Operator: Dear ladies and gentlemen, welcome to the Full Year 2021 Results Call of Brenntag SE. At our customers’ request, this conference will be recorded. As a reminder, all participants will be in listen-only mode. After the presentation, there will be an opportunity to ask questions via the telephone lines. [Operator Instructions].

May I now hand you over to Thomas Altmann, Head of the Investor Relations. Please go ahead.

Thomas Altmann: Thank you, Luca. Good afternoon, ladies and gentlemen. On behalf of Brenntag SE, I would like to welcome you to the earnings call for the full year 2021.

On the call with me today is Dr. Christian Kohlpaintner, our CEO. He is in quarantine and will take you through today’s presentation from home. Please excuse any sound issues if they occur. I am also very delighted to welcome Dr.

Kristin Neumann, our CFO as beginning of April. After the presentation, we’re open for your questions. All relevant documents have been published this morning on our website at brenntag.com, under the section Investor Relations. In the same area, you will find the playback of this conference call later today. Before we begin, allow me to point you to our safe harbor statement, which you will find at the end of the slide deck.

Having said this, I will now hand over to our CEO, Dr. Christian Kohlpaintner. Christian, the floor is yours.

Christian Kohlpaintner: Well, thank you, Thomas, and good afternoon to everybody. So before we start talking about the current affairs and the details of our business performance last year, I also warmly welcome Kristin Neumann, who is joining us today.

Kristin, thanks a lot for being here.

Kristin Neumann: Thank you, Christian. I’m pleased to be here today joining the full year 2021 analysts call and I would like to take the opportunity to introduce myself. My name is Kristin Neumann and I will take over the position as CFO of Brenntag SE as of 1st April this year. Currently, we are in the transition phase and I have already started to make myself familiar with the topics I’m going to be responsible for soon.

It is a great pleasure for me to part off and shape the successful transformation of this great company. As some of you might know, already, I had been working for LSG Lufthansa Service Holding AG, where I was CFO since mid of 2014. Prior to that, I have different top level management positions amongst others member of the board for Continental Europe and CFO UK at Thomas Cook. Communication with a capital markets is of utmost importance for us and I very much look forward to be together with Christian in close dialogue with analysts and with our current and future investors. Hopefully, I will be able to meet some of you in person within the next couple of months.

Christian Kohlpaintner: Okay, thank you, Kristin, and welcome to our team. Now, before we get into the business topics, I would like to say a few words about the war in Ukraine. In view of the dramatic situation and the human suffering we are currently seeing in Ukraine, it is difficult for me personally, to report to you lightheartedly on our performance in the past year. The here and now is too dramatic and upsetting for that. We strongly condemn the invasion of Ukraine by Russia and the ongoing war in Ukraine.

Brenntag has sites in both countries. Our thoughts these days are with our employees and their families and with everyone in the region, who has been affected by this war and its consequences. We are very concerned and are in daily contact with our employees. We are doing everything we can to ease the situation. To support the people in Ukraine and the refugees, Brenntag will donate 500,000 Euros equally split to UNICEF and the UN Refugee Agency and we continue to collect further donations via a separate Brenntag donation account.

In addition, the Board of Management of Brenntag SE has decided the following. We suspend all imports to and exports from Russia and Belarus. This applies for all shipments from and to any Brenntag entity and subsidiary. We discontinue the business of all Brenntag entities and subsidiaries in Russia and Belarus for the time being. These decisions are effective immediately and valid until further notice and will be executed in a controlled manner.

We regret having to take this step after years of trustful and excellent working relationships with our employees, customers, and suppliers in those markets, however, the current situation as well as our values leave us no further choice but to take these decisions. Now let’s have a look at the full year 2021 starting with the highlights. Ladies and gentlemen, Brenntag achieved record results in 2021. Our business model again proved its resilience in particularly difficult times of severe pressure on global supply chains. We managed to maintain supply and continue to provide products and services to our customers throughout the year, with only very few exceptions.

This was mainly achieved due to the long lasting relationships with our supply partners, as well as the exceptional efforts and expertise of our Brenntag employees. Our unique global presence in 78 countries, our strong position in our industry segments, and our intimate product knowledge helped us to mitigate the macroeconomic challenges we had to face last year. Of course, also, our long standing customer relationships are very important to navigate wealth through 2021. Brenntag generated an operating gross profit of around 3.38 billion Euros, which is an increase of 90.6% on a constant currency basis compared to previous year. Our excellent annual results are also reflected in an operating EBITDA of 1.345 billion Euros.

On a constant currency basis, this is an increase of 29.5% compared to an already strong operating EBITDA we generated in 2020. The rise in operating EBITDA is almost entirely organic, the strong increase in earnings in both of our divisions, Brenntag Essentials and Brenntag Specialties. The fact that our operating EBITDA exceeds the upper end of our guidance range of 1.32 billion Euros and against the background that we upgraded the guidance ranged already twice last year underlines our excellent performance. Our free cash flow came in at 425 million Euros. In 2021 cash flow generation was impacted by higher spend for working capital due to the strong chemical price increases.

Therefore, the free cash flow was significantly lower compared to 2020. However, we continue to focus on our strong and efficient working capital management and we increased our working capital term to 8.3 times compared to 7.3 times in 2020. Earnings per share for the full year 2021 stood at 2.90 Euros, slightly lower than in 2020, driven by special items to be explained in detail later in this call. Last year, we were particularly active in M&A. We acquired six companies with a total enterprise value of around 440 million Euros.

All these acquisitions are currently exceeding our plans. I’m proud to say the Project Brenntag is ahead of plan and we continue to make very good progress in our comprehensive transformation journey. The Management Board together with the Supervisory Board are going to propose a dividend of 1.45 Euros to the general shareholders meeting mid of June this year. This is an increase of 7.4% compared to the dividend we paid for financial year 2020 and it is the 11th consecutive increase since our IPO in 2010. And finally, on the outlook we expect our operating EBITDA for the full year ‘22 to be in the range of 1.45 billion to 1.55 billion Euros.

Now let me provide some more color on the exceptional economic environment that we are still facing in our end. The COVID-19 pandemic has been posing major challenges on the global economy and society for two years now. But in addition, the global market dynamics were characterized by various cumulating influencing factors. We saw severe disruptions into the global supply chains driven by reduced supply on the one hand that was triggered amongst others by several forced measures and exceptional weather conditions, we have talked about this over the year and recovering global demand on the other hand. Logistics challenges like harbor congestions, container shortages, the blockage of the Suez Canal, and lack of labor led to even further shortages.

In addition, 2021 was characterized by strongly increasing energy prices in Europe, as well as in China due to the national dual control program to reduce greenhouse gas emissions. These factors negatively impacted available capacities in the energy intensive chemical value chains. Ladies and gentlemen, rising energy prices impact substantial parts of the chemical industry in multiple dimensions. Let me illustrate this by a prominent example. Natural gas is needed both as an energy source but also the raw material, for instance, in the production of ammonia.

