Operator: Dear, ladies and gentlemen, welcome to the Q1 2021 Results Call of Brenntag SE. At our customer's request, this conference will be recorded. As a reminder, all participants will be in the listen-only mode. After the presentation, there will be an opportunity to ask questions. [Operator Instructions] May I now hand you over to Brenntag's CEO, Mr.

Christian Kohlpaintner. Please go ahead.

Christian Kohlpaintner: Yes, thank you very much. Good afternoon ladies and gentlemen and welcome to our conference call on the first quarter 2021 results of Brenntag SE. My name is Christian Kohlpaintner and I'm here together with our CFO, Georg Müller.

Together, we will walk you through our business development in the first month of this year. I would like to start with a highlights and Georg will provide further details on the financials as always. Afterwards Georg and I are available for your questions after our presentation. Ladies and gentlemen Brenntag started very well into 2021 and achieved very strong results in the first quarter. The group generated an operating gross profit of €764.5 million which is on a constant currency basis an increase of 7.4% compared to the first quarter of 2020.

Operating EBITDA reached €300.3 million on a constant currency basis this is an increase of 20.7% compared to the already strong first quarter 2020. Free cash flow was solid with €75.6 million and our earnings per share stood at €0.63 in the first quarter. Regarding our non-financial performance we continued to achieve the best safety performance ever also in the first quarter of this year. We are very satisfied with these strong results and I underline once again the strength of our business model as well as the important part Brenntag played in global distribution markets particularly in difficult macroeconomic condition. In January this year, we went live with our operating model and our two new global divisions Brenntag Essentials and Brenntag Specialties.

We will walk you through the details of the financial performance of our divisions later. Also in the first quarter, we continued to consequently work on project Brenntag and on the step-by-step implementations of the various initiatives and we continued to make very good progress here. Finally, we confirm our operating EBITDA full year guidance for 2021 instated in March. We expect the positive earnings development in 2021 and confirm that operating EBITDA will be in the range of €1.08 billion to €1.18 billion. Ladies and gentlemen, in course of last quarter, we closed three acquisitions.

Comelt in Italy, ICL Packed in the United Kingdom and Alpha Chemical in Canada with a total enterprise value of €59.2 million. Regarding our M&A activity in 2021 and beyond, we stick to our proven approach. We intend to spend €200 million to €250 million on M&A per year. And we will focus on specific geographies in emerging markets, and in particular in China. Also, we look for targets operating in specific industry and targets delivering a more meaningful operating EBITDA contribution.

Our acquisition of Zhongbai Xingye in Mainland China was the first important step in this direction, as it meets all three requirements that our [indiscernible] approach is focusing on. Zhongbai Xingye distributes a variety of specialty food ingredients including dairy products and proteins. With the first pick, we acquired two-thirds of the company for an enterprise value of €90 million. The second tranche to gain 100% ownership is intended for 2024. Ladies and gentlemen, let me now provide some color on the overall market conditions in the first quarter of this year.

The trends and the overall business dynamics we saw towards the end of 2020 also continued into the first month of 2021. The COVID-19 pandemic is still with us. But with our global crisis management in place, we successfully limited the impacts of the pandemic and protected the health and safety of our employees and our business partners. In the first quarter, supply chains came under severe pressure all over the globe due to a number of cumulative incidents. Amongst others, the ice storm in the United States, the blockage of the Suez Canal and the ongoing container shortages heavily impacted market conditions and global supply chains in the past quarter.

Moreover, a multitude of suppliers suffered from production outages leading to product shortages and allocations. In that respect, we had to deal with significant supply chain challenges, but navigated through them prudently. And with this, I hand over to Georg who will talk in more detail about our financial performance in the past month.

Georg Müller: Thanks, Christian and good afternoon to all participants. I will speak about the key financial figures for the first quarter 2021 and let me start with the development of operating EBITDA.

