East. We don't depend on that primarily. We have sources in El Dorado, which is not affected at all.

So here, we do see upside potential in trading, but the strongest momentum we clearly see in Advanced Intermediates. This segment and here notably the business unit, AII, was suffering through competition coming from China. And of course, we had a substantial amount of pressure on some of the value chains here.

This should change. Here, customers are clearly looking for delivery security, 1. And second, we have seen over the last 4 to 6 weeks that even the chemical pricing on these products in China have been on the rise. And guess what, they are on the rise in our business as well.

So this should give you some qualitative color on how you should look at the segments compared to the last 3 quarters. So let's see if you can then better model second quarter, and it's up to you how you look into '26 in total.

What we would like to give you comfort for, or comfort on is our full year guidance. The world is in quite a turmoil for various reasons that are all known to you. We clearly see positive momentum for Q2.

So we try to here give you a quantitative corridor of EUR 130 million, EUR 150 million, which would be a strong sequential improvement versus Q1, which we clearly see either driven through volume or through pricing, in some cases, driven by both in respective business units. But we don't change our yearly guidance in light of the turmoil that we see in the world.

If Q2 momentum continues, of course, that could give further comfort to potentially go into the upper range of the guidance. But please take note of the fact that, escalation in the Middle East could accelerate again, and then we potentially look at demand crush and then we look into the lower end of the guidance.

For that very reason, we give you a broad range where you slot in yourself is in your hands, but we want to give you comfort on the full year guidance and definite comfort that second quarter will come out sequentially clearly stronger than the first one. And here, we see that the business is moving accordingly. This is what we would like to give you as entry presentation on Q1, and we now open up the floor for your questions.

[Operator Instructions] We have the first question from Thomas Wrigglesworth from Morgan Stanley.

A couple of questions, if I may. Just focusing on -- thank you for the guidance range that you've given for 2Q. That's very helpful. But how much visibility do you actually have into your order books? Do you have to make this solely on what you're seeing in April and make a best guess for the next few months? And any sense of how you think those volumes will continue through the quarter?

Second question, if I may, just coming on to -- so one of the things that we've seen and it's in the context of Saltigo has been a significant spike in glyphosate and I assume glufosinate as well, which would suggest that maybe some of the generics from Asia are going to have less market presence for crop protection chemicals. I appreciate that Saltigo makes the API, but maybe this will see -- could we possibly see a rotation from customers away from generics given supply chain risk back towards more branded products, which probably have more LANXESS-orientated products embedded in them. So just kind of keen to get the crop protection picture, both from a disruption and actually, if you add any color around the seasonality, that would be helpful as well.

Tom, very valid questions, indeed. Let me take them one by one. As far as visibility is concerned, we have clearly April strong clarity as far as volumes and pricing is concerned. So sales are known to us. And we have a good order book for May. So a very reasonable visibility and of course, a softer but already a reasonable indication for the month of June.

We see in April that the momentum from March continued. Of course, we know when our price increases will more and more contribute to quarterly support. Of course, we are still in the rollout of the announced price increases of March. So once you do a price increase, you afterwards go to your customers. In some cases, you have contractual agreements that you cannot change on a quarterly basis, but you then go for the spot markets and afterwards, you adjust for the quarterly contracts in the following quarter.

So this is an ongoing process. But we know definitely that volume are at the same momentum that we've seen in March with a slight uptick for April and May. And then, of course, we know ourselves what price initiatives are ending up in the P&L and when this is going to occur. So as far as visibility is concerned, I think we have, for the next quarter, a reasonable good indication.

Now your question on Saltigo is operationally very focused and smart. In the last 12 months, we have seen in the crop protection space and here I'm not alluding to glyphosate, but to Crop Protection specifically that the commodity products in Crop Protection were under severe generic pressure from India and China. And I think that was being mentioned by the big agro company themselves. They all alluded to pricing pressure, and that was definitely not on the innovative products, but on the commodity grades.

Now with China facing substantial freight issues and cost explosion on trades and some areas also pressure in their supply chain, we definitely have to monitor the markets. We don't see an immediate reaction here in Europe, but that is likely to come in the weeks and months to go. And that could change, of course, the competitive landscape for the European crop protection companies, which we don't see at this point in time, but normally, we would see that 3 to 6 months later. So this is something high on our radar, and I'm very impressed that you have spotted that as well.

The next question comes from Christian Bell from UBS.

So I just have a couple. My first one, I guess, picks up following the discussion in the previous question on April customer demand dynamics. Are you able to just please give a sense of how much of the volumes that came through in April were at the higher prices that were implemented in mid to late March. I'm just trying to understand, how much of those volumes that have come through are getting ahead of prices or whether they are -- what percentage is actually effective at the new pricing?

And then my second question would be just to help us bridge to your EBITDA guidance -- at the midpoint, your second quarter guide is roughly 7% below last year, which implies you need to do about 20% growth in the second half to reach the midpoint of the full year guidance, which is quite an acceleration. So just what do you think underpins that acceleration? Is it largely price cost normalization? And then if possible, if you could sort of speak to any potential demand deterioration that you're thinking about that may offset some of that margin improvement?

Thank you, Christian, for these thoughtful questions. I would take them in the same sequence as you asked them.

So as far as April is concerned, we basically see same to slightly modestly higher volume pattern compared to March. So this is positive because April is -- if you look into holiday seasonality, that was main impact here as far as Europe is concerned, in April Easter holiday season, la, la, la. So as far as underlying trading volume-wise is concerned, slight uptick versus March.

On pricing, as I said before, we made the announcements in March, in course of March. And then afterwards, you -- wherever you have spot contracts, or spot pricing, you can then adjust customer by customer. This takes normally something like 4 to 6 weeks, depending on the customer base, depending on, of course, the sensitivity, elasticity they have, and then you change the pricing one by one.

On the contract establish quarterly contract pricing, you basically can take that only with a certain delay, but that follows afterwards. So on pricing, generally, you should assume that this will ramp up first steps in April.

Then, I would say, 2/3 will be reached in May and then the full effect you will see or should see in June. Of course, we have to monitor what implications that has on the volume side. But from the pure pricing side, there will be a gradual buildup at cost of Q2.

And then, of course, if momentum remains healthy, the contract, the quarterly contract pricing would then be also a driver for Q3 going onwards. All this having this assumption that the underlying momentum on volumes will not change, and with all questions on geopolitical tensions. So that should hopefully answer your first question.

Now on second quarter, I think my answer on the volume and pricing side will give you also some color on Q2. If you look into second half of this year, of course, our cost savings that we've initiated will gradually ramp up as well. And that should give you the indication that we are still not falling in euphoria for the second half.

We are clearly very, very straightforward and not modest, but we take the current geopolitical tension very seriously. And therefore, we keep here our assumptions in a normal environment and not into a gradually improving environment. And with this, I think you have the best basis for modeling the full year implications for our company.

If I could just quickly follow up on that last point. Are you able to -- like given second half cost savings are important to the full year guidance, are you able to give us -- tell us what the net cost saving you are expecting in the second half will be from your cost saving programs, given that there should be a relatively, I guess, concrete level of foresight over there?

Yes. We've given you the yearly number, and I think this should suffice with the comments that I've made that this will gradually build up. And therefore, please take this as basis.

The next question comes from Anil Shenoy from Barclays.

Just 2, please. The first one is a little difficult question on your unconditional put on Envalior in 2028. So you have mentioned that the put obligation sits at the Holdco level and not Advent. And I know you have a confidentiality agreement, and so you cannot give a lot of details. But just theoretically, what are the funding pathways that the Holdco will have in 2028? From what I understand, it's either refinancing from Advent or taking on external debt or dividends upstream from Envalior. Would that be the right way to think about it?

And finally, on a sort of pessimistic note, if -- what happens if the Holdco declares bankruptcy? I mean, does -- in that case, does LANXESS end up becoming an unsecured creditor? In other words, basically, what I'm asking is, is there a risk to this unconditional put in 2028?

Yes. Let's take it step by step. First question is a question I cannot answer due to confidentiality reasons. And I stick to that 100%.

Your second question, I've read your report. This basically shed at 100% concern on our company and completely hence one-sided. I was very much surprised about this. And therefore, let me simply come on a higher level. You said, it's a theoretical question. So I give you a theoretical answer.

In insolvencies or bankruptcy, the party going insolvent loses everything. Everything is gone. It is normally by somebody who runs the insolvency afterwards, any possible areas where you can get proceeds is going to the lenders. So if there is a company holding shares, they lose everything, 100% loss. This is the consequence. Taking such a hit for any investor who might have a major investment is a complete disaster.

Next to this, the company theoretically that goes into bankruptcy, loses its global reputation. That might be even a bigger damage. And therefore, that's my answer on your theoretical question with a theoretical answer, food for thought.

The next question comes from Chetan Udeshi from JPMorgan.

My first question was, you said you've already seen April sales. And I was just curious, you talked about volume versus March, but are you able to provide some clarity on when we think about year-on-year, how are we tracking in terms of volumes? Is it now up 5%, 6%, 7%? Any sort of color in terms of how you see the volume momentum building on a year-on-year basis, that would be helpful.

The second question was LANXESS was one of the companies that was more active, I would say, over the last 18 months in pushing the European Union to do more of these antidumping investigations. Some of these investigation actually went into your favor last year with Adipic Acid, phosphorus additives and all those stuff. But I'm just curious, have you seen any benefit from these antidumping investigations in your numbers given that some of those were already decided and ruled into your favor in second half of last year?

And the last question I have is, you mentioned about customers coming to LANXESS for security of supply. Is that because you actually -- based on your conversation with these customers, do you actually see that your Asian competitors are not able to supply right now? So in other words, some of your Chinese or Indian competitors, are they having supply issues? Or are customers coming to LANXESS just to make the supply chain more resilient rather than not necessarily driven by short-term supply shortages?

Thank you, Chetan. We will take them one by one, and Oliver will start on price and volume, and I take the other 2 questions. So Oliver?

Many thanks, Chetan. Actually, I'm thinking about, what I could add because Matthias has already been pretty diligent here in outlining how volumes have picked up in March and what we have seen in April. And to be absolutely frank here, I wouldn't like to go into a monthly reporting now.

I would just like to remind you that there is an awful lot of uncertainty out there. And I think the commentary that you've received so far is a positive one with regard to going into Q1 and going into Q2 and the volume development. And beyond that, we really need to see how things evolve, but the positive impetus is there. Back to Matthias.

So thanks, Oliver. Then on European dumping, I think, been very clear at the outset when we mentioned it that this is taking time. And we said that, this normally lasts 12 to 18 months. So this is the normal duration of an antidumping case or antidumping trial. You mentioned a typic asset. So that was one that was decided in, I think it was August last year, summertime.

What you need to take into consideration is that the antidumping once it's declared is, of course, positive for any supplier operating in this market like us. But in the first antidumping cases, like on Adipic Acid, we have seen that China was loading up the value chains before the antidumping declaration was imposed. So China was loading this value chain by around about 6 to 9 months with capacity. And only once this capacity is absorbed, you truly see volume momentum rising and pricing rising. For Adipic Acid, this is now happening.

So we have seen the declaration on antidumping last summer. The value chains and stocks were loaded immediately before the declaration became effective. I have to say, fortunately, the European Commission has realized this practice in many other similar cases and have now basically put the volume buildup under scrutiny as well. So this will be retroactive impacted by price adjustment or antidumping cases as well, which is a positive move. So this gives you the color.

And I do expect that further antidumping cases will be decided in the course of this year. I know that many chemical companies have cases that are filed in the European Commission. We keep a close eye on this. And I do support that one and the other products could positively be impacted by us as well, which will help us going forward in areas where we see dumping being practiced. So that should address your second question.

Now on the third question, there are basically 2 drivers. First, European customers want to protect their supply chain. They want to have security. They are concerned that similar disruptions could happen that they've seen in Corona times. So we've seen over the last 6 to 9 months that customers went to China because of pricing, pricing, pricing benefits.

We had a very tough economic situation here in Europe. So pricing was essential. But now for many customers, supply security is higher in the priority and some of the customers that left for China in the last 9 months are coming back into our order book. We also see completely new customers, which is a positive sign.

Second point is, I think also China and Chinese companies have realized that the pricing level of last year has also ruined the pricing level in China itself, which is not liked by the administration. And of course, long term, no company can generate losses. So we also see that the pricing level now in China is moving upwards, which is a clear difference to the last 12 months.

And when the pricing level in China moves upwards, you can assume that then, of course, pricing in the European area is also being positively impacted by that. So you have 2 perspectives on this, and I think this answers your third question.

The next question comes from Tristan Lamotte from Deutsche Bank.

Two questions, please. The first one is coming back to your comments that you made on pricing timings. I was just wondering kind of high level, do you generally see net pricing is likely to be a positive? Or kind of how do you expect the phasing to be there? Is it, for example, negative net pricing in Q2 and then positive in Q3 if all current conditions stay the same?

And then second question is, could you maybe elaborate a bit on the current dynamics in bromine? Because I think there was a price spike and the China price has fallen back. And obviously, I appreciate that you don't necessarily have direct exposure to the China price, but what kind of underlying dynamics are going on there? And has the demand fallen off versus what it was?

Thank you, Christian. Let's take that also step by step. So on your first question on pricing, I would like to give you the indication on a sequential basis, so not vis-a-vis previous year, but versus Q1. What we should see in second quarter that prices versus Q1 are -- should be up.

The tendency, if the momentum continues, like I explained, and you assume that there is no insanity happening in geopolitics anymore or no further escalation, and current trading continues, you should also see a sequential price increase in Q3 vis-a-vis Q2. But with all the nonsense that is happening on the geopolitical side, I take that, of course, with some -- with a pinch of cautiousness, and I hope you understand the rationale for this.

Now on bromine, I would like to allude again or come back to the stated seasonality we see in China on the spot market. We always have a seasonal price increase in bromine prices notably in Q4 and Q1 because of the bromine extraction methodology, i.e., water vaporization. So therefore, when in the colder months, Q4, Q1, you normally see that bromine prices are on the rise, and they go down again Q2, Q3.

If you now look at the last 6 months, that was exactly what happened. Bromine prices went up. They went up to a high level of EUR 60,000, EUR 70,000 and are now moving down to around about EUR 38,000, EUR 39,000, EUR 40,000. This is the normal seasonal pattern.

But overall, the pricing level is clearly still in the healthy territory. EUR 40,000 is 100% up compared to 1 year ago or 2 years ago, when the prices were more depressed. So now the pricing level despite having fallen now in the last 4 weeks is still at a reasonably high level. I hope that clarifies the points on bromine, Tristan.

And maybe just a follow-up on the pricing question. I understood your comments on the kind of price rises timing. How does that align to the cost increases, i.e., what kind of net impact should we think about modeling? Or is that just too many moving parts to comment on?

No, no. This is a smart one, Tristan. I think we've always stated that a lot of our input costs are basically set up in a way that like in Q1, when you have a rise in input costs, you adjust in the quarter afterwards. So you've seen the increase in precursors on raw materials, on oil derivatives on energy.

You've basically seen that already in March, with no real implication on our P&L because we clearly stressed that in March, we rather had a positive momentum, profitability-wise, turnover-wise. And this was volume driven, but not because input costs have been falling. They have rather been on the rise, but not impacting the first quarter P&L.

The implications of the higher input costs will be visible in second quarter. That's the reason why we've given you the financial guidance. So we basically -- in our guidance of EUR 130 million, EUR 150 million, we absorb the rising costs that we have now seen in March, which will roll into our P&L in the second quarter. So that's the reason why we tried to give you a good hard landing so that you understand that we are sequentially clearly managing the situation and manage the input cost increases.

And the last question comes from Georgina Fraser from Goldman Sachs.

Given the situation, I was wondering how your relationship with your distributors might be evolving. Are you kind of selling through the same distribution channels as historically? Or are you seeing more direct to customer sales?

May I understand more of the backgrounds to this question, Georgina?

Well, I wanted to understand if every single chemical company is discussing the fact that security of supply is #1. And the question is, are customers seeing the manufacturers as the most likely source of secure supply? Or are distributors being seen as being able to source from lots of different places. Does that make sense?

Yes, that makes sense. So I mean, the distributor world in chemicals is very broad. In parts, you have niche distributors, then you have specialized distributors in certain chemical value chains, then you have the bigger distributors that have the broad reach. You have some that only pack and ship, others give service like finishing, like analytics, et cetera. So the world in chemical distribution is very, very broad.

So giving a general answer that solves everything is, I think, not possible. But I would like to give you the following. In our interaction, we use distributors basically globally, wherever we see that the size of the order level is simply too small for us or the customer is too distant away for us. So we use distributors. But companies like ourselves, of course, are more and more reinforcing the direct contact to customers as well. So this is a trend on our side, and I cannot speak for the industry, but what we are doing, we use distributors.

But also we would like to have a better market transparency, market dynamics, customer trends, et cetera, on our end. And therefore, we strengthen the relationship also to the next level of manufacturing. And therefore, of course, also a question if we do need a distributor or not. So that is the one thing I can say for our group.

Then for customers, we do see customers that want to have the direct access to the manufacturer in order to have clarity. and also preferred treatment. When we are selling to a distributor, there are some that are very, very close to us, but some that we simply used to pack and ship.

If a customer is ordering from a distributor, he does not get the same preferred treatment that direct customers often have. And therefore, on the customer side, we also see that for very important precursors and chemicals, they also tend to establish more direct relationships.

But I say again, this is this is an answer that does not apply to this huge distribution network that you have in the chemical space. There are different kind of distributors with different business models. So the specific answer I have given will not be an answer for the general industry. I hope that clarifies the point. Any further questions?

So there are no further questions, and I will now hand back to Matthias Zachert for closing remarks.

Well, thank you so much for orchestrating this conference call, and thank you to everybody who listened in.

I hope this was giving you enough color on current markets and trading environment. We will be now heading on the road to speak to investors and looking forward to the exchange. And if you have follow-up questions, please don't hesitate to touch on my Investor Relations team, and they would be very happy to take any questions and provide answers. Thank you so much. Take care, and bye-bye.

[Interpreted] A very good morning, ladies and gentlemen, dear colleagues. My name is Claus Zemke. I would like to extend a cordial welcome to you on the occasion of the Q1 press conference call. So we have got Matthias Zachert, CEO; and Oliver Stratmann, CFO, on site. And they will update you on the first quarter of 2026 and give you an overview of guidance for the full year, but let me start by giving you some technical information.

So we will have the press conference in Germany. It is translated into English. And for legal reasons, I have to point out that this call is broadcast live on the Internet, including your questions.

So Mr. Zachert, the floor is yours.

[Interpreted] Thank you very much, Mr. Zemke. A cordial welcome to you, ladies and gentlemen, on the occasion of the Q1 telephone press conference. Cordial welcome here in Cologne, LANXESS.

I would like to start with Slide 3. We distributed the presentation beforehand summary. We came off to a weak start. Particularly, January and February continued with sluggish market conditions, what we saw towards the end of 2025. But in the month of March, things changed, became more positive with a continuous increase in volumes, and this is also true of the second quarter.

Now, let me talk about the specifics of Q1. We have sales and earnings down, unfortunately. And the conflict in the Middle East for the European chemical industry means that we have sort of more favorable market conditions. And we have to say that at the end of the day, we are faced with a global energy crisis, but the supply chains in Asia are more dependent on supplies from the Middle East in comparison to Europe and Germany. On the basis of the first quarter and the development in the second quarter, we feel that we can confirm the guidance for full year 2026.

Let me now talk about the KPIs of the group. So sales and EBITDA came down minus 14% and 29%, respectively. At the same time, I would like to point out that in the first quarter of 2025, we were not yet faced with the customs roller coaster and then the tariff discussions and that depressed the mood. In the first quarter of 2026, we compared ourselves against the sort of normal quarter with no tariff struggle in 2025.

Now, let me talk about Consumer Protection. Weak demand and a weak U.S. dollar, and that meant that sales came down as well. EBITDA declined by 15%. Similar trend, though with different impacts on sales.

In the Additives segment, Specialty Additives, volumes were slightly up, but there was a lot of price pressure in the Additives segment, very much dependent on what is happening in America. So therefore, also a negative percentage figure sales, that is minus 4%. EBITDA, minus 15%.

Just like last year, the new year suffered most in Intermediates. So this is Slide 17 -- minus 17% sales. And we have got a lot of activities here in Germany, and this is the rationale. So both business units are first and foremost active here in Germany. And site conditions in Germany are still not competitive by global comparison, as we can see that in all the media outlets. And this, of course, is reflected in sales, minus 17%, very much driven by volumes pressure. And this means that EBITDA came down by a whopping 33%.

Let me now briefly talk about the situation in the Middle East. We investigated and explored the situation from 4 different points of view. Let me start by talking about the supply chains, logistics. And here, I do have to commend my organization. Where we could see difficulties, there was a fast response to remedy the situation. So from the logistics side and also from the raw material procurement side, we don't feel any direct impact on our production that would have hit us.

At the same time, though, I do want to be very clear about the fact that the ships that left the Middle East shortly before the eruption of the crisis have only now made it to their points of destination. And in the next couple of weeks, we will have an idea how supply chains will be affected. And we feel that globally speaking, in the next couple of weeks, 2 months or so, the situation will remain tense, and there might be additional distortions because of the situation in the Middle East and the Strait of Hormuz. And at the end of the day, the Asian markets will be hit more because there is a greater degree of dependency from that part of the world. The markets, globally speaking, here, we see that the number of events of force majeure that are reported have been very much on the up. And this, of course, is indicative of what I have said a minute ago.

When it comes to volumes and prices, and they are the next 2 issues I would like to discuss with you, as of March, we see a continuous strengthening of the demand, which is positive, of course, a revival in demand. So the situation will improve after January and February 2026. And it is also a fact that supply reliability becomes evermore important also when we are discussing matters with our customers. So supply reliability is certainly the name of the game. And if we can demonstrate that we can assure reliability, this will come very much our way.

We are all cognizant of the fact that prices go up and raw material prices go up, oil, gas and derivatives. And therefore, immediately after the start of the war in the Middle East, we started to increase our prices because it is our objective that increased logistics costs and raw material costs are passed on right away.

Now, Slide 9. This is the general economic framework. Here, the clear statement, tensions are here to stay, and we see that reflected in worldwide reporting, and the uncertainties are here to stay because of the conflict in the Middle East. And I mean, we have seen that things change every couple of minutes, so to speak. And it is against this backdrop that we stay modest in our guidance and on our take of things.

We take it that effects of the German economic stimulus program could come to bear and -- probably only in the second half of the year, and we may only be able to see that more clearly in the first half of the next year. With respect to the dollar, I think the weakness of the exchange rate will prevail and the negative exchange rate effects will last throughout the year.

Let's talk about LANXESS. We will confirm our guidance of EUR 450 million to EUR 550 million EBITDA, and we continue to stick to our high level and very pronounced cost discipline. For the second half, you will see a clear increase in the second quarter as compared to the first. I have already said that there are some signs for positive momentum, and we will see a continuing positive trend also for the second half year. And the price increases that we have communicated will take effect as of April and then the next wave as of May.

And may that suffice as our explanations on the first quarter's results, and we are now more than happy to open the floor for questions. I hope we have some time.

[Interpreted] [Operator Instructions] And the first question is from Jonas Jansen, FAZ.

[Interpreted] Perfect. Thank you very much for these interesting statements. I do have some questions. For example, on the point concerning the strengthening demand on intermediates, could you give us some examples of what is higher in demand with you? And I would like to know how you can guarantee the supply reliability, given the situation that we have?

And on the price increases, could you give us a ballpark of range by which you may increase this? Last time, you said, you could also speak about 50% increases, but does that depend on the product? I would like to have more details on that.

[Interpreted] Thank you, Mr. Jansen, for your valid questions. Let me go through them question by question. With the intermediates, last year, we had pointed out that we felt a lot of pressure from China, which concerned different product groups that are faced with global competition. And the dumping approach of China on many European products, that was also commented on by many of the competitors, made the business units with the intermediates suffer. The situation has changed in March and April. We see that on the one hand, China is now confronted with increasing raw material prices.

Let me explain that a little bit. Before the outbreak of the war on Ukraine, de facto, we had a global price for oil. And there were differences of $1 to $2 between the different regions that offered oil. But oil was a global good, and de facto, there was one global oil price and oil standard. The outbreak of the war on Ukraine and the sanctions introduced in the wake of it made the Russian oil clearly cheaper. And we're talking about price discounts between $20 to $30 per barrel. And this Russian oil, as you know, didn't predominantly go to Europe, but this cheaper oil went to the Asian region so that the chemical supply chains in Asia had cheaper oil products and could use these products and the derivatives to produce much cheaper.

And in last year, where China was dumping American products in Europe and also could go down with the raw materials and thus reduce the prices tremendously, that led to a situation where our supply and value chains were hard hit. And that is changing now. Most probably, China is faced with higher raw material costs now or at least costs that are similar to the ones that we have to pay. And thus, there will be more pressure on their prices than we experience. And in China, the prices with the products that we produce with intermediates is increasing. So our position is strengthening.

That was a bit of a lengthy answer to your first question, but I hope I gave you some more macroeconomic backdrop.