Producers of ammonia often contractually limited to pass on the higher manufacturing costs to customers as quickly as they would need to. As a consequence, we observed curtailed production output in divert and still are experiencing a shortage of downstream products of ammonia, such as fertilizers, or urea, and even as a result, we also saw reduced availability of the diesel fuel additive AdBlue. This is just one simple example but all these factors mentioned led to the high price volatility and the strongly increased costs for chemical raw materials and for transport. In addition to the well known challenges we have been dealing with for now several quarters already, the overall global situation has now become extremely serious. Russia has attacked Ukraine, and we are facing the first war in Europe for decades.

This is obviously creating increasing geopolitical risks, and further supply shocks are to be expected, which will impact the global economy. We will continue to monitor the situation and developments in the Ukraine and Russia as well as international measures very closely. We regularly conduct a risk assessment on this basis to be able to take further considerate measures if necessary. Currently, taking care of our 35 employees and their families in Ukraine as best as we can, and they’re all safe so far. This situation is new to all of us.

From a purely operational standpoint, our exposure to both countries Russia and Ukraine is less than 1% on gross profit level, so rather minor. Ladies and gentlemen, I will now provide more details on the progress of Project Brenntag. We have made very good progress throughout the year executing our ambitious transformation program, Project Brenntag. As you remember, Project Brenntag is designed to build a strong basis for sustainable organic earnings growth in the coming years. It will expand Brenntag’s global market leading position through an increased focus, the reduced complexity and even stronger partnerships with our customers and suppliers.

Our new go to market approach is now fully implemented globally with dedicated sales organizations for our two global divisions Brenntag Essentials and Brenntag Specialties. As Project Brenntag is addressing the needs of our different stakeholder groups, we are delighted about the extremely positive feedback we get on our new operating model from our customers and our suppliers. Our business partners appreciated Brenntag’s new setup to service the different business and industry needs in a more distinctive and effective way. Overall, Project Brenntag has achieved already more than half of its expected benefits by the end of 2021 against the baseline of 2019. Since its inception, Project Brenntag contributed around 120 million Euros of additional operating EBITDA, which is expected to ramp up to the well-known 220 million Euros annually by the end of 2023.

We have structurally reduced 925 shops by now and have continued with the optimization of our global site network. So far, we have closed 72 sites out of about 100 planned sites. These measures already resulted in increased utilization rates and improved inventory planning. It has profoundly enhanced our flexibility to serve our customers, while at the same time strengthening our supply chain resilience. In addition, we have continued to invest in upgrading and expanding our existing network.

Let me especially mention our investments in two new mega sites in China, as well as consolidation and modernization of several sites in the United States. On slide six, we illustrate the breakdown of the achieved EBITDA contribution in top line in bottom line levers. Measures addressing our top line contributed around 27 million Euros. The bottom line levers, mainly our go to market approach and the site decide network optimization as well as our measures with regards to indirect procurement are summing up to around 93 million Euros. Let me emphasize that we will continue with our focused execution in 2022 to deliver on our ambitious targets by the end of 2023.

2022 was also a very successful year for Brenntag in terms of M&A. In addition to our strong organic growth and the successful Project Brenntag execution, we also pushed ahead these substantial acquisitions. We have completed six transactions with a cumulative enterprise value of 440 million Euros. This is the highest investment amount on M&A since 2015 and the second highest since our IPO. Let me emphasize with our newly acquired skills and processes, as a consequence of Project Brenntag, also strongly support the smooth integration processes of our M&A targets.

Brenntag is and remains a very disciplined acquirer. We have strict hurdle rates for M&A, and we are focused on maximizing value creation by synergies from cross selling opportunities, operational efficiencies, and from bundling purchasing activities. Despite the strong M&A spending in 2021, our leverage remains at a level of 1.5 net debt-over-EBITDA and we have ample headroom for continued M&A activities. We therefore are very confident to continue on our successful M&A trajectory and we are willing to take decisive actions, as it was the case in 2021 for even more value accretive M&A, should the opportunity arise. We delivered on our promises to strengthen key focus areas and geographies with M&A targets, delivering a sizeable operating EBITDA contribution.

Around 80% of the M&A spend in 2021 was related to the life science sector, especially to the nutrition industry. The acquisition of JM Swank was a major step in strengthening our specialist portfolio in North America. JM Swank is a renowned player in the North American market in the distribution of food ingredients. With this deal, we doubled the size of our nutrition business in North America, and became the leading food ingredients and food processed chemical distributor in the region, increasing our market share of food ingredients in the United States from 3% to 6%. The acquisition of a majority stake in Zhongbai Xingye provided our market entry for food and nutrition in China and fits our strategy of expanding our specialties business in Asia.

As a result of those acquisitions, our global nutrition business grew now to almost 2 billion Euros sales in 2021. With decisive strategic steps in M&A, we increased the share of the nutrition focus industry within Brenntag Specialties now to 30% of its global total gross profit. Overall, we are very pleased with the integration progress so far and the performance of our acquisitions is also ahead of our plans. In a nutshell, our acquisitions contributed in total 33 million Euros to our operating EBITDA of which the majority was attributable to the deals closed in 2021. In the current year 2022, we continued on our successful M&A path with our market entry into Israel.

Beginning of March, we have acquired Y.S. Ashkenazi, one of the largest specialty chemicals distributors in the country. Ashkenazi offers a broad product portfolio coincided with some of our Brenntag specialty focus industries such as personal care, HI&I and nutrition. The company generated 39 million Euro sales in 2021. Signing and closing appeared simultaneously last week on March 3.

Ladies and gentlemen, I will now talk about our key financial figures for the full year 2021 and I will start with the development of operating EBITDA. On slide 10, you see the bridge of operating EBITDA from full year 2020 to full year 2021. The financial performance in 2021 was excellent, despite very challenging macroeconomic and operational conditions, as I mentioned before. So in the full year 2020, operating EBITDA amounted to 1.058 billion Euros, then you see a translational foreign exchange effect with a headwind of about 19 million Euros, then you see our acquisitions contributing 33 million Euro to the operating EBITDA growth. And here the majority of the contribution from our M&A activities is attributable to Brenntag Specialties.

Our FX adjusted EBITDA growth rate for the whole group came in at about 30%. On slide 11, you find a more granular view by division and/or other segments. Brenntag Essentials reported operating EBITDA growth of 178 million Euros and Brenntag Specialties grew by 136 million Euros, which is an FX adjusted growth rate of 29% and 34% respectively. Both divisions saw a headwind in FX translations of around 10 million Euro each, acquisitions contributed 6 million Euros in Brenntag Essentials and 27 million Euros in Brenntag Specialties. Operating EBITDA for the full year 2021 came in at 1.345 billion Euros, reflecting an FX adjusted growth of 30%.

