Operator: I am Sergen, the Chorus Call operator. I would like to make that. All participants will be listen-only mode and the conference being recorded. The presentation will be followed by question-and-answer session. [Operator Instructions] At this time, it's my pleasure to hand over to Thomas Altmann, Senior Vice President, Corporate Investor Relations.

Please go ahead.

Thomas Altmann: Thank you, Sergen. Good afternoon, ladies and gentlemen, and welcome to the earnings call for the full year 2024. On the call with me today are our CEO, Dr. Christian Kohlpaintner; and our CFO, Dr.

Kristin Neumann. They will walk you through today's presentation, which is followed by a Q&A session. We are also joined today by Thomas Reisten, who will assume the CFO role as of April 1 and who will shortly introduce himself. All relevant documents have been published this morning on our website and can be found at brenntag.com in the Investor Relations section. In that same area, you will also find a replay of today's call.

Before we begin, allow me to point you to the Safe Harbor statement, which you will find at the end of the slide deck. With that, I will hand over to our CEO, Christian, over to you. Dr.

Christian Kohlpaintner: Yes, sir. Thank you, Thomas, and good afternoon, ladies and gentlemen.

Before we start talking about kind of affairs and the details of our business performance last year, I also warmly welcome Thomas Reisten, who is joining us in this call today. Thomas is a well-respected interculturally executive and with his experience in corporate transformation, he is an excellent addition to our management team. Thomas, thanks a lot for being here.

Thomas Reisten: Thank you, Christian for the kind introduction. I truly appreciate the opportunity to join this call today even ahead of officially stepping into my new role next month.

Dear, ladies and gentlemen, I'm excited to briefly introduce myself to you. My name is Thomas Reisten, I will take over the position as CFO of Brenntag SE as of April 1st this year. Currently, we are in the transition phase and I have already started to make myself familiar with topics I am going to be responsible for soon. I have extensive experience in financial leadership, most recently as Chief Financial Officer and member of the management Board of Vantage Towers. There I was deeply involved in the Company's carve out from the Vodafone organization, its successful IPO and later its transition to private equity ownership and delisting.

Prior to that, I spent many years with the Vodafone Group, holding senior financial leadership positions across multiple markets including the UK, Germany, Ireland, Romania, India and Japan. I would like to express my sincere gratitude to the Supervisory Board of Brenntag SE and also to Christian Kohlpaintner as CEO of Brenntag for the trust they have placed into me. Brenntag is a company with very strong fundamentals and significant growth opportunities. I look forward to working with the talented teams across the organization to drive the ongoing transformation of the Company and create long-term value. My experience in high performing finance, supply chain, corporate development, M&A and strategy organizations will be key in supporting Brenntag's continued success.

I'm eager to officially take over the role of CFO of Brenntag and engage with many of you in more detail. Thank you again for the warm welcome. Christian, back to you. Dr.

Christian Kohlpaintner: Yes, thank you, Thomas.

And I will now start with the highlights of 2024 followed by a strategy update and Kristine will then walk you through the details of our financial performance. Multiple geopolitical challenges, general uncertainties and the lack of consumer confidence impacted the economic development and chemical markets we are serving experienced and extended bottoming out of the industry cycle. As a consequence, industrial chemical selling prices remain strongly under pressure. Sales for the full-year amounted to €16.2 million on group level, which is 3% below the prior year. Despite these challenges, we kept our operating gross profit stable at €4.03 million.

On group level, volumes continue to show sequential improvements since the beginning of the year as predicted. However, gross profit per unit declines essentially compared to 2023 on group level with distinct developments in both divisions. At the same time, our gross profit as percentage of sales increased slightly compared to last year, which indicates that we managed gross profit to our advantage despite the strong pressure from industrial chemical selling prices. This again proves the resilience of our business model. As indicated by our stable absolute operating gross profit on a year-on-year comparison, higher volumes compensated the lower gross profit per unit margins.

Due to higher volume driven costs and inflationary impacts, we achieved an overall lower bottom-line result. Our operating EBITA amounted to €1.1 billion meeting the guidance provided in August at the lower end. This is a decline of around 13% year-over-year. We generated a strong free cash flow of €893 million. Nevertheless, this compares to the exceptionally high free cash flow of €1.7 billion in 2023, which was characterized by substantial release of working capital due to declining chemical prices during the destocking cycle.