On Slide 7, you see the bridge of operating EBITDA from the first quarter 2020 to the first quarter 2021. This structure to bridge in a different way than the bridge you have seen on prior result releases. We went live with the two global divisions Brenntag Essentials and Brenntag Specialties and we structure the bridge now around these divisions. Operating EBITDA in the first quarter last year amounted to €263 million. So translational foreign exchange effect amounted to a negative €14 million.

Our acquisitions contributed €3 million to the EBITDA growth. Our division Brenntag Essentials reported outstanding results, with an organic growth rate of 29% and a contribution of €44 million to the growth of the quarter. Brenntag Specialties also performed strongly with an organic growth rate of 7% equaling additional €7 million of EBITDA. Similar to the past all other segments comprise central functions of the group and the operations of Brenntag international Chemicals. All this adds up to €300 million of operating EBITDA in the first quarter of this year.

On group levels we reported operating EBITDA growth of 19% organically, which represents a very strong performance. Product availability and the ability to deliver promptly and reliably were key for our success as our highly valued by our customers. We continue to benefit from group margin management and were able to overcompensate effects from supply chain challenges by higher operating gross profit per unit. Before I talk about the financial performance of the division, let me remind you of the setup and the characteristics of our new operating model. Since the beginning of this year, we steered the company in two global divisions, Brenntag Essentials and Brenntag Specialties.

So new operating model with its distinct market approach enables us to better service our business partners and best meet their changing needs. Both divisions address attractive and growing markets. Brenntag Essentials is the agile, lean and efficient distribution partner for our customers and suppliers in local geographies, and markets a board portfolio of process chemicals across a wide range of industries. The division stands for local market expertise and customer proximity and it ensures smooth and cost efficient supply chain. Brenntag Specialties builds on our position as the largest specialty chemical distributor worldwide and focuses on six selected customer industry.

These are Nutrition, Pharma, Personal Care, HI&I, Material Science, Water Treatment and also Lubricants. The portfolio of Brenntag Specialties consists of ingredients and value-added services that are directly applied in the production of our customers and products. And coming to the divisional results, Brenntag Essentials achieved outstanding results this quarter. The division reached an operating gross profit of €472 million and reported very strong operating EBITDA of €194 million. This is an increase of almost 30% to prior year's Q1.

Due to the extraordinary conditions regarding the pandemic and pressure on global supply chains. Our ability to maintain customer supply clearly paid-off. All geographic segments contributed to this positive performance. This Brenntag Essentials in EMEA and Brenntag Essentials in North America in particular making a significant contribution to the divisions gross. Operating gross profit per unit developed the best previous year's level and supported to strong conversion ratio of 41%.

In North America, the stabilization of the oil and gas industry is ongoing, but it is still on low levels. Brenntag Specialties also reported very positive results in the first quarter. This division which an operating gross profit of €284 million and reported an operating EBITDA of almost €120 million. In Brenntag Specialties, product availability as the ability to service our customers were key in Q1. EMEA and Asia Pacific showed a particularly strong performance across all industries.

Brenntag Specialties supported and EBITDA conversion of around 42%. In summary, we are very satisfied with the performance of Brenntag Essentials and Brenntag Specialties. Both divisions contributed to these very strong results and post their strength in a challenging environment. On the following Slides 11 and 12 it provides a full set of figures for Brenntag Essentials and Brenntag Specialties as well as figures for the regional segments in each division. This is mostly for your reference, but let me point out one thing.

On Page 11 besides operating gross profit and operating EBITDA, we also show operating EBITDA for the divisions for the first time. But the Brenntag Essentials certain CapEx in it and therefore does carry some level of depreciation. So business model of Brenntag Specialties is particularly excellent. For Brenntag Specialties operating EBITDA for the quarter totaled €120 million and operating EBITDA is very close to that number at €112 million. This demonstrates the high cash conversion for this business.