So, Brenntag accomplished to translate the positive gross profit growth into an over proportionate growth of operating EBITDA. This had a particular positive effect on our group conversion ratio, the conversion ratio increased by 290 basis points to 39.8%. For the full set of figures in this regard, please refer to pages 24 and 25 in the appendix of this presentation. We also are providing the bridge for the fourth quarter 2021 which can be found in the appendix of this presentation as well. Operating EBITDA in Q4 2021 amounted to 346 million Euros with an FX adjusted growth rate of 33%.

In general, the trends we saw throughout 2021 also continued into the fourth quarter last year and in this environment, both divisions performed very well. For further details, again, please refer to page 28. Now let me come briefly to the performance of both divisions. Both of our two global divisions delivered excellent results in the first reported year within the new operating model. As a reminder, when talking about growth rates in channel, we can only talk about FX adjusted growth rates.

Brenntag Essentials showed a strong performance and achieved excellent results. Operating gross profit grew 16.1% year-on-year to around 2.07 billion Euros, with operating EBITDA reaching now 843 million Euros, 28.6% above previous year. Operating EBITDA development was almost entirely driven by organic growth. All segments contributed to this positive performance. EMEA and North America showed a particularly strong performance.

Asia-Pacific and especially China performed somewhat weaker towards the end of last year, due to constraints in local supply chains, including COVID lockdowns in cities with port access, high energy cost, as I’ve mentioned before, as well as product shortages. Our Essentials division had to deal with various challenges such as these high energy prices, inflationary cost developments, particularly for transport, and the pressure on the supply chains. In this environment, we managed to maintain deliveries to our customers largely uninterrupted. Conversion ratio for this division came in at around 41%, this is an increase of 400 basis points compared to the full year 2020. Regarding the development of conversion ratios in our Brenntag Essentials segments, please refer also to the appendix.

In Brenntag Specialties, the overall macroeconomic environment was also impacted by COVID pandemic, also inflationary cost development management as well as supply shortages. In this environment, Brenntag Specialties reported an operating gross profit increase of 25.4% year-on-year to around 1.28 billion Euros with an operating EBITDA climbing up by 34.3% to now 567 million Euros. Earnings grew mainly organically but also supported by the acquisitions we closed last year. This growth was broad based across all segments with a particularly strong growth contribution in Americas and in EMEA. In EMEA, we saw strong growth in nutrition and personal care, HI&I throughout the year, also lubricants performed well in 2021.

In America, the focus industry nutrition, personal care, HI&I, material science, and lubricants showed a particularly good performance. For the full year 2021, the conversion ratio for the division developed very positively to around now 44%, an increase of 278 [phonetic] basis points. Also for Brenntag Specialties, we provide the details of conversion ratio development in the appendix on page 25 of the slide deck. In summary, ladies and gentlemen, we are very satisfied with the performance of our divisions. On slide 14, we come now to the income statement.

We generated a strong operating gross profit of around 3.38 billion Euros. In the course of last year, we have talked a lot about the overall inflationary environment. We saw rises in chemical prices, but also in other cost items. The later is reflected in our operating expenses. Operating expenses, excluding special items, increased by around 14% in 2021.

Besides higher logistics, fuel, and energy costs, the vast majority is related to higher variable personal expenses, especially in Q3 and Q4 due to the very strong results. Now, let me explain our special items in more details. For the full year 2021, we report special items of around 229 million Euros. The majority of special items include expenses and provisions from excise duties of 175 million Euros, resulting from a routine review of the alcohol and energy tax payments. The German authorities claim documentation mistakes regarding the selling of denatured alcohol, that is alcohol which is used outside of food and drinking applications.

There are no concerns raised about the proper use of these alcohol products. The risk has consistently been reported in our risk report and it refers to business activities several years ago. Brenntag disagrees with the assessment by the authorities and has filed an appeal. Our legal opinion differs from that of the tax authority, and let me explain how this topic developed last year. In the second quarter 2021, Brenntag received a tax decision notice of 63.1 million Euros, which we reported in our quarterly results accordingly.

Further tax decision notices in the amount of 30.9 million Euros were issued in the fourth quarter 2021 leading to a total amount of around 94 million Euros. This figure is cash flow relevant, and the payment has been executed already. These tax decision notices refer to the years 2014 to 2016. Although our legal assessment differs from the opinion of the authorities, we had to comply and execute the respective payments. As a precautionary measure, we decided to fully provision potential future liabilities out of ongoing tax assessments in Germany, up to the year 2018, with additional 81.5 million Euros.

As stated above, tax assessments with payment obligations were received in the course of the fourth quarter, and it became apparent that the authorities are not willing to participate in mediation talks. It can therefore be assumed that also further tax assessments will likely include payment obligation and this change in circumstances induces a revised assessment that the outflow of financial resources is now deemed to be more likely than not and, accordingly, provisions are to be recorded for the expected payment amounts, which we did accordingly. Other special expenses are related to ongoing activities for Project Brenntag in the amount of 35 million Euros mainly for severance and consulting costs. Amortization also increased as previously communicated with Q1 results. Here the maturity of around 65 million Euros is related to our enhanced approach with regards to digital data and IT.

We have to recognize the increased speed at which the market is moving and developing and after critically evaluating our existing assets and IT initiatives against the future needs of our customers and suppliers partners we made the necessary amendments across our IT portfolio. We are in the process of detailing out our digital data and IT value creation roadmap and the digital operating model and will report on the implementation of our future digital business architecture in due course. As a consequence of the special effects, profit after tax came in at still strong levels and amounted to around 461 million Euros. As a consequence, earnings per share ended up weaker than 2020 amounting to 2.90 Euros, impacted by the special items I previously mentioned. Page 15 shows our cash flow relevant items.

Free cash flow generation can be attributed to several factors. First of all, we were able to grow operating EBITDA strongly. Secondly, CapEx spending amounted to 214 million Euros for the full year due to new timelines driven by planning and preparation efforts for some of our key investment projects. And thirdly, we spent about 500 million Euros for our working capital compared to an inflow of more than 300 million Euros last year, where we saw an extraordinary development of our free cash flow. So, free cash flow for 2021 amounted to 425 million Euros.

This is again a strong free cash flow and fully in line with the long-term expected trend. Free cash flow generation in 2021 was impacted by higher spend for working capital due to strong chemical price increases. However, working capital management measured by working capital turns continues to be strong. I will come to the details in a minute. Coming to further cash flow items, we paid 272 million Euros for interest and taxes last year, payments for our M&A transactions amounted to around 440 million Euros, and finally, in June last year, we paid a dividend for the fiscal year 2020 in the amount of 209 million Euros.