Earnings per share stood at €3.71 compared to €4.73 last year. Our earnings per share were also impacted by the sale of Raj Petro Specialties in India to improve our business portfolio and the other special items which Kristin will elaborate on in detail in the financial section. As we always strive to create shareholder value and to let our shareholders participate in the successful performance of Brenntag, we have decided to propose a stable dividend of €2.10 to the Annual General Meeting in May. Subject to approval of the AGM, Brenntag has maintained or increased the dividend payout now for the 14th time in a row. We are doing this based on our resilient cash generation, our strong balance sheet and our confidence in the future performance of our company.

Let me say a few words on the outlook for 2025. Last year was characterized by sequential volume improvements predominantly driven by Brenntag Essentials. However, the highly competitive business environment in which industrial chemical selling prices remained under pressure impacted our gross profit per unit and eventually our bottom-line results. For 2025, we expect continued moderate improvements in volumes throughout the year and a slightly better sequential pricing environment in 2025, which should result in an improved gross profit per unit compared to 2024. At the same time, the economic and political uncertainty remains very high and global economic growth is expected to remain subdued.

Therefore, we expect an operating EBITA for the full year 2025 in the range of €1.1 billion to €1.3 billion. Before we have a more detailed look at our full year results, I would like to talk about our strategic achievements in 2024. We have been working intensively on the execution of our divisional strategies, which we presented to you at our Capital Markets Day in 2023, and we made good progress. We continue to execute the targeted disentanglement of our two divisions in areas with the highest value creation and differentiation potential. At the same time, we are prudently managing our cost base and are executing our cost containment measures, while focusing on running our business.

We have reiterated frequently that Brenntag Specialties is focusing on improving its performance through a combination of short-term and long-term levers. We initiated several short-term margin management initiatives in 2024, which already led to optimize pricing and purchasing structures. We saw meaningful improvements in gross profit per unit in the second half of 2024 compared to the first half. And you also see this momentum continuing into 2025, this is encouraging. At the same time, we also continued our longer-term measures like optimizing our business portfolio in specialties in multiple dimensions.

This includes business mix refinements, the review of our geographical setup, as well as further leveraging our Global Industry segment and upgrading our strategic supplier management. Here, we were able to score important additions to our supplier portfolio. In total, we have gained more than 25 new authorizations in the last year, some of which are top of the pyramid additions. We are confident that we are moving in the right direction here and this is also confirmed by very positive feedback from our supply partners. In Brenntag Essentials, we are executing our triple strategy, focusing especially on our last mile service operations.

We created around 100 LMSOs globally and are currently implementing the new steering structure through the standardized KPIs. We also continue to optimize our global site network and closed 33 locations in 2024, further shutdown measures are in progress or in the preparation phase. In our essentials business, we also focus on optimizing our business portfolio. We sold Raj Petro Specialties in India, a non-core asset of Brenntag. We decided to sell the business since we do not intend to run a highly volatile business with fluctuating margins and substantial manufacturing assets, which require a different focus compared to our distribution business.

The sale leads to an overall loss of around €63 million which has already been procured in 2024 for the vast majority and which is recognized in special items below operating EBITA and amortization. We also made good progress in terms of M&A, on the one hand strengthening our industry segments in specialties and on the other hand driving our triple strategy in Essentials. In total, we have closed eight acquisitions with an enterprise value of around €550 million in 2024. Two of those acquisitions were already signed in 2023. Brenntag Specialties closed three acquisitions.

We acquired Chemgrit in South Africa and Lawrence Industries in the UK, improving our footprint and technology portfolio material science. We also acquired PIC and PharmaSpecial in Brazil, expanding Brenntag's Life Science business in one of the largest global markets for personal care and pharma products. Within Brenntag Essentials, we closed five acquisitions in 2024. These include the two major transactions of Solventis in Belgium and Química Delta in Mexico, which both added to our triple-shed strategy by providing access to toll gates through marine terminals. M&A remains a key strategic pillar for us and an enabler of future growth.

Let me also briefly talk about our sustainability achievements. We are proud that our innovative CO2Xplorer won the ICIS Best Digital Innovation Award 2024. The tool allows companies to assess and manage the carbon footprint more effectively and to calculate CO2 emissions across the entire supply chain. Our CO2Xplorer is well accepted by the user community already supporting several thousand business partners engagements. Furthermore in 2024, Brenntag fully reviewed and adapted its climate change mitigation targets, which now cover scope 1, scope 2 and scope 3 missions.