Now, reliable supplies. I can tell you that globally, looking at the logistics agreements, we always follow an approach of having 80% to 90% of our logistics under contract for the whole year. This is what we also did for this year. So we have very, very strict commitments even if there are logistic chains that are under pressure or if the situations are under pressure, but we have agreements and contracts that make sure that we will get the supplies. And in spite of the distortions on the market, we have clear commitments of our partners, who also confirmed their commitment in the past couple of years. So logistically speaking, we are well braised.

And on the raw material side, we do purchase products from Asia, but not necessarily products that have to go through the Strait of Hormuz or the Middle East. So since we always have 1 to 2 additional suppliers registered with us, we can also guarantee reliable supplies on the raw material side.

On the price range, I have to be quite clear and say that, that is different from product group to product group, which has to do with the significance of the energy prices per product, raw material costs. They are also depending on the product. We want to actually pass on the costs. And products where we have to use more energy or oil derivatives, we have to increase prices more than with other products that don't have to suffer so much. We are confronted with price increases of 5% to 10% in some product groups. But there are other product groups, as you pointed out, the price increases go up to 50% plus. So we try to do that with a measured approach and focus but in a very disciplined way in order not to suffer any structural downsides in the quarters to come.

I hope that answers your questions.

[Interpreted] Yes, it does.

[Interpreted] The next person is Bert Frondhoff from Handelsblatt.

[Interpreted] One question was already answered, namely the question of what will happen if force majeure will increase in Asia and what will that mean for the supply chains to Europe. Do I understand you correctly that you have no fears and that you're well braced? Could you confirm that?

And now, on the supply chain issue, if the Strait of Hormuz were to be opened in the days to come, will that mark the end of the problem very soon, including the advantages that you are experiencing? Or what is the time frame that you will expect until an old market condition could be back or the situation normalized?

[Interpreted] With pleasure, Mr. Frondhoff. On the supply chains, first question, we proceed on the assumption that we will have distortions over the next 4 to 6 weeks. Who is going to be hit in Asia remains to be seen. But we think that countries like China, India, Korea and Japan will be impacted because there's a great degree of dependence there. And when it comes to the products from the Middle East, be it gas, be it oil, and here, I'm particularly referring to the next stage concerning naphtha, chain product, so this is a precursor of very many chemical products, and here, we've got a great degree of dependence in the Asian countries, the raw material supplies coming from the Middle East.

So if and when the ships can no longer enter over the next 2 to 4 weeks that are needed for the global trade, these countries will go back to their raw material reserves. And there are great differences here. China enjoy much higher reserves than other countries, and then they will have to start allocations, and then it remains to be seen who will still be in a position to produce. And the number of events of force majeure in Asia is going to increase and not going to flatten. And I have given you the reasons for that.

And then, you mentioned the time framework. We actually analyzed various scenarios and simulated them and discussed matters with large representatives of the logistics industry. And they say, even if the Strait of Hormuz is going to open in the next 1 or 2 weeks, it's going to take 3 to 6 months before the situation will have stabilized again. And therefore, we feel that there will be a great degree of uncertainty in the markets for the global economy, and energy prices are going to stay tense over the next probably 2 quarters. And then, we will have to have a look at how these things pan out politically. So this is certainly not a short-term matter, but something that is on our plate for the next couple of months.

Does that answer your question, Mr. Frondhoff?

[Interpreted] It does indeed.

[Interpreted] Next question, [indiscernible].

[Interpreted] A brief question. What about the reduction of jobs, particularly here in Germany?

[Interpreted] Well, we mentioned that at the press conference concerning the financial statements at the beginning of the year. We are in a phase of implementing it all. It's going to take 2 to 3 quarters. But the program has started, and we are doing things in line with the timeline.

[Interpreted] Next question, Patricia Weiss, Thomson Reuters.

[Interpreted] Well, Mr. Zachert, you wanted many questions. So you will get a few from my side. And I'd also like to talk about the positive momentum from the month of March, and this is something you don't hear that often. So can you give me more details? Are people building up inventory? So what is it exactly that is happening? And maybe you can give me examples for intermediates, just like Mr. Jansen asked, so for me to get a better idea of what is involved.

And then, you also said there is a revival of the business not to be expected over the second half of the year. So is that still true? And then, I'd ask for your rating at Moody's. It's junk level. And what are your ideas and the income from the Envalior transaction? What are your activities there?

[Interpreted] Thank you very much for your question, Ms. Weiss. So I will take the first 2 questions, and the CFO, the last. So the revival in the month of March. Well, indeed, over the past couple of months, we have seen that after the so-called Liberation Day, 2nd of April 2025, over the ensuing 6 months, quarters, down to the beginning of 2026, reduced demand and that there was a lot of price pressure because of all the goods and merchandise being imported into European markets. And that was a major burden on our industry.

In March, we could see that after the first difficult months and the difficult months before, business activities picked up again. And this was not a sudden event, a sudden peak, but a gradual increase day by day. So from our point of view, we can say that the demand levels have kind of normalized. But we have also seen that the price pressure from China came down a little bit, which is a positive development.

If you had a strong peak on a 1- or 2-day basis, it would mean people are [ squirrelling ] stuff away and precautionary measures in inventories. But this is not what we have seen. So we saw a gradual increase, coupled with less of a price pressure from Asia, which is encouraging. This is a healthy development.

Now, let me talk about the second half of the year. I am firmly convinced that the investment package that was issued and will be issued by the federal government will now take roots in the industry, in the economy. And we had hoped that in the second half, the building and construction industry would pick up again, but we don't see it in the order books yet. There are more permits applied for new construction projects and for restoration projects, which is good. But as I said before, it is not yet leaving traces on the order books. And therefore, we proceed on the assumption that there will be a positive effect, but not before the second half.

And when it comes to rating, Mr. Stratmann, why don't you take that question?

[Interpreted] Ms. Weiss, thank you for your question. Right from the beginning, we wanted to be an investment-grade company, and we are very, very solidly funded. So when it comes to the rating, we want to come up with KPIs that give us an investment grade. And now, you asked what kind of measures have been taken to ensure that? And Mr. Zachert has mentioned that already. We are actually working on a cost-saving project or program. And then, we have a look at the capital tied up in the working capital. And ultimately, you see that the adaptation -- adjustment of our selling prices are increased because of our higher purchasing prices. And then, it is also that we want to reduce our leverage, our debt, and that will save money.

Does that answer your question?

[Interpreted] Yes, it does indeed.

[Interpreted] [Operator Instructions] Annette Becker from Borsen-Zeitung.

[Interpreted] I also have 3 questions. One focuses on the topic of increased demand, when it comes to Intermediates, what does that mean for your capacity utilization? Because with Intermediates, the earnings dropped twice as fast as sales, which is probably also due to utilization of capacity. What about the future thereof? And you do say that from building and construction, you will see effect at the earliest in the second half year, but the geopolitical conflict will have some effect on the global economy, thus on the demand in the global economy. What's your take on that? Because at the end of the day, that could have a negative effect. And if you "benefit" from the situation, why is it that the share price is at a 9% minus today?

[Interpreted] Capacity utilization is still tense, clearly speaking, also with Intermediates. We can say that we are still in a difficult situation. Utilization is weak, but on the increase. And in the next quarter, it will continue to increase, but we haven't reached a normal level yet, which would be above 80% in the industry. Last year, we ended with 65%, i.e., below 70% for the year. And we take it that in the second quarter, we will see clearer increases, which will help utilization. And because of the volumes that will increase, it will reduce the fixed costs that could otherwise not be compensated for. And then, that should lead to earnings and better margins for the group. And we will see that most pronouncedly with the Intermediates because they need higher volumes than the other 2 segments.

We gave our feedback on what we expect for Germany. And as we have pointed out, in Germany, there are some positive indicators that become visible that will also be seen like that by the macroeconomic institutes. And of course, should we experience further escalations in the Middle East and should interest rates increase considerably and consumer trust drop to the seller, then the building and construction industry will not be the only one to suffer. It will be other industries as well. We see that -- and we say in our guidance that the Middle Eastern conflict lets us be very careful. And here, we have to clearly take into consideration the volatilities. We are living with a lot of uncertainties worldwide, against the backdrop of which, we cannot be absolutely euphoric because the second quarter is better than the first.

In our guidance for the second half of the year, we remained modest. The macroeconomic situation is something that no one can foresee. The share price suffered. That's always an effect in reporting that the shares are suffering, Solvay also is down by 9%. I don't think that the market expected that we could announce a firework of positive future guidances. And I say, quite clearly, there are no [ bonds ] in Europe that cannot increase expectations. And you have known us for 21 years. We don't do that. We stay at a moderate level, and we try to focus on what we are good at, namely at being transparent with respect to operating figures and work.

[Interpreted] Thank you very much, Ms. Becker. The next question, Andrew Noel.

I've got 2, please. The first one is on -- if I could ask you about the mindset of your customers and maybe they're buying local in Europe now. But do you think, as soon as the situation returns, they'll just go back to the cheapest option? I'm just wondering if you could tie in with longer-term contracts? Or is there any way of -- is there any sign that they will longer term be a bit more loyal to Europe? That is the first one.

And the second question is for Oliver. You made the point that LANXESS is well funded. Can I ask about the next priorities for refinancing and the options available and whether, if the window opened, you had some possible disposals in mind?

Thank you, Andrew. Coming to your first question on customer mindset. Here, we see the current customer mindset, the customer mindset right now, especially as far as European, but also Asian customers are concerned. So we should not only look at Europe. Generally, we see that delivery security is currently very intensely debated in the customer base. And they clearly interact with us on delivery security. So this is more a priority point in customer discussions today than it has been over the last 3 to 9 months. In the last 3 to 9 months, due to the global pressure on competitiveness, on profitability, the name of the game was price, price, price.

Delivery security was not the theme in the past few quarters. This is changing. And it does change here in Europe, and it does change also in parts of Asia. If this is going to be a theme now for midterm or long term, I would say, the jury is out. But I think customers have realized that being completely dependent on Asia leads you -- can lead you to a situation where you are completely stuck. And my assumption is that one and the other customer is going to reflect about that with their global procurement policy.

And then, I hand over the word to our CFO.

Thank you, Matthias, and thank you, Andrew, for the question. You asked about the priorities for refinancing. And first of all, you rightfully so mentioned that we are indeed very well financed. There is a maturity in October of this year, a benchmark bond EUR 500 million. First of all, I'd like to mention that this maturity is quasi prefinanced. We don't only have north of EUR 400 million in cash on balance, but we have around about EUR 1.3 billion of completely unused credit facilities. And on top of that, the markets are open. So, for refinancing purposes, together with the treasury department, I'm monitoring the market, and we're going to use instruments and windows basically as we find them attractive.

All clear, Andrew?

Yes.

[Interpreted] The next question also goes to the English-speaking room, [indiscernible] from Reuters.

I know that you partly explained it and answered that question, but I would really appreciate it if you could give us more details about the Middle Eastern conflict impact on LANXESS and chemical industry. That will be the first question of mine.

And the second question of mine would be, how much is your price assumptions for oil in the coming weeks? And how much does this conflict cost you so far? And what are your expectations in the coming months?

Well, valid question. On Middle East, I hope that I had explained the impact of the Middle East conflict earlier in the presentation when I talked about the implications on Page 8, where I basically stress that value chains' delivery security is intact, that we do see that on the energy and oil price side, we basically are confronted with rising input costs. But third, our focus is very clearly on rolling that over to our customer base so that we don't get the margin squeeze and hit from rising raw material and energy costs. So, that is my feedback to you on the Middle East impact for us and for the chemical industry.

And I would like to add another point. The European chemical industry was hit hard in the last 12 months because of the tariff escalation that we had and the capacities that China, in many value chains, dumped on the European market. We had generally a situation here in Europe where our energy prices were higher than in Asia, and that situation is about to change. The Ukraine war was toxic for the European chemical industry. The [ Near East ] conflict is a global problem because of rise in energy prices, oil prices, et cetera. But the Middle East conflict has a stronger negative impact on Asia than in Europe. And this is important to distinguish. For that very reason, there are many chemical companies that say the conflict is a disaster globally but changes the competitiveness of Europe potentially for a certain period of time to the better.

Now, to your second question, oil, our clear focus on oil is, it will be high, most likely in the $100, $110 area for the next several months. Of course, this can change, should there be a stronger tendency to peace. It can change to the worst if the escalation on the military side comes through again. So nevertheless, despite having a high oil price, our clear target is to roll that over through product price increases, which we have flagged on our -- Internet over the last 2 to 4 weeks. I hope that answers your question.

Yes, it does.

Thank you very much, dear colleagues, I think we are done with the questions. So I would like to ask you whether there is anybody else who would like to ask a question? This does not seem to be the case. So thank you very much for joining, and stay safe. Greetings from Cologne, and we'll see you or hear you next time.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Thank you for joining our LANXESS full year IR conference call. The conference will be recorded. I will hand over to Eva Husmann, Head of Investor Relations, for opening remarks.

Thank you, Mandy, and welcome, everybody, to the call from our end as well. As always, I have our CEO, Matthias Zachert; and our CFO, Oliver Stratmann, with me. Please take notice of our safe harbor statement. We will follow our usual procedure. Matthias will start with a short presentation. And afterwards, we will open the floor for your questions. Matthias, please go ahead.

Thank you, Eva, and welcome all of you to our full year results, Q4 conference call, and we will start directly on Page #4 on the document that has been distributed or dispatched on our Internet. So here you see Q4 EBITDA. Q4 was down as expected compared to Q4 2024. The previous year was, of course, also influenced by prebuying as we have indicated in 2025 due to tariff escalation throughout the year led to lower volumes. Noteworthy also the negative FX, I referenced to the dollar and the portfolio effects as we have sold our urethanes business effective 1st of April. EBITDA for full year at EUR 510 million. So we landed according to guidance. .

And I would take pride on making reference to net financial debt, which another year in sequence we lowered and have now come down to around about EUR 2 billion net debt. An area that should be looked at as well is net working capital. We've managed that nicely. Oliver keeps his hands tightly on that. and we will continue doing this going forward. Page #5, as we've communicated recently, Advent has declared not to be able to finance the acquisition of the LANXESS stake in Envalior. And for that very reason, the mechanism that we have highlighted September '25 is now going to be followed with reference to '27 and notably to the put optionality without any conditions at all of 50% of our participation.

We have a very good and strong contracts in our hands, and therefore, it's not a question of if we sell, but rather when we sell. Page #6 shows you the implication that the downgrade by Moody's is going to have on us. We would chat here simply light on this for clarification. We have put in place many, many, many years ago, and this was always a strength of LANXESS to have a sound financial platform and financial structures. This becomes very obvious also right now. Our issued bonds that we have outstanding in the market have all fixed coupons without any financial covenants at all. And therefore, our external bond financing costs remain the same. As far as credit commitments are concerned, and we have ample of these for the revolver, for instance, for many, many years duration.

Here, the incremental costs will be around about EUR 1 million in total through the downgrades, stemming from the commitment fees that we have in these embedded contracts. Neither bonds nor credit lines, as I stated, have financial covenants. And of course, as I highlighted before, future monetization still is clear and will come, of course, from our Envalior put optionality. Slide #7 shows you the liquidity position that we have. If you look into the balance sheet that we've just published on full year numbers, we have roughly EUR 0.5 billion of liquidity on our balance sheet. LANXESS is known in the bond market pretty well. The market is liquid. We have a solid track record in the fixed income markets. And therefore, this is obviously a market we always will assess when we do liability management. On credit facilities, I've mentioned the revolver, which has EUR 800 million of liquidity undrawn.

On top of that, Oliver have made sure that we have further committed bilateral credit facility in order to have further opportunities in terms of financing diversification. So as far as the upcoming maturity on our fixed income bonds in October is concerned, we have already through our instruments that we are showing here ensure that financing -- refinancing is not a problem at all. Page #8, I would like to address the current geopolitical issues, and I referred to the situation in the Middle East. This is, of course, leading to a volatile situation for the geopolitical setting. I would, however, now be specific to how we look at this from the economic business standpoint, political scenery, I think you can assess all through the media pretty well.

As far as LANXESS direct exposure to the Middle East is concerned, we have sales less than 2 percentage points. So this is not really relevant. What we have started instantly after the conflict escalated like we've done in '22, when the Ukraine war broke out. And whenever we had crises, we put specific teams together. We've done that here as well. We are daily coordinating on logistics, on raw materials, regional volatilities. So today, we can clearly state to you that our supply chains are not disrupted. Of course, here and there, we see when problems occur, we go for second, third supply alternatives, and we've managed that reasonably well. So today, touch wood. There has been no disruption at all. And we see as far as the next weeks are concerned that our supply chains remain robust.

Of course, we take note of the fact that gas and energy prices are moving upwards. And of course, the precursors on oil and gas products are also moving upwards. And that is something that has instantly led on our end to price increases. And if you look into our Internet, we did not start with this just this week. We've started this already last and the week before. So here, wherever we see that substantial precursor prices on the oil and gas derivatives move upwards, we see that this can be addressed in an instant swift way. On the gas side in Europe, of course, here, we monitor that very clearly as well. But we don't see here that due to the sourcing that Euro pass is not going to be confronted with the gas shortage. I alluded to the countermeasures we are doing on contractual clauses on pass-through clauses that we have.

Of course, I allude to the fact that Oliver and I have mentioned over the last 6 to 12 months that we have put strategic energy hedging also in place. And therefore, let me sum up. As of today, we don't see visible impacts, but of course, the volatility on geopolitics and the uncertainty worldwide are high. But let me allow to make a final comment on this and to put here things into perspective. While this is -- the Iran conflict is leading to energy uncertainty and cost increases, this is not comparable to the Ukraine war. Europe was heavily impacted through the aggression war in the Ukraine because of the gas and oil supply being given, provided by Russia. The Iran conflict is different. Europe is not the prime dependent economic region of Iran. This is Asia. This is India and notably China. So whilst we take note of the fact that this is going -- the Iran conflict is going to lead to pressure -- pricing pressure on worldwide energy prices.

On the supply side, we don't think that this is going to be the issue for Europe. This might lead to difficulties and precursor difficulties for supply chains, notably in Asia. And I think if you look into macroeconomic analysis, this is pretty much being stated very clearly there as well. So we monitor the situation and we see clearly that this is leading to uncertainty and therefore, we have to be alerted and focused. But at the same point in time, this cannot only be an area where you talk about risks. You have to look at chances at the same point in time. Let's come to chances stemming from structural savings, Page #9. You know about the program FORWARD! that we started in 2023. FORWARD! has been, by and large, implemented by end of '25. In summer last year, Oliver and I communicated on optimizing the production network.

And November reflects that another EUR 100 million will be taken out of the -- notably out of the administration costs. And today, as promised, we give you the phasing, which is shown on Page 9, which show you the cash outs and the amount of headcount reduction that will be implemented over the next few years. So we are talking here about a headcount reduction of 550. Of course, this time, we will also make use of the fact that many of the baby boomers are going to retire. And here, we are making use of this as well. So we have the benefits this time to more use normal demographic change and that leads to lower cash off in course of this year, next year. Ladies and gentlemen, I would now like to take the liberty on Page 10 to talk about the segments.

On Consumer Protection, let's start from left to right, we see the operational performance of the segment stable. However, you are aware about the fact that we last year had some one-timers not only on take or pay, but some insurance payments and that is, of course, not factored into the projection year for '26. Additives, slightly above '25, a game changer could be if construction comes faster and stronger than we currently have. Currently, we only assume that a modest improvement will come in the second half. But here, you see that there are some indicators on the macro scene that already lead to positive momentum in the construction field. I referenced here Europe. We see that the developers are starting to be more active, have more momentum and we see that this could be a continuation and also in the successive parts of the value chain.

Of course, many of you watch the bromine pricing. It's strong, especially if you look into the spot market in Asia. So pricing is at a healthy level. If volume comes back, it will be a good financial equation. Good volume, higher volumes sitting high price normally is attractive. Intermediates, slightly above '25. That is not great, but we see here that in some cases, in some products like -- assets, we have obtained a positive ruling by antitrust. We see that peer consolidation is happening as we speak. So while all in all, we are still fighting hard here, we see some elements that should make this business stronger. Now I turn your attention to Page #11 on guidance. On the macroeconomic scenery, I think you know everything that is noteworthy. I would here like to shed light on 2 elements on the LANXESS outlook.

First, I know that normally, with Q4, we give qualitative guidance in light of the high volatility, we would like to start with a range already now with Q4 numbers, the range we see between EUR 450 million and EUR 550 million as far as EBITDA is concerned. Consideration for Q1, we've started the year in a soft momentum like many other of our peers have also confirmed. Beginning of March, we clearly saw an uptick in volume. And this uptick in volume was happening throughout the months before the conflict in Iran broke out, but we've also not seen that afterwards, there was a disconnect. So the current order momentum in March is positive. But I think in English, you say one swallow does not make a summer. So we look on Q1 with not really operational sequential improvement. But as far as the trading pattern is concerned, March gives some positive momentum.

But clearly, it's too early to make a call on this basis for the year in light of current geopolitical volatility. And with this, ladies and gentlemen, I would close the call with 1 slide, Page 12. The overall economic environment remains tough. I think you see that for our chemical industry now for the last 3 years, overall, very tough environments. But I would look at the positive elements. Our group, LANXESS has restructured its portfolio. We left the polymer businesses if it relates to rubber, if it relates to polyamide, if it relates to the urethanes business, we left polymers behind us. Many of our peers have just started with this consideration last year. Therefore, as far as overall portfolio is concerned, we have a good basis in all of our business units with very strong market positions. But we need volume.

If volume comes, you will see the impact, boom. In order to mitigate the current low volume environment, we address costs year-on-year. And of course, this is something we are now implementing also with the announcement we made last November on the EUR 100 million. You all talked about the governments stimulus. We see that this is being processed in Germany. And therefore, it's for me not a question of if it will come, but when it will be more visible in the order books.

Anti-dumping, Chinese competition. This is being processed in the European Commission. More and more rulings are happening. And we also -- whilst not counting on it, of course, are working on it. And I think you would see more rulings on antidumping in course of '26 and '27. Now if I look at market and supply chains, the consolidation has started already. And in some of our business units, we would see that this will be an area where we will come out stronger than before because our competitors will cease to play in our areas. And last but not least, Envalior, we have a strong contract. It's not a question of if, but when the monetization will occur. So these are some fruitful thoughts. And with this, we open up the call for your questions.

[Operator Instructions] We will now begin with the first question from Peter Spengler, DZ Bank. The floor is yours.

Could you provide some color on the profit development of Envalior and clarify how it is accounted for in the P&L? And maybe a second question, if I may, on China -- what is your assessment of the Chinese government's position on the high overcapacities in the chemical industry? And are you seeing any policy actions being taken to address this?

Well, Peter, thank you for your attendance and your questions. I will take the China one and then we move to Envalior. Oliver will start, and I might step in. On China, of course, China is an economic system, governmental system. They want to grow. They have done that over the last few decades. And they've also seen now in the last 12, 24 months that in many areas where investments have to be made, this is leading to substantial overcapacities, which put pressure on the Chinese system as well. So not only that China exported pricing pressure on the European market, which was accelerated through the tariff escalation between United States and China, but also the overcapacities have led to price erosion in the market, China itself. And the tougher price reduction is the lower the income and the cash flow is to make innovation and to reinvest.

I think this is something that the Chinese government has seen and understood by now. So this is being now taken into consideration for a variety of industries. If I look at China in general, I think the approach will be taken to consolidate, but consolidation is not happening over a quarter or 2. This will take a multiyear approach. And I assume that this is something, therefore, we are going to follow over the years to come. With this, I chip over to Oliver on Envalior.

Yes, happy to take that on board. Peter, thanks for the question. Envalior, first of all, is considered in our P&L as an equity investment. And the way that works is that the tax net income of our joint venture is shown with a 40.94% stake that we own in our P&L. And I bet you've also not looked only at the performance, but how it is reflected. And as you know, we are somewhat limited to we can report on Envalior. I'd clearly like to first of all, to the 9 months numbers. where you could see that our equity line in our P&L was actually around about EUR 20 million ahead of previous year. So better performance apparently coming from Envalior and maybe the one hint I can give in order to better understand the full year numbers is that not only in our books, but also in various books, there was an impairment of assets, and I think that helps to understand and better look at the numbers. I don't know, Matthias, if you'd like to add something.

Yes, that was a perfect answer, and there's nothing to add on my end. Thank you, Peter, for joining and your time. So let's go to the next one.

Next question comes from Martin Roediger from Kepler Cheuvreux. The floor is yours.

Thanks for taking my 2 questions. Firstly, you say in your handout on Page 14 that the utilization rate was exceptionally low. In your report, you say that the utilization rate was down by 200 basis points year-over-year from 67% to 65%. However, this is far better than the trough level of 58% in 2023. So EBITDA in full year 2025 is on par with the trough level of 2023 but the utilization rate is 700 basis points above the trough level of 2023. Is the mix effect so horrible? Or did the utilization rate collapsed sequentially from 67% in Q3 to 50% in Q4 to explain that. And secondly, it's more to Oliver, regarding the EUR 500 million bond, which expires in October 2025. You say that the refinancing is insured. I have 3 clarification questions. Did you already sign a bank loan, which starts to be effective as of October. If so, did you fix the interest rate for this bank loan already before the downgrade by the rating agency and c, do you intend to tap into the bond market this year?