Now coming to the details of working capital, working capital amounted to around 2.1 billion Euros at the end of last year. This is an increase of more than 700 million Euros and is mainly driven by high commodity prices, particularly in the third and fourth quarter. Despite this price and inflationary driven increase, we turned the working capital 8.3 times which is significantly above last year’s level of 7.3 times and this improvement demonstrates the strength of our working capital management. Let me also briefly touch upon our value creation metric ROCE. Brenntag creates consistently substantial value with our ROCE being significantly above our [indiscernible] of 7.1%.

For 2021, our ROCE came in at 15.5%, 140 basis points higher than previous year. Excluding the special items mentioned previously, our ROCE would be even better at 19.6%. Now coming to balance sheet and maturity profile, our net financial liabilities amounted to around 2.1 billion Euros at the end of 2021 compared to 1.3 billion Euros at the end of 2020. The increase of net financial liabilities is driven by the operating development of our business in particular by working capital development, as well as by payments for this year’s acquisitions. Our leverage, that is net debt-to-operating EBITDA amounts to 1.5.

I would like to draw your attention also to our Bond 2029 in the diagram on the right hand side. Brenntag continues to maintain a strong financial profile. With the issuance of our Bond 2029, we have further structured our financial profile for the long-term and the bond provides very attractive conditions. It has a maturity of eight years and carries an annual coupon of 0.5%. It is the first bond issue to take place under our 3 billion Euro debt issuance program, newly established in 2021.

Now let me come to our dividend payments. The Management Board and Supervisory Board will propose a dividend of 1.45 Euros for the 2021 financial year to the general shareholders meeting mid of June. This is the 11th consecutive dividend increase since our IPO. In terms of net income, the proposed dividend represents a payout ratio of 50%. This puts us at the upper end of our corridor of 35% to 50%.

In total, we will pay out more than 2020 million Euros to our shareholders. Ladies and gentlemen, let’s come now to the outlook for 2022. We expect the overall geopolitical, macroeconomic, and operational conditions to remain challenging. In particular, we expect the war in Ukraine to be the prevailing topic in the coming months, if not for much longer. Also supply chains have been and still are under severe pressure, further impacting production and supply.

We also continue to closely monitor all developments around COVID-19 and we will keep implementing all necessary measures to meet the requirements and regulations in all our markets and regions. Given the magnitude of the current supply chain disruptions, we only expect some normalization of market conditions much later in the year 2022 [phonetic]. Against this background, we expect a positive performance at operating EBITDA level in 2022, with both divisions contributing to this growth. For the financial year ‘22, Brenntag expects an operating EBITDA between 1.45 billion Euros and 1.55 billion Euros. The forecast takes into account benefits from Project Brenntag as well as contribution to earnings from acquisitions already closed.

Moreover, it assumes that exchange rates will remain stable on the level at the time of the guidance publication. Any potential impact on the global economy arising from exceptional influencing factors such as the COVID-19 pandemic, current geopolitical developments, pressure on the global supply chains, inflationary tendencies, and price volatility cannot be reliably forecasted and are therefore not included in this guidance. And with this, I would like to conclude the presentation and Thomas and myself, we’re more than happy to answer your questions now.

Operator: [Operator Instructions] The first question is coming from Simona Sarli at the Bank of America. Your line is now open.

Simona Sarli: Yes, good afternoon, gentlemen and thanks for taking my questions. I have three please. So, the first one is regarding your 2021 organic EBITDA growth. So if I exclude the contribution from Project Brenntag, that would have been roughly a 15% year-over-year. So can you give us an indication of the split between price and volume? And also, again, excluding the positive contribution from Project Brenntag, it looks like the conversion ratio was down year-over-year? Yeah, if you can give a little bit more color on this.

Second question is related to your 2022 EBITDA guidance. So at midpoint, what is your underlying assumption in terms of organic growth and also the split between price and volumes? Last question is on Project Brenntag, so you mentioned that is proceeding faster than expected. What are the reasons for that and what could be the moving parts that might potentially lead you to achieve more than 220 million Euros? Thank you.

Christian Kohlpaintner: Okay. Simona, thanks a lot.

I will start maybe with the Project Brenntag question, then coming to the guidance and then to the explanation of the EBITDA growth last year, and also Thomas, in particular for the last question, ask him also to chime in if necessary. So on Project Brenntag, no, we are making very good progress, as I’ve said. I think we have already now 50% of -- or more than 50% of the projected impact realized. I think we are progressing quite well with the implementation of our operating model. Also, the top line levers are contributing positively; I mean, you saw it in the slides.

And again, our site network optimization makes good progress. So overall, we are quarter-by-quarter, building this impact now and we see currently a very good momentum, which we would like to maintain. And again, so we are very confident that the 220 million we have promised to you will also be materialized. Now on the 2022 EBITDA guidance, we will look at the moving parts. We have, of course, the impact from the FX side.

So we currently expect about an impact on FX of about 25 million, then we have also M&A impact of around 25 million of the already closed, as I said, targets, and then we have about 80 million currently in few for Project Brenntag. And so that means that we are expecting an organic growth, I mean, you can calculate the number, which is contrary to what we did expect, if you remember, when we were talking about normalization, slowdown, and how much negative impact we can expect this year from a normalization of market conditions. We don’t see that in this extent, as we have maybe foreseen last year. Now on the 2021 organic EBITDA growth, I think what is important is, first of all, the 120 million of Project Brenntag are since inception, so we had already an impact of last year. So then we need to basically take the 105 of Project Brenntag as an impact.

And then again, it’s -- you know that this is a plethora of measures we are undertaking. So these are actually our bottom line cost impacts, which we have. Headcount reductions are progressing well and we see the impact here. And also when we look on our top line levers, this is also delivering to Project Brenntag, in all fairness, given the good market environment and the good constellation for pricing initiatives. One is it’s getting increasingly opaque to say what is really related to Project Brenntag top line levers versus the normal course of commercial activities.

And this is why I always -- and I reconfirm this year, always focus on the top line -- on the bottom line impact, because this is really what counts and this is what I’m really looking for. So overall, as I said, we are, we are pleased with the progression, the EBITDA growth has been almost exclusively price driven, so very, very little volume impact. Little bit different from Essentials to Specialties, but overall we see a quite satisfying development in 2021. And again, if Thomas wants to add something, please feel free to do so.

Thomas Altmann: Yeah, hi, Simona.

This is Thomas. I think Christian, I answered all of your questions, correct.

Simona Sarli: Yeah. And just to clarify, I was also asking, if possible, to have a rough indication of what is your underlying assumption for the organic growth in 2022 in terms of split between our prices and volumes? Thank you.

Christian Kohlpaintner: Yeah.