This change was necessary to meet the requirements of the science-based target initiative SBTI. All targets were successfully validated by the SBTi at the beginning of 2025. This target confirmation cements our commitment and market leadership in sustainability. Last but not least, we also increased our score in the comprehensive EcoVadis sustainability assessment and have been again awarded with the highest possible platinum rating. These are just some of our many sustainability achievements which clearly demonstrate Brenntag's leading role in our industry.

Let me now hand over to Kristin who will elaborate on our cost containment program and our DiDEX initiatives before talking about our financial results in more detail. Kristin?
Dr.

Kristin Neumann: Thank you, Christian. Let us take a closer look at our cost containment program, which we introduced in the context of our Capital Markets Day 2023 and which includes the expected benefits from our DiDEX initiatives. With our cost containment program, we aim to achieve a cost reduction of €300 million per year by 2027 compared to the base year 2023.

To achieve these benefits, we also outlined the amount of one-off costs we expect to incur over the planning period. Initially, this was a range of €450 million to €650 million to achieve the disentanglement of our two divisions and our cost takeout program. In the course of 2024, we reduced this number to €300 million of one-off costs related to the targeted disentanglement and to achieve our cost of program. Around two thirds of the €300 million to around €200 million will be related to our cost containment measures. Overall, these costs will be shown as special items below operating EBITA.

In addition, we announced €250 million of one-off costs to implement our DiDEX initiatives and for our ERP harmonization. The majority of these costs are included in our general OpEx line and therefore included in operating EBITA. A smaller amount is associated to CapEx. The cost out program is in full execution and is already contributing positively to our underlying cost development, reducing our cost base by slightly more than €50 million in 2024. The executed measures include, among others, the organic reduction of around 230 headcounts in 2024, which was largely carried out towards the end of the year and helped to mitigate inflation related increases in personnel expenses.

Also, as part of our site network optimization measures, we successfully closed 33 locations last year. Looking at 2025, the targeted cost out impact is roughly double the amount of 2024 and we have a clear plan to achieve the communicated €300 million annual cost out effect by 2027. The actual one-off cost incurred to achieve our cost containment measures and the targeted disentanglement amount to around €50 million in 2024. And for 2025, we intend to spend around €100 million where of the vast majority is linked to our cost out program. Our DiDEX initiatives are well on track and will contribute to achieve the intended cost takeout and efficiency measures as part of our €300 million savings program.

In the course of last year, we incurred one-off cost to implement order mix initiatives of around €60 million, and for 2025, we aim to spend around €40 million to €50 million. Alongside these one-time direct investments, we have been incurring some running costs like licensing costs, which will, of course, continue in the future, which have not been part of our €250 million one-time cost projection. For 2025, we expect these running costs to be more or less on the same level as for 2024. The one-time cost to achieve our cost IOT and direct measures are generally more front end loaded and they gradually reduce over time. The benefits of our initiatives are gradually increasing over time with a stronger impact towards the end of the project phase as soon as all measures are implemented.

Naturally, in the starting years, the costs outweigh the benefits. With this, I would like to switch to our financial performance in the full-year 2024. I will start with the development of our operating EBITA on group level. As a reminder, when talking about growth rates, we generally talk about FX adjusted rates. In 2023, we reported an operating EBITA of €1.265 billion.

The translation and foreign exchange effect in 2024 had a negative impact of €5 million. Exhibitions contributed €31 million to the operating EBITA development. 2024, we reported an operating EBITA of €1.1 million for the whole group, which is 13% below the prior year figure. Organically, operating EBITA declined by €189 million compared to 2023. The EBITA conversion ratio for the group came in at 27% compared to a conversion ratio of 31% in the prior year.

Our results were overall characterized by a continuously challenging market environment and intense competition, which put pressure on industrial chemical selling prices. As expected, volumes were higher compared to 2023. These higher volumes were in fact able to compensate for a lower gross profit per unit, which emphasizes the resilience of our business model. However, in combination with higher volume and inflation driven costs, this led to a lower overall bottom line result year-over-year. Let me briefly talk about our Q4 development.