And moving forward to Pages to Slide 13. I will particularly focus on the lines below operating EBITDA. We reports special items amounting to an expense of €71 million so quite substantial which are on the one hand related to our ongoing activities for projects Brenntag. On the other hand, special items include a provision for likely alcohol tax payments. This risk has consistently been reported in our risk report, we now received a text assessment in the amount of €64 million.

So German Authorities claim documentation mistakes regarding the selling of the naturated alcohol. That is alcohol that is used outside food and drinking applications. Let me be clear, there are no concerns raised about the proper use of these alcohol products, the case is about documentation. So selling of the naturated alcohol has comprehensive documentation requirements. The authorities claim mistakes in handling the documentation.

We disagree with the assessment by the authorities, we are currently analyzing the final reasoning presented by them very, very likely we will file an appeal. Then we get back to the other P&L lines. Depreciation amounted to €61 million slightly below the first quarter last year. Financial results amounted to net expense of €18 million. Finally, profit after tax came in at around €100 million in Q1 earnings per share at €0.63 cents and that compares to €0.74 cents a year ago.

The reduction is driven by the special items. The cash flow has again developed solidly in the first quarter, we reported the free cash flow of €75 million compared to the extremely strong free cash flow in Q1 last year. So reduction is driven by the outflow for working capital resulting from higher chemical prices. And I'll come back to that when I speak about working capital. Our net financial liabilities amounted to about €1.5 billion at the end of the first quarter about stable compared to the end of 2020.

Our leverage by this net debt to operating EBITDA also remained stable at 1.3 times. Working capital amounted to €1,540 million at the end of the quarter and that compares to €1.3 billion at the end of last year. This is an increase of slightly more than €200 million and it is mainly driven by higher spent for working capital due to higher chemical prices. When we look at working capital management quality, we do note that we turn to working capital 8.7 times which is very strong compared to 7.3 times that we had an average over last year. In summary, we are very satisfied with the financial results for the first quarter.

We delivered very strong earnings growth and a solid free cash flow which provides financial flexibility for the group. I hand the presentation back to Christian.

Christian Kohlpaintner: Thank you, Georg. As mentioned already at the beginning of this call. We continued to work on implementing the various initiatives of project Brenntag and made very good progress in the implementation also in the first quarter of this year.

We already talked about the successful go live of our two divisions and we have seen our new external reporting structure. Above and beyond we have started to roll-out measures of our new more efficient and differentiated go-to-market approach leading to an even closer alignment with our customers and suppliers needs. We also reduced complexity and increased customer proximity by further optimizing our site network. In total, we have identified, detailed and rolled-out almost 1,000 different measures in connection with project Brenntag implemented a global monitoring and tracking with tools. Strong line management involvement ensures the appropriate focus on the execution of these measures.

The last quarter, we were again able to increase our working capital return. As Georg have mentioned returned working capital 8.7 times, which is a strong improvement compared to 7.3 times at the end of 2020. Since the initiation of our program, we’ve reduced around 350 jobs out of our workforce. Also, we have already closed more than 50 sites globally since the implementation started. Currently and we are in Phase 3 of the implementation of project Brenntag.

As announced during our full year 2020 results call. We will provide detailed information on the operating EBITDA contribution from project Brenntag when entering into the next phase of the implementation after the second quarter. Ladies and gentlemen, besides operational and financial topics, we have some other important aspects playing a crucial role within Brenntag. First, I want to talk about our efforts with regards to digitalization. In 2016 -- sorry no.

On the -- on page sorry -- just a moment. In 2016 Brenntag was one of the pioneers in our industry on digital across the globe launching one of the first e-commerce platforms. Since then, we have developed multiple digital solutions and omni-channel model. Now we enter into a new phase to ensure to service our customers best. With Brenntag Connect our global one-stop-shop for our customers.

We offer 1,000s of products now in 16 countries. And you see a significant increase in number of active customers and number of orders on the platform. We are continuously expanding the functionalities of Brenntag Connect. We recognize the increasing speed at which the market is moving and is developing. In addition, our new operating model brings change requirements for our future digital business architecture.