Currently the situation is extremely fluent Simona, as we see it. We saw some volume recovery coming in Q4 and that momentum kept into Q1. So, we see some impact, but not dramatically against still supply chains are under severe pressure, not all products are available and that situation could get even worse. So from that perspective, I would not bet too much on a massive volume recovery just because supply is limited, at least in the first half and then we need to see how Q3 and Q4 plays out. But, given Ukraine and everything which is going on, we don’t expect the volume recovery to kick in very, very quickly.

And so from that perspective, the progression is related mainly to pricing.

Simona Sarli: Thank you.

Christian Kohlpaintner: You are welcome.

Operator: Next question is coming from Isha Sharma at Stifel. Your line is now open.

Isha Sharma: Hi, good afternoon. Thank you for taking my questions. I have two please. Given the substantial increase in gas and oil prices and their impact on chemical prices, is it fair to assume that the net working capital outflow again this year will be as high as in 2021? That is around half a billion. And can we expect more structural improvement in net working capital management from Project Brenntag? And the second one would be could you remind us of your priorities in terms of use of cash? At what level of leverage can we expect to shareholder returns?

Christian Kohlpaintner: Hi, Isha.

Thanks for your questions. So let me go maybe step by step. The development on gas and oil price is extremely volatile right now. I mean, you can read it every day in the press. I mean, it’s very, very hard to predict.

Of course, gradually, these price escalations on the energy side will move further down the value chain. You see announcement of large producers in the chemical space for massive, massive price increases. So, I think the inflationary trend on the chemical prices, I think, we cannot really avoid. So, we will see that this will coming down, I would say the next three to six months to, I would expect or rather large extent. Of course, we will do everything but we can do to improve further working capital turns and try to mitigate as much as possible that impact on our working capital.

So, all hands on deck basically to make sure that we are pushing back on these inflationary trends on the working capital side with clear management decisions around working capital. On the priorities of use of cash, so we have our net debt leverage -- net debt-to-EBITDA leverage of 1.5. You know we have always guided around the level of 2, which is comfortable. And now we need to see how we are using that cash. I mean, we have made substantial acquisitions last year, I mentioned it, 440 million alone in 2021.

Our guidance on M&A is, at this point of time, still unchanged 200 million to 250 million per year. But again, as I said, should the opportunities arise, we also are willing to take decisive steps. Our M&A pipeline is healthily filled. You saw just one example coming out of that and so I would expect us to continue that successful M&A path. And also of course our return to shareholders through increased dividends is also an important part of our strategy and guidance here.

Isha Sharma: Thank you and get well soon.

Christian Kohlpaintner: Thank you.

Operator: The next question is coming from Rory McKenzie at UBS. Your line is now open.

Rory McKenzie: Good afternoon.

It’s Rory here. Three from me, please. Firstly, can you be more explicit about where your volumes are compared to pre-pandemic levels? Could we assume they’re still 5% to 6% below 2019, for example? And then secondly, on the expansion, you see instead, in the gross profit per ton over this time period, can you talk about how much of that is on a like for like basis and what the current chemical price inflation environment means for that gross profit per ton? How long it lasts? Maybe those two first and I’ve got a question on the provisions? Thank you.

Christian Kohlpaintner: Yeah. I think when we look at the volumes, and again, we should differentiate between Essentials and Specialties because in Specialties, we believe the volume number is less meaningful, because sometimes you’re trading small products with very little volume, and there could be shifts there.

So overall, we’re still, volume wise, a little bit down from pre-pandemic levels. I think Thomas has more accurate numbers available, but in particular, we see that they have not fully recovered yet, the pre-pandemic levels, but are on a good trajectory to do that. Again, let me also maybe explicitly mention that because I didn’t say it in the previous question from Simona. We also took delivery choices, I mean, this situation, this market conditions, with supply shortages is forcing you to make also deliberate choices when it comes to the profitability of the business you want to serve and which you don’t want to serve. So we also have been, also as part of Project Brenntag, very clearly said, okay, we are, for instance, eliminating negative or dilutive margin business and some of the results you see here, maybe less progression on the volume side, but the nice progression on the margin side.

So I think this is what we currently see and, as I’ve said before, in the next six months, I do not expect any major volume recovery out of the risks and the shortages I have described earlier. So that means the expansion of gross profit per ton is of course driven by two elements. One is, of course, Brenntag has a remarkable capability of basically rolling over pricing or pricing escalations, which we receive from our supply partners into the market with a relatively short delay, until that happens. So unlike to chemical manufacturers, our setup, our business model allows for rather quick and speedy adjustment on the pricing so that means the inflationary trends we have on the raw material side, we are confident to roll them into the market. And then of course, there is now, as I said, a much more focus on value-based pricing, where we clearly are saying, okay, in particular, in the Specialties field, we believe the company and the services we are providing are getting stronger and stronger and that you see also in a gross profit per ton number shown.

So I think it’s a mixture of both major areas, but I think our confidence that you’re able to deal with this inflationary environment is rather high.

Rory McKenzie: Thank you. And just a quick follow up, I guess, price volatility and price, I guess, opacity is also relevant in this market. So has the exceedingly volatile market also kind of played into this ease of expanding your margins at the moment?

Christian Kohlpaintner: I think I frequently said in our calls and also when I talk to our large investors that volatility is an environment which is very good for Brenntag and actually in both directions. I think the volatility is managed very well by the company and stagnation over a long period of time, over years, like we had it from, let’s say 2014 to 2017, 2015 to 2018, this kind of stable environment is actually detrimental, because it is chewing into your margins.

So this volatility, I would say, as a general market condition, which is supporting Brenntag’s pricing capability and so on that retrospective we see this volatility is something we can deal with, and this actually playing into our course.

Rory McKenzie: That’s great. Thank you. And then just if I can on the provisions you took, can you explain how you quantify the extra 81.5 million? And also, can you outline the timeline and tests you would have before you took any provision reversals and how they would be treated [phonetic]? Thank you.

Christian Kohlpaintner: Yeah.

So, Rory, the 81.5 million is, of course, now encompassing everything what we foresee as a really full potential risk out of those assessments, up to the 2018. Then procedures were adjusted to what your tax authorities deemed to be the right procedures. Again, the debate is around how has European law translated international law, in particular into the German law and how is it interpreted by the customs authorities, which is responsible in Germany for that particular case and whether this tax requirements is really in proportion. And in that debate, and, as I said, we have filed an appeal. We will -- as we are very, very convinced that this is not justified that we will take all the necessary legal actions to get this clarified.

That takes time. So, we do not expect there are short term positive news. I must say this, our proceedings, which can take five to seven years, so in that range, you should not expect anything changing from that provisions, which we have built now. But again, we fully provisioned now the German topic and I think this is very important to get this out of our way.

Rory McKenzie: Okay, understood.

Thank you very much.

Thomas Altmann: Hey, Rory. Thomas here. Just to back up the remarks on the volumes, which Christian just mentioned a few minutes ago, so, basically, if we compare the volume today with the pre-pandemic level, you can fairly assume that volumes are low-single digit below pre-pandemic levels.