Looking at our operating gross profit, the trends we observed in Q3 broadly continued into the fourth quarter. We saw a positive volume development compared to the prior year period. At the same time, our gross profit per unit declined year-over-year. However, we were able to stabilize gross profit per unit on group level compared to Q3 on a sequential basis. From a cost perspective, we saw a meaningful cost increase compared to Q4 2023.

This is mainly driven by higher volumes, additional costs from acquisitions as well as general inflation, which were partly counterbalanced by our cost out measures and lower variable personnel expenses. Additionally, the fourth quarter of 2023 benefited from one-time income effect resulting in a more challenging year-over-year comparison. This resulted in operating EBITA of €264 million in the fourth quarter 2024, which is 9% below the prior year quarter. For further details of the Q4 financials, please refer to the appendix of this presentation. Let us now have a look at our two divisions, starting with Brenntag Specialties.

Brenntag Specialties reported an operating gross profit of €1.2 billion which is around 1% lower compared to 2023. The gross profit margin in relation to sales stood at 22.4%, which is slightly higher compared to the prior year. The results were affected by stable volumes in combination with a slightly lower gross profit per unit compared to the prior year. Operating expenses for Brenntag Specialties increased year-over-year. Around one third of the increase is related to exhibitions.

On an organic basis, the increase was mainly driven by inflation related increases in certain and other operating expenses as well as the internal allocation of further costs in connection with our direct initiatives. These are costs from prior years, which had previously remained in group and regional services or formerly known as all other segments and were charged on this year when various digital products went into operation. As a result, operating EBITA declined by 12% and reached €447 million. The segment Life Science reported a year on year operating EBITA decline of 9%, whereas the operating EBITA in Material Science declined by 8%. Our Life Science segment showed a positive trajectory within 2024, and operating EBITA increased by 3% in the fourth quarter compared to Q4 2023, which is encouraging.

Material signs remain challenging throughout the year. The EBITA conversion ratio for Brenntag Specialties was 38% and below the prior year level of 43%. Let us have a look at the gross profit performance of our business units within the segment. In our Life Science segment, the business unit Nutrition almost reached the prior year result, where Pharma failed headwinds in 2024. Beauty & Care showed growth throughout the year.

Nutrition, we experienced ongoing price pressure of non-branded ingredients, leading to operating gross profit slightly below the prior year level, mainly driven by our North American business. However, we also saw strong gross profit per unit momentum towards the end of the year with double digit gross profit per unit growth in Q4 compared to the prior year period. Beauty & Care was the strongest business unit throughout the year with operating gross profit growth mainly coming from EMEA and APAC and driven by both organic and M&A contribution. Similar to our BU Nutrition, we saw double digit gross profit per unit growth in Q4 compared to the prior year period, which is encouraging going into 2025. In Pharma, our operating gross profit remained under pressure in 2024.

The operating gross profit in Materials Science was slightly lower compared to 2023. Although we saw slight improvement in case in construction in the course of 2024, our overall results are still impacted by the high interest rate environment, which keeps housing construction and public investment at lower levels. When looking at the performance of Brenntag Specialties in the fourth quarter, we saw meaningful improvements in our gross profit per unit compared to the prior year period and also compared to the first half of the year, reflecting our various margin initiatives, which Christian highlighted in the strategy section and which we focused on last year. Coming to the performance of Brenntag Essentials. Brenntag Essentials reported an operating gross profit of €2.9 billion which is stable compared to 2023.

The gross profit margin in relation to sales stood at 25.9%, which is slightly higher compared to the prior year, reflecting our ability to manage margins in a challenging business environment. In 2024, we saw the strongest market normalization in industrial chemical selling prices in a long time, but we were able to partly mitigate the impact on a gross profit per unit level, which also shows the resilience of our business model and our strong market position. All our segments in Brenntag Essentials achieved a positive volume development. Brenntag even achieved double-digit volume growth compared to last year. This volume development was able to offset a lower gross profit per unit, leading to a stable absolute gross profit for the division.

Operating expenses for Brenntag Essentials increased year-over-year, but more than half is related to our acquisitions. On an organic basis, the increase was mainly driven by inflationary effects, volume related increases in transportation costs and the internal allocation of further costs in connection with our direct initiatives. These are costs from prior years, which had previously remained in group and regional services or formerly known as all other segments and were charged on this year when various digital products went into operation. Operating EBITA of Brenntag Essentials stood at €781 million. This is 14% below last year.