This project Brenntag we have embarked on a significant transformation journey, which also includes digital and IT. Next to them redeem data and analytics as the third core element of our digital transformation journey. We are in the process of detailing out our digital value creation roadmap and our digital operating model to implement our digital business architecture. We have critically evaluated our existing assets and IT programs as well as initiatives against the future needs of our customers and suppliers as well as the requirements for our new operating model. Based on this evaluation, we made necessary amendments across our whole IT portfolio.

These changes leads to a one-time write-off of intangible assets of around €52 million based on current estimates in the second quarter. This is a one-off and non-cash relevant impact. We will provide an update on our digital transformation journey later this year. Ladies and gentlemen, Brenntag is highly committed to continuously improve its sustainability performance and is currently developing a new strategic framework. Sustainability is part of our corporate strategy and corporate culture.

Just two weeks ago, we published our 2020 sustainability report. It presents our performance on the field of sustainability and documents, our global activities and achievements in the areas of safety, environmental protection, supply chain responsibility, employees and social involvement. In 2021, we are re-evaluating our sustainability approach with the aim to develop a comprehensive strategic framework for sustainability in line with our corporate strategy. We consider sustainability aspects as drivers of our business, an important contributors to our growth and the enhanced value creation. Developing new ambitious long-term goals will be part of this comprehensive framework to prioritize our resources to drive the implementation, and to monitor our performance.

As for our digital journey, we will provide a further update on this important topic later this year. Now, ladies and gentlemen, let's come to the outlook for 2021. Against the background of current business development, we confirm our guidance for operating EBITDA to be in a range between €1.08 billion and €1.18 billion for the full year 2021. This guidance includes the uplift from the project Brenntag initiatives as well as M&A contributions. It is based on the assumption at the date of the forecast publication that exchange rates will remain stable.

The COVID-19 pandemic will stay with us in the coming months, particularly India and Brazil face difficult conditions currently and we do see a continued uncertainty in that respect. However, we also expect the recovery of macroeconomic conditions to gain traction in the course of the year. While we assume that supply chains maintain on the stress, the coming months, we feel well positioned to deal with this environment. Ladies and gentlemen, 2021 will be a year of transformation for Brenntag. We focus on the implementation of the measures of our transformation program and stick to our M&A approach with an increased focus on a more sizable target dedicated geographies and industries.

And with this, I would like to conclude the presentation. Now Georg and I are more than happy to answer your questions. Thank you very much.

Operator: Thank you. We will now begin our question-and-answer session.

[Operator Instructions] One moment please for the first question. Our first question comes from Simona Sarli, Bank of America. Your line is now open.

Simona Sarli: Yes, good afternoon and thank you very much gentlemen for the presentation. I have one question.

You reported very solid growth in conversion ratio in North America in its potential. While if we look at the financials for Specialty and the conversion ratio not that positive is actually declining year-over-year. So it seems to me that you've benefited from supply chain constraints in essential while in Specialty probably were impacted could you maybe explain the reason for the different trends in this region for Specialty and Essentials? Thank you.

Christian Kohlpaintner: Yes, I think I will start and then maybe Georg is adding to it. I mean, the first quarter has been a very special quarter when it comes to managing the supply chains.

I mentioned before we had the ice storm in particular in the United States. We had all the other effects I've mentioned also the increased shortages in containers. And managing that supply chain of course, was done extremely well by Essentials people and to be the harvesting on our capability to deliver to our customers. In North America, the Specialties business had also some special effects in the first quarter, which are impacting the growth rate we have been seeing in particular. So, the conversion ratio so these are one-time special effects we saw in the first quarter.