Well, Martin, thank you for your questions. I think both of them will be handled well by Oliver.

Perfect. Martin, first of all, I think we need to be very precise on what we comment in terms of utilization rates with regard to quarter and full year numbers. What you've stated is correct with regard to the full year number. However, the fourth quarter number was really the exceptionally low number. And without that we go into quarterly updates here with regard to utilization, but it again was substantially lower exactly as your analysis said in Q4 compared to previous quarters. And with regard to the refinancing of our EUR 500 million bond that becomes due in October 2026. Look, what we wanted to make clear here is that there is no refinancing risk. It is not only that we have liquidity on our balance sheet in the magnitude of just short of EUR 500 million, but it is also that we have fully committed and at the same point in time, fully unused credit facilities of EUR 1.35 billion.

Now I won't talk about the interest rates. One thing though is clear if the market that is obviously open to us, if we were to tap it, it goes without saying that we are in a different environment than we used to be when we established our average 1% interest rate that is clear and correct.

So I hope that clarifies. So just an add-on from my side, Martin, you gave reference on utilization to '23. Let me here give you simply also the feedback. In '23, we had urethanes fully consolidated for an entire year. That's one. The second, in '23, we did not have on top tariff wars and a situation where China just dumps many of its products into the European market. So here, the overall macroeconomic environment in '25 was a tough one, I believe. And therefore, that might give you a little bit more color. Then on your questions in terms of credit lines, our contracts are signed. They are committed. So we don't now need to decide on drawing the credit line when we don't need them, but we have the flexibility to draw whenever we want to.

And of course, we might use them when it comes to refinancing the bonds maturity in October. Taking now liquidity on board. On top of the EUR 500 million we have would be economically absurd, and that's what we are not doing. I hope that clarifies everything. And thanks for your participation. Next question, please.

The next question comes from Matthew Yates from Bank of America. The floor is yours.

I've got 2, please. And I think it follows up a little bit on what Martin was talking about the evolution of profitability. So the FORWARD! plan was executed and delivered EUR 100 million of cost savings, but it's obviously not apparent in the bottom line results of the company. Is the way to think about that, that it's simply been absorbed by price concessions over that period. I guess my question is to what extent the next wave of cost savings would drop through.

And then my second question is around liquidity. I appreciate what you've been highlighting in your remarks and the slides about access to credit lines. But given the low level of profitability, you're guiding for this year and the restructuring charges, I assume the company won't be generating free cash flow. I was also looking back at the experience of 2021, '22 when we had that spike up in energy costs. And LANXESS consumed almost EUR 1 billion in cash from working capital. So at what point, given the debt that needs to be refinanced between now and '28 when you aim to monetizing value of state. At what point do you worry about a reputational risk that suppliers and customers wouldn't want to do business with LANXESS because it's perhaps not conceived -- perceived as a going concern? And at what point do you think it would simply be prudent to raise more capital in the form of equity, given that these credit lines you're highlighting, obviously, only have a finite definition -- finite duration by nature.

Well, thank you for your presence and your questions, all valid. I would like to address both of them from a strategic standpoint or higher level. Oliver will step in if further granularity needs to be given. So far, you are fully correct. '23 was an extremely tough year. And here, for reasons that are known, prices on energy skyrocketed. We had concerns on overall demand. And of course, we have seen in 2023 also something that was hitting our company pretty hard. That was the change of the ERP system, which was sending shockwaves internally. So we started FORWARD!.

And I think all of you know that '24 was not a great year economic-wise, either. But we implemented our cost savings and jumped in terms of profitability from EUR 500 million to EUR 600 million. So FORWARD! left its mark in the P&L, it led to profitability increase. If you now look into 2025, I reference again we have urethanes that are out. We have pricing pressure after antidumping. Q1 '25 was on the solid or better trading pattern and then the respective Liberation Day and tariff escalation happens, which was sending shock waves through the system. So therefore, as far as cost implementation of FORWARD! is concerned, it did help us, but overall economic environment and portfolio adjustments left its mark. Nonworking capital.

You give reference to '23 that inventories or working capital massively skyrocketed. Indeed, if you look at 9 months numbers in 2023, we were close to EUR 2 billion and had a substantial increase in net working capital because of the ERP change and ERP release. Instantly, once the ERP situation was solved, we released substantially working capital. And Oliver will correct me, I think we had a cash inflow of EUR 500 million in '24. We are not having any system issues anymore. We are not having, therefore, by any means currently in our simulation working capital increase of the neighborhoods that you have mentioned.

Looking now into second quarter, we monitor the price escalation. We see that TTF has gone up to EUR 50, EUR 60 but we are not at EUR 300 or EUR 350 as in 2023. Oil price has gone up from $70 to $100, $105, $115, but not above $150 and elsewhere. So therefore, we are monitoring the situation. We don't rule out that working capital can increase over the next 2 to 3 months, by EUR 100, EUR 150 to be seen. But we are far away from a situation in '23. That we have ample of liquidity for that I've stated very clearly. And last points, there is no customer that has called us since we were downgraded from BBB minus to BB on Moody's language Ba1, we have a negative outlook. There is not a single customer or supplier that has called us. And I hope that clarifies your question or potentially your cost concern. Capital raise is not on our agenda in light of the ample liquidity we have. Oliver, any further comments?

There is nothing to add other than maybe stressing that in the period that you have mentioned, we have decreased our indebtedness by 47% and not only have we had a negative cash flow in '22 of a bit more than EUR 200 million. But as Matthias said, we had EUR 526 million positive free cash flow right afterwards because we managed our working capital. Also, big things from my end for your questions.

Next question, please.

Next question is from Tristan Lamotte from Deutsche Bank. The floor is yours.

First question is, you implied you don't see a prebuy driven by the conflict. I think in some of your businesses, you're the last man standing in the Western world or that was the kind of terminology that you use, do you see an opportunity to increase market share? And how material could that be on the 2026 results?

Tristan, here we have to rather look into the respective businesses and then product lines. And here, I start with the business that is from our point of view, very clearly perceived to be one of the last man standing in some areas, the last man or woman standing and that is Advanced Industrial Intermediates. The plants that we have here are more world scale in nature so they should be able to compete. Some of the plants, however, had some remaining smaller competitors here in Europe. I refer, for instance, to hydrofluoric acid. Here, we are definitely the biggest player in Continental Europe, and we have seen that over the last 12 months, 2 players have the remaining players on the small sites being number #3, #4 in the markets have gone out of the market.

There is one player remaining who is smaller than us. And our assumption is if the competitive situation remains as is, this competitor will step out as well. And then we are the only one left. This kind of situation we have in a few other plants as well. where we are talking about being the last or the last 2 men or women standing in the entire Western Hemisphere. That's the reason why our plants, for instance, in chlorobenzenes, if this plant is gone, there is no producer anymore in the entire Western world, meaning Europe and North America. We don't think this is going to happen. We think that this plant is one that can be strongholds going forward.

Then there are other plants like adipic acids, where eventually, there will be 2 players left in Europe and other capacities are fading. And therefore, that gives you some color, whilst, of course, I will not give you a market share for the entire LANXESS group that would be not the wide rate to handle it. We have to be business unit specific. So that was your first question. The second one was relating to...

I was going to follow up with another question. I was wondering on pricing pass-through, do you think that overall, you could expand margins by pushing prices above raw material cost increases and would be interested on a comment by business and also maybe a linked comment on the impact on spreads for Envalior given the conflict as well.

So Tristan, I think our aim is to pass on input costs. That has always been the case in the past that will also be the situation right now. And therefore, we have already gone out with respective price adjustments on some of the product rates that you see on our Internet. So now your second point implies structural price increases. So adding price adjustments on top of input cost inflation. I would like to answer this in the following way. We have seen 2025 that a lot of products were dumped in Europe, pushing prices substantially down. Pushing prices in some areas into the direction that this was leading to antidumping cases.

Now what we are seeing right now that in some of the product lines in the markets or in the areas we are competing, there is no Chinese offering anymore due to supply chain disruptions. This started just recently, not one day under the Iran conflict broke out, but it has now started last week. In some areas and provinces crackers have gone down. This is being reported. In some areas, raw materials are on allocation. This is something we need to monitor. This is something we monitor very closely. If we suddenly see that the overload of products being dumped in Europe like last year comes to an end, then we might have, again, a more balanced supply-demand situation like in the years before.

But this is too early, Tristan to make a call on that. The markets, as I indicated before, are highly volatile. The name of the game is now to be operationally very close to the markets, the customers input costs, volatility and to act swiftly. And that we do that, you can see on the price increases in the Internet. I hope that clarifies your question.

The next question comes from Andres Castanos-Mollor from Berenberg. The floor is yours.

Could you please explain your Q1 outlook considerations when you state that there is no operational improvement in Q1 versus Q4 sequentially? Is that a reference to the absolute EBITDA levels or to the volume or utilization levels or maybe to both?

I think we -- I tried to give you the indication on this in a qualitative way in my presentation. So we don't -- we state here in our outlook. We don't see a sequential improvement versus Q4. And then we give reference that if you go make a comparison to 2025 first quarter, the urethanes business was still included in Q1 this year. Urethanes is out. I've given you a qualitative color that we started the year with a soft momentum January as well as February, but we clearly saw a change in underlying momentum in the course of March. Now 1 month or one swallow does not make the summer. I have heard that this is the English saying. And therefore, in the current volatility environments that we see out there, there is no reason to be anything else but cautious, humble, but very focused and agile, and that's the approach we take.

Can I also ask on consumer protection performance as well. So I see 7% down in prices there. But how much is that in sequential terms. When you look at Saltigo, in particular, is the price level still at risk depending on where we are or we continue to be in the demand cycle in your view?

Yes, we will not give you a pricing bridge volume pricing on business unit level that would be not reasonable from the competitive side. And Oliver will give you some color in general on the approach taken.

Yes. Matthias has already mentioned that with regard to raw materials and also with regard to energies, wherever it really matters in terms of the production and the contracts with a certain time delay, we are pressing on and have passed on in several years in the past, our pricing and I guess you also know that in consumer protection with regard to pricing, raw materials matter way less with regards to the price setting than it matters in other segments. So I would confirm what Matthias has said, we won't be looking at the analysis in a sequential way on business unit level, and I hope for your understanding.

The next question comes from Christian Bell from UBS. Floor is yours.

My first one is on just your guidance 2026, EUR 450 million to EUR 550 million EBITDA. So if we normalize for EUR 40 million of one-offs in 2025 and consider your comments around a weaker first quarter, can you please just help us bridge what your assumptions are to reach the top end of your range? And I guess, part B to that first question, within that, what are your assumptions around energy costs and any potential impact from Middle East disruptions? And I'll ask the second question after.

Yes, Christian, tough questions that you're asking specifically with regard to Iran. Let me revert back to what Matthias has mentioned. First of all, this is the time to be cautious with a little bit more than 2 weeks into the war, it remains to me and not really professional attempt to try and tell you what the impact on a full year level could be without having an estimate on how long this war would really end. I'd like to reemphasize that Matthias has mentioned, clearly, due to the distribution of the burden basically by the closing of the Strait of Hormuz, there might be occasions where we can benefit versus the Chinese. But I don't see a sensible way and a credible way right now to put that into any numbers. If you ask me what would have to happen for us to get to the upper end of the bandwidth. You know what the biggest driver is in our business, it is volumes. So if north of our expectations, volumes were to pick up, then we have given this deliberate bandwidth, and we would then certainly move to the upper end.

Yes. But clearly, we have communicated today not a qualitative, but a range. And my feedback to you is range means we look at EUR 450 million and we look at EUR 550 million, but currently, we don't specify wherever we are. This is too early in the year to make any further specification. We will do that in course of 2026.

Okay. Cool. That's useful. And then just my second question on the revolver facility. Are you able to confirm just how the pricing is structured just to give us a bit of a sense of what to expect, I guess, as you go to refinance. Is it a benchmark like Euribor plus margin framework? And then following that, how should we think about a margin step up following the move to Ba1?

Yes. What I'm very happy to do is to tell you that the additional cost for the commitment are really limited on an annual basis to below EUR 1 million. And what I'm not happy to disclose is what our cost structure in that element is so I'm not prepared to talk about that.

Okay. No worries.

The next question comes from Chetan Udeshi from JPMorgan. So I'm not sure if you have moved around your question, but you can speak now.

Can you hear me?

Yes, we can hear you.

Okay. Cool. I just had one question. Matthias, you mentioned the increases that you are seeing in raw material prices, and we can see that as well in some of the quotes that we see on different providers, platforms. I'm just curious, from today's perspective, if you have any sense on, firstly, are you willing to pay these high prices? Or you are taking an approach of not committing to something that may be short term? Second, I mean is there a big gap you think between, in some cases, we've seen, for instance, like benzene prices going up by 40%, 50% in some regions. How realistic are these? I mean, are you seeing these prices actually coming into your contracts or your contracts are seeing much smaller price increases? What I'm trying to get to is just get a sense of how disruptive the current environment could be not just on sourcing perspective but also from a pricing perspective, not just for LANXESS but for the whole supply chain.

Yes, I will be straightforward on the first question. We don't source at prices where we know that our customer is not going to pay for these prices. So when you say prices are that high, do we stop just buying, we continue buying if the customer accepts to pay for the products. And therefore, you can see right now, especially in areas where prices are moving up, we are posting price increases, in some cases, regionally, in some cases globally because we know this is something where the market is there. And if we cannot sell, we of course, would stop to buy and stop to produce, which is not the case as of today.

On benzene prices, you make reference to this one price, we can give -- we can, of course, use a different example as well. You need to see if there is global markets or regional markets. Most of these products are the oil derivatives are local products because they are locally cracked. So benzene, for instance, or toluene or what have you cyclohexane and the like have regional prices in general? Global arbitration sometimes leads to over quarters to an alignments or leading to the fact that prices are not completely disconnected. But in general, you start locally. If you have supply, if you don't have oil, which cannot be cracked, you have no derivative.

So you need to look specifically if you see that benzene right now goes through the roof in China or Asia, it might be because of there is no oil anymore available and then you cannot export. And then you might see that pricing in Europe goes up because pricing power is there. So it's not that easy to simply make a call on the derivatives. You need to be locally pretty specific. And that's the beauty of a global player like us. We are in all markets. We look in all markets, we monitor and take respective actions. We might be in a situation that in the last 3 years, was different. In the last 3 years after the Ukrainian war broke out, we saw that there were not one oil price, one global barrel oil price that was monitored, but you basically had two. You had one in the Western world. And then the -- let's put it like this sanctioned Russian oil which was being sold to Asian markets, notably India and China at $20, $30 less.

So there was kind of artificial benefits for a certain period of time until the Iran conflict broke out. Iran has been a clear supplier exporter of oil and gas to Asia, notably China. And this supply source is, of course, going to be reduced. Now what the implications of this are, I think we are too early in the situation right now. We need to monitor the markets for the next 2, 3 months. But if China has supply issues on oil, the derivatives of oil will definitely rather be on the rise than going down. I hope that gives you some color around the question.

The next question comes from Jeremy Kincaid from Van Lanschot Kempen. The floor is yours.

I just have 1 follow-up question on your covenants and debt. Obviously, your current bonds don't have any covenants. But I was just wondering if you were to get more bonds in the future or refinance with more bonds in the future if you think you'd still be able to get bonds with no covenants given that you said that the interest rate environment has changed, and obviously, your credit rating has also changed.

Yes. Well, thank you for the question. Here, clearly, we will decide that when the question will arise -- the question currently is not to be answered. And we have ample instruments in place that gives us the luxury to decide when we need to decide.

And we have the last question from Tom Wrigglesworth from Morgan Stanley. The floor is yours.

Hopefully, you can hear me. First question, Matthias, obviously, you're straight away from making forecasts. But if everything stays as it is now, based on your experience, maybe you can highlight the similarities to previous other cycles that you could call out and maybe the differences that we need to be aware of that you see that maybe we don't. And the second question, just on the free cash flow for 2026. Obviously, you haven't given us a guidance, but can you be free cash flow positive in the range that you've given? And what needs to happen to be free cash flow, let's ignore working capital moves.

Tom, for the importance of cash, I will hand this over to instantly to Oliver, to be answered. So let's address priority one, cash, Oliver.

Tom, let me run you through -- run you through the building blocks, and I'm actually relieved that you mentioned yourself, let's leave out working capital. Too much of uncertainty there. We've given an EBITDA guidance, EUR 450 million to EUR 550 million. We've also guided the building block of CapEx being around EUR 330 million and when you look through our presentation, you will find an expectation of up to EUR 60 million of exceptionals, you can assume that they can be considered cash outs as well and then maybe the last larger building block from a tax perspective, I would be comfortable to tell you that also on the basis of the previous years, I wouldn't expect more cash out for taxes than EUR 20 million or EUR 30 million that leaves you with some room here in the absence of working capital movements.

And maybe last thing from my end. Also when you look at the typical seasonalities that we have, in the first quarters of '25 and '24, you've seen a ramp-up of working capital in any first quarter with rising prices now. I think it's a fair assumption that you also have to consider that.

So I hope this gives you clarity on your free cash flow questions, Tom. And then I would like to answer your first question on cycle. I would say if you look at the current situation, you can definitely say this is a severe crisis that we have seen in the industry for the last 2 to 3 years. Ukraine War, tariff escalation. Now the Iran, Middle East crisis, you cannot compare that with the financial crisis. You cannot compare Corona pandemic with the current situation. I think every severe external shock is different. However, what you need to prove is can you manage that. And I think you've seen in the financial crisis, you've seen in our internal rubber crisis, you have seen in the pandemic, you've seen with Ukraine war, LANXESS always swiftly acted and managed the crisis.

What I've seen is when people think that the world is going to fall apart like in '28 (sic) [ 2008 ], when we were trading down at EUR 10 per share, people did not give us a chance. They thought this is it. And then 12 months later, our stock was back to EUR 40 per share. So what I would like to highlight is, it depends all on if you are agile, if you're swift and if as a team, you get your act together in a speedy way. And I think this is what LANXESS and my leadership team has proven over the last several years, we can manage crises and you see that we've done that over the last few years. We mitigated on costs. We accelerated on cost improvement. You see now that with swiftly act, we are passing on prices. You see that from the platform, our financial structures are healthy, prudent and far sighted. So we are protected in this regard. And therefore, with everything it takes to also manage this crisis. I hope this answer helps you.

And this was the last question. So back to Matthias Zachert for closing remarks.

Ladies and gentlemen, thank you for your participation, for your questions, and we wish you all the best and hope to see you all on the road in course of the next few days when management and Investor Relations will be coming and make the efforts to visit you. Thank you so much. Take care, and bye-bye.

A very good morning, ladies and gentlemen. Welcome, dear colleagues. I extend a cordial welcome to you on the occasion of the financial statement press conference 2025. And we have got Matthias Zachert, CEO; and Oliver Stratmann, CFO, on the panel. So you will be updated as far as the performance of 2025 is concerned and also the outlook for 2026. Happy to have you here. And as you can tell, we have got the presentation in German, but there's translation into English, and then you can ask questions. And for legal reasons, I need to point out that this event and your questions are transmitted live on the Internet.

Ladies and gentlemen, thank you very much, Mr. Zemke. Ladies and gentlemen, a cordial welcome to you here in Cologne and LANXESS. You all over the past couple of months and quarters reported that the chemical industry in Europe has great difficulties. It is a perfect storm. So there is a behavior which is harmful to the industrial base here in Germany and Europe. Globally speaking, we've got a very weak demand in the majority of our end customer industries. And ever since 2025, since the escalation of tariff decisions, we have been confronted with a glut of products from Asia that are offered at rock bottom prices. And that means that we have to do something about it here in Europe.

The geopolitical uncertainties are known to everybody. And the result thereof for our industry is that the capacity utilization is so low in comparison to 30 years ago, it hasn't happened before. So it means that there is realignment and there is closure of facilities. And of course, we are impacted by that as well. So it was a truly challenging year. Costs and -- sorry, sales and earnings are below the previous year. But nevertheless, we have been able to reduce costs and debt further.

So the transformation of the portfolio continued in 2025. And I can say that we have gone away from our dependence on plastics. And this transformation has been concluded. The plastics businesses have been divested in 2025 for good with the divestment of polyurethane. Many companies have only started to do so now. And what is also positive is that our sustainability profile has been further improved, and I'll come back to that later.

Well, ladies and gentlemen, business development. So sales and earnings, weak market environment has got a bearing. So minus 11% in sales, EBITDA, minus 17%. And this is not all because of operational reasons when it comes to sales because of the portfolio changes and also exchange rates, we have lost sales. From an operating point of view, however, volumes and prices have been increased or were discounted by 3% to 4%, and that is indicative of the tough times.

Now let me discuss the individual divisions or segments. Consumer protection is something that we have expanded over the past couple of years in order to generate more stability in the individual segments. And this is also reflected in the difficult and challenging environment. So EBITDA could be kept constant, EUR 290 million in comparison to EUR 286 million. So with an EBITDA margin of 15%, this is a robust result. And the proclaimed objective to further expand consumer protection is here to stay, because we have understood that this is the right direction.

Now let me talk about additives. So there was weak demand, but also adverse currency effects. Sales down by 7%, EBITDA by 11%. So this segment is dependent on good activities in the building and construction industries. It's still weak, has been weak for 3 years, but we can see a first silver lining, a rebound here in Europe and Germany. Macroeconomic statistics point into that direction.

Let me now talk about intermediates. So this is a segment that is firmly rooted here in Germany with several production sites. And here, we are hit by high energy costs, increases in wages and salaries and regulatory rules. And in addition to these challenges, there is strong competition from Asia, and they offer products at totally irrational prices. And therefore, sales minus 8% EBITDA, minus 39%.

So as a group, we are counteracting these developments, and we are optimizing whatever we can optimize. It all starts with reducing costs. But at the same time, we have to see to a further improvement of our processes in order to further improve our competitiveness. But then there's also been good progress. We have reduced debt. And over the past couple of years, we have been able to reduce our debt by 47%. And we did the job last year as well because we divested Urethane systems. And we promised 2 years ago to reduce our debt, and we've delivered, and we will deliver more in the future.

So now let me focus on cost discipline and prioritize the keeping up of the earnings, and we will propose a EUR 0.10 dividend. Ladies and gentlemen, let me speak about the strategy. I had mentioned that we have completed the realignment of our portfolio. Some years ago, we were so much concentrating on plastics and polymers in our business portfolio. And several years ago, we had told you that we will concentrate on the chemistry and the polymer business, which is characterized by a high CO2 share, high energy costs. And here, we are in markets where a lot of commoditization is taking place. Against this backdrop, we decided to exit the plastics business some 4 years ago.

The last remaining polymer business, the Urethane systems business were given to UBE last year, and we completed the sale in April and the proceeds were used totally to reduce the debt situation. And this shows that we were able to reduce debt accordingly.

Let us talk about the Envalior stake, which was also directly to the polyamide segment. In 2022, '23, we first communicated that this joint venture was entered into, and there was a contractual clause saying that you could offer your selling rights. And in September 2025, we communicated this to you, but we also said that there could be several steps in '26 and '27. But at the latest, by 2028, we should go into implementation. There is a financing contingency. And so now we can go into implementation in the next contractual steps. And let me say that this is not about whether we will divest. It's just a question of when. And we take it that here, we will have clear triple-digit million amounts against the backdrop of the present economic situation. And thus, this is a very advantageous agreement that we signed in 2022.

Let me also mention that we have a very robust financing situation at LANXESS, although we experienced a downgrade by a rating agency, but we take it that we will be within the corridor soon that will allow an upgrade of this rating. Ladies and gentlemen, the fact that we are doing something about the situation can be seen with what I'm telling you now. In 2023, we saw the beginning of a very difficult market condition that had an impact -- a negative impact to the chemical industry. And we started early in 2025 with forward and the EUR 150 million that we communicated at the time were now fully effective since late 2025. In the summer 2025, we communicated additional savings in the production network. And here, we are fully effective as well. Full implementation will be completed at the latest by the end of 2027.

Last November, we communicated to you that we are taking a further step to improve our competitiveness. At the time, I announced that we wanted to save EUR 100 million by way of costs over the past -- or the next 2 to 3 years and that until the first quarter 2026, we would communicate the details to you. That's exactly what we want to do today. The EUR 100 million that need to be saved means that we will reduce the jobs by about 550, the majority of which will be cut in Germany and the majority thereof in admin. Of course, like in the past, we will do whatever is possible to do so in a socially responsible way. In doing so, we are using demographic change and an earlier entry into retirement.

The fact that LANXESS is also in a position to find new and clever solution can be seen by the fact that the works council and trade unions agreed with us to introduce a 35-hour work week until the end of '26, which reduces costs, but it is much better for the workforce or else we would have had to cut more jobs than announced for the colleagues not covered by the collective bargaining agreement and for the management employees, we communicated no wage increase in 2026. Of course, we will be reducing operating costs wherever possible.

All of this goes to show that we are working to reduce our costs, but at the same time, we are also trying to shape our future at LANXESS. And this slide goes to show that in many aspects, our objectives are not what we keep in sight, but we actually step on the accelerator. And let me talk about application-oriented research. In many business areas, we are dealing with products that are to address the problems of tomorrow and in doing so, providing solutions. Let me give you an example. Our liquid purified ion exchange business is well known to you, and that's a business which has earned international recognition when it comes to wastewater purification in different facets and industries. This is the main field of application of our ion exchange products.