The EBITA conversion ratio for the division came in at around 27% compared to 32% in 2023. Let me briefly comment on the performance of Brenntag Essentials in the fourth quarter '24 compared to the prior year period. On the one hand, we saw a continuation of volume improvement in all our segments. On the other hand, the sustained pressure on industrial chemical selling prices led to a lower gross profit per unit. Moving to Slide 11, where we look at the income statement in more detail.

We generated sales of €16.2 billion a decline of 3%. Our operating gross profit stood at €4.03 billion and was more or less stable compared to last year. We were able to expand our gross profit over sales margin, which indicates that we are managing our gross profit per unit to our advantage despite the heavy pressure from selling prices in the market. Operating expenses, excluding special items, increased moderately and stood at €2.6 million in 2024, up 4.7% compared to the prior year. I will talk about our cost development in more detail in a minute, but let us first continue with the income statement.

We reported an operating EBITA of €1.1 billion. Special items below operating EBITA had a negative impact of €111 million. This include the negative effect of €42 million from the initiated sale of Raj Petro Specialties in India, which is related to valuation allowances on property, plant and equipment and net working capital. It also includes cost for our strategic projects in the amount of €50 million, which are mainly related to severance and advisory expenses and which will help to achieve the desired cost reduction targets and drive our disentanglement efforts. Furthermore, we incurred expenses for legal risks mainly arising from the sale of talc and similar products in North America in the amount of €43 million.

Positive one-time income in the amount of €11 million resulted from lower-than-expected tax liabilities for excise tax risks in Sweden. We also booked an income of €15 million for insurance payments in the connection with fires at warehouses in Canada and Turkey, which occurred in 2023. Depreciation and amortization amounted to €430 million and were significantly higher compared to last year. The increase in depreciation is partly related to our acquisitions. The increase in amortization is mainly driven by our Raj divestment.

Net finance cost stood at €173 million compared to €120 million last year. The increase is to a larger degree driven by higher net financial liabilities and changes in purchase price obligation relating to acquisitions. Our performance translated into a profit after tax of €540 million and earnings per share of €3.71 this compares to the prior year profit after tax of €721 million and earnings per share of €4.73 last year. To provide more clarity on the development of our operating expenses, we show an OpEx bridge on Slide 12. In 2023, we reported operating expenses of €2.46 million.

The translational foreign exchange effect in 2024 had a positive impact of around €5 million. Operating expenses related to additional costs from acquired companies and our strategic investments in DiDEX and IT, increased by around €90 million with the majority of the increase coming from acquisitions. Our underlying costs only increased by around €50 million. The increase is mainly related to higher personnel expenses, which are driven by wage inflation, partly counterbalanced by reduction of variable personnel expenses. Furthermore, both personnel expenses and other operating expenses increased due to higher volumes compared to the prior year.

In addition, the 2023 cost base was amongst others positively impacted by one-off effects, which did not occur in 2024. Overall, these effects led to a cost increase of around €50 million compared to last year. Our cost out measures, which had a positive impact of slightly more than €50 million could partly offset this development. As a result, operating expenses for the group stood at €2.57 billion in 2024. We will continue to focus on our cost development with strict discipline.

Switching to Page 13. In 2024, we generated a free cash flow of €893 million. This is below the exceptionally high number of €1.7 billion last year. The decline in free cash flow generation is next to the decline in operating EBITDA driven by movements in our working capital. But we generated a cash inflow from working capital in 2023 driven by significant price effects, Brenntag recorded a slight outflow of working capital in 2024.

Our working capital turnover was higher compared to last year and stood at 7.6x. The increase reflects our initiatives to manage our work capital more effectively compared to the prior year. Let me briefly touch upon our value creation metric ROCE. For 2024, the ROCE stood at 14%, which compares to a ROCE of 17.7% in 2023. Our ROCE before special items came in at 15.6% and was below the prior year figure of 18.9%.

Looking at our balance sheet, our net financial liabilities amounted to €2.8 billion in 2024. The increase compared to the end of 2023 is primarily driven by lower cash from operations as well as the cash outflow for acquisitions in particular from Vantage and Química Delta. In addition, lease liabilities were higher compared to the end of last year, also partly driven by these two acquisitions. Our leverage ratio net debt to operating EBITDA stood at 1.9x. Before Christian will talk about the outlook, I'd like to take a moment to say goodbye.