Georg Müller: Nothing more material to add maybe I should point out that the segment Simona you are hitting under scrutiny so Specialties America is relatively limited segment in the overall scheme. So out of the say close to €800 million GP that the group generates a quarter 10% a little bit more than 10% in that specific segment. The gross profit is stable almost stable, so many customer industries in that segment developed well There's also some lubricants business in there that actually still prior to pandemic in January, February, last year had a pretty good one, which due to the pandemic this year, didn't really repeat. And then what Christian already mentioned, when you make some move from to EBITDA, there is a little bit of income netted against expenses last year that didn't reoccur and some higher expenses this year, but in a small segment, this can easily lead to some volatile gross rate.

Simona Sarli: Okay, thank you.

And can I ask you, how should we think about the conversion ratio through the year for Essentials and for Specialties? Thanks.

Christian Kohlpaintner: And you see us -- Simona you see us hesitating a little bit, this will to a fair degree depends on market circumstances on the gross profit pattern side, so Q1 conversion ratios to benefit from market circumstances. So we need to take a prognosis for how long these market circumstances continue. On the other hand, we will have savings from project Brenntag kicking in. So if you permit the rough answer, I would say, Q1 conversion ratios are probably good conversion ratios for the full year maybe a little bit at the higher end on what you can expect for the full year.

Simona Sarli: Thank you. Our next question comes from Chetan Udeshi, JPMorgan. Your line is now open.

Chetan Udeshi: Hi, just a couple of questions from my side. The first question was on the contribution from project Brenntag.

Are you telling us there was not material contribution in Q1 because the way I think about it is you talked about PPC job cuts already happening, 50 sites have been closed. But then when I look at your OpEx, OpEx is still lack on a constant currency basis, we doesn’t feel like you have seen any real benefit of project Brenntag in Q1 and I'm not sure why? Maybe can you help us understand that. And second question was just coming back to the guidance. I mean, I understand your point on GP per unit, probably not there is a bit of uncertainty on how long it lasts at this level or given that you, you also mentioned previously that you also have the ramp up of project Brenntag contribution. Why are you guys not a bit more confident in terms of 2021 outlook given the Q1 run rate is already €300 million per year, which should in theory such as that is the top end of the guidance should be achievable even if one believes some moderation through rest of the year?

Christian Kohlpaintner: Yes, I will take the first question and then Georg is taking the second one.

I mean, there has been impacts of a project Brenntag that is clearly conceived from the numbers we are showing to you I mean, in fact that’s really continuing our site network optimization. So when we spoke last time, we were talking about 30 sites being closed. Now it's already 50 out of this 100. So we're making excellent progress there. Also, when it comes to the structural reductions in our headcount, we have now about 350 positions eliminated.

And so from that perspective, we are actually exactly where we wanted to be as far as Project Brenntag contributions is concerned. OpEx there are many moving parts and OpEx you have logistic costs, you have many other aspects going into that. So it would be caution to just to look at this equation, OpEx is Brenntag savings or reduction OpEx. And as we said in the full year result call, we want to stay away from giving you a quarterly message about where we stand in Project Brenntag quantitatively. We want to do this as we move from face-to-face because these are the -- for us the more relevant review phases than we let’s say the quarterly impacts we are looking at it.

So I think overall this project Brenntag we are making very good progress actually what we expected and within the schedule. So from that perspective, I hope we can remove your constraints that there are no impacts of project Brenntag in this rather strong performance we had the first quarter.

Georg Müller: Chetan, good afternoon. Thanks for your question also on the guidance. And we issued a guidance this year despite uncertain market circumstances pretty early in the year already in March deviating from past practice issued quantitative guidance for operating EBITDA.

Yes, Q1 was strong, no question, but there was a little bit also a level of uncertainty. You do see, I think very few companies changing guidance only based on Q1 results. So we would more appreciate to take a steady approach to raise the -- for developments over the next month, the next quarter and then take a more fundamental approach. It feels too volatile to change guidance based on each quarter's results.

Chetan Udeshi: Understood.

Thank you.

Georg Müller: Thanks for the question.

Operator: Our next question comes from Markus Mayer, Baader. Your line is now open.

Markus Mayer: Yes, good afternoon, gentlemen.