Rory McKenzie: That’s great.

Thank you very much.

Operator: The next question is coming from Chetan Udeshi at JPMorgan. Your line is now open.

Chetan Udeshi: Yeah, hi, thanks. Thanks for taking my question.

I think the first question I have is, have you seen any change in the ordering patterns in terms of supply landscape in the last two weeks, post the worsening of the war and the dynamics around that, that will be useful to know. Second question is and I go back to the question, I had asked back in third quarter, I mean, I still struggle to see various the obvious benefit of Project Brenntag on numbers because if I look at just sequential development in Q4 on gross profit, gross profit is up like 5% and the OpEx is up 10%. So OpEx is actually growing twice the rate of gross profit growth, even on sequential basis. So, I mean, what is going on the OpEx line, can you just help us sort of split it into different components because given that we’ve already achieved half of Project Brenntag’s savings and to not see that that is on a visible basis in P&L I just struggle with that?

Christian Kohlpaintner: Okay, Chetan. Yeah, thanks.

Thanks a lot. Maybe I start with the short term question around, do we see a change in the order pattern? I would say not massively yet but I believe that’s maybe just a little bit the quiet before the storm. I think, of course, the situation is very volatile, it’s hard to predict right now and everyday is actually a new day, one has to say in this situation. Largely orders and order patterns are determined by availability of product, this is everyday’s discussion with the customers do we have product, can you supply. And then the pricing discussion starts, but everybody knows, and is aware of this massive inflationary environment we are in.

So I think pricing and pricing discussions have been now a second priority because product availability supersedes anything else. And so whatever we can supply and have a chance to supply, we are doing. And again, being able in a remarkable way to really adjust to the almost monthly and weekly changing pricing changes we are faced with from our key suppliers. So I think this is what I see right now but it will get a little bit more rough, I must say, in March, April, May, this is at least my prediction when we see maybe more sanctions kicking in. I mean, you saw the announcement yesterday with the Russian oil to the US and not doing this one.

And the benefit of Project Brenntag, I mean, Chetan, I know this is always a discussion point be on the OpEx side. Again, we have been faced and Thomas can maybe give you more granularity, we have been faced with OpEx increases from various angles. One is of course, the escalation which we have on the OpEx side, so on the logistics costs and also the energy costs we have to bear. This is quite a substantial impact because again we have partly our own drivers with our own trucks but we also, of course, have third party logistics and here logistic costs, I mean, you can read it, and you have seen it, container costs, trucking costs, and so on and so forth, are really impacting that OpEx picture. And the other large big bucket is of course, that we had, based on the variable compensation, a phenomenal year in 2021, which pushed up variable compensation for our employees substantially.

And this has been a major contributing factor when you even look at the PEX [phonetic]. So even if you would look at PEX as a total, you would be seeing an escalating number. But when you really start to drill it down into fixed versus variable, you see that the huge majority of the PEX increases is coming from variable compensation. I think I’m not alone here with our company, this you will see in other companies as well. So this is also driving OpEx.

And then again, also we have made substantial acquisitions, so OpEx costs from those newly acquired targets are also running into that into that OpEx number and this is there also probably adequately reflected. So I think it’s a mixed bag, as we have already discussed several times but I’m sure that we can provide you the granularity, you need to have to assess that better going forward. And Thomas, I mean, feel free if you want to add something.

Thomas Altmann: Yeah. Hi, Chetan.

Yeah, maybe a few thoughts on the cost base basically. So first of all, if you look at the costs of operating expenses and personal expenses, you should first basically exclude the special items. So, if we exclude the special items, and then we talk about, let’s say, the operating costs, we saw an increase of around 14%. And just as Christian has mentioned, really the majority of the increase, first of all, is related to organic cost increases. And of this organic cost increase, basically, the majority relates to personal expenses.

And that is the big back bucket in the rises or in increase in the cost, which is then basically driven by higher variable personal expenses, which are more than offsetting the decrease in fixed personal expenses.

Chetan Udeshi: That’s helpful. Maybe if I follow up on the previous first question, I asked is, I mean, you talked about the similar trends. I was curious if you are seeing maybe more supply disruptions than was the case before the war or have you not seen that yet, in terms of your suppliers providing you with the supply?

Christian Kohlpaintner: I think this will -- this is my expectation that this will be worked on the value chain over the next weeks. And I think it depends a little bit on gas availability and is Russia, for instance, supplying enough gas to Germany, also to Europe in general.

So, this will have an impact on the chemical industry, about this topic. You will see, of course, key materials, which are coming out of Russia being under threat. I mean, this is, of course, naphtha; naphtha, massive raw material for the chemical industry, so let’s see how that that develops. Pricing already escalating, you know that. And domestic production in Russia, the chemical industry in Russia is not extremely well developed, so you see still the impact more on the basic chemical side.

But for instance, if I take my example I used for ammonia, I’m getting increasingly concerned about availability of ammonia in fertilizer and downstream products and so we need to see how that plays out because it’s also tied to gas and to gas costs, of course. So I think this is, I would say, a scenario, which is not a trivial one at this time. And I think it will -- depending on how long the conflict and the war continues and the sanctions are imposed, this could knock down the next month further down in the value chain. To which extent is hard to say, but I do expect it impacts here.

Chetan Udeshi: Thank you.

Christian Kohlpaintner: You’re welcome, Chetan.

Operator: The next question is coming from Dominic Edridge at Deutsche Bank. Your line is now open.

Dominic Edridge: Hello, thanks for taking the questions. Just a couple of myself.

First is going back to the point about volume, could you just maybe discuss it versus the market? Because I suppose you feel that you’ve sort of maintained your share in the market or you’re above or below the market in terms of the Essentials business in particular. Secondly, is your working assumption still that as or should our working assumption, sorry, be them still that if prices fall, that should drive a bit more volume, as well, to the system, if we do see some normalization later on this year? And then just finally in terms of the quarterly developments, I know that obviously, there was a bit of a slowdown we saw in the APAC business in particular in the Essentials side, is anything we should read into that or is that just literally to do with a tough comp? Thank you very much.

Christian Kohlpaintner: Yeah. Dominic, thanks. Thanks a lot for the question.

So, when we look again on the volume development, I think we described before, we took also in this scenario, quite deliberate choices. Volume demand, at least in our case, was to some extent hampered or limited by the product availability. So we could definitely not sell everything we would have liked to sell. We had to curtail supply to major customers, but also customers in general and this is still continuing. So we clearly see that volume growth is limited by supply at least in our area and globally.