You know that I decided not to prolong my contract with Brenntag and at the end of the month, I will be leaving Brenntag and handing over to Thomas Reisten. I want to thank you for the valuable exchanges over the past three years and for your continued interest in the development of our company. It has been a pleasure engaging with you and I truly appreciate your support. Thank you and all the best for you. And with this, I would like to head back to Christian to talk about the outlook for 2025.

Dr.

Christian Kohlpaintner: Yes, thank you, Kristine. Ladies and gentlemen, last year was characterized by sequential volume improvements across the business. However, the highly competitive business environment in which industrial chemical selling prices remained under pressure impacted our gross profit per unit and lastly our bottom-line results. For 2025, we expect continued moderate improvements in volumes throughout the year and a slightly better sequential pricing environment in 2025, which should result in an improved gross profit per unit compared to 2024.

At the same time, the economic and political uncertainty remains very high and global economic growth is expected to remain subdued. Therefore, we expect an operating EBITA for the full year 2025 in the range of €1.1 billion to €1.3 billion. Our forecast takes into account the contributions to earnings from acquisitions already closed and assumes that exchange rates will remain stable on the level at the time of the results publication. We fully focus to execute our strategic plan. Our priorities are to further improve the Company's operational performance and to execute our growth strategy along the clearly laid out strategy to win and to leverage our existing setup as one brand tag with two differentiated divisions serving the distinct needs of our customers and suppliers supported by our lean joint services background.

With this, I would like to close the presentation now. And thank all of you for participating in today's call, and we are now looking forward to your questions.

Operator: Ladies and gentlemen, we will now begin the question-and-answer. [Operator Instructions] The first question comes from the line of Carl Raynsford from Berenberg. Please go ahead.

Carl Raynsford: I've got three, if I may. The first is just following on from your comments on outlook, Christian. It seems volumes are strong through 2024. And price locks have stabilized to an extent in Q4. So how should we think about the price and volume mix through 2025? And it will also be useful to understand your thoughts on the phasing of that throughout the year.

I know you said in the past that there may be a possibility of pricing as a lever for growth in the second half, more than the first. The second question, would you be able to call out sort of -- I know you've done this to an extent, Christian, but to call out the positive or negative dynamics you've seen at the start of this year, specifically in your specific end market, especially in the context of the political uncertainty, both in the U.S. and globally? And further, are there sort of end markets or geographies that you see as particularly depressed right now, which you think could or perhaps are recovering well throughout 2025? And then just lastly, on the cost out. How should we think about that this year versus the just over €50 million in 2024? Again, if possible, to be phasing by quarter? That would be useful. Dr.

Christian Kohlpaintner: Carl, thanks a lot for the questions. The third question, I refer to Kristin. Coming to your first question on volumes and pricing development. I mean as we have said, and predicted, by the way, for 2024, we saw sequential improvement in the volume. This is our prediction as we go into 2025 as well, a slight sequential improvement in volumes, not to the extent we saw in 2024, but still a positive trend.

The same is true also for the pricing environment. Also, sequentially, we have made good progress over the year 2024, particularly in the second half versus first half. And that momentum sequentially appears to hold up. And so that is what brings us to the guidance we have, we have shown in the framework around it. And it's not that this is end loaded in 2025 second half.

I think it is a sequential improvement quarter-by-quarter as we go into the year. On the positive and negative dynamics, when we have -- when we are looking into the start of the year, of course, we saw already encouraging signs in our Life Science business in Q4. We see continuing this also into the first quarter of 2025 in Specialties. So, Life Sciences is indeed, I would say, the positive we see at this moment. On the negative side, we need to be clearly watch-out what kind of impact do we see by the tariff situation and the impact it will have not only our direct business, but of course, the secondary and tertiary effects we can foresee.

Our regional split in our presence in the regions, however, is protecting our business to some extent against this because the vast majority we sell in a region like in the United States, we also source locally and regionally in the same region. But it could open up also some arbitrage opportunities, which we, given our set up, can now play and you can have a look at it. Too early to tell how that plays out. Every day is a new thing. Every day, there's a new announcement, so let's wait and see how that plays out.

But this is how we see currently, the situation. When you ask for the best and the most potential for recovery, this is only a potential -- hard to predict. Could be, of course, a truce or a peace treaty with Ukraine and Russia and the -- at least, temporarily moderated wars between Ukraine and Russia, plus, and you know all the discussions around the German stimulus pack they are working out. If that is materializing, that can also have some positive impact on Europe as a recovering geography, but let's wait and see how that plays out politically and with the negotiations. Then, I will hand over to Kristin to give you more flavor on your question here.