One question as well on the conversion rate goes up some basis points and Brenntag Essentials from the first quarter of the year, but only up slightly in the Specialties. Please help me to understand this quarter uplift due to the logistical issues and supply [indiscernible] kind of pricing probably you had was mainly due to their project Brenntag? And if so, as this conversion rate to stay or how is this conversion rate? Thank you.

Christian Kohlpaintner: Yes, I mean, maybe I comment qualitatively and then maybe Georg can click and head on that one. So I think the conversion margin we saw in Essentials this remarkable good one, again, a little bit reflecting the special situations we are currently seeing. And that does not mean that this is only in Q1, I think this circumstances of stress supply chains, product availability, more important than pricing here and our people managing that volatility extremely well.

This has led to I would say a quite good conversion ratio. Also, of course where are we focusing for instance with our site network optimization and Essentials hosting, the asset base that clearly also shows that there are that are the progress noticeable here as well. So I think you wrote it also in your report. And I think one also needs to be clear about it’s Q1 had special circumstances, which continued to last into the second quarter. I frequently said also in other interviews that I even anticipate that we will still see stress in supply chains into the third quarter.

So I think it's now up to us to navigate this prudently. And mostly utilize our position we have in some of the markets as the global leading chemical distributor. On the Specialties side on executive there where we wanted to be in the starting in the beginning, I think we gave you guidance in the Capital Market Update in November, that we anticipate is in the range to be 41% to 43%. So this is a this 42%, we have accomplished in this quarter exactly where we see that Specialties business. And here we are maybe a little less vulnerable to swings in demands or stress within supply chains when it comes to that conversion margin.

So I think this is how you should read this. But again, don't think that this is only a one quarter very high special effect we still have a similar situation going now into the second quarter.

Markus Mayer: Okay.

Christian Kohlpaintner: Georg anything to add?

Georg Müller: I think you received the questions answered Markus Mayer.

Markus Mayer: Yes, absolutely.

Thank you so much.

Operator: Our next question comes from Ms. Suhasini Varanasi, Goldman Sachs. Please go ahead. Your line is now open.

Suhasini Varanasi: Hello, good afternoon. Thank you for taking my questions. Just a few from me please. Can you -- you commented that in 1Q the volumes were down pricing per unit was up? Maybe you can comment on the monthly trends and especially the trends into April, I think you indicated that it has continued to April but has it become better or worse, just to get some sequential candidates. Secondly, understand the investment in working capital has resulted in free cash flow reduction as expected.

How should we think about the full year free cash flow development please compared to 2019 levels? And maybe just the last one. I understand that you haven't received much benefit from project Brenntag in 1Q. How should we think about the benefits to approve again group and projects you're given a target of €60 million, is it more from 2Q or should we accepted it to be more second half [indiscernible]? Thank you.

Christian Kohlpaintner: Yes, I will take you through the first and -- the first question and Georg can talk about the working capital. The trends we see in the business, I think when you compare to the situation a year ago and again, I want to remind you that we had already pretty strong quarters last year, improving again the resilience of the business model in the first quarter, but particularly also in the second quarter last year.

So since then we saw a gradual recovery in volumes, we saw a gradual recovery in business activities. And these trends continued well towards the end of 2020, but also into the first quarter. So that trend -- trends also continue in the second quarter, we see clear -- again increasing demand compared to previous year, but the baseline is extremely low, should also recognize that the comparable in Q2 when you talk about volume, when you talk about demand is a different one than the pre-COVID quarters. So, overall in the summary, I will say those trends to continue, supply chains are still under pressure. Still many outages, which are hampering no availability of product allocations is in some product groups also daily business.

So that you do not get all the materials you probably would need or customers would need. And you see them in -- you only need to read the newspaper. You see shortages in the plastics area and polymers area. You see basically everywhere. So and I don't believe that this stress of those supply chains will be ending with Q2, I firmly believe that we see this going well into Q3 continuing.