It was 1 to 3 years ago that we communicated more frequently that we wanted to go into different applications as well. And we managed to do so with respect to PFAS purification, we are already in implementation, and we are represented all over the globe, but we now found through additional development steps in application engineering that with our ion exchanges, we can also affect carbon capturing. We are addressing the topic of purifying air and the fact that CO2 can be reduced by our technology is a truly viable field for the future that we would like to travel into even more intensively. But also when looking at battery technology, we are active.

During the past 18 months, we were able to achieve further progress with our ion oxide or ion phosphates. And here, our products at the present point in time give us hope that we can support the battery technology business. The fact that we are really serious when it comes about sustainability is something that you could see for years already. The brand that we have introduced across our business units is called Scopeblue, and it spells sustainability for sustainable products characterized by either 50% or more use of sustainable circular raw materials or by the fact that this group of products clearly reduces the product carbon footprint.

And here, with the Scopeblue products over the past 12 years, we have -- months, we have made a lot of progress with respect to rubber additives, but also with respect to our business unit of lubricants. And I'm also happy to report as some of the papers already picked up the message because we communicated on that regional and national level, we are also investing into AI, mainly in the area of production because this is an area where we have a broad base that can be scaled up. And here, we are using AI technologies, especially when it comes to predictive maintenance, but also by planning plant availability or going about international logistics because we want to be better and even more competitive in an innovative way.

Ladies and gentlemen, let me now talk about sustainability. We have been doing this ever since 2018 during every financial statement press conference. We inform you about our ongoing developments and trends to tell you that this is not just a one-off exercise, but that we are doing this on a continuous basis. We are doing that on the basis of our Scopes 1 and 2 success and our Scope 3 data. Let me start by Scopes 1 and 2. Not like many other companies, we do not compare ourselves to 1990, but 2004. And we see that in Scopes 1 and 2, 6.5 million. This is what started in 2004. And over the past couple of years, when we communicated the target 3.2 million tonnes, the emissions. And you see year-on-year, we improved our performance in this respect. And now in 2025, a value of 1.7 million tonnes in comparison to 6.7 million. This is a reduction of 73%, and that's a lot.

Now let me talk about the entire supply chain, i.e., Scope 3. And it was only in 2015 that we started collecting reliable data because this is not only numbers coming from our own business, but the entire supply chain. And we did that for the very first time in 2015, and there we had 27 million tonnes. And again, you can tell over the years, we have been able to reduce the figures significantly. In 2025, we have got 10.3 million tonnes. And you can tell that this is a significant, a substantial reduction in comparison to 2015. And this brings it home to everybody that both in Scopes 1 and 2 and Scope 3, we are meeting the requirements. And at times, we have exceeded our ambitions, and we are international standard setters.

And you can see here, external sustainability ratings confirm our success. And in their sustainability articles, they are communicating on the basis on the CDP list, and they award us top marks. And there's been an improvement over the past couple of years, as I've said. And therefore, we received the A rating once again, and this is a top rating in our industry. When it comes to water management, we got the second best mark A-. And [Audio Gap] CDP, we are -- EcoVadis is also a rating agency for sustainability issues. And we are one of the 5 top companies in the EcoVadis range, and we received the gold medal. Sustainability really keeps us going, and this is here to stay. And I can tell you, our employees go the whole hog. And at the end of the day, we are quite proud of our performance.

Well, ladies and gentlemen, outlook. I mean the economic environment is tense. And I can't see that changing very soon. There are geopolitical uncertainties that were already huge throughout 2025. And now we've got the conflict in the Middle East. So the situation has further deteriorated. At the same time, we believe that the measures taken by the federal government will make it possible for the industry here in Germany to rebound. Question, of course, is when that will be reflected in the sales figures and to what extent. And I would like to emphasize that on the basis of the current uncertainties we see changes, and then there are also changes because of the change in exchange rates, adverse exchange rates and the dollar in comparison to the previous year has shown a weaker development. But then, of course, we will have to wait and see how the Middle East conflict will pan out.

And let me now talk about the situation in the Middle East. I mean, in the conflict zone, we do not generate any sales. It is only 2% of our entire sales, and therefore, there are no direct implications to be expected. Since the war started, there have been internal task forces at LANXESS and they take care of the supply chains to coordinate the supply chains and the teams are very agile, and I can communicate that we don't see any disruptions in our supply chains, which is positive. But we need to keep our nose by the grindstone. Raw material prices, energy costs, that, of course, will have a negative impact. I mean, when the oil prices go up, the prices for the derivative products will go up as well. We are expecting that over the next couple of months. The same is true for energy. And I mean, we all see it at the petrol pump, and we see it in gas prices. Gas prices go up. impacting the chemical industry. And as I've mentioned before, private consumers are also impacted at the petrol stations and when it comes to their heating bills.

Now the guidance for LANXESS. Despite the adverse conditions, geopolitical conditions, economic conditions that we see for 2026, we can say challenges will remain for the entire industry, for the chemical industry. But despite all that, we consider EBITDA in a range of EUR 450 million and EUR 550 million is to be expected. Please let me tell you this year, we will no longer have the contribution from the urethanes business because we divested it. And we will have no exceptionals like we had it in 2025, for example, on the basis of insurance contributions.

Well, ladies and gentlemen, the chemical industry is a great industry. It is the third largest industry in Germany and makes robust contributions to value accretion and wealth is at the very beginning of all value creating change and therefore, it's sometimes called the mother industry or the German industry. It is innovative. And over the past couple of decades, we stood crisis and many companies showed that they emerge stronger after a crisis. So ladies and gentlemen, it is well worthwhile to further fight for this strong industry in Germany. And we are saying so out loud vis-a-vis the German and European policymakers. So we have to see to it that the industries that supported our economic activities here in Germany and in Europe and that we need to fight for it. We need to defend it. And this is why I'm saying it is worthwhile promoting this industry and advocating this industry. And rest assured, our workforce, our managers, our Management Board is very, very ambitious and we will do the very best in order to improve the situation.

Thank you very much, Mr. Zachert. Dear colleagues, now is the time for your questions. [Operator Instructions] The first person who wants to take the floor is [ Ms. Henning ] from [indiscernible]. I hope you can hear us.

I have 3 questions. You talked about job cuts mainly in Germany. Does that only affect the head office in Cologne or also the [indiscernible]. And you said, if possible, you want to have it in a socially compatible way. Does that preclude determinations? And a political question, what would you like the Federal German government do, for example, increase the lump sum for commuters or whatever?

Thank you, Ms. for participating and for your pertinent questions. The sites in Germany, when it comes to administration are Cologne and still Leverkusen. I had pointed out that the majority of the jobs will be cut in administrational jobs. So that affects predominantly Cologne and Leverkusen. Turning to your question with respect to terminations for operational reasons. We don't preclude that. At the same time, I would like to emphasize that over the past 20 years, LANXESS has never ever been in dismissals for operational reasons. And we have a partnership with the trade unions and our works council members. It's a very positive relationship. And we want to all make this company competitive again and to make it much better.

And we've seen the financial crisis, for example, in the past. And in the past 20 years, we always found joint ways. And let me refer to the COVID crisis, which we weathered together. And this crisis here will be weathered and mastered together with the works council members and the trade unions. And we all know that in this phase, we need to be competitive, and we are working on competitiveness.

Your question on the political wish list. If I could wish for something. Let me say, I'm glad that this government is doing something that they are getting going. And I didn't see that in the previous government because there, we had a paralysis. We are making progress. However, I would like to see more progress and more support and faster support. Should this happen in an accelerated and enforced way, that will not only serve the chemical industry, but the total -- totality of industries in Germany. Let me emphasize at the same time that we, in Europe, have to make an even major effort. And I know that the federal government actually supports this, and I'm happy about that because the previous government didn't even think about it, and we are not even represented at the Brussels level in some councils of ministers. And now I see that the Ministry for Economic affairs, the Minister for Financial Affairs and the Chancellor are actually acting, and we are more visible as Germany at European level, and that's necessary.

And I hope that Europe recognizes that the well-being of Europe depends on the economic companies without keeping wealth in Europe, the societies will see crises. So Europe will be well advised to create framework conditions that take a close look at reality. I hope that answers your question. Thank you.

The next question comes from [ Jonas Jansen from FAZ ].

I would like to know where your plant utilization level is? And what are your hopes when you say we hope to improve the situation in the course of the year. Then I would like to know whether you have to take a closer look. The German business is negatively impacted by high energy prices. Do you have to take an even closer look at plant utilization or investing in plants or reducing utilization? And there was this piece of news in the morning that BP is selling its refinery in Gelsenkirchen. Does that affect you in any way because that is more in the geographical direction of [indiscernible]. But basically, these crackers are of importance for the chemicals industry. Could you comment on that as well?

Thank you, Mr. Jansen. for participating and asking your questions. Mr. Stratmann will talk about the plant utilization in 2025, and I will comment on 2026 and the 2 follow-up questions. Mr. Stratmann.

Thank you, Mr. Zachert. Mr. Jansen, the plant utilization in 2025 was really at a very low level, as Mr. Zachert already said, we only had 65% utilization across the year, and we ended the year at an even lower figure. And I will leave it to Mr. Zachert to speak about the future. 65% utilization, Mr. Jansen is not a lot. Normally, our industry would have 80% to 85% utilization. This is why the VCE emphasized that the chemical industry is right in the middle of a tremendous crisis where the utilization in 2025 across the entire industry was at 70% on average. That means 10 to 15 percentage points below normal utilization levels. So this is something that all the group companies have to have on their radar screen and so do we.

Looking at 2026, let me say the following. We can't expect a substantial improvement of the situation in 2026. So plant utilization at the present point in time is at a similar level as in 2025. You can see that when looking at our outlook and in our guidance. However, I can say that we have seen some pickup since the beginning of March. And it hasn't really come to a close when the conflict broke up out in the Middle East. But that's too early to say now. We have to see how -- what effect this conflict has on the global economy. Does that -- will that have an effect on people's purchasing behavior, and that will be the question in the months and quarters to come. We have to look at the demand side, and that's what we are going to do.

And I hope that this answers your second question as well. We have to continuously look at our plant utilization at the present level. We look at the plants. There is nothing new to communicate. Of course, sometimes we will have to rethink certain situations completely, but we have to continuously work to improve our competitiveness to increase profitability and cash generation.

Your third question, BP and its intention to sell the refinery. In Germany as well as in Europe, we can see that some industrial chains are closed or divested. The plastics industry, as I mentioned beforehand, is hit very hard, both in Germany and in Europe. That's true for petrochemicals, but also for the cracker situation. We don't think that selling the refinery of BP will have an effect on us. But of course, we are worried when looking at the situation where some chains will disappear from the picture. And that is a situation that increases the dependence on foreign companies from foreign countries and doesn't reduce it. And that should be the declared goal, both of Germany and Europe to not become dependent, but to maintain intact systems that have and that will and have made the European and German industry strong for decades.

Next, Ms. Becker. We can't hear you. Can you hear us because we can't hear you. So maybe get front of [indiscernible] and come back to [ Annette Becker ] later.

Thank you for the possibility of asking questions. In actual fact, I've got 3. First, reduced working hours until the end of 2026. What exactly is the savings potential? And do the employees earn less? Or is it something like an internal furlough scheme? Can I call it that? And then second, the proceeds from Envalior to be expected, EUR 1.2 billion, I think, was a figure discussed. And now you mentioned a 3-digit million figure. Can you explain that? And then there were speculations in the market, that LANXESS would have to increase their capital. Can you comment on that?

And then third, what about the cost increases when it comes to petrochemical feedstock? Will these increases be passed on to the customers because he said that this is going to have an impact on the value-creating change.

Thank you very much, Mr. [indiscernible]. They are very good questions. Well, the 35-hour week. This will give EUR 20 million, the impact will be EUR 20 million if the program is implemented in its entirety. We got started with the program in the beginning of February. And of course, now we will have to go through the individual sites through the individual functions and what the overall bearing is going to be. And the reduction of the working hours in a weaker market with lower volumes. And I mean, this hasn't got to do anything with a furlough scheme or short-time work, but that there is less activity. And therefore, in inverted commerce, we have found this LANXESS solution in order to -- well, not do anything drastic. As far as jobs are concerned and wages and salaries are adjusted to the respective shortening of working hours and value.

I mean, if we were to go for the 100% earnings figure and that we said and it was communicated EUR 505 million, and this is something we communicated last September. So EUR 1.5 billion -- 1.2 billion, would have to be paid. But if the economic performance is below that, then the percentage deviation would have to be factored in, thus reducing the EUR 1 billion figure. And if and when you're having a look at the economic situation of Envalior and Standard & Poor's and Moody's and Fitch communicated that, we would have to proceed on the assumption on a high 3-digit million figure.

Capital increase, great wine. Yes, there are rumors, but they are peddled by a few. If you have a look at our reporting, the comments we have issued over the past 1 or 2 weeks, we've got a liquidity in our balance sheet of around about EUR 500 million. That is EUR 0.5 billion. That is cash and undrawn loan facilities in the amount of EUR 1.35 billion without any covenants or any other restrictions. And that means we have got full funds at our availability. We are fully funded. We are well equipped when it comes to finance. And in this day and age, this is the right thing to do, and therefore, the capital increase is not on the horizon.

Petrochemistry, yes, the oil prices go up, gas prices go up and the subsequent chains go up again. And I mean, we have got increases of prices in the last 2 weeks. So the energy costs have gone up. So we have to do something about it and pass on these price increases so that we do not have to foot the bill. I mean, in the current situation, this is anything but easy. And if you have a look at the situation of our competitors, they are doing the self same thing. But we started early in order to counteract as early as possible. And I mean, we will see that everywhere along the value-creating chain. And if the Middle East conflict is to persist, then we will have a lasting increase in prices in the industry. So I hope I have given a full answer to your questions, Mr. [indiscernible].

Now [indiscernible] again.

Not really. A political question. Do you think that the German government should do something about the protection of the Strait of Hormuz? And then a question of sponsoring, and a question about the [ nature ].

Well, there were acoustic problem, so I could not fully understand what you asked. There were interferences. So to the extent that I heard well, let me talk about the political situation. I understand how the government is ticking when it comes to the Strait of Hormuz. But I do not want to be politicizing here. This is not my job, but I can share with you my rational take on things. I mean, at the end of the day, this is also an economic question, and this is something we know. If and when we are having a look at the conflict in Iran, it's horrendous, and it will give us further geopolitical tensions. There might have been a different way of going about it.

But of course, we do see that energy prices go up. But of course, you have to have a look at it. I mean this is not comparable to the situation in the Ukraine. I mean both crises or escalations at the end of the day meant and mean that energy prices go up. So because of the conflict in the Ukraine, the war of aggression there, Western Europe was hit hard. But in the conflict with Iran, the situation is a different one. I mean, Iran is not the main supplier of Europe, but more of Asia, China and India in particular. And therefore, the global economy is hard hit by the blocking of the Strait of Hormuz. And the world sees that on account of increasing energy prices.

But if you have a look at volume flows, you will see that other regions are hit worse like in India and China, some of the supply chain are suffering from allocations. In other words, they have to reduce their capacities, and we do not see that yet for Europe. And I think from the economic point of view, the situation there is a different one. And I hope this explanation is helpful.

Talking about LANXESS Arena, we signed the contract some years ago, and I think the term is until end of 2028. [indiscernible] is the expert, and he says, yes, that's right. We've got a contract, and we will actually fulfill the contract. There is a question from the English space, Mr. [indiscernible]. Can you hear us? Can you hear us?

[ English ] So LANXESS today announced additional cost measures and therefore, expecting to cut 550 jobs. I think you partly answered the question, but I would like to ask it anyway. Is there any consideration of further job cuts in the near term? Might there be a need to have more layoffs? And my second question would be the conflict in the Middle East. As you already know that the widening war in the Middle East is impacting the global economy and some sectors specifically and chemicals industry is one of them. How is LANXESS dealing with soaring costs so far? How do you see the conflict and surging energy prices impacts on LANXESS and specifically chemical sector as well as supply chain disruptions?

[ English ] Thank you for your attendance and your questions. I have been asked at this time to answer in English, all international questions. So I will do that respectively. Your first question alluded to further cost cuttings or further job reductions. I can tell you that we have done our analysis. We have done our communication last year that we are striving for another EUR 100 million of cost reduction. Today, we've been very, very specific in terms of numbers, in terms of savings and also in terms of phasing. So as of today, this is the number that we have communicated. We will always revise or adjust if macroeconomic environment, business environment does change to the better, to the worse. I think this is professional leadership. This is professional management. But today, the clear statement to you is the EUR 550 million have been identified, and this is what we are going to implement going forward.

Your second question was addressing price inflation or input cost inflation. Of course, we monitor that on a daily basis now and definitely in tight cooperation with business by business. We definitely see that all products that have intensive energy input or oil derivatives as precursors, we see a rise in costs. And I've stated earlier on to one of your colleagues, please go to our Internet page. We have posted in the last 2 weeks, I don't know, 3, 4, 5, 6, 7 price increases instantly. And most of these price increases, you can clearly attach or associate to products where obviously energy and raw material precursors are on the rise. So I think we are extremely alerted, focused and swift in the implementation and don't be surprised if we continue posting further price increases in the coming days and weeks. I hope that clarifies your 2 questions.

Thank you very much. So one last attempt to connect with [ Annette Becker ]. Now we can hear you. Wonderful.

I didn't see the unmute sign beforehand. But never mind, I'm here now. I wanted to ask you, Mr. Zachert, with respect to the question as to whether there will be sites that will have to be closed or else some equipment that will have to be closed because of your very low utilization figures. I didn't hear too specific an answer. Are you taking a look at that? And by when will you come up with decisions because you cannot deal with these high fixed costs for a longer period of time?

And then a purely technical question, leverage inclusive the pension liabilities. Did I do the numbers right, 4.8 by the end of the year. And then you also said that as soon as possible or swiftly, you want to strive for conditions that would ensure a rating upgrade, but you preclude a capital increase. How would you then like to reduce debt if EBITDA can be at best stable? And I would also like to hear some more details on this loan that you gave to Envalior. Could you say that this becomes due? And what is the amount thereof?

With pleasure, would we like to answer this question? The second part will be answered by Mr. Stratmann in detail. Let me briefly speak about the first question of plants and equipment. Last summer, we spoke about closing down some equipment, and we closed an operation in the second half of the year in Germany. That's the Hexane oxidation that could no longer be upheld. We also communicated that we had to close [ Witness ] in England, and we did so by the end of the year. And now we have to further implement this closure. These are sites that have being closed down or operational sites. And we have no sites today that we would have to comment on today because we are not envisaging closures.

Within the sites, proper optimization measures may become necessary to improve competitiveness. But that is our daily business. That's daily operational considerations that we have to go for every day given our economic situation, and let's come to the leverage and Mr. Stratmann will answer that, and maybe I will comment on that as well. But Mr. Stratmann, go ahead.

Thank you very much, Ms. Becker. I can imagine and fathom how you did the numbers. You have to do it in more details when you look at the pension obligations and want to have that as part of the balance sheet because also pension assets have to be adjusted for at the asset side. And we also have deferred taxes and de facto, you will end up at 4.55. So it's not quite the 4.8 that you worked out.

And then the loan to shareholders nominally, this amounts to EUR 200 million. But let me also point out that it has more than EUR 260 million in our balance sheet since the interests are not cashed in, in cash. When we actually established this, we wanted to spare the cash flow. And so the value increases quarter-by-quarter and at the moment is at the level of EUR 260 million.

And could you say that this could become -- could come due? The loan is to finance in value. So we will not say it becomes due, but pro rata, it has to be paid up to the extent, as Mr. Zachert said, that in 2028, without a financing condition, our shareholding will be sold and then the loan will come due. Does that answer your question?

No, the question, how you want to achieve a swift rating upgrade without increasing capital?

To improve KPIs, you either have to sell proceeds or look at the loans that become due that you have issued and then there's also an option where the operating business could generate more cash flow. But we are working at all fronts, but not at a capital increase. If you take it that in 2028 at the latest, it could be 2027 as well, a high 3-digit amount in millions could be received from Envalior, then it's all over and done with and then the KPIs of the group will change substantially.

The current EBITDA 2026, we say that we will be in the same vicinity. But on the basis of the measure savings of EUR 100 million and also taking the pressure of the production network in the second half of 2026 will give us an 0.8% to 1% growth rate as they forecasted now. And our OEE goes from 65% to 70%, then we would be talking about EUR 100 million, EUR 150 million additional EBITDA and EUR 100 million and EUR 150 million additional EBITDA will fundamentally change the EBITDA figure, and we do believe in this, and we are working on it.

[Operator Instructions] [indiscernible].

I've got a follow-on, but come back to what you have seen proceeds on the basis of divestment. So that is on the agenda, isn't it, meaning that you've got an improvement of the key performance indicators by partial divestments. That is my question.

Well, Envalior, this has all been started. And now we are in the implementation phase. And it's not a question of whether it's going to happen, but when it is going to happen. So the time is passing and a hard put option is still doable for 2028. And that, of course, will mean that the value of this stake is on the increase continuously. So then I got the wrong end of the stick because you said that you are exploring further possibilities of divesting in order to improve the financial standing?

No, no, you really misunderstood me because I referred that to Envalior. And then one more question. I mean, geopolitics is really the major risk for your company. So how do you handle that in your day-to-day management? Is that the top topic in your management meetings? Are there geopolitical expert teams to keep a watchful eye on the developments also when it comes to supply chains? Have you got monitoring systems in the place? So can you give us a feedback on how you work on it in day-to-day life?

Well, Mr. [indiscernible], we've got permanent crisis for 3 years plus in an intensity, which we haven't seen for 10 years or more. So let me briefly describe it. I mean, the war in the Ukraine. When the aggression started in February 2022, it was on the 24th of February, right? It was in a space of 24 hours that we established a management task force, and it took 2 weeks and it was the middle of March where we had a similar event like this one here, the financial statements press conference. So within a space of 2 weeks, management Board worked together with the task force in order to understand the interdependencies and the possible outcome. And then in March 2022, quite soon after the invasion that we said, well, we withdraw all our activities from Russia, and we won't produce there any longer. At the time, it was possible to show the world that we are able to act on our feet and that we discuss topical issues.

Now the current conflict also in comparison to what happened in 2024 and 2025. I mean, that we had the escalation of the tariffs, we established a list in order to understand which country is affected by these customs. And at the same time, we established a U.S. task force because we have got sites in America as well, and they were also impacted, and we could see that there would be bottlenecks. So we monitored that strictly, and this team is still very active because tariffs are still going up and down according to the weather report. And I mean, the crisis started, Iran started last weekend. So we coordinated the activities between the purchasing department and also the production.

And we get day-to-day updates because day-to-day decisions are required in order to understand what is impacted in the supply chain and how the energy costs are impacting the activities and how we can respond. And you saw it on the press release say and said, yes, we are going to increase our prices as a result of our analysis and as a result of our decisions. And I would guess that all the companies will do the same things. So we need to pass through the prices, and we tackle the crisis as we always tackle crisis and are quick on our feet.

Thank you. Now one more question by Annette Becker.

It's a follow-up. Mr. Zachert, you said that you've got the put option, the hard put option 2028 Envalior. But if I understood it correctly, this is only 50% of the stake. Is that correct?

Yes, this is correct.

Thank you very much, dear colleagues. This is what we wanted to share with you. All the best to you. Hope to see you soon again. Have a good day.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Good day and thank you for standing by. Welcome to the LANXESS Q3 2025 Results. [Operator instructions] And please be advised, today's conference is being recorded.

I'd now like to hand the conference over to your first speaker today, Eva Husmann, Head of Investor Relations. Please go ahead.

Thank you very much. And also from our end, welcome to our Q3 earnings call. As always, we have our CEO, Matthias Zachert; and our CFO, Matthias (sic) [ Oliver ] Stratmann, here today.

Please take notice of our safe harbor statement, and Matthias will start with a short presentation, and then we will open the floor for your questions.

With that, I'm happy to hand over to Matthias. Please go ahead, sir.

Thank you, Husmann, and welcome, everybody, to Q3 '25 LANXESS conference call.

I start the presentation on Page #5, where we give the key updates on financials on EBITDA being the first to be addressed. We have a decline to EUR 125 million compared to last year, partly driven by portfolio effect. We have divested the Urethanes business beginning of the year, but predominantly due to volume decline in the third quarter, stemming from low demand in end industries, competitive pressure from Asia, and also due to respective uncertainties also in the United States from tariff situation. Volumes declined by 6.5%, leading to utilization, which is now around 67 percentage points, clearly too low to achieve good underlying profitability.

As far as net debt is concerned, we managed that tightly. So we kept it stable compared to second quarter, as you can see. And one driver behind that is also the working capital management, which has here a positive contribution, but mainly stemming from better collection of receivables, but also lower sales driving receivables down. And noteworthy, of course, what we've communicated end of September, just for the fact that this was completed in the third quarter was the right to exercise our put option in Envalior.