Dr.

Kristin Neumann: Thank you, Christian, and good afternoon, Carl. So, in 2024, we achieved slightly more than €50 million of benefits for our cost-out program. We plan and we target to double this amount in 2025. And if you asked about the phasing, so there will be a sequential increase across the year of the additional savings, which should give you a good guidance.

Carl Raynsford: Just a follow-up quickly, Christian, if I may. Maybe this is a better way to ask you that. The dynamics you're seeing regarding the relationship between order frequency and order size, is that any different at the start of this year versus Q4, sort of -- I'm trying to get a gauge of a customer confidence as got any better in the past sort of 2.5 months versus what you saw at the end of last year?
Dr.

Christian Kohlpaintner: I think there is no pattern recognizable for us. I think customers are cautious.

This is very clear. That given how the market is currently developing and as I said, the political uncertainty and also geopolitical uncertainty is adding to that. But it's not that there's a material either prebuying or preloading or whatever, observer not -- we didn't see that in Q4, contrary maybe to some industry comments you have. You have heard, not from distribution, but for manufacturing. That's what we could not observe.

But of course, everybody is now cautious around how does it play out, what impact does it have on tariffs. And so, I would consider this as neither very negative nor positive. I think it is just a normal course of business in times of uncertainty.

Operator: The next question comes from the line of Suhasini Varanasi from Goldman Sachs. Please go ahead.

Suhasini Varanasi: Can you maybe discuss what are your underlying assumptions on Essentials versus Specialties growth within your EBITA guidance for the full year? And what would get you to the lower end versus the upper end of your EBITA range? The second question is on the 1Q commentary, I think you mentioned that Life Sciences has continued to do well in 1Q. Can you comment on Essentials as well? And -- what -- how should we think about GP and EBITA in 1Q versus fourth quarter? Should it be sequentially up?
Dr.

Christian Kohlpaintner: Yes, Suhasini, thank you so much for your questions. And coming back to our assumptions, particularly in what we are seeing. So, we do expect the progression in both divisions going forward into 2025.

As you rightly mentioned, there is currently at least what we observed in Q4, but also continuing in Q1, a positive development in our Life Science part of the Specialties business. And that is continuing, I would say, for the moment. And Kristin has commented on the performance of Nutrition of Beauty & Care. So, I think these are pretty good segments which are performing quite well. When we look at what we see at the lower end and what could happen at the low end of the guidance, it is, of course, continued pressure on pricing and margin in Essentials and a weaker than anticipated volume growth.

And this is, at this moment, very opaque to us and very difficult to assess and talking to our supply partners. We also hear cautionary notes on the business development and in particular, on the demand side. So this could lead to answer your question on the low end and impact on the Essentials side. On the other hand, should be there, as I described before, clarity around the Ukraine-Russian war should there be clarity around stimulus packages in Europe, should be clarity around increased spending in defense in Europe that could be indeed stronger volume growth, including also pricing power plus arbitrage opportunities here and there out of tariffs, which we can see. So that would be the upper end of the guidance to give you a little bit of flavor, what needs to come together to define a little bit this rate.

So overall, I would say at this moment, we are positive on the Specialties side, and particularly in Life Science. And for Essentials, we see currently a lot of undefined variables depending on now how the political environment and geopolitical situation will evolve.

Operator: The next question comes from the line of Alex Stewart from Barclays. Please go ahead.

Alex Stewart: A couple of questions.

In your Q4 statement of the documents, you called out higher transport costs as being one of the reasons why the EBITA was lower. I think you called it higher volume-related transport costs. Could you just explain that? Because I was under the impression that transport costs were effectively passed through to the end customer. So, I'm not quite sure why higher costs would have impacted your earnings. Secondly, you talked about having a lower bonus provision in 2024.

Assuming you hit the midpoint of your guidance in '25, what should we assume for a normal bonus provision in '25? In other words, what's the impact year-on-year? And then finally, going back to your statement. The other thing I'm curious is that you talk about GP per unit pressure in Specialties from more competition. But you don't put that sentence in the Essentials commentary. The competitive pressure increasing is only included in Specialties. Why is it that you're seeing more competition on GP per unit in Specialties than you are in Essentials?
Dr.