On the project Brenntag effects, I think we have always clearly communicated you can expect 220 million EBITDA uplift full year run rate 2023. So that's what we are confirming. As I said, we're making very good progress so with the measures of project Brenntag there will be a significant contribution as we said the front-loaded effect in this year also is €20 million, we already had and have an impact out of last year, which [indiscernible] in the full year numbers as well. So, once we are going from Phase 3 and to Phase 4, we give you another transparency of where we stand and what EBITDA contribution will be with the announcement of the Q2 results and then you will clearly see that there is already a benefit in the first half and the largest portion will of course, then come in the second half.

Georg Müller: When it comes to free cash flow this year, when we do have a strong basis for free cash flow generation also this year anchored in our strong EBITDA generation and the trajectory we have demonstrated in EBITDA.

So one part of free cash flow, which is subject to material external influences is working capital or working capital change. We do control and will control working capital management in terms of working capital turnover. And we fully expect the working capital turnover to remain above 8 times this year, which is a substantial improvement from last year. So that's a positive trajectory we achieved second half of last year and we now expect to at least maintain and slightly improve these levels further. But chemical crisis plays a significant role when it comes to absolute working capital cash flow.

And it's very difficult to forecast. From today's perspective, you would have to expect by this influence sector by sector of chemical crisis. So free cash flow this year to be a couple of €100 million lower than last year's number.

Suhasini Varanasi: Thank you.

Operator: Our next question comes from Isha Sharma, Stifel.

Please go ahead. Your line is now open.

Isha Sharma: Hi, good afternoon. Thank you for taking my question. Thank you for the transparency on the segment level as well.

Maybe one based on the discussion so far, probably just a little bit color on what a normalized level would look like at Brenntag I think the question is, if we have a special situation now as you pointed out and it continues in Q2 and Q3, but then what is the conversion ratio which you would say you are confident to deliver when this is over?

Christian Kohlpaintner: I think it is indeed a very specific year this year and we don't know about next year. I think we have no most economies on a path of recovery once they go out of the lockdowns and when you can read this and follow this personally day-by-day. So, that means we are trying to navigate all of those volatilities we have shortages we have the stress in the supply chains as much as we can. And I believe we as the global market leader are in excellent position to draw on those special effects to the maximum. So, normalized conditions this is also a question, what is the new normal? Is it -- or is it never normal? We have to expect after the pandemic, there will be fundamental changes, so it's hard to predict what the new normal will look like.

Nevertheless, currently we feel very comfortable with the guidance we have been given to you in our Capital Market Update on the long-term conversion ratios we see. I think we have to disclose this to you with Specialties, as I said before, 41% to 43% in the centrals, now I forgot the number, so slightly lower was lower than that. And then you will have over the cycle over these kinds of special events, movements in one way or the other. But I think we are on a very good trajectory. And what you can see, I think in this number in the special circumstances that what I've said also in the past, we have I would say a very, very strong essential business, which is currently under estimating in it’s capability.

And we also have Specialties business, which is very solid. And we are will managing it in developing it in a proper way because we have now the full transparency and the focus on this as well. So overall, in a nutshell, hard to predict what the new norms will look like. It's almost unpredictable. But we believe that those situations we have right now will not go away from one month to the other.

Isha Sharma: Thank you.

Christian Kohlpaintner: Georg you want to add something.

Georg Müller: No.

Operator: Is your question answered madam?

Isha Sharma: Yes, thank you very much.

Christian Kohlpaintner: Thank you, Sharma.

Operator: Our next question comes from Mr. Laurent, Exane BNP. Please go ahead. Your line is now open.

Laurent Favre: Yes, hi Laurent.

I have two questions, please. The first one is going back to the comments you made around sustainability and strategy. I was wondering, were you referring to work you need to do on your own impact in terms of emissions of trucks, et cetera? Or are you more taking along the lines of realigning the product portfolio to better cater into an industry where clearly there's more and more trends around sustainability more and more focus? And if it's the latter, how much work do you think is required? So that's the first question. And then the second question. I'm sorry, going back to guidance, going back about 10 years, I think Q1 has never been less than a quarter of the full year.