Now let's turn our attention to Page #5. Overall, the economic situation in the chemicals sector in the world has not changed, but Europe is under heavy pressure. And for that very reason, we have now started a further cost reduction program, which is yet in the negotiation with workers council and unions. The overall amount we are targeting is EUR 100 million, also coming from further streamlining of our admin functions. And in order to support our target here, we have globally gone for a hiring freeze until further notice. And due to the sluggish performance in group profitability, we have, of course, also released our provisions in third quarter for variable pay as far as managerial grades are concerned.

Page #6 shows you what we have done in order to counteract the current weak economic environment. As you recall, '23 was a tough year for the chemical sector already. At that point in time, we started the FORWARD! program. This is largely implemented as we speak. So by end of '25, the headcount reduction and cost reduction will be in place.

Summer this year in Q2, we gave reference towards production efficiencies that we will go for, especially through the site closure at Widnes, U.K., closure of the Hexane oxidation in Uerdingen and product optimization, production optimization in our El Dorado site. So this is something we are implementing and working on. Hexane oxidation has gone off stream. The witness is being prepared and the same holds true for El Dorado plants.

What we are now working on is the EUR 100 million restructuring program basically coming from reduction in personnel and related costs. This will be done through the ongoing demographic change we have in Europe, but also focused redundancy packages. So we will use both tools as we have done in the past. And we will also adjust processes going forward in order to get further agility and also assuming an underlying operational level where you simply need to be more competitive in order to regain power once momentum and volumes return.

On Page #7, this is how we look into next year. I wouldn't say that the tariff situation will improve 2026, but there will definitely be -- or that definitely is a too strong word in current times. But our assumption is that the high uncertainty on tariffs will somewhat soften. In many cases, there is some kind of agreement that's being found. So we are not anymore in the full escalation process, but somewhat on the direction, at least this is our view that people find bilateral or regional agreements. That should give a little bit more planning certainty for all of us and, of course, for all of our business units.

Our assumption clearly is that the government stimulus that has been decided by the German government, and we see that they are working on it, should be visible in 2026, potentially more in the second half than in the first half, but we see now that the respective regions and states within Germany are already working on it, and therefore, it will still take some time. But our assumption clearly is that this is going to ramp up in '26 for the German economy being clearly a positive.

Business units that definitely should benefit because they are -- all of them are having business in a visible way in construction, for instance, is Advanced Industrial Intermediates pigments, obviously, but also our polymer additives where construction plays a major role and the same holds true with our biocides business. And therefore, these 4 business units are the most obvious candidates for benefiting from infrastructure stimulus.

But now we also have antidumping, which should be mentioned. In many of our business units, we are working on specific cases, value chain by value chain. By now, however, I can fortunately confirm that 2 cases have been positively decided. One happened recently in October for European adipic assets, sorry, for adipic acids, not assets. So here, the European Union has decided on a European protection of the respective value chain. As we are playing in this with an Advanced Industrial Intermediates, we definitely have here a better position, even though it needs to be mentioned that notably from China, substantial capacities have been sent to Europe pre the decision-making process. So we currently, I think, in the next 3 months, we'll have to absorb the landed goods from China. And then from '26 onwards, we will start seeing that this antidumping case plays in the right direction.

Also on the phosphor chloride ester products, we have a positive case decided for the European industry, and let's see what further decisions are going to follow. What we also take note of is market consolidation. So at the end of the day, competitors also in our value chains step out. That's beneficial because we clearly see that our business units have strong footprint where we play. We've always alluded to the fact that most of our business have very strong leadership positions also through a good technology and good plant. So they have everything to be the last man standing. This definitely holds true for Advanced Industrial Intermediates, where we've seen that competitors have stepped out like on hydrofluoric acids. We are clearly here the strongest in the markets. And therefore, my assumption is this plant will make it to the end and then take a good time afterwards. But right now, we are fighting and make sure that we are here in the market to stay for good.

The same can be said on Rhein Chemie with a more modest tonality, but also here, we are in the end consolidation in the Western Hemisphere with our accelerators and antioxidants. But also in neighboring value chains, of course, we know that from our former business unit, polyamide, which has been -- is now part of the Envalior also here, for the Envalior business, there have been notifications by competitors of Envalior that they are closing capacity like fibrants recently went out and communicated in October that they will close their caprolactam capacity. And we know that Envalior has a very, very strong capacity in Antwerp and being world scale. So at the end of the day, that will be positive for the ones that will be running in a more consolidated market. So we see that in crisis times, markets consolidate. And at the end of the day, the ones that stay in the market take the benefit.

Ladies and gentlemen, let me now come to outlook, described on Page 8. As far as the macroeconomic environment is concerned, I think you all take note of the fact that economic environment is volatile. High uncertainties persist. And for that very reason, let's focus now on LANXESS. We are now adjusting our guidance to the lower end of the previously mentioned EUR 520 million to EUR 580 million. So that's what we are seeing at this point in time. I would like to mention, of course, versus previous year, urethane is out. Q4 is normally seasonally weaker than Q3. What you should take into account, of course, we look into our business when we make our guidance. We are now beginning of November. So we look into the books of October, November. Based on this, we provide our guidance to you. So this is not out of the blue, but with respective analysis and business judgment. And based on this, we are guiding around the lower end of EUR 520 million.

Ladies and gentlemen, this is what we would like to communicate to you. And now we are open to your questions. Please go ahead.

[Operator instructions] We will now begin with our first question. This is from Christian Bell from UBS.

I think the extra context around the competition in Asia was really useful. And I guess that's where I kind of want to start with my questions. I have 2 that both relate to competition coming from Asia. And the first one is, are you able to indicate what proportion of LANXESS' business you would consider relatively insulated from Asian competition? For instance, sort of what product lines do you feel have a stronger competitive moat or less direct exposure to Asian imports? And if possible, could you provide a rough percentage of the business that represents?

And then the second question, following from that, given the competition from Asia, what type of resolution or policy change would LANXESS need to see in order to restore competitiveness in the intermediate segment and your other segments? And once resolved, how quickly do you think LANXESS could regain lost volumes or margins in the affected business units?

Well, Christian, let's take that step-by-step. I think if you -- on Asian competition, I think if you look into our 3 segments, you somehow can take the analysis from there. The business which has been most impacted is intermediates. You see here the profitability decline. You also see the volume decline. This business is more volume-driven relating to inorganic pigments, but also AII. So here, of course, we are in direct head-to-head competition with Asia and here notably China. If you go to the intermediate, sorry, into the additive space, this is the segment which is impacted, but not as heavily as Advanced Intermediates. So impact here clearly is there. Here, the impact, however, is also coming from tariff situation. A lot of our flame retardant business from El Dorado, of course, uses the market in China. And I think you know very clearly that here, the escalation on tariffs is at its toughest and therefore, exporting flame retardants from United States to China is not an easy sell.

So additives is being impacted, but not the same way as intermediates is, which, of course, is by and large, operating from Germany, where energy prices, et cetera, are not competitive. Now the division that has been impacted at least is Consumer Protection. That's the strategic direction that we've decided on and executed on. So Consumer Protection, of course, sees competitors here and there, but not at the same magnitude. So I think this gives you a very good indication on exposure to Asian competition. But Christian, let's face it. We see Asian competition everywhere in our German industries.

We see that in the automotive industry. You've read Chinese competition being mentioned by the capital goods industry. There was an interview by a medicine company producing medical devices, Braun Melsungen, a German company that also despite producing medical devices mentioned stronger competition because many, many, many of the goods that China shipped to United States are currently being shipped to Europe. So we see extra volumes due to the tariff escalations ending up in the European markets. And this is in Q2, Q3, these have been the strongest quarters where the incremental volumes were visible. So you see that not only in chemicals, you see that in end industries as well.

Now your second question was alluding to political changes. What does it take to restore our competitiveness? Well, we are in dialogue with politicians at the level [indiscernible] very clearly, where we definitely find support. We definitely address our points also in Berlin, where more and more our points are understood. It takes apparently a little longer in the European Union, but all of my peers in the industry, we are very active on that end. I know that from the -- my colleagues in neighboring industries, automotive industry, capital goods, we are also very often present in Brussels to make things aware there.

But in all clarity, Christian, we have decided now to simply go for regaining and restoring our competitiveness ourselves. That's the reason why we take further measures on the productivity side. So we will again cut costs. We are not cutting capacity. We will streamline here, notably the functions in order to keep the operational profitability where we want it to be when volumes return. But clearly, the organization will be another -- will go through another lean efficiency program. And therefore, that's the way we want to restore competitiveness because when we take out another EUR 100 million, that will be eventually a higher competitiveness for our product base, and that's our way to go for restoring our competitiveness. I hope that clarifies all of your questions.

Next question is from Thomas Wrigglesworth, Morgan Stanley.

A couple, if I may. Firstly, the take-or-pay contract that you call out in Saltigo, does that have implications for 2026? Is this basically an early termination of an agreement that means you book the profit now, but then you don't have the business or you've got a fine replacement business in '26?

And my second question is around free cash flow for 2025. Clearly, working capital is unwinding this quarter versus last year where it was up. So obviously, you're trying to make the working capital more efficient. But what can we expect from a full year basis? And what other levers can you pull?

And of course, we will take both of your questions, I will take #1 and Oliver will take #2. The take-or-pay is in the business Saltigo. We've every now and then stressed that we here go for -- I mean, this is custom manufacturing business. So specific projects for specific customers. And in many of our contracts, we have take-or-pay clauses. So when a customer goes under a certain level of volume, he has to pay if he doesn't take. And this is something that was triggered. So of course, leading to everything but good volume momentum, but we get an equalization or protection for the lower volumes through the take-or-pay clause, and that was -- that's the business model and that was beneficial in the third quarter. And for that reason, we've mentioned that. We have this in a variety of contracts that is part of the business model. And it protects us, of course, in a year like 2025.

And then I give the words to Oliver on free cash flow. Oliver?

Well, on free cash flow, you've already hit the nail on the head that working capital plays a major role here, provided that we're going into Q4 with the typical weak seasonal business momentum. If you look back through the last years, what you've seen is the cash inflow that comes from our typical seasonality in terms of working capital. You know that we have typically our maintenance turnarounds in the fourth quarter and then consume the working capital, bringing it down. You can also expect us to continuously work on and deliver on cost savings. And of course, we'll be remaining very disciplined in terms of CapEx.

Now to bring it down to the point, and I will give a very comparable answer to the question compared to the last 2 years when I was asked that we will be very diligently putting an eye on free cash flow generation and working into that direction. If you look at the inflows in the last fourth quarters of the last years, they were between EUR 70 million and north of EUR 200 million. Whether at the end of the day, we'll be able to show a positive free cash flow for the full year, we'll have to see. But I can assure that we put everything we have into that direction.

And just as a follow-up, Matthias. So this is always going on, right, in the Saltigo business, this take-or-pay where customers are probably -- it doesn't feel like this is a one-off, but more of a -- this is just the nature of the business?

Well, we've done always long-term contracts with -- on bigger projects with our customers and long-term contracts always with take-or-pay. So this is nothing abnormal. But of course, the current demand environment is somewhat abnormal. And that's the reason why for -- it's not the first time, but it has not happened that often that customers decided for pay rather than take. And that's the reason why we stressed that in this quarter.

Next question is from Martin Roediger from Kepler Cheuvreux.

I have a question on the bonus provision release, which was a low to mid-double-digit euro million figure, if I'm right. A, is there a chance for another release of bonus provisions in Q4? B, if so, is that upcoming release of provision already baked in your guidance? And c, what has been the total budgeted bonus pool at LANXESS at the beginning of the year? Maybe in that context, you write in your handout that the release of bonus provisions has positively impacted the segment Consumer Protection. Did other segments benefit from that release as well? I'm asking because I see that the reconciliation line is in Q3 less worse than in Q1 and Q2. So I wonder, is there also an effect here as well? Or is there another reason why the reconciliation line had a relatively low loss in Q3?

Martin, all valid questions, and I hand all of them over to our CFO, and it will be in good hands with them. Go ahead, Oliver.

Martin, thanks for your 2 or 3 questions. So you've quoted directly the low to mid-double-digit million amount. And I will start basically from the back with the other segments. What you have to imagine is, first of all, everywhere where our management people are working, they are eligible to a bonus if the criteria are met. Hence, if the criteria are not met, wherever they are working, the release of the provisions will be shown. -- because they are also built in these line items. So you will see them basically not only in every segment, but also in every line item.

And with regards to the other segment and the development now and our guidance for full year, the point is for the last -- for the first 2 quarters, provisions have been made. And then the provisions that were made all the way to the 30th of June were released. Hence, our corporate reconciliation segment looks quite substantially improved. And for the fourth quarter, I would be rather expecting something that is more comparable to the amount of expenses we have had in the first or second quarter. And that then if you sum it up, leads to the amount that we are expecting there. for the full year.

Then you asked whether there's going to be another chance of a release. You know that our variable compensation is based on several criteria. Most important one is EBITDA. We have already mentioned that this has been released. So I'm not expecting any further release, but you have, of course, the fact that there is also no building of provisions, which in the fourth quarter is one building block that also flows into our guidance.

And the next question is from Andres Castanos-Mollor from Berenberg.

Just a follow-up on the all other segments line, which is essentially the question. So you explained well the improvement there for the -- because of the bonus release. I wanted to ask if there is other corporate costs that are evolving favorably year-on-year and also on the current hedging impact that we're seeing this year. I assume that's a benefit. Can you compare it year-on-year, please?

That will be all addressed by Oliver.

Yes. On the corporate costs, indeed, our efforts to take out costs to save within FORWARD! and the newly announced program will not only come from business, but we will have a clear focus on our admin functions. We are taking out costs here in basically every function. The larger functions will, of course, contribute more. And you will -- you also know that I've been talking about the implementation of our new SAP program for quite some time here. By the end of the year, we will come to an end. So next year, you will also see savings coming from this one.

In terms of the hedging, indeed, you do see a relief because we have a rolling hedging approach. which I would rather not quantify with a 1 million number but guide you to the rule of thumb in terms of the overall impact, which still is there when you look at the weakening of the U.S. dollar and that rule of thumb was EUR 3 million per cent change in the exchange rate, and that is valid also going forward.

Next question is from Jeremy Kincaid from Van Lanschot Kempen.

I also have 2 questions on the antidumping. Firstly, could you -- there were obviously 2 positively decided cases over the quarter. Are you able to quantify how much revenue as a percentage of your business that those 2 decisions could impact?

And then my second question is you also mentioned that there's some cases in execution. Are you able to call out which cases could be most material for your business or which would be the largest impact to the business if successful?

Well, definitely valid questions. On the first one, I can tell you that is for the 2 business units being positively impacted by this. I mentioned AII and Polymer Additives. I will not flag to your revenue, but I will flag to you that this is on the EBITDA side, low double-digit amounts, respectively. So it is something that we see. So that's on the first one, antidumping being decided upon.

On the potential execution, I have to clearly state to you this is competitive intelligence. This is not for us, favorable if we speak about that. And therefore, we keep it to our chest.

Next question is from David Symonds, BNP Paribas.

Just one for me, please. And it's a follow-up on the Saltigo take-or-pay. Are there any shared services between Saltigo and Advanced Intermediates that might mean that the lower volume in Saltigo, which triggered the take-or-pay clause also affected fixed cost coverage in Advanced Intermediates? Or are those businesses totally separate now?

And then maybe just if I can squeeze another one actually on the same subject. Was the take-or-pay payment for lower volume in the third quarter or for lower volume in the first half?

Well, that was -- I'll start with the second one. That is respectively for the running quarter. On the second question. And now on the third one, let's be very clear, we are a group. We are playing together here. If one business unit makes take-or-pay contracts with the other business unit, goodness, we are not in this -- we are not working like that. Saltigo is a very strong technology chemical player. Of course, Saltigo every now and then when we need a need for specification for analysis, extremely sophisticated chemical products. Internally, some business units make use of Saltigo. But within the own group, within the own legal entity here in Germany, we don't go on a managerial basis on take-or-pay. That would be completely bureaucratic. So take-or-pay, we have with external parties, but not with internal parties.

Yes. Sorry, just to be clear, I meant -- because obviously, the Saltigo business used to sit within Advanced Intermediates. So actually just meant are there any shared assets that would mean that if you run a lower operating rate at Saltigo, it might impact fixed cost coverage in Advanced Intermediates.

No, Saltigo has its own assets. So here, we are speaking about small vessels, and its custom manufacturing business. So it's a very dedicated focused value chain. And intermediates, we are talking about big vessels. So there is, again, some help here and there on research application know-how, et cetera, on finding solution and chemical reaction, but the one business unit Saltigo does not produce for Advanced Intermediates. That's not the case.

[Operator instructions] We will now take our next question. This is from Tristan Lamotte from Deutsche Bank.

First one, I'm just wondering kind of high level, with the European chemicals industry under pressure. Do you think that there could be significant knock-on effects from the closures of capacities of competitors given that chemicals is so interlinked and the companies buy from each other. So do those ongoing closures decrease the efficiency of the supply side in Europe?

Well, definitely, we see that the weakest capacities will vanish. And therefore, I alluded to earlier to the vibrant caprolactam capacities. We always stressed when we were owner of the polyamide value chain. We always stressed as LANXESS being 100% owner of the polyamides that our Antwerp caprolactam plant was one or is one or was one, I referred to when we were owning it, of the most competitive ones in Europe. And we always flagged that BASF Antwerp was also extremely powerful in its setting. Thus clearly stating indirectly that all remaining Capro plants in Europe would be less competitive.

And now looking at today's situation, the 2 fibrant plants, I think DSM always mentioned that they were at a capacity around 140, 150 kt, whilst ours was under LANXESS running at 230 kt, BASF was known to be also above 200. These are the most competitive couple sites, and the smaller ones vanish. And if you have less competitors, your position gets even stronger when volumes return.

Right now, the market is long. But when volumes return and markets turn tight, the less competition you have, the better you shine. And therefore, the crisis that we currently have cleans up the capacities in the European setting, the strongest survive. So you have to make sure that you belong to the strongest. And with the setting that we have, I clearly see that most of our plants are world scale. We are in Europe in a good position. And when the consolidation happens, it will eventually be beneficial to the ones that are still playing in the market. And that's how I look at consolidation.

And maybe a second unrelated question. I was just wondering how the agriculture business performed in the quarter. And how do you see conditions for that business developing over the next few quarters? Are you seeing pricing pressure there?

Well, we have -- this quarter, we had a mixed picture. We saw companies last quarter sending positive picture and then 1 quarter later, completely changing their view on the market. So we overall see that volumes in the agrochemical markets have stabilized and is improving, whilst pricing pressure in the market is still there. So that's, in a nutshell, how we look at the agrochemical markets. But on our order book, we've been very clear. We currently still see a very soft order book, and that's the reason why we keep the modest tonality on Agro.

And I would now hand the conference back to Matthias Zachert for closing remarks.

Well, operator, thank you very much for your moderation. And to all of you, thank you very much for participating and listening to our Q3 earnings call. We will start road showing now, and Oliver and I will look forward to seeing you on the road, answer your question, and we send our best regards from Cologne. Bye-bye from LANXESS.

Thank you. This concludes today's conference call. Thank you for participating, and you may now disconnect.

[Interpreted] A very good morning from Cologne, ladies and gentlemen, dear colleagues, this is Claus Zemke, and I'd like to extend a cordial welcome to you on the occasion of our telephone press conference on Q3.

We have got Matthias Zachert here, CEO, and the CFO, Oliver Stratmann and they both will give you an update on what has happened over the past quarter, and we'll give you the guidance for the remainder of the year.

Thank you very much for joining. Technical remark from my side. We are having this press conference in German, but there will be simultaneous interpretation into English. If and when you want to ask questions, there will be a possibility after Mr. Zachert's talk.

How that is going to work will be explained a little bit later. And then, for legal reasons, you must know that there is an Internet stream. Mr. Zachert?

Thank you very much. A cordial welcome to all of you listening to this press conference of LANXESS.

So let me talk about Slide 3, making a head start on my update. And I'd like to give you a description of the general situation of the economy, the German economy.

And I mean, you are all reporting about what is happening in the major industries of Germany, that is, the automobile industry, mechanical engineering, and this quarter, all the industries mentioned that the economic situation is very difficult indeed. And this is, of course, also true for the chemical sector, which requires a lot of energy.

Well, the reporting has corroborated exactly that. And this brings me to LANXESS. So we are navigating stormy waters, and EBITDA and also sales are burdened.

There is one segment that we have strategically developed, and this much to our pleasure, is rather stable, and that is consumer protection. Going to talk about that a little bit later, but the 2 other sectors, segments, that is the intermediates like the individual units, they go to show what fierce competition we have got and how difficult it is to run the business.

And this is also true of Specialty Additives. So we are doing our best to offset the general conditions and navigate these stormy waters by cutting costs.

So this is something that is under control, under our control, and we will go about it. And we will need to be more precise about the remainder of the year in a minute.

Now, the Slide #4, weak environment, unfortunately, and also changes in the portfolio. And I mean, we divested a business unit, but also the unfavorable currency translations and the weak American dollar have had an imprint on sales and EBITDA.

So sales are minus 16% and portfolio and currencies are one side of the story. But on the other hand, we have got price reductions of around 2%, a bit more than 2% and also a volume decline, which is rather painful because that holds up to 6%.

Of course, that has a bearing on EBITDA. In the prior year quarter, we had EUR 173 million, which was not exactly brilliant in 2024, but that's still better than this year, and it was also an improvement over 2023.

So we are still in a weak environment in 2024. And now figures have come down again. And this goes to show how dramatic the situation is in the energy-intensive sectors.

Now, let us talk about our individual segments. And I have mentioned before, consumer protection. What we can see here is a rather stable operating income.

The level of the prior year, and the margin is quite high, just under 16%. And this is the segment which we have developed and strengthened, also on account of acquisitions.

So we have entered businesses that show rather stable performance, even if competition is a bit more intensive in comparison to previous years.

Now let me talk about Specialty Additives, Slide 6. This suffers from the weak demand in the industry, particularly in the building and construction industry is still very sluggish, particularly in China, but also here in Germany. And suffers from the declines.

This is something we have not seen ever before, particularly if you have a look at the last 10 to 20 years. And I mean, of course, there is an awful lot of catching up to do, but somehow it doesn't happen.

There is still a crisis in the building and construction sector. And then the weak dollar is also having a negative impact on sales and EBITDA. As we all know, we are very busy in America as well, and we deliver from America to China, particularly when it comes to our fire protection materials, flame retardants, and well, the relationship between America and China is not exactly helpful in this context.

Advanced Intermediates. In this segment, we see a lot of competition from Asia, particularly China, and weak demand. And the Advanced Intermediates business is the core activity of our activities here in North RineWustralia.

So our sites in Leverkusen Endingen, and these business units, the Advanced Industrial Intermediates and also inorganic pigments are being produced there. And they suffer not only because they are confronted with strong Chinese competition.

Well, the Chinese actually deliver at prices that are below our production costs. And I mean, we really have to discuss antidumping here. These activities not only face fierce competition, but also suffer from high energy costs, a lot of bureaucracy, and general conditions.

I mean, we keep trumping that off the rooftop, saying they are conditions that are breaking the neck of our sets, even if our facilities are top-notch when it comes to their activities, their abilities to produce, and they can produce on a world scale.

We are hard hit here over the prior year. We must say that there is a further decline.

Slide #8, cash management. We are doing a good job here in the third quarter, stable environment. When it comes to the group's capital structure, net financial debt is stable, which has to do with good cash management, which we a couple of quarters.

Now, Slide 9, geopolitical situation. I mean, tensions are still very, very high, which makes a contribution to the uncertainties in the world and in the individual regions.

We still proceed on the assumption that the automobile industry will stay weak, as well as building and construction, and also the agricultural sector, even if there are different developments among the different actors.

Looking at LANXESS, we are continuing with our cost and efficiency program. These are topics that we can control, and we are doing our level best to improve the framework conditions. And whenever possible, we try to draw attention to the fact that it is high time to bring the economy back on course and improve the framework conditions for the German economy.

We talk to politicians and decision-makers, and these framework conditions have to be reestablished or else it's going to be so difficult, both in Germany as well as in Europe, to keep up strong industries that are definitely suffering under the present framework conditions.

Our guidance of EUR 520 million to CHF 580 million, as published in the summer, will end up at the lower end of our forecast range. And in the second half of 2025, the framework conditions as well as demand haven't changed. So that supports this.

On Slide 10, we would like to present the programs we are already using. You know our program forward with CHF 150 million. We finished this program swiftly, and we will be fully effective by the end of the year.

In the second quarter, I spoke about the optimized production network. And we mentioned the closure of 2 operations and optimization of organization, and we are implementing these plans, and we take it that we will be successful according to our plans.

Today, I would like to let you know that we are in the process of preparing further measures to achieve structural improvements of around CHF 100 million over the coming years.

We are already discussing matters with our works council members, and we'll do so very soon and discuss, and decide and implement very soon, and this will probably be specified in the first quarter of 2026, so that you will be in the picture as well.

You do see that we accept the market environment, and we change whatever we can change and control. And of course, we hope that the framework conditions will change in the future. But in particular, Berlin and Brussels are involved in the framework condition situation, and we hope some progress will be achieved there.