Secondly, again, talked about the deliberate choices we did on the margin aspects and value creating business. Situation like this also, as I said, allows you to take choices and maybe let business go, which you should have let go already quite some time ago. So this is one part of Project Brenntag to go step by step through that and saying, is this business worth to maintain or not, and this has also an impact on volume. Not their concerned that we are making now a big mistake or losing massively market share, I think we drive currently the company for profitability but because we don’t see a volume play really, really materializing at this time. It could change quickly.

I mean, again as I said, I think at least the next three to six months are, on the volume price dimensions, really interesting and decisive ones. And we are highly alert and if not paranoid, that we don’t miss the tipping point where actually the pricing will stimulate volume growth, which we then can really cater to, because we have enough material. But what I see right now, this is not the situation yet. Pricing is still by far the driving force in that in that game. And now the slowdown in APAC in Essentials, I mean, one needs to be fair, Asia Pacific has had -- and I was talking about this, Q3 and Q4 was a rather subdued development, because we had still lockdowns in Southeast Asia and in China as well in the harbors, you’ve read about it.

And also availability of workers has been an issue. And then so we saw Q4, in Asia Pacific, which was in general less active, but also Q4 typically is a more slower quarter anyhow. And again, comparable to Q4 2020, Asia Pacific was very, very hard to beat. So we had a strong, strong Q4 in 2020, in Asia. So it was really difficult to show a massive progression now in this fourth quarter as well.

But then we also say that we see in the momentum, step by step, recovery, now. China is actually developing, in the last two months, positively, again, with a grain of salt. We need to be careful, it has been a Chinese New Year, it has been the Beijing Olympics, which already, of course, had an impact on Q4, in particular, in China with reduced economic activity. And we see this coming out of the woods now step by step. So I think we are a little bit more optimistic for Asia Pacific than we were maybe in the last one or two quarters.

So this is how I would frame the answer to your questions.

Dominic Edridge: Okay. Thank you very much.

Christian Kohlpaintner: Dominic, thanks.

Operator: The next questions come from Markus Mayer at Baader-Helvea.

Your line is now open.

Markus Mayer: Hi. Good afternoon, Christian and Thomas. I have three questions for you, if I may. The first one is again on Russia and Ukraine, you said direct exposure is roughly 1% of your gross profit but what about the indirect exposure in particular, on your supply? Could you give some clarification here and also the same question for your competitors? Are any of your competitors more exposed to Russia directly or indirectly than you? And what might this mean also, for the market share situation in Europe going forward? That’s my longer first question.

My second question is on the strong start, you said you had in 2022. Was this also due to restocking at your customers, as inventory levels in many end customer industries are said to be very low and this might also continue with this supply tightness? And then my last question would be an M&A. You said you have ample M&A headroom, but are the M&A discussion currently ongoing due to this environment or they’re currently paused, as the market or the M&A participants are struggling on what kind of economic growth assumptions should be taken into account in DCF model of the respective companies?

Christian Kohlpaintner: Hi, Markus. Thanks a lot for the question. So coming to the first question on Russia, Ukraine, yes, it is 1% in Belarus, Belarus in that -- for simplification reasons.

So it’s a yes, it’s about combined 1% of gross profit and it is almost exclusively a domestic game, so it’s very little product which is moving out of Russia, let’s say, to Europe or almost non-existent from Belarus and the same is true for the Ukraine. So, those are typical markets where we have a push into those markets from supply from different locations. And then bringing those into Russia, as I’ve said, in many cases, the chemical industry in Russia is not as sophisticated, developed, so that the domestic business is -- and the business going out of Russia is rather small in our case, so almost ignorable. How that plays out now to other areas, I mean, I mentioned there certain supply chains, which need to be watched very carefully. I mentioned here in particular, as I said, ammonia in downstream products, urea and these kind of more basic chemicals.

So we need to see how that will play out. The other chemical industry in Europe, of course, is somehow relying on energy supply, gas supply in particular, but also naphtha, as I mentioned before. And then we have no impact, let’s say, in areas like, like the automotive industry, I mean, you see that the large car manufacturers have actually partial shutdowns of their operations, because they get not the proper equipment, for instance, out of Ukraine. And that will have also, of course, impact on our business at some point of time, because we’re the subdued automotive industry, we’re also somehow exposed. Nevertheless, I think this broad, broad position of Brenntag, across all the industries, more or less, with over 190,000 customers, we believe that we have this inherent risk balance in our portfolio, which allows us really to or will not expose us now to a massive, massive issue, if one of those industry segments is really suffering.

But again, I reemphasize it, situation is currently very volatile, every day something new and so we need to see how that plays out in the next weeks and months. The restocking in 2022, you’re asking for, it’s really hard to tell, I have to say, because still product availability is a topic. So the restocking although maybe desired or wanted, is practically maybe not possible. And you have mentioned it yourself. I mean, I think I predicted it also in Q3 call; some customers cannot even restock material for the peak season, which is actually Q1.

And so I see raw stock levels on the lower end and on a higher end in Q1 and going well into Q2. So there is of course always a pool trying to get material but whether there is really a restocking possible, I make my question marks. On the M&A side, I think it’s a mixed picture. I think the large transactions in these kind of things, I have the impression over the last two weeks have slowed down a little bit, maybe because of the uncertainty and because of large private equity houses and other so non-strategic maybe a little bit less active than we have seen it in 2021. Nevertheless, more strategic to strategic discussions are just continuing and this is -- you saw Ashkenazi, that was a typical strategic to strategic deal with no other private equity also involved.

So I believe that this M&A activity on that level continues but I will say the larger, larger deals are current currently considered or looked at in a more cautious way than they would have been maybe three months ago or two months ago.

Markus Mayer: Okay. Thank you so much.

Christian Kohlpaintner: You’re welcome.

Operator: The next question is coming from Rajesh Kumar at HSBC.

Rajesh Kumar: Hi, good afternoon. Thanks for taking the question. The first question is, now that you’ve run your specialty with a separate unit for one year, what are the new risks and opportunities you’ve discovered, which you wouldn’t have known if it was merged with other division or what have you learned by splitting the two up after one year? Second question is, if I look at your end market exposure in the specialty business, your organic growth, in theory, should be faster than [indiscernible], which have a lot more life sciences in it. So I’m just asking what is it that you need to do to accelerate organic growth to the level that your end market exposures should allow you to do? Or if it’s just me as an analyst, getting lost on my spreadsheet, and missing the fact that you are a much bigger business on specialty business, so 5% organic growth in dollar terms is a lot more growth than any of your peers. So some color there would be very helpful.

And third would be just how do you -- how invent do you want to communicate a bit more detailed strategy on the specialty business again, to the market? Are you going to do at this year some point or next year? That would be helpful. Thank you.

Christian Kohlpaintner: Hi, Rajesh, thanks. Thanks a lot for the questions. Let me start, maybe we see what did we learn on Specialties now for one year.