So I'm just wondering, there's of course a lot of pluses and minuses but that is the message that based on the trends of so far this quarter is no the [indiscernible] later this year – this year should be again a year when Q1 is a quarter of the full year? Thank you.

Christian Kohlpaintner: Yes, let me take the sustainability question first and then and then Georg. As I mentioned, we will take this year to develop our strategic framework around sustainability. And here it is absolutely clear that we need to look on the various dimensions with ESG thinking and then driving our sustainability efforts forward. I'm a firm believer that sustainability needs to become a driver of our strategy.

So emissions is one aspect and here we talk about Scope 1 and Scope 2 emissions but for us as a member of this value chain, chemical value chain the Scope 3 emissions also in line with our key suppliers and then our key customers, it will also be in focus because I believe we need to look at sustainability across the value chain. There's also comes to more responsible sourcing of material. So here it actually already starts, we cannot guarantee that the source material accordingly to sustainability standards. And then of course the continuous thinking about what is the proper product portfolio for Brenntag going forward? Are we focusing more on products which are now giving higher growth rates and also higher profitability because they are also highly sustainable. All of that framework will be developed in the course of the year and as we discussed it digital, we will give you insights later this year where we stand in our considerations.

On the guidance, I referred to Georg.

Georg Müller: Yes. Thanks for the confidence you are having in us. De-risking is numbers this year. And as I said earlier, it's just too early to readdress the guidance question, we need to see how the market develops.

We need to see how earnings develop. On your observation that Q1 typically was never more than a quarter of the year. Well don't forget Q4 is typically seasonally a little bit weaker and partly end of Q2 beginning of Q3 seasonally a little weaker. So it's not that straightforward and simple. And then you have the question of how it develops in course of the year.

And to question how the market develops, be a little patient with us and then we will either over time we affirm guidance or make an adjustment if we deem it necessary.

Laurent Favre: Thank you, Georg. Thank you.

Georg Müller: Good evening, Laurent. Thank you.

Operator: [Operator Instructions] Yes we received one more question. The next question comes from Chetan Udeshi, JPMorgan. Your line is now open.

Chetan Udeshi: Yes, hi, this is follow up on the previous question, if you can. Which is again, coming back to not necessarily full year guidance, but just looking at your trends and again going back to the particularly Q2 tends to be better than Q1 in terms of earnings at least, is that something you see today? Or do you believe there's a reason to see that differently in Q2 this year versus what you have seen in the past?

Christian Kohlpaintner: Yes, as I said, we see the trends due to continuing in the overall market that means the efforts of increasing demand which is hampered by the constraints in product availability and also logistic constraints.

So that trends we believe will continue for a period of time. That means at the end of the day that even being the world leader in chemical distribution, you cannot maybe do all the business you could do, because you're just not receiving the material you do need to have, that's what I meant is also product allocations. We currently see in some product groups. So it's hard to predict how that is going away or how long it will stick or it will get even worse. So that's not so easy to say.

So we see a good volume recovery as far as this is possible. We are harvesting the volatility received massive, massive price volatility in both directions actually now up and somewhere down and what we manage that that very carefully. , :

Chetan Udeshi: Thank you.

Operator: We haven't received further questions at this point. [Operator Instructions] And we haven't received further questions I will hand back to the speakers.

Christian Kohlpaintner: Well, thank you very much for dialing-in and taking the time. I appreciate the discussion. insightful questions and looking forward for the further interaction. We are very satisfied with this quarter the best quarter Brenntag has ever shown. Good progress in safety, good progress in executing project Brenntag.

So overall, also our team and I want to thank your team here for delivering in this very volatile and uncertain market conditions such a respectful result. So thank you very much again and talk to you soon. Bye-bye.

Operator: Ladies and gentlemen, thank you for your attendance. This conference has been concluded You may disconnect.