The next slide, #11, gives you an overview of what's happening in the European chemical industry. Handelsblatt already mentioned some or many of the closures on the left-hand side in an article published in the summer, and we are repeating this.

But in the right-hand column, we would like to share with you what was published recently. So you see, it's not just 10 minutes to 12, it's already gone to 12, and a lot of these changes are already taking place.

The industrialization of those areas that need a lot of energy, and this is to be emphasized, those industries that need a lot of energy are taking place. And these are closures of operations that will not be resuscitated. They will not be back.

These are closures of industries, especially the German industry is reputed for the high wages paid in this industry. We are among the industries paying the best wages.

But should the framework conditions be such that you can no longer be competitive or even incur losses, then you have to draw your consequences, meaning you have to close plants and operations. This leads to lost jobs and a reduction in wealth.

Other countries are fighting for their industry, knowing fully well that this is a driver of wealth and will attract other services, which will be beneficial for any country's wealth.

So a lot of regions are fighting for their industries. And let me call a spade a spade. What is being closed here is in areas where the chemistry is needed and will be produced, most of which will be produced in China, where they're using coal for their production, which means, for the climate balance, this is no good news at all.

There is not so much technological cleaning taking place. We know purification of water and air, tar, and catalytic purification. This is part of our standard. We are world market leaders there, but these capacities will be migrating to other countries, and they produce the same chemistry and generate wealth for their countries, but that is not beneficial to the global climate.

So this is a detrimental effect on our global climate. This is worth thinking about again. You should know that the chemical industry right now is facing one of the most severe crises I've seen over the past 30 years, and we need to return to good competitive circumstances and framework conditions so that this high-level technology, especially the chemical industry, as the third largest industry in Germany, will be able to survive here in Germany.

So the signals and the feedback we send out to the political decision-makers, as you see it on Slide 12, is that it's high time to act. We must return to competitive energy prices.

We welcome the present discussion or initiative. Hopefully, there will be decisions taken soon on the industrial electricity prices and the compensation of electricity prices that have to be taken into consideration for the chemical industry.

We clearly and unambiguously communicate to the European Commission and the European Parliament what is our position with respect to European emissions trading systems, and this needs to be reformed. And you quite frequently cover this topic in your articles.

We also face the decision-makers, especially in Brussels, and say that they should not burden the European industry with additional regulations and restrictions, but rather to finally start to defend their own industry, to protect their own industry, as many other states are doing.

And I also think we have to have a faster antidumping process. At the moment, it takes around 12 to 18 months rather than just a quarter. And things can be analyzed and decided within a quarter, if you ask me.

Ladies and gentlemen, let me now look at the last slide in our deck. The economic situation has just been described, but there is also some light at the end of the tunnel or on the horizon.

In the second and third quarters, we've seen the maximum uncertainty in the world because of this erratic tariff policy. And at the moment, this has a full effect in the second and the third quarter.

I take it that this tariff uncertainty will be here to stay, but at a lower level. There are some stipulations and regulations in some places; there is no longer total escalation.

So the level of uncertainty should exist in the next year, but not as much as we've experienced this year. We also think that the stimulus program for the defense of infrastructure in Germany will also have its bearing on the industry in 2026.

So order books will see more orders accepted. That will have some consequences on different products, flame retardants, screed, coatings, and pigments.

We've got different portfolios, and we don't take it that this will change overnight. It's November now. We don't see the effects right now, and we take it that there will be a gradual increase.

The new government has only been in office since May. And it is on the various levels, like the Federation, the federal states, and the municipalities, that this is going to be implemented, and then it should bear fruit.

I can say that the EU is already working on antidumping processes. We have been successful in 2 such procedures in a way that we were supported in that respect, and this is an adpinic acid sector, and also the phosphorus-based claim retardants.

And of course, we are looking for further investigations simply because here in Europe, we see that we are actually being glutted by products that are produced by China, products that they cannot sell in the U.S. any longer.

Now they are pushing that into the European markets for a song. And market consolidation is what is happening just now. And as I've said previously, there are company shutdowns, site shutdowns, and also our competitors are reducing their capacities or closing them for good.

That, of course, will strengthen our position in the market. And from a technological point of view, and also from a size point of view, our facilities are well established. And if we were to survive this competition, then of course, we will emerge stronger from the crisis once it's overcome.

This is what I wanted to share with you, ladies and gentlemen, concerning the third quarter and the market environment. So together with my Board members, I have discussed the situation at great depth.

And I must say I'm really very pleased that we are all rolling up our sleeves, taking rapid decisions, and responding in a pragmatic fashion. This is what is required in order to get through a time of crisis.

We accept that we have a crisis on our hands. We are doing something about it, and we all pull together in order to handle 2026. But before that, of course, we need to conclude 2025.

And when we are going to have our financial year press conference at the beginning of next year, covering the entire year of 2025, you will hear what we have been doing.

[Operator Instructions]

Now Jonas Jansen. Mr. Jansen, you can ask your question.

Thank you very much for your statements. I've got a question concerning your cost-cutting program, even though you say you can only be more detailed at the beginning of the next year.

But what are your ideas? And you said as of 2027, the situation ought to become better. So, is that on the basis of the cost-cutting efforts planned for 2026?

And what does that mean? Does that mean that more facilities need to be closed? Or will you try to cut costs further? And I mean, you already have an ongoing program and EUR 350 million, and now you want to double that figure.

So where on earth do you intend to get that from?

Well, Mr. Jansen, the EUR 100 million well, actually, we will be more detailed at the beginning of next year, but it is not true that this is only to have an impact on 2027.

Part of it will already have an impact in the course of 2026. And how are we going to do that, please? Can I ask you to accept that we can only share more details if and when we have discussed the matter also with our works council, and when we can be more specific about the implementation.

But it is quite clear that in the course of 2026, this will come the group's way and will bear more fruit in 2027. So when it comes to individual sites or facilities, I have said before that when it comes to production, we have already carried out our analysis and the implementations thereof, and we communicated that in the summer.

So I'm really fighting for these sites. I cannot make any promises, but this is what we are fighting for to keep these sites, and sitting here today, we think that we will be able to keep all our facilities here in Germany.

But that, of course, means that when it comes to our general cost basis, COGS, we need to save more money. And that, of course, is geared towards whatever does not make a contribution to the actual production.

And then, of course, you have to discuss possibilities of simplifications, streamlining processes, and how to become even more efficient and effective. And we have to make sure that no facility produces any loss any longer.

Since competition is so fierce and tough, we can only do what is under control, and this is keeping costs at bay. But as I've said before, we will communicate more details thereof in the first quarter of 2026.

Next question, Patricia Weiss from Reuters.

I hope you can hear me all right. Well, the demand situation. And you said that this is going to stay weak until the middle of 2026, or even not longer. So will that reduce your earnings further in 2026?

And then the second quarter, also, when it comes to your program to cut costs. And you said you want to keep the existing sites up and running. So, where do you want to get these savings from?

I mean, are you considering further job cuts? And then also when you're talking about the general conditions, I mean, it seems that you are a victim of the general conditions. But what else can you do? What can you do when it comes to your strategic setup?

And how can you become more resilient as an industry or a company in that sector?

Well, Ms., let me take these questions one after the other. Job cuts are not exactly excluded. I mean, we are trying to keep as many jobs as possible, but we cannot exclude that some will go away.

I mean, we will go for the approach of natural attrition. We are talking about demographic change, and that makes it possible to reduce the workforce without actually dismissing employees.

And your second question, I mean, there is still quite a chunk of COGS, general costs. And 2 years ago, I said that we, for example, are spending too much on our IT.

We are significantly above a target value that we must achieve, which is attributable to the fact that over the past 3 years, we introduced a new ERP system. So that was double a burden, if I can call it that. But this is now something that we have concluded.

In the first quarter of 2026, this will be concluded for good, and there should be a major part from this sector that will then help with saving costs. That was our target and still is our target.

When it comes to the strategy of LANXESS, I mean, the individual segments, if you have a look at what we have done up to now, we have certainly established a consumer protection element.

This is a very strong pillar in our group now, and very many of the businesses that we have separated from were polymer activities, and the polymer industry is being shut down here in Europe.

This is really in the crossfire together with other sectors of the chemical industry when it comes to Europe. So it was a good idea to get rid of these polymer activities.

But then the remaining sector of the chemical industry is still subject to a lot of difficulties. But over the past 6 months or so, we said, yes, we want to orient ourselves in a way that we become future-proof with a strong global position.

So this is the market orientation we are affecting, but this cannot be done overnight. And this has nothing to do with the cost, but with the business model and the go-to-market approach, which, of course, we are strengthening in parallel and reorganizing our company accordingly.

I hope this answers your questions.

Next question to Annette Becker from Börsen-Zeitung. We can't hear you yet. Now we can hear you.

Another question on the consolidation of the market as of 2027, as you expected. Do you think that it will be exclusively due to competitors dropping out of the market? Or will there be some options for acquisitions as you see it?

And is the European chemical industry in a position at all, given the market conditions, to acquire new businesses, because what we've been seeing for 1.5 years is costs up, costs down, and so on.

And where on earth would you want to have the money from to acquire new businesses?

Well, looking at the past 30 years, there were different waves of consolidation in our industry, and they always took place after a severe crisis.

Thereafter, acquisitions were an option. But quite often, there were also mergers that took place, creating a critical mass together with another company or more companies at the plant, at the business, at the value, adding chain level.

So the industry always came up with innovative approaches. These need not always be decisions to acquire new businesses. There were also other approaches in the past, and we will see what the industry will be doing in the next 1 or 2 years to come.

I believe that everybody will see that it's not only your own structures that you have to influence and change, but you have to think outside the box. And that has always been an element used by the industry, so I'm firmly convinced that the chemical industry will remain an innovative industry and will find new ways of strengthening its own position for the future. T

Next question from Bert Frondhoff from Handelsblatt. He is still muted. Can you unmute yourself, Mr. Frondhoff? It doesn't seem to work. So we will return to you.

Annettebekker seems to have another question. I was probably too fast. Annettekka, back to you again.

Talking about mergers, another question. The prime example for mergers is to be seen one of the partners will have to have the upper hand. And when you sold your primary businesses, you showed that there was 1 of the 2 companies that remained in control.

And I think you are talking about mergers to create critical masses, but that's unrealistic. A lot of companies are failing when this happens.

Well, Ms. Becker, I can't confirm that there are successful joint ventures and less successful joint ventures. And over the past 30 years, when looking at the different value chains, there were good examples.

Also, we did have a good joint venture of PBT with DuPont, where both of us had 50%. This joint venture was extremely successful, and there are other examples as well.

So I would like to say that talking about mergers, if we were to imagine a special type of joint venture, we should talk about it once it's communicated for value chains.

All I said was that acquisitions alone are not the panacea to consolidate the business; there are different tunes that you can play on the keyboard, right down to a joint venture. And should that be announced, then we ought to talk about it. I hope that answers your question, Ms. Becker.

Sorry about the glitch beforehand. I have 2 topics. The first topic is that the first emissions trading in Europe was commented on yesterday by the ministers in Europe about free allocation.

How do you see it? And what are the numbers? What would happen if this were not implemented and with respect to free allocation and further allocation, and short-term measures?

And the second question is linked to this. Are you in favor of abolishing ITS as it is at the moment? Or do you want to see it changed? And if so, how should the change be affected?

First question. I can only briefly comment on this. I have not seen an evaluation on the individual elements discussed by the federal ministers at the European level or the different ministers at the European level, whether it's free allocation, yes, or no. And will the door be opened or rather closed, and how to consider this?

So let's turn to the second question right away, which was of a more general nature. On the system or the trading concept with CO2 certificates. There are very clear comments on this.

Our industry has a consensus. And here, I would like to share with you what I'm reading and what my colleagues are saying. This system, according to our opinion, needs to be revamped, reformed at least, if not abolished.

There are different levels of clarity in the comments, but everybody says that the present design of the system would substantially make or worsen the framework conditions substantially and let me be very, very blunt.

Our industry over the past years has made substantial progress with respect to achieving the climate targets. If you look at our company, we were really supported and praised, especially by the SBTi initiative.

We are Climate Truck Paris 1.5. We earned many awards, although we are not so affected by the ETS costs because we have a much progressive portfolio. But looking at the industry, I have to clearly say one thing.

The European industry has the highest standards, and we have all sorts of requirements when it comes to water purification or water treatment, recycling, and air purification.

I mean, they are all very, very strong, and we are being certified and need to earn these certificates. So we've got very high ecological standards, and we've got wonderful facilities that meet the requirements at a top-notch level.

But over the past couple of years, these facilities have been hit hard by increasing energy prices. And over the last 3 to 4 years, particularly because of Timmansi, former commissioner, who is not exactly friendly towards the industry sectors, quite the opposite is true, I must say.

So all the industries, including the chemical sector, were hit hard by excessive requirements and red tape, and whether it is EUR 50 billion, EUR 80 billion, or whatever, I mean that is the cost that is being mentioned because we all had to spend a lot of money in order to meet the requirements.

So it is bureaucracy. It is high energy costs, and we had quite high labor costs, and other industries thought that it was really quite enviable that we could pay such good wages and salaries.

But then, on top of it, we cannot invest very much in America or sell a lot there. And there is other stuff developing. And on top, the fierce competition of China now in 2026, on the basis of the decisions that were taken by the commission in 2022 and 2023 under the auspices of Commissioner Timmansi, that the ETS allocations ought to be curtailed when it comes to free allocation.

Now there is an additional burden, and this is where our industry is saying. I mean, that was decided 2 or 3 years ago, and this is no longer in line with our current realities.

What is happening here is a significant additional burden and triggers their respective shutdown events. And the general conditions are no longer the right ones here.

So we are producing chemical products, which we are producing under very good conditions, and all that goes to China. And China will care less about clean production.

So they use coal and they will not reduce their emissions, and then they put that into their tankers and transport the stuff to Europe, which is fueled by heavy diesel fuel.

So we get the products from an environment that is not as conscious about climate protection as we are. And we are, and I mean, it comes back to Gemlif, saying that this is suicidal when it comes to climate protection and when it comes to the protection of our industries.

I mean, this is really a very clear and very tough statement. But at the end of the day, I can see the reality thereof. And unless we get our act together now and protect our industry that produces products in an environmentally friendly way.

And then we will lose out, and the whole world will lose out because we will then get the products from areas in the world that couldn't care less, or at least are not as conscientious as we are. So we will abolish ourselves unless we reform, unless the lawmakers can agree on a proper compromise, which, at the end of the day, will protect both the climate and our wealth.

Under the current conditions, this will not be possible. So, Mr. Frondhoff, I hope that I've been clear enough.

Mr.Frondhoff says he's got another question, but of course, he doesn't want to hog the scene. So, is there anybody else? Well, why don't you go on, Mr.Frondhofff? Quite all right with us.

Currency translations, foreign exchange effects. Can you quantify that? What does it mean for you? Is this attributable to the weak dollar? Or is it also the renminbi development?

And what kind of further developments are you expecting? And maybe you can also talk about the business situation in the individual regions.

Well, Oliver, why don't you take over?

Well, Mr. Frondhoff, you kicked it off very well. I mean, the most important currency is the dollar. Well, this dollar is the basis for our business in America and in Asia.

So this is about 3% simply on account of the weakening of the dollar. And we expect this to stay? And if I have a look at the banking sector, this is a consensus that you cannot really talk about a short-term recovery when it comes to the most important foreign currency.

Thank you. Now we have a question from the English space, Andrew Noel.

If it's possible to get an answer, that would be great. The first one is, I guess, LANXESS was at the CPHI, and you've got some feedback from there. I want to ask, has CDMO finished in Europe? Has the market already shifted to India and Asia? Because when the Syngentas of this world look at ASM, it's in administration.

I'm just wondering how much confidence they have in the future of Europe's CDMO. And what is the plan for the longer-term plan for Saltigo, if that's the case?

The second question is just a clarification. We've been speaking about mergers and consolidation this morning. And I heard you sort of say different tunes that you can play on the keyboard and so on. Can I ask, do you feel more open to strategic mergers and the other kind of options, LANXESS as a company?

Do you feel more open to these situations than previously due to the downturn in the market?

Well, I will continue in Germany, and I just hope that you can understand the translation well. First, CDMO. For everybody to understand what that means. This is a custom manufacturing business, and this is all bundled in the Saltigo unit.

And the conference that you mentioned is a conference that is happening here in Europe on a regular basis, where everybody comes together. And now your question is quite clear.

We want to keep CDMO here in Europe. And this is a business activity, which is very important for the chemical sector. But then, of course, you really have to have first-class facilities and first-class technology to offer.

I think the very early synthesis stages that are not yet on a high technological level that they will be in the hands of Indian and Chinese producers. But when it comes to the more complicated synthesis, and there are more steps in the entire chain, that they are going to remain here in Europe.

But of course, you need to have a competitive position here. You have to know the technology, you have to know about innovation, and you have to be cost-effective. And you see that in the automobile industry.

They have got a strong position in the premium segment, and they have to have that in order to have a good cost structure in order to be competitive in the international comparison.

This is also true for the European and German CDMO business areas. You mentioned ASM, and that's not on our list for closures. I think in October, there was a communication that the Austrian CDMO company, ASM, filed for bankruptcy.

They were by far not as widely established as Saltigo, and they used to be owned by a private equity company for 10 years before that. So they were not as well-equipped when they had to face the storm. And therefore, they were hit hard.

This is changing the market in a way that Saltigo should benefit more than have a detrimental effect. So CDMO will remain important in Europe, technologically speaking, for the respective customers and clients.

Cost-wise, of course, you have to keep pace so that in the international environment, you can survive the competition. And this is the motto also for Saltigo going forward.

Our technology is of high value, high [indiscernible] value. But of course, we have to face the cost of the international competition as well. I hope that answers the first question.

Second question, more with respect to mergers and acquisitions. Looking at the past 10 years, LANXESS has always been a company, which on the M&A side, was rather progressive in inverted commerce or took a pragmatic approach, never a dogmatic approach.

And we will have a look at what will be beneficial for both LANXESS and our stakeholders. And then we will see what kind of strategic steps we may take in the future. I hope that suffices as an answer for the second question.

Thank you, Mr. Zachert. I have no additional questions, or nobody wants to take the floor, but let me look around. No show of hands.

Thank you for attending our press conference. And lots of success and enjoy the rest of the day, and greetings from Cologne, and goodbye.

Good afternoon to everybody. Good afternoon to everybody from Cologne, and a warm welcome to our conference call regarding our important strategic decision to exercise the right to offer for the sale of our shares in Envalior. I have our CEO, Matthias Zachert; and our CFO, Oliver Stratmann with me.

Today, we do not show the presentation on the call, so please be so kind and view the presentation, which we have published on our website. And always, please take notice of our safe harbor statement. And with that, I'm happy to hand over to Matthias for a presentation and afterwards for your Q&A. Matthias, please go ahead.

Thank you, André. And ladies and gentlemen, I welcome you to our conference call, and I'll start the presentation on Page 3.

Just to wrap up on what we have done roughly 3 years ago, Advent and LANXESS together formed one of the strong players in the polymer industry, especially on polyamide 6, with some further products gum on specialties, which notably came from DSM and some polyamide 66. So all in all, this was -- this is one of the leading powerhouses in the polymer industry.

And we were happy at that point in time to set up this powerful joint venture and with strong leadership by 2 shareholders, strong management team and all the power that this joint venture can unfold in the years to come. Important step, of course, to improve also the business profile on the LANXESS side.

With the first closing, we announced that we expect proceeds of EUR 1.1 billion. Eventually, we got EUR 1.3 billion, which compares to at that point in time, an evaluation by capital markets between EUR 600 million and EUR 700 million. So I think the first closing was already all in all, a good closing.

However, we kept 40% of the shares in the joint venture because we consider that after synergy implementation, further value could be achieved for both shareholders and thus for LANXESS. End of this month, the lockup periods will end. And this is the reason why we have decided to make use of our optionalities and has given or have given respective notification to our partner today before end of September, the notification period would have expired.

On Page 4, we show you the strategic rationale that we have at that point in time taken in order to form the joint venture and to let go of the polymer business. We clearly wanted to reduce further our automotive exposure, which used to be a significant portion of our turnover and is now by around about 10%, including aviation, we are now a 10% sales exposure at group level.

We went down from 4 to 3 segments. We have, in the meantime, reduced our net debt from EUR 3.8 billion to EUR 2.1 billion, and we clearly stressed that we will deleverage the balance sheet strongly. And I think we are here going in the right direction. And we not finish there, but will further improve also thanks to the announcement we've made today. As far as CO2 emissions is concerned, we year-on-year have walked the talk and improved clearly in our sustainability metrics.

Now let's come to what we have decided today. Let's give you -- let me give you further clarity on our way of exiting Envalior going forward. Let's recap on the left-hand side of the slide, we show the first step or the closing that happened a few years ago.

At that point in time, we, of course, achieved the proceeds of EUR 1.3 billion. That was the first installment, which was announced already at the time of the signing when we said that our business was evaluated at a multiple of 12, and at that point in time, reflect a total enterprise value of EUR 2.5 billion.

And at that point in time, when we announced the transaction, we also said that EUR 1.3 billion after the first closure leads to EUR 1.2 million residual value. The reason for this announcement was very clear as we stressed that. And today, we give you further clarity in the simplified structure that we show here.

So the EUR 1.2 billion base value, of course, need to be evaluated according to where the business actually performed but we locked in 3 years ago, the EUR 1.2 billion, which at that point in time was reflecting the 12x multiple. And therefore, this put option now will no longer be rediscussed on multiples or on net debt levels, the cornerstone is the EUR 1.2 billion.

And for the ratio or the percentage of the EUR 1.2 billion, the achievement of the last 12 months EBITDA in percentage of the signing EBITDA is important. Signing EBITDA being shown on Page 9 of this presentation being EUR 505 million.

So the mathematics for calculating the value of the put is as simple as that. Now when we come to exercising the put option, the first optionality, the window opens, April '26, and at that point in time, it is subject to financing. Should our partner, Advent, not be -- we'd not be in the position to finance respectively. Then with further time after 2 years, we can again put our optionality. At that point in time, without conditions for 50%. And without conditions means without conditions.

I now would like to bring your attention to Page #6. So here, we give the time line, and we show September 25. This is today, we have given notification on the fact that we exercise our puts. By April 1, '26, our partner has the chance to then come back to us and give us a feedback if they will follow our respective put optionality. If they cannot show and demonstrate respective financial capabilities, then a period of 2-year starts. There would be in '27 also the possibility for Advent to pay at the same conditions of April '26. And to call then on their side, the participation that we hold in value for the same conditions as we have exercised April 1, '26.

If this does not happen, then by April '28, we can decide on our own, again, for the hard puts on 50% of the shares we hold. Should this then be exercised, the remainder would then continue Envalior, and we would then leave the rest together in an exit with Advent. I would like to stress that this is without the shareholder loan we have provided to Envalior. This, of course, needs to be added to the proceeds equation with the time line mentioned on Slide 6.

Ladies and gentlemen, I would like to sum up. I think we have here demonstrated in this document that the contracts nearly 3 years ago was well negotiated, thoughtfully negotiated. We had a clear predetermined exit mechanism envisioned and executed. We clearly delivered on our strategy that we have conveyed to you 3, 4 years ago.

And I think we have here in this contract, further upside valuation that is offered in the future. And with this, ladies and gentlemen, I hope that clarification is given. You can assume that we have taken all legal respected advice in order to prepare this documentation and to go attack in the communication as this is very privileged information, and we are happy that we were able now to share with you the information that has been given in this presentation. With this, I close the presentation on my end and open the call for your questions.

[Operator Instructions] We are now going to proceed with our first question. The question has come from the line of Martin Roediger from Kepler.

Two questions. Firstly, so the first possibility to sell the 41% stake in Envalior to Advent is in April 2026 and is subject to the financing by Advent. I struggle to understand how the 8 biggest private equity company in the world with EUR 53 billion asset under management does not get any financing. Can you help me how Advent can get around of this topic so they can delay the purchase or can delay your put option?

And secondly, regarding 2028, where you have the second put option where you can sell half of your 41% stake regardless of any conditions. So assuming you have done so, when are you able to dispose the remaining stake in Envalior? And is that just in a joint exit? Or is there a different time line that you can sell the final 50% stake to Advent later on?

So Martin, let me make the comments on your first and second questions. On the first one, well, you clearly make the points. Advent is one of the biggest private equity companies in the world, highly reputed and very knowledgeable in the chemical space. They have proven this in the past several years, if not to say, decades. But here, it's totally in their hands. So we have now as a partner exercised our put optionality and now Advent is to answer. This is as far as your first question is concerned.

On your second question, I mean today is all about the exercise rights we have '26 and '28. We are, by law, following external, internal legal advice. According to law, we have to communicate this information to the capital markets. As far as all other communication is concerned, this is, again, privileged. And for that very reason, let me refrain to what I've said before.

Of course, we have an unconditional exit rights of up to 50% of our shares that we hold at this point in time. And on the rest, I've only said and I stick to this, we will go for a joint exit.

So we are now going to proceed with our next question. And the question come from the line of Jeremy Kincaid from Van Lanschot Kempen.