First of all, I mean, it is now one year and we have now created the dedicated sales forces to Specialties and to Essentials, so one of the key learnings actually is not so easy to separate once you have one company together to separate those commercial efforts and the commercial setup. I mean, it looks easy on paper and practically, it’s sometimes quite difficult to assign customers, to assign products in these kinds of things. So I would say the task of basically making Specialties and Essentials on a commercial side more separate from each other is actually quite a tough job and that’s important to know. Interesting enough the people sort each other very quickly from left to right, you have specialty sellers who are saying I always wanted to sell Specialties and always had to deal with this caustic soda tank trucks. I’m so happy that I can now bring my technical knowhow and competence to the game and do that.

And you have here on the other end guys who said this little bitsy Specialties, I want to sell big tank trucks, this is what I like. So I think the people sorting themselves, which is good, but still while you have sorted them, you also identify gaps, of course, in capabilities. In particular, in the Specialties field, not so much that our people who’ve been to the Specialties business are lacking that capability, it is just that here and there, you would need maybe more people to beef up those capabilities and bring it on the street and bring it to full traction. And there I think we need to we need to fully flex our muscle now once, now we have done this first year behind us on the specialty side and also continue to invest in our application and technology knowhow going forward, so this is currently emerging. And that means, you know that, of course, I’m not 100% satisfied with the performance, if I see some -- the exposure we have to life cycle -- and life science and we have to certain industry segments, that I believe we still have not reached the peak performance when it comes to growth in the sector but that’s I would say a key task, which we have to get right in the next 12 to 24 months.

On the next step of Brenntag’s transformation and the Brenntag’s strategy going forward, we will communicate later in the year to the markets, most likely in fall or late fall. We are currently developing what I have already discussed with our large investors also with you here and there, what we call Horizon II [phonetic]. And that again will be a holistic phase of the next chapter of Brenntag where, of course topics like digital ESG will play the appropriate role and so from that perspective, we expect, as I said in late fall, to come back to you with the strategy update and how the next chapter of Brenntag will look like.

Rajesh Kumar: Thank you very much.

Christian Kohlpaintner: You are welcome, Rajesh.

Operator: The next question is come from Rikin Patel at Exane BNP Paribas.

Rikin Patel: Hi, thanks for taking my questions. Just two left. Firstly, just following up on your comments on guidance, if you think about the upper end and the lower end of the range, could you maybe describe what takes us to those two scenarios? And then secondly, another follow up on OpEx costs, could you maybe just give us an indication of what you are assuming for underlying OpEx inflation within your guidance for 2022? Thanks.

Christian Kohlpaintner: Yeah, I will ask Thomas to get ready for the OpEx question.

I will talk about PEX and what we has been seeing so far. Coming to the guidance, I mean, it’s actually a rather mathematical topic. We are very early in the year and so, we have chosen a range that we feel comfortable with, this is 100 million treated between the upper and the lower end and this is coming more or less from our considerations, what is a reasonable target for midpoint. And so we have talked about the various influencing factors being it FX, being it M&A, being at the Project Brenntag contributions; of course the lower end could be related and then the underlying organic growth, sorry for that. So if you take all of those together, and then the lower end would mean maybe a less efficient execution of Project Brenntag, less contributions, maybe a less underlying organic growth.

We can see FX and M&A, I think, is more or less set and then we see, of course, on the upside side, maybe a faster than expected organic growth. Pricing still is very, very strong, I have to say, momentum from Q4 into Q1 has maintained well, and so let’s see how that plays out. So this is what I would say to the guidance. On the OpEx costs, just to give you a flavor on the PEX costs, and this is what we assumed as the base salary adjustments globally. We had budgeted 2.7% and we have just completed all the union’s negotiations and everything which you need to do and we came up now at about 3.1% globally.

So that means, yes, you see inflationary trends, you don’t see massive, massive salary increases requested. As I said, for this year, with 3.1%, we are actually -- we came out rather goods, considering this inflationary environment. The variable cost, PEX cost is an important topic, of course, with again, a very good trajectory, we have started into 2022, we need to see how the variable comp will play out. And on the logistics costs and other energy costs, again, hard to predict what it is. I think Thomas can give you maybe a little bit more granularity on what we have planned for, but we still believe that we are operating in a in an inflationary environment also in those dimensions.

Thomas Altmann: Yes, hi, Rikin. Thomas here. So regarding the OpEx inflation, I would say, it would be fair to assume more high single digit inflationary trend for the year 2022.

Rikin Patel: Great, thanks. That’s helpful.

Operator: Your next questions come from Christian Cohrs at Warburg Research.

Christian Cohrs: Yes. Good afternoon. Just one question left for me. When you presented actually the transformation program, you were guiding us for net cash out in the magnitude of 370 million to be expensed via special items in the P&L but also via CapEx.

Now the special items related to the transformation project so far were rather moderate. So compared to the 370 million, where do -- first of all, is this figure still valid? Where do we stand and so what to expect for the remaining two years? Thank you.

Christian Kohlpaintner: Hi, Christian, thanks. Thanks for the question. Absolutely right, the 370 million we said, it was a combination between investment and OpEx.

First of all, I think the -- what we have managed so far quite well was the severance payments. So I think overall, we used and tried to use as much as possible fluctuations and other things. We did it all in a socially responsible manner. What we had negotiated with the unions in the various countries, sometimes was above what we expected, but in many cases was below. So I would say the whole severance payment package is actually smaller than we have thought in the past.

And let me also remind you in this 370 million for Project Brenntag, we have basically also investment projects in there, which have some delays because they needed more proper planning, as we had to discover, particular the investments into the mega sites we had indicated. But let’s also be fair, we had in the whole program considered the costs for those investments, but no impact on the Project Brenntag deliverables. So what you always saw from Project Brenntag was what will happen in the year -- in the years, up to 2023, some of the investment costs and some of the investments would have been done already in 2023, but only creating an impact in ‘24, ‘25, which we never considered in Project Brenntag. So we’re quite tough on putting the costs into the whole program and communicate this while knowing that some of the benefits will even come after the Project Brenntag timeframe. So maybe that helps a little bit to illustrate that.

And again, we will prudently manage that bucket going forward, but we can expect that maybe that bucket will not be used to the full extent.

Christian Cohrs: That’s clear. Thank you.

Christian Kohlpaintner: You’re welcome.

Operator: Ladies and gentlemen, now we have no more questions waiting in the queue.

I would like to hand over to Thomas Altmann, Head of Investor Relations, to conclude this conference call.

Thomas Altmann: Thank you, Luca. This brings us to the end of the conference call for today. Thank you very much for joining us and your interest in Brenntag. If you have any further questions, please don’t hesitate to contact us.

We will publish our Q1 2022 results on May 11, 2022. Until then, we’re looking forward to further discussions with you. That’s it for today. I wish you all a good day and a great week. Thank you and goodbye.

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