My first question is just on the EBITDA of the EUR 505 million for Envalior. Is that how much you think that the company will make over that time period? Or where does that number come from? And maybe if you could provide some context around what the rating agencies think that number might be over the same time period. That would be very helpful. And then also, if you could just give us a little update on what you think you might do with the proceeds if this deal goes through as planned?

Yes. Well, let me address that one by one. I would take the second, third question, Oliver, you would like to comment on the EUR 505 million?

Yes, Jeremy, I think that number resides back from the time before you started covering us when the deal was set up. That was the initial EBITDA. That was the basis basically for establishing the JV. So it's a reference point right now. And any LTM last 12 months EBITDA as a basis would be simply calculated as a percentage of that EUR 505 million. And in the presentation on the final -- the last chart, you will find an exemplary calculation here, I think it's really pretty easy and pretty straightforward.

Yes, I hope so. I mean, we try to clarify as much as we could in line with the legal requirements. Now I would like to address your second and third question.

You asked for information on the rating agencies. I give you one, but you can look at Moody's report and Fitch report as well. I guess just referenced to a rating that is even public, I understand. So it can be the Googled or looked at in the Internet, Standard & Poor's issued in December last year and the expectation they are on yearly numbers. The expectation for '25 is EUR 380 million to EUR 420 million. So that's the expectation for full year '25.

I referenced also the numbers for '24. Here, the number of 300 tenders made. I would like to state that the EBITDA number that we are addressing is an EBITDA number, of course, with adjustments like EBITDA pre. And now I come to the year-to-date numbers in our P&L that we have communicated.

And if you look into our numbers, first half '24 shows equity number. So consolidation of affiliates in the equity consolidated line of minus 73%, the same position in the first half '25, again, following the line at equity consolidation is minus 59%. So you see that operationally, in our accounts in value improved by 20%. Now 20% improvement on EUR 310 million looks pretty similar or close to the numbers for December '25 of the Standard & Poor's rating reports, just as a mathematical based calculation of public available numbers.

Now as far as proceeds is concerned, we are not there to have the proceeds. But today, I think Oliver and myself would clearly look at deleveraging the balance sheet has clearly highest priority for us. The more money we get, then, of course, balance sheet at some point in time are cured. And then you can bet we would consider a strong share buyback. Next question, please.

We are now going to proceed with our next question. The questions come from the line of Christian Bell from UBS.

I just have one really. Just -- are you able to sort of clarify who determines whether Advent has the capital to complete the transaction, is the assessment entirely within beer control? Or are there other safeguards in place?

Well, pretty straightforward. We have our contractual rights. So this is not just a normal process. I think you can see here in this what we have communicated, this is well thought through. And every answer given to us, therefore, expects from a big private equity company will therefore be well thought through. This is not just a decision to take like this. This will be a decision following highest professional standards.

So in other words, they would need good reason to be able to show that they don't have the financial capacity to be able to execute the transaction.

Well, I think I just allude to what Martin Roediger has said, this is a blue-chip private equity funds. They have a contractual obligation, and they will be, of course, tracked by our analysts and investors worldwide. If they follow what's they have -- what they will have to communicate. So of course, now we have to wait for Advent's answer, but they, of course, will have to look into the contracts and see if they can do what they have contractually committed to.

[Operator Instructions] We are now going to proceed with our next question. The next question comes from the line of Andres Castanos-Mollor from Berenberg.

Congratulations on the announcement. So what mechanisms do you envisage back then when you signed the deal to make sure that whatever Advent entity that was linked by this contract was doing its best efforts to raise the debt. And do you -- can you name the entity? And do you have an idea if what is the capacity to do that as at today?

Yes. Let me take that question, Andres. The entity is an entity of Advent and in the typical investment entity. And in the contract, of course, there are certain obligations and documentation duties for them to obtain sufficient financing. Hope that really helps your question.

Yes, it's not in value, the operational company. So this is a holding company of Advent.

Right. Okay. I've got what I wanted. Another question, if I may, please. On the 20 -- on post 2028 exit. So that would be not subject to any put or any other mechanisms that would be most likely a joint exit when it's a final exit of the to co shareholders? Or is there a room for a different exit on different time line?

Andres, I would say the following. We have not really gone into detail, but your assumption here is a reasonable one.

[Operator Instructions] We are now going to proceed with our next question the questions come from the line of Anil Shenoy from Barclays.

Sorry, my questions have been answered. I meant to take myself back out of the queue. I'm sorry about that.

No worries. All good, Anil. Any further questions, operator?

Sure. We are now going to proceed with our next question and the question's come from the line of Tristan Lamotte from Deutsche Bank.

The release mentions Advent -- they're required to acquire all or half of the LANXESS shares if they had the financing in April 2026. Are they required to buy all of them? Or could they choose to buy 50% even if they have the financing?

So contractually, we have a very straightforward situation. It's exactly 50% or 100% or 0 if they cannot get the financing. That's what the contract says.

We are now going to proceed with our next question. And the questions come from the line of Michael Schaefer from ODDO BHF.

Two questions. I'd like to come back on your Slide 9. You've made pretty clear how the calculation looks like if EBITDA of Envalior last 12 months drops below EUR 455 million or ever on the opposite end. So if we find out basically that the EBITDA is going beyond EUR 505 million, it's rather unspecific what kind of further upside potential you are talking about. So is this kind of the same kind of pro rata calculation to the upside? Any clarification would be helpful.

And my second question is pretty simple, maybe. Why now? If I recall correctly, you basically stated in the past that the whole idea of the JV creation, was not only about creating a world champion, as you alluded to, but also to generate significant synergies. And if I understand this correctly, we are in the middle of this process. So the question is, wouldn't it be wiser to wait longer to see this -- the synergies coming through entirely? So any reasons,, any remarks on your side would be helpful.

Yes. very well understood. So let me brief on both questions. On the first one, 505, I mean we don't want to overload the information provided to you. I think we show very clearly what the algorithm is, so to say.

The likelihood today, if you follow rating reports, the likelihood today that we are above the EUR 505 million in the current market environment is not that high, therefore, we clearly specifically focused on where the likelihood rather is, and that is below the EUR 505 million. That's how you should read our communication. And of course, if the joint venture does better than EUR 505 million, we clearly say we will take a benefit as well.

Now, why now? We have not decided this on a spontaneous basis. We have looked at this from the legal side from a business side, for I would say, several quarters. And if you follow the rationale that I have conveyed in because of the call, of course, we have to evaluate balance sheets. We have to think about market environment, about fewer market dynamics.

And I think in the -- in what we have decided today, we have a balance of all, including future upsides where synergies and marketing -- market environments are more benign. So I think the decision we take today and communicate today is a very balanced from all perspective, and that's the reason why we've decided today to exercise our option in due course today. That's it, Michael.

[Operator Instructions].

Thank you very much to all and see you in due course. Best regards from Cologne, bye-bye from LANXESS.

This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you, and have a great day.

Good day, and thank you for standing by. Welcome to the LANXESS Q2 2025 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, André Simon, Head of IR.

Yes. Thank you very much, [ Sandra, ] and a warm welcome to everybody to our Q2 conference call from my end as well. Today, I have our CEO, Matthias Zachert; and our CFO, Oliver Stratmann with me. Please take notice of our safe harbor statement. Matthias will start with a short presentation, and then we will open the floor for your questions.

With that, I'm happy to hand over to Matthias.

Thank you very much, André, and welcome to everybody on the second quarter conference call from LANXESS. I turn my attention to Page #4, in the distribution we have dispatched and start to comment on our key financials. Overall, it has to be said that Q2 was the expected tough quarter when we look into the end industries that have reported by now tough momentum in the automotive industry, tough momentum in capital goods and of course, chemicals have all faced tremendous pressure in the second quarter due to the high level of uncertainties in the global industry.

And I think all of us and all of you know the reasons behind that. Demand has been depressed. High volatility, very, very short order pattern by our customers. And this is the reflection in sales different to first quarter. Second quarter left its mark on volumes nearly being down by 4 percentage points.

And in some of our segments, notably intermediates, we clearly see increased pressure coming from China products, which no longer find their way to North America and are more or less being dumped in the European area. Of course, urethane divestitures leaves its mark in second quarter as well.

So all-in-all, this business generated EUR 50 million of EBITDA last year and of course, also absorbed some central costs. And if you look into second quarter, we do lack the sales and of course, the EBITDA contribution. So EBITDA second quarter is down EUR 150 million versus EUR 181 million in last year. And the reasons are driven by volume, price and portfolio effect.

If we look at working capital, this might come as a positive surprise to you. We have kept working capital in the second quarter pretty stable. Notably, our inventories didn't follow the normal pattern because we kept high attention on the inventory side. Q2 on the absolute inventory level is as low as Q4.

So you see that we have room for improvement here, room to pick up when we see that demand moves up again. We see also at our customer level that they have cleaned up inventories. So all-in-all, by many of our industries, we see low levels of inventories, which normally is a positive thing. But it also reflects that everybody is pretty cautious and therefore, keeps the balance sheets in order like we are doing.

The decline on working capital is basically being driven by receivables reduction [ and here ] positive. If you look at our KPIs like DSO, you see that we have improved here. So Oliver and his team were pretty fierce on receivables collection, thanks to the finance organization on this regard.

And of course, lower sales also leads to a receivables reduction. So working capital being down in Q2 and predominantly driven by receivables. On cash flow, I think all of you know that Q1, Q2 normally are quarters where we rather absorb cash, and this is something which we -- due to tight working capital management turned to the positive. So EUR 31 million of positive free cash flow in Q2.

And this was one of the reasons why net debt went down. The primary reason for the net debt reduction from EUR 2.5 billion to roughly EUR 2.1 billion, is driven by the urethane sales. And I think in the hindsight, one can clearly say this was a strategic and financially excellent deal, which becomes visible now in the balance sheet.

Now let's turn to Page #5. We have started already around about 6 months ago a review on our overall production network and have looked very carefully on what can we further improve in order to improve the overall platform of our company. And I'm happy to say today that our teams worked hard to accelerate the Hexane oxidation plant closure. Originally, we had stated that this will be closed by March '26.

Now contracts with customers and contracts with supplier could successfully be renegotiated in the meantime. So today, I can say that this is [ better ] complete. We have closed the Hexane oxidation by end of June. There will still be some remaining costs, will be incurred in Q3. But from Q4 onwards, you will see first savings supporting the P&L. The overall annual savings will, of course, be then visible next year in full, roughly EUR 10 million of cash and profitability improvement.

And by the way, Hexane oxidation had a high CO2 footprint, and this is, therefore, also contributing to our overall sustainability targets. As far as Leverkusen is concerned, we looked at our agrochemical plants and have realized that further optimization can be done here on the efficiency side. So that also is being addressed and will be implemented in the months to come.

Let's move on to U.K. We will close our small plant in Widnes. The products will be allocated to other plants. Widnes was underutilized from the outset and has not become better. And that's the reason why we will reduce complexity, reduce costs and improve profitability.

El Dorado is one of our big sites. And of course, here, we know that the end markets in flame retardants, construction are tough and continue to be tough at least for the next 6 to potentially 12 months. And for that reason, we have analyzed in detail for quite some time now and will improve efficiencies here also on the process side.

So that's the reason why also this without adjusting capacities will lead to process improvements, and we will implement that in course of '26. So further measures are being taken to counteract economic weakness. Let's now move on to the segments. And here, let's start with Consumer Protection. From what we see today, and I have to stress this year is marked by high, high volatility and it leads to the uncertainty, I think, everywhere and all companies comment on that, not only in the chemical space, but also in the other process industry.

So we are no different. So from what we know today, we give guidance on the segments. Consumer Protection, our view is that profitability will be slightly above prior year. Additives, by and large, on the same level. Additives, which rebounded nicely last year, is facing next to tough market environment on volumes in Europe, pressure especially from China. So we do see that Chinese goods are impacting, especially the European and Latin American industries.

When we look at our segments, Intermediates is the most impacted. Additives is somewhat average impacted, consumer, the least impacted. But everywhere, we see that Chinese goods are being dumped in Europe as they don't see respective entry routes into the United States.

Now we got questions from investors and analysts, what about a pickup in the second half due to German government stimulus? My feedback to you is government stimulus, we don't expect in the second half to occur. Nevertheless, we do face tough quarters, Q2, Q3. Also Q3 will be impacted by the uncertainty. So all the volatility, uncertainty, tariff escalation, la la la that occurred in Q2 spill over into Q3.

Company take adjustments on production and their summer holidays in July, August, all of that we will, of course, see in Q3. Even though we see that customers also start to prepare for Q4 in order to be prepared for volume pickup in '26. So this is something where we turn a little mildly cautiously positive for the fourth quarter, but let's face it. Q2 and Q3 see the terrible uncertainty impacting industries across the globe due to the escalation on tariff and what have you.

Now let's come to guidance, Page #7. So here, like many other companies in the industry and notably in chemicals, we adjust our earnings projections for '25. I think the macroeconomic, in general, I don't need to comment further. That should be crystal clear to all of you.

Let's come to LANXESS. Guidance being adjusted to EUR 520 million up to EUR 580 million. Even though the chlorine force majeure by one of our suppliers here in Germany, most of you know who I'm talking about, has not been finalized in its assessments. We've tried to get our best understanding on all facts that are available. Within our guidance, we factor in a shortfall of EUR 10 million.

Noteworthy to know for your side, we are protected should that be higher because, of course, we have insurance and our self-deductible is at EUR 25 million. And therefore, the EUR 10 million we consider as realistic for the current analysis that we have, and it's reflected in our assumptions. Consideration for -- take note of the fact that urethane is gone, so you need to adjust your models for the divestitures that is now happening also in Q2. And as far as Q3 is concerned, please understand it will be sequentially due to the reasons I've mentioned, lower than second quarter.

Let's finish the presentation before we open up for the questions you have with a glance on Page 8. We are ready for demand picking up again. Our assumption is, at least from the German government stimulus program, we should see following also many of your macroeconomic insights from your macroeconomic departments that Germany and the German economy will pick up in '26 again, coming out of its draw and therefore, having also a positive impact on the European economy.

We also assume that '26 will see more stabilization on the high tariff escalation debate that is currently leading to uncertainties. So our assumption is that '26 will have a demand pickup, and we are prepared for that. Our inventories are at low levels. Our portfolio is solid. We have obtained and gained through the transformation over the last few years, leading market positions in all of our business units.

We have a [ good ] regional footprint, very lean improved cost structure. So if demand comes back, we are ready and of course, are prepared for whatever comes along. Ladies and gentlemen, with this, I would like to finish the presentation and Oliver and I are prepared to take all your questions.

[Operator Instructions] We will now take the first question from the line of Martin Roediger from Kepler Cheuvreux.

Three questions. The first question is on the Agro business. In Q1, you provided some slight optimism about agro, as you mentioned, positive volumes and higher earnings versus a weak prior year, especially in Consumer Protection where Saltigo sits. I hope that the challenging agro environment, which affected already Q1, but is in place for several quarters already, would fade at some point in time.

Now in Q2, you reiterate the persistently challenging agro environment in Consumer Protection. What is going on in agro that this trough last so many quarters? Is the low demand linked to the fact that there are not many launches of innovations at your customers or b, that a key customer of you is now sourcing more and more volumes from other suppliers?

My second question is about the intended closure of your site in Widnes, U.K., where you produce aroma chemicals for the flavors and fragrance industry, but also for cosmetics and consumer care. I understand that the demand is low while competition is tough. I wonder whether the recent approach by your competitor, Croda in U.K., which is buying market share via big price concessions has been the tipping point for your decision to give up that plant? Or is it primarily linked to rising Chinese competition?

And my third question is for Oliver. Sorry to bother you with the same question I asked you at the Q1 conference call. It is again about energy costs. In your handout, you mentioned four times that energy costs are a burden at group level and also at all three operation segments. At the conference call of Q1, you said that for a longer period of time, you are able to pass on energy costs where they really matter and that deviations are possible on a quarterly basis. Do you think that you can catch up in the second half? Or should we wait until next year?

Okay. So let us go through all three questions. Thank you for raising them. And I'll take the first two, Oliver will take energy. On agro, I mean, we stay tuned. We, of course, follow the communication done by our agro clients, and most of them are listed, so you can follow their transcripts and presentations as well.

We are happy to see that there's a more tonality on the positive by some of the agro companies. Normally, this should with a time lag also be visible in our order book. But at this point in time, they are still modest in ordering. So that's the reason why on the order book side, we keep patience and can, therefore, at this point in time, not confirm that our order book and volume are increasing. And that's basically the communication we see in -- on agro.

We do see a high activity on innovation in the agro companies. And I can tell you that in many of these innovations, we are participating. So for the mid and long term, we are not negative. We are positive, but agro industry is a cyclical industry. I know this now for more than 20 years. And it takes some time to rebound. When it rebounds, it normally rebounds reasonably strong.

On Widnes, I have to adjust your assumptions. This has nothing to do with Croda or whatever. When we made our announcement on the Emerald Kalama acquisition, and if you -- I think it was '22 or '21 when we made the announcement on Emerald Kalama, you might find in this transcript of that communication day that I highlighted already at that point in time that we acquired three plants and one plant is subscale, which might lead to an adjustment going forward.

I was conditional at that point in time, but Widnes was clearly compared to our remaining four sites subscale. The other four sites are -- have the broad product portfolio. And I think this is the time now when you take tough measures. The plant was always low in the utilization, around about 50%, 60%. We tried to fill it up with other chemicals. But at the end of the day, this never led to a utilization that we aspire in our plants of 70, 80, 90 percentage points.

And when we now reviewed our entire production network and have made sure that we can respecify the products that are being produced in Widnes. In our other sites, we took the decision to reduce complexity, reduce costs while keeping the product portfolio alive. And that's the prime reason for closing Widnes.

And now I pass on my -- the ball to my partner, Oliver. Go along.

Matthias, I'm picking up the ball and Martin, thanks for the question. Look, indeed, energy costs are a burden in terms of competitiveness. If you look at the -- let's take as a proxy, the natural gas costs, if you compare the U.S. to what we have to pay here in euros, specifically in Germany, we are comparing on an apples-to-apples basis.

So in euros to megawatt hours, prices that are around EUR 7 or EUR 10 in the U.S., and you can track the gas price here, which is in the magnitude of, let's say, EUR 30 to EUR 40 recently EUR 35. So there is a competitive disadvantage. But you're also right that indeed, we have, after the energy crisis, implemented contracts wherever energy in the production played a major role for the product to pass those burdens through to our customers.

But Matthias, I think, in a lot of detail has outlined how competitive the situation is right now. So in such a situation, every competitively disadvantaged cost burden is worth mentioning, and this is why we put it out. Just as a little final example, only in the first half compared to the first half of last year, we had energy costs that were higher by EUR 30 million. And of course, we are pushing that through. Whether it will be possible by year-end to no longer point to these energy costs, we'll have to see.

Next question please?

We will now take the next question from the line of Andres Castanos-Mollor from Berenberg.

I would like more clarity on the Consumer Protection results. Firstly, it seems like the majority of the pricing reductions of the group concentrated in this division. I wanted to ask why? And understand to what extent this, which is the most valuable business division, is insulated from Chinese competition.

And also on this division results, I would like more comment on the mix improvement that you mentioned. Also the adjustments that apply here, I assume they are related to the closure of the Widnes plant, but would love to hear. And finally, on the insurance adjustment, is the third quarter, if I'm not mistaken, that you have received a payment. What is -- is there more to expect in this front? Is this related specifically to the chlorine force majeure? Or is this about some other event?

Well, great questions. Oliver and I will share that. I will address Consumer Protection. Well, if you look into Consumer Protection, let's address business units. Here, we do have a material protection in the water purification business. Of course, here and there, we have competition from China as well.

But we are in many of our product grades in a higher, more specified and data protected or registered specifications. And of course, here, the pressure by competitors is lower. And therefore, here, the profitability of these two business units are clearly more resilient. If you go to Saltigo, this is the one that is impacted the most right now because of agro weakness. We are not really directly impacted in Saltigo on the molecule side, on the competition side in the molecules we sell, but we, of course, do see that our end customers are facing pricing pressure and in some cases, volume pressure.

And thus, they either hand over the volume reduction to us into the order book or sweat out inventories and of course, are very fierce in the pricing negotiation. So therefore, in Saltigo, we see that our customers are impacted on the competition side. And that's the comment on Consumer Protection. So all-in-all, this segment is less impacted by Chinese competition, which is, I think, the natural conclusion you would also have.

But in return, our Intermediates are eye-to-eye competing with Chinese competition. I hope this clarifies your Consumer Protection question. And on the exceptionals for Consumer Protection, this is basically Widnes. But Oliver will give more color on this in absolute numbers and will address insurance as well. Oliver?

Yes, Matthias. On insurance, you may remember that we had an incident -- actually, we didn't have the incident, but in the bottling side of our business unit, Flavors & Fragrances, the steam provider, AVR had an incident, couldn't supply us. And this is in the aftermath a payment. And I remember, we received the question also on Q1, whether there is more to be expected.

And here, the point is simply that the process that you run through with an insurer doesn't give you clarity on what will qualify as a covered impact. So I was not in a position in May to signal that. Now looking forward, there could be tiny payments, which will not [ drop ] the needle to the extent that we've seen a high single-digit amount here. And indeed, with regard to exceptionals, the Widnes side, and I think you see that in our quarterly report also quite neatly with the EUR 60 million, EUR 61 million value is for the closure of the Widnes side, as Matthias has mentioned.

We will now take the next question from the line of Peter Spengler from DZ Bank.

I have three. First is you reported positive free cash flow in the second quarter. Could you provide an outlook on the expected free cash flow development in the second half? And on your production network, you have already taken steps to optimize your production network, obviously. What are further opportunities? Do you see, let's say, more levers that you can pull actually to increase efficiency further? And then last question, what do you expect from German government and EU Commission to improve your situation in Germany and in Europe competitive-wise?

Well, our Chief Cash Flow Officer, Oliver, will address your question on this one. Let me take network and German government. I mean you see that we ongoingly address productivity where we find it. On the production network, we basically started end of last year, beginning of this year and now come to a conclusion. We reviewed also site-by-site everything in Germany and have at least seen here that there is no plant that we need to address at this point in time, but we accelerated the hexane oxidization. So you see that we really review site-by-site.

And we will, of course, do that on an ongoing basis. That is operational optimization work that you should do, and we are doing it. And of course, I mean, in such an environment, my clear ambition is in tough times, you have to take always the opportunity for sizing opportunities. So you should not assume that with the actions we have announced today, we stop going for further opportunities. Technologies are evolving.

We see a lot of new technologies through especially artificial intelligence that is more and more entering our industry. Of course, if you work on AI, you need to get the algorithms to work, feed with data and then see what opportunities arise out of that. So we've done the forward cost reduction in SG&A. We are now addressing network opportunity.

And you can be assured that if we find further opportunities, we will make them happen. Now on the German government, I mean, I'm extremely happy that they don't only talk and make big statements like we have seen before or make further laws and rules that nobody needs like we've seen before. They take action. Of course, in the media and press, there's always in Germany, a lot of criticism.

In Germany, you always have criticism on everything. But from an economic standpoint, it's the first time that we see that actions are happening. We also see that this is now entering into the doings. So the new government has announced their plan. They are now implementing their plan. They have passed respective approvals. And now we see that they are pushing hard to get that into the industry. Of course, that takes some time, but the infrastructure projects right now are being started.

Of course, before that ends in the order book, it would still take 1 to 2 or 3 quarters. But we see that the government is clearly here on the acceleration path. And therefore, I'm, first of all, very happy that Germany is taking actions again. I think you guys in Europe, in London, Paris, Switzerland, wherever you sit, you suddenly see that our German Chancellor is again doing something and not hiding himself.

So he is active. He wants to contribute. He wants to solve problems, turn them into solutions. And the same we see from the industry side, things are happening. Of course, it takes always some time until actions leads to reactions and momentum. But the positive thing is we see that here, fortunately, things are moving in the right direction. And with this, again, I pass the ball to Oliver.

Matthias, thank you. Peter, I'd like to emphasize two or three points here with regard to free cash flow and specifically your question on the development in the second half. I think in the second quarter, it was pretty apparent and Matthias has mentioned that in the beginning that we are indeed putting a lot of focus and a lot of effort into tightly managing the cash flow here.

You could see that with regard to our collections, with regard to the volume management in our inventories. I cannot, however, close my eyes when I look at the fact what the operational environment is currently. And if I compare it to last year, also seasonality has to be taken into consideration. So if you look back in the numbers, we had a negative free cash flow in the first half last year as well, ended last year with a positive free cash flow of [ EUR 188 million ] and had a huge seasonal inflow in the fourth quarter. We'll be working with a lot of energy into the direction of showcasing a positive free cash flow here. But with the uncertainty that is out there, I hope for your understanding that I cannot give you a precise guidance.

Peter, looking forward to do road show with you in Frankfurt, so you see us next week. Next question please.

We will now take the next question from the line of Chetan Udeshi from JPMorgan.

I was listening, Matthias, to your commentary, and it seems you highlighted the competition point from China, imports, et cetera, to a different degree across all your divisions. I'm just curious, you talk about demand weakness, and this is not just relevant for LANXESS but probably for the whole sector. How much of the weakness we see in the sector is a function of just higher competition rather than just maybe not as bad a demand? And if that's the case, why would that change next year?

Well, I think, I made the statement that, first, customers no longer order on a 2 to 3 months approach like they have done for decades with a few exceptions, financial crisis, Southern European debt crisis and pandemic, but all of them lasted basically 1, 2 quarters. What we see right now is that -- and this is obvious when you have tariffs of 145%, 50%, what have you, you basically don't order, you wait for better tariffs to come.

And therefore, orders and order books have moved from 2 to 3 months pattern to daily, weekly patterns. I followed my colleagues in other industries in their reporting season. I followed some of my peers in the chemical space and talked to a few guys here and there. This is pretty much the same everywhere. So we see that from the customer side, people are reluctant and are very conservative. They don't buy more, they buy rather less. It's being bought on short notice.

Second, I've stated that inventories are being reduced nearly everywhere. So people produce less in uncertain times and also consumers buy less in uncertain times. We see that saving rates in many countries are on the high side and not on the low side. So of course, it needs positivism. It needs certainty, et cetera, to ignite against spendings. Spending levels are low in the consumer side, on the industry side. And that's the reason why we clearly consider that this current order pattern is not the new normal and that it's going to improve in the years going forward, but we need to have a little bit more positivism, and that's the name of the game. I hope that clarifies your question. Next question please.

We will now take the next question from the line of Christian Bell from UBS.

Can you hear me okay?

I hear you loud and clearly, Mr. Bell.

So I just have a couple of questions. If I could ask the first one and then maybe come back to me for the second one, that would be great. So firstly, it would be good to get a clearer picture of your outlook for the second half, particularly by segment based on the midpoint of full year guidance of EUR 550 million and frankly applying the commentary by segment, I think that implies for the second half. And Intermediates weakness is anticipated to persist through the second half, which I can understand. But then in Additives, that's expected to show improvement or at least remain flat. And then in Consumer Protection, there's a notable slowdown from the first half. So firstly, like I said, could you sort of confirm or correct me if I'm wrong? And in either case, provide your thinking on the assumptions for the second half, particularly for Additives and Consumer Protection. And if you can break that into third and sort of fourth quarter, that would be even better.

Well, Mr. Bell, thank you very much for your question on volumes momentum by segment and by quarter. We don't do that in general. We've given a company guidance on the entire group. I don't guide by segments on pricing and volume, these communication details. We always provide for the quarter. I've given you qualitative guidance by segment how we see profitability. I think that should give you as much color as possible.

And so please look into the presentation and reassess again how we qualitative-wise have commented on Consumer Protection, Additives and Intermediates and how we addressed our full year. And I think with this, you have the best information we provide at group level at this point in time.

Okay. Another way to ask that, I guess, are you sort of -- so I guess you called out auto, agro and construction as being the sort of the most impacted end markets through the first half. What are you sort of expecting from those in the second half? Is it sort of -- some sort of recovery or largely sort of a continuation of what the current environment is? And then outside of those segments, are you -- what are you kind of expecting there?

Well, I come back to what I stated earlier on, we do assume that Q3 will be another very tough quarter driven by normal seasonality you have in the industry. Third quarter is always one where you have due to the holiday season in July and especially August, less momentum because many of our end industries like car industries go for production shutdowns in course of August.

And therefore, you have always a little more milder activity -- production activity in the third quarter. And I've stressed very clearly that the tariff escalation that basically occurred within Q2 still leaves its mark in the order pattern of the third quarter. I alluded to the fact that in the fourth quarter, we should not see government stimulus coming from Germany. But we see that already one and the other customer are starting to prepare for an order pickup in '26. And therefore, we do assume that there will be an order uptick in the fourth quarter in some of the industries that will benefit from what is being decided at this point in time. That's the communication I've made earlier in this conference call.

Okay, great. And then my second question sort of relates to the margin decline in Additives and Intermediates in the second quarter there. So are you able to sort of explain what a typical EBITDA drop-through would be for -- like what a typical EBITDA drop-through would be on incremental sales that would potentially help, give a sense of how much of the fall in EBITDA was due to operating leverage versus other impacts such as in energy costs?

Oliver, do you want to take this?

Yes. Unfortunately, that is also a question where I prefer not to provide a drop-through to EBITDA rule of thumb here by segment. I'm referring to what Matthias has already stressed. We're happy to take that up in the aftermath with you trying to build a bridge to help you model your expectations, but we won't get to the point where I guide you to a segment or a business drop-through on EBITDA.

We will now take the next question from the line of Tristan Lamotte from Deutsche Bank.

First one is there's a peer who reported yesterday that July was a bit better than June. I'm just wondering, is that something that you're echoing? And is there a potential that Q2 saw some destocking, which therefore, might not continue into Q3? And the second question is, I was wondering about the outlook for Envalior. I'm just wondering how much we should read across from the weak forward-looking outlook Celanese gave, if you could comment on that.

Tristan, thank you for both questions. I will take them one by one, and Oliver will step in if he has something to add. I will not be specific now on month trading, how was July or the first week of August. My feedback to you is, as we have guided Q3, we communicated it will be weaker than Q2, and I've given the reasons behind that.

We might have seen some preordering in March, Q1 on the -- which burdened potentially a little Q2 at the beginning. But by and large, we do see that Q2 and Q3 are the tough quarters for the industry. So if there are different, one exception making different comments, so be it. But our view on the industry is Q3 is going to be another tough quarter for the industry. I think this is the reason why most chems and automotive companies, capital goods companies have adjusted their guidance for the full year.

If all of them would have seen that suddenly strong momentum is there, I think most of the companies would not have taken down their guidance. But the opposite is the case. I think most of our end industries see Q2, Q3 are tough quarters. And that led to the fact that across industries and specifically in chems most of the companies took down their yearly outlook, and we are no different.

Envalior, if you look at the year-to-date numbers that we have reported, and I here can only allude to the equity consolidation line in our P&L. We posted last year a negative number of EUR 73 million. And if you look at the first half '25, it's a negative EUR 59 million. So from that number, you should conclude that Envalior has improved. I back test that with the analyst reports of 3 rating agencies that have all communicated Envalior is going into the improved profitability direction in course '25. So if I look into my financial numbers in what we have reported to you, this is pretty much confirmed. I hope that clarifies your question on Envalior. If there's anything else, please let us know. Next question please.

We will now take the next question from the line of.

Thomas Wrigglesworth from Morgan Stanley.

Two questions, if I may. Firstly, just on clarification around the guidance and the free cash flow commentary. It sounds like there is some optimism for '26, and therefore, the business will be positioned for growth for '26. So you're not going to run aggressively hard on inventories into year-end because you want to pick up that '26. Is that the message that I've received?

The second one is just -- sorry, there's an alarm going off in the background. The second one is on credit rating agencies. Could you just give us an update as to the discussions you're having with credit rating agencies? How -- what are they looking at? Are they giving you any leniency for the uncertainty, which is obviously unprecedented in the market today in terms of how they look at the cash flow potential of the business?

So Tom, wow, on working capital, you are raising a very operational and to some extent, also operational strategic and resource allocation question. That's exactly the discussion you internally have to deal with and to discuss. Our view is, and we get signals from customers that some of them are preparing for more momentum in '26.

So exactly this discussion we are going to have internally if we are prepared for supplying this in a speedy way. And then, of course, you have to be humble on further reduction on inventories. If you see that the momentum remains depressed, you can clean up the balance sheet at year-end. So this is exactly the discussion we are going to have with our business, I would say, starting in 6 to 8 weeks from now because then we take the call on with what kind of inventory levels will we end fiscal 2025. And I think you've heard our saying on how we look at Q3 and Q4 and how we look into '26. So exactly on battery side, this decision is going to be discussed or prepared and then finalized in around about October this year. Then on credits and credit rating, rating agencies, I mean, who is the best expert in the room, Oliver, go on.

Matthias, thank you. Tom, look, we do have a very close exchange and frequent exchange with the two rating agencies, Moody's and Scope covering us. The way it normally works is that you have quarterly discussions and then you have like a longer, more in-depth discussion typically over the summertime, which we have already had.

I think when you look at the Scope rating, you have seen a change in that rating just a week ago. They have withdrawn our negative outlook and upped our rating. And I think the fact that the -- there is free access or at least payable access to the research also from Moody's. And when you read that, you can conclude that they recognize and appreciate the improvements that we've achieved in our portfolio, in our cost structure, and they also see the efforts and success with regard to cash flow.

So the fact that we have been provided with the negative outlook with the typical grace period and the agencies are apparently looking at us and are appreciating the improvement speaks for itself. So that's as much as I would like to answer that question.

Thank you, Tom, and see you in London soon. Next question please.

[Operator Instructions] We will now take the next question from the line of Oliver Schwarz from Warburg Research.

Two questions. First one is on regional sales distribution. A couple of your peers recorded on a bit different regional pattern than you did. They said, and it also showed in the numbers that business in Asia was holding up, wouldn't say pretty well, but wasn't as affected as other regions by the downturn. That doesn't seem to be the case in -- when it comes to LANXESS' especially when looking at Q2 results.

Can you fill me in what's the reason for that? Is that due to the divestment of the Urethane system? Is that product specific? And in general, what's your outlook on your Asian business, please?

Second question would be about the outlook. I appreciate that the uncertainty has been mounting up during the year. And hence, with 7 months in, the spread in the brackets of your new guidance has become even a bit larger than at the beginning of the year. However, could you fill me in what bring you to the upper end of the guidance versus the lower end of the guidance range?

Well, let me take them one by one. I think we -- our comments have been on the regional sites for the group. Already at the March reporting or in May reporting that if you look into the regions, we used to have a good momentum in the United States. We had a weak demand in Europe, and we had a weak demand, especially in '24 and '25 in Asia, while Asia modestly stabilized and then modestly improved.

I think that was the tonality we had. And this all-in-all has only changed for the United States. Here, we see softening. It's still positive, but softening. Europe remaining weak. In Asia, the picture is different in terms of countries. We see good momentum in India, good growth. Whilst in China, we see pricing erosion. So please take note of the fact our local production in China is very humble.

We export to China. For the exporting to China, look at, for instance, our flame retardant business. We don't produce locally. We sell to China. And of course, here from the United States, you had a lot of turbulences on tariffs. If margins erode when you export to China, you are more humble in your distribution. And therefore, all-in-all, if you look into Asia, we see that there is market-wise, a very modest improvement if you look at entire Asia.

If you look at specifically into Asia, into the two great countries, you clearly see the positive momentum in India, and we have here reasonable local production. And as regards to China, I think, I made my comments. As regards to the guidance, upper or lower end, I would look to Oliver and let him comment on this.

Well, typically, with the uncertainty, the general answer would be, the earlier we get stability in the tariffs dispute, the more it would help us because it would probably fuel some demand. If there is a further escalation in any of the geopolitical tensions or there are new negative ideas that are being discussed in the tariffs, it would rather burden us and bring us to the lower end.

Should the European Union decide to speed up antidumping processes, for example, against Chinese products, it would help us. So there are many factors that we can talk about that would bring us to the upper and lower end. And the fact that we've decided to expand the bandwidth just gives you a feeling for the uncertainty that indeed we're feeling here. So many factors, Oliver.

We will now take the next question from the line of from Reuben Scherzer from AMG TimesSquare Capital.

Can you hear me?

Yes, Reuben, we can hear you.

Okay. My question is, what's been the overall group capacity volume reduction from the period before the forward cost saving program was put into motion and what it will be after the cost saving program announced today will be complete? If you could ballpark, and I'm sure like down to the exact percent is unreasonable, but is it like a 25% volume reduction? Is it less, more?

Well, let's be specific. Forward was predominantly an SG&A exercise. So with forward, I think I've stressed that at that point in time -- we clearly stressed that forward is not reducing our capacities worldwide, but it's improving our productivity and is reducing our admin costs, which was visible in the P&L in the functional line administration.

With forward, of course, we announced two potential site closures. One was hexane oxidation and the other one was chrome oxide. On chrome oxides, we said this might be divested or closed. Eventually, we decided last year to keep it running because we basically reduced our entire admin costs in this business by 20 percentage points. So this was a severe cost cutting we did in that area.

And on top of that, we renegotiated a supplier contract of a big raw material, sodium dichromate by a substantial amount of money and the business which was completely underwater turned into good profitability and is contributing now on. So chrome oxide capacity was not adjusted. The business was not sold but kept. And with hexane oxidation, we've now announced that this will be closed. Hexane oxidation is a capacity of around about 30, 35 kilotons.

So in the overall picture of Advanced Industrial Intermediates, this is not a big number. For the business itself, we basically destroy a business that had no cash returns that was, by and large, EBITDA zero or even slightly negative. And therefore, we improved profitability, we reduced cash absorption, but we don't significantly change the capacity.

As far as Widnes is concerned, which is now announced for closure, I've stated that this plant was underutilized in the past. We reduced the capacity in the market, but still take the products in our remaining sites. So it does not reduce our structural profitability level. El Dorado and Agrochems are efficiency gains, but not capacity adjustments. I hope that clarifies your question. Any questions left?

There are no further questions on the phone. Please continue.

Well, if there are no further questions, then I thank you for your participation. We are, of course, there for you. I know it's in most of the cities summertime. So enjoy your summer break. Oliver and I are ready to take your calls. Investor Relations is there. I will be on roadshow next week.

So if there's any further follow-up and need for discussion, we are prepared to answer all your questions. Thank you for your attention. Bye-bye. See you on the roads until next time. Thank you from LANXESS.

This concludes today's conference call. Thank you for participating. You may now [Audio Gap].

Good morning, ladies and gentlemen. This is a cordial welcome to our Q2 press conference. My name is Claus Zemke, and we have got Matthias Zachert here; and Oliver Stratmann, CFO, and they will give you an update on Q2 and give you an outlook to the remainder of the year. Thank you very much for joining. And we are having this press conference in the German language. It will be translated into English.

And after Mr. Zachert's presentation, you may ask questions, and I'll explain how to do that later. And for legal reasons, I have to point out that this is a live stream via the Internet. Mr. Zachert, the floor is yours.

Cordial welcome, ladies and gentlemen. Thank you very much for joining. And I mean, this is really something because it's lovely weather outside. And you have chosen to attend this press conference. So you have heard and probably also reported about the fact that the German and European industry is having a challenging time. The automobile companies have already announced declining sales. The same is true of mechanical engineering sector and also the chemical industry is hard hit.

Nearly all the companies in Europe and Germany had to downward revise their guidance, and we were hit likewise, but we are counteracting the development. So let me talk about the second quarter and cash flow could be worked out in a positive way, those sales and earnings were below prior year, and we have been able to reduce our net debt, and we are adjusting our global production network, and we are focusing in on the consumer demand, which has deteriorated, and therefore, we had to adjust our guidance.

Now let me talk about the figures. Slide 4 show sales, minus 13%. But I have to point out that we no longer consolidate in this figure the Urethane business, which at the end of the first quarter was sold to the UBE Corporation. And that means that there is a technical decline in the amount of 4%, but the remaining decline in sales is attributable to currency and interest developments. And EBITDA is minus 17% over prior year.

Let me now talk about Consumer Protection. And here, we see that in the second quarter, the sales were declining, but we had a better product mix. And we also continued with our forward cost reduction program, and that meant that EBIT was increased by 9%. Consumer Protection being the most resilient segment of our company as expected. When it comes to Specialty Additives, here, things are driven by a weak construction industry and higher energy costs.

And that means there's an impact by around about minus 7% in sales and Advanced Intermediates, again, a weak industrial demand and the segment, well, has to face the fierce competition from China. And I have already announced previously that there is a lot of pressure because the Chinese companies are no longer selling their products in the American market and instead in the European markets. And they have reduced their prices tremendously. And we feel that really turns upside down the chemicals industry in Europe and Germany.

Slide 6. This is the balance sheet. And here, we can say that EUR 31 million cash flow is a positive contribution. Normally, the first 2 quarters of our group would be a time of absorption of cash because we are stocking up and building our working capital, but this has not happened in the second quarter. And therefore, we did a good job in this respect. And at the same time, divesting the Urethane business meant that we have now a reduction of debt from EUR 2.5 billion to EUR 2.1 billion.

And now let me talk about the production network, which is being optimized. And here, we go through the individual global facilities, and we adapt the facilities to market conditions. And therefore, we are doing each and everything that if and when demand returns, we will be able to do it and do business in an efficient way. And we, by the end of 2025, will be done with the adjustments and also by the end of 2026.

So we have zoomed in on El Dorado, production of bromine products, and we will streamline activities there to capture more potential. And Widnes is going to be closed in the course of 2026, and we will have completed this project by the end of 2026. So the products will be produced elsewhere. So the sales will continue, but the complexity and cost of production are going to be reduced. Krefeld-Uerdingen, I mentioned already last year, that a facility is going to be closed down, and this is the hexane oxidation facility. Originally, we wanted to do that by March 2026. But now we revised the contracts and the implementation, i.e., the closure will happen by the end of the second quarter in 2025.

So obviously, we have already completed this plan. Let me now talk about the outlook of the individual segments. I mean we are all cognizant of the geopolitical tensions and the uncertainties on the global markets. They are really ginormous, and they are impacting the activities of our segments. But we believe that Consumer Protection will be best positioned to handle the developments, and we wanted this to become a resilient segment, and it is resilient.

And we believe that we will be slightly above prior year results this year. And Specialty Additives are more impacted by the weak construction and automotive industries. And we feel that we will be more or less on prior year levels and Advanced Intermediates is really having a tough time. There is fierce competition with China. And in view of a market demand weaknesses, but also because of the stronger competition from Asia and the massive overcapacities there.

And well, maybe I can put it in a course way that they are really dumping it on the European markets. And they point to the other industries that suffer from the same activities are also suffering very much. And therefore, we welcome the respective stimulus package, the infrastructure stimulus program of the federal government. This goes to show that the politicians have understood that we need some action in order to increase our competitiveness and to do something about the economic framework, general conditions.

And we believe that in 2026, we will be able to benefit from a better economic environment. So ladies and gentlemen, what is our guidance for the year? And you can refer to Slide 11 of the presentation. So you see there are general market developments, but I will not discuss the details thereof because you're all aware of them anyway, aren't you? So there is a lot of uncertainty. There is huge volatility and short-termism, left, right and center. And this is also true of the ordering behavior, particularly in the chemical industry.

And therefore, the guidance is being adjusted on the basis of the market performance of EUR 520 million to EUR 580 million. And we also take into consideration the force majeure of Chlorine supplier, and that came in, in the amount of EUR 10 million. Factored in, in that figure, in that guidance range that we have given. Let me now conclude by saying the following LANXESS, we are ready. And we know that after a business downturn, there will be an uptick again, and there will be an economic upturn for sure.

And we believe that over the past 2 years, we have done a lot in order to emerge stronger from these challenging times. Our portfolio is competitive. All our business units have been adjusted. We have consolidated in order to respond to market conditions, and we have got leading positions world over. And therefore, we come from a position of strength. And the structures have been streamlined. The costs have come down. And when the demand will come back, we will be ready with the respective earnings power. So much for what we wanted to share with you on Q2 and well, over to you. You may ask questions now.

Thank you very much, Mr. Zachert. [Operator Instructions]. Mr. [indiscernible] the first question is yours.

Talking about the production network and the measures taken or announced, you brought it forward with respect to Uerdingen, as you said. What about the other 2 sites in U.K. and the United States? Are these measures brought forward there as well? Or is it earlier than what you anticipated? Or could you just give us an idea of where you are time-wise and also the background reasoning for -- because closing production sites with respect to Uerdingen, it's a closure for the others, it's just optimization or partial closure? Or how do we see that or it's adjustment of workflow?

Thank you for your question, Mr. [indiscernible], let me specify what we said. With respect to hexane oxidation in Uerdingen, it's already been announced last year. Now we brought it forward because we did a lot of work with all the issues to make it possible. We spoke to customers and suppliers. We adjusted contracts. And since we did a good job there, at least that's what we think. We now do not want to continue operating a site that is no longer competitive. So we are several months. I think it's 8 months earlier, but we announced it 9 months ago, and now we were able to bring it forward.

U.K. and the U.S., the 2 sites mentioned beforehand, let me specify the backdrop there, too. In Great Britain, Widnes is the site. It's a smaller site, and we are going to close it. We saw during the past couple of months that the site is totally underutilized. We had reached values of 30% to 40% utilization.

And we then, together with our customers, analyzed the situation and also looked at our production network and found out or ask whether we can produce the same products elsewhere and would our customers accept that. This needs to be well prepared, analyzed. You need to go for interaction with the customer base, which is what we did. And it's possible. So we can close the site. It reduces complexity, so we can implement this without harming sales. So it's a win-win situation for everyone.

Looking at the workforce, we contacted our employees, explained everything and everything is done in an orderly fashion. In El Dorado in the United States, we are not talking about a closure. This is one of our major sites where there is a lot of substance. And our engineering team, our global engineering team optimized processes and analyzed flow of energy, looked at processes and analyzed these.

And we found out with all this analysis that the production has room for optimization, and we are going to make use of this potential. So it's not a closure, but an optimization of the site. So that means so much on hexane oxidation and weakness and its optimization and after closure.

So it's the aspect of measures brought forward. You said in case, as you are somewhat earlier than what you thought. And for the other sites, today's announcement is new? Well, it's brought forward for hexane oxidation and El Dorado is new and the preparation will be done this year and the implementation will be effected in 2026.

Maybe one last question on the tariffs because now we know that Trump and the EU have agreed on 15% tariffs and VCI said it's still too high. What's your take of that? How do you think things will be affected at LANXESS? Is that a blow to you, the 15% tariff rate? Could you comment on that?

Thank you, Mr. [indiscernible]. Tariffs, generally speaking, are not helpful for global economy. We have known that for decades. And it actually weighs on everyone's welfare and affluence. So we don't consider this the right way to proceed. And we also see when looking at the economies in Europe, Asia or America that the momentum has weakened and this affects everyone. So this is a consequence of the increased uncertainty as we can observe it in almost all industries. This is detrimental for everyone actually.

Of course, we consider it "positive." We have more security when it comes to planning or we can be more certain. And we think that this will help that there is an agreement and we can use the 15% rate rather than 30%, 50% or whatever else. Nevertheless, the tariffs and the escalation ever since April led to a situation where the second quarter has turned out to be much weaker for all industries. The agreement was only entered into recently, and we will be seeing that the third quarter will be affected by this massive uncertainty.

We've seen 2 quarters characterized by uncertainty, volatility and lack of sales and purchases. And we take it that the industry in Europe will pick up a little bit in Q4 and turn out to be a little more stable, and we will be more certain with respect to planning. But Q2 and Q3 will be heavy going. And then, of course, the third quarter is the holiday quarter you come from France. And you know that in August in the south of Europe, there is less activity to be observed. So we see that the tariffs are anything, but advantageous for the affluence of our world.

And I do hope that all parties can see from the economic data that we return to reasonable strategies and economic policy. Looking at LANXESS, our production expectation for the United States shows that we are rather resilient with respect to the direct impact on us, but the indirect effects of the tariffs on our end industries have considerable effects. I mentioned the automotive industry as I started to speak and you hear that they are strongly affected. The same is true for mechanical engineering and other industries. So the indirect effects are felt in chemical industry and also in LANXESS. Does that answer your questions?

Now we've got a question by Mr. [indiscernible] S&P Global Chemical Week. And he's got technical problems, and therefore, he gave us his questions in writing. And he asked what about China and their overcapacities? And he also asked a question of which sectors are particularly hard hit by this development. And the second question is site closures. Do you have figures how many people will be laid off?

Okay. I'll take your question, site closures to start with hexane oxidation facility, we mentioned figures already last year. So there are around about 65 employees who are affected. And we offered all the members of staff to pick up a different occupation in our company in the region, and most of them accepted that offer. Others will go for early retirement or will leave the enterprise in a socially compatible way. So this is all in an orderly fashion as we would always organize this.

In Widnes, 70 members of staff are affected. It is a minor site. And here, we are still in the process of communicating things to the employees, hexane oxidation. I mean, we have known about the closure for 9 months and in Widnes, this is now only happening. So much for site consolidation. And now your question concerning China. The overcapacities in China, whether this is in the automobile industry or in real estate, other industries as well as the chemicals industry. I mean, we have heard a lot about that before, and the media took it up -- so this is just a reality we have to face over the past 3 to 5 years, China had enormous overcapacity simply because America has become a more difficult market for them. They are now dumping their products on the European markets.

And I hope that the European Commission will take respective action to counteract this trend. And of course, we are impacted by that behavior as well, but you have to be very specific about how to interpret it. Consumer Protection is less impacted. Specialty Additives is impacted by that development and even more so than Consumer Protection, but less than industrial intermediates.

And here, we are more in the upstream sector. And therefore, when it comes to the products, the individual products, we have got more competition from China. And that means that on the demand side, we are affected by volumes. But when it comes to prices, we also are impacted by price pressure. And we are trying to defend our market share, but we have to downwardly adjust our prices. And this is all factored into our quarterly reporting for the second quarter of the year. And I just hope that this answers your question.

Thank you, Mr. [indiscernible]. Are there more questions?

I can't see any requests for the floor. So thank you very much for joining the press conference, greetings from Cologne, and enjoy the rest of the day. Thank you very much, and goodbye.

[Statements in English on this transcript were Spoken by an interpreter present on the live call.]