Christian Kohlpaintner: Alex, I will take the last question, and the first two would refer to Kristin. I think it would be a misunderstanding that gross profit per ton pressure on Specialties is only coming from competition. I think what we tried to describe or explain is that we saw a decline in gross profit per ton in Specialties in the full year 2024 versus 2023. But sequentially, we saw a step-by-step improvement, in particular in the Life Science segment. So, to clarify that topic.

Gross profit per ton pressure on Essentials was less pronounced in the second half compared to the first half as well, and this is why we didn't mention it specifically. So, I hope that clarifies that. On the other two questions, I would refer now to Kristin to give you a response. Dr.

Kristin Neumann: Hi, Alex.

So, for the full year, you said that we had higher transport costs in our OpEx line. There are volume burden and come on top with the higher volumes at a major of the business. However, if you look at the combination with our GP as Christian described, and GP per ton, we had tremendous pressure on our GP per unit numbers. And therefore, that was more or less then the problem creating that together with higher OpEx cost that the overall result went down. If you look at the bonuses for 2025, it's fair to say that we have to add a low to midsize two-digit million amount in terms of performances.

Alex Stewart: Sorry, was that two digit million amounts. Was that -- could you clarify?
Dr.

Kristin Neumann: Low- to mid-size two-digit million amount.

Operator: The next question comes from the line of Dominic Edridge from Deutsche Bank. Please go ahead.

Dominic Edridge: Kristin, thanks so much for thing over the last few years and good luck for whatever you're up to in the future. Just some questions for myself. Firstly, just after the bleak Q1 we had last year, I'm just wondering if you could say, are you expecting a much more normal year in terms of the phasing of profitability? Or should we expect some of the things, for instance, cost savings to come through towards the end of the year versus the start of the year? Secondly, I didn't notice in the annual report, it suggested that in Germany, your revenue was down 18%. Which I know revenues are very bad indicator for your business. It seems a lot worse in other countries.

Can you maybe discuss that a little bit? Is there any particular issues in Germany? Or does that just imply there's much more of a cyclical business in Germany? And then lastly, Christian, maybe a question for you. What are the key goals this year for you before, obviously, you're retiring at the end of the year? What are you sort of key things that you would like to get done this year?
Dr.

Christian Kohlpaintner: Yes, I will probably answer the first and the third question. On the phasing, I would expect on 2025, not an unusual phasing of results. So typically, we have a Q1, and then we have two strong quarters, Q2, Q3 and then Q4.

So, I would not expect that seasonality to change as again, say, in the absence of any major geopolitical impact we might have. Again, some of those positive assumptions materialize like peace, Ukraine-Russia and the stimulus package in Europe. And then, of course, business development could be slightly different than usual. But I would not expect that this is changing in 2025 compared to previous patterns we have seen in those years. Overall, I would say from a savings standpoint of view, we have a running program which is lowering the run rate month by month as we go into the year.

So, I also would dare not see any massive back-end loaded saving. So as this is in full swing, we add month-by-month, the savings into our run rate. So this is what I don't expect that this is also end loaded. So, I'm refraining from saying everything will be great in second half. I'm just saying sequential improvement is what we expect with a normalized pattern for the year quarter-by-quarter.

What do I want to accomplish is pretty clear? First of all, I want to make sure that we have a smooth transition from Kristin to Thomas on the CFO domain. It's very, very important that we show continuity and that we also now have Thomas on board with the new management team. Then we need to make sure also. And I know that the Supervisory Board is very carefully looking into a succession plan, but this is also as smooth as possible and the handover for a new incoming CEO will be done very properly. And then, of course, making sure that the cost program is designed and set up in a way that the costs actually are really taken out according to our plan.

So, rhythm and rigor and drumbeat to get the cost position in line what we need to have going forward. At the end of the day is what I want to continue and want to deliver. It's nothing exciting. It's just continuation, stability, clarity for our organization and for the external world and our business partner. That is, at this moment, the most important thing.

Dr.

Kristin Neumann: And then, Dominic, the last one, outstanding, the decrease in revenues in Germany by 18%. So, it's a mixture of different things. First of all, as in all other countries, also the decrease in chemical prices, which was quite substantial, as we also already described, then we had a lack of demand in Germany. And on top also in Germany, our transregional business is located.

That is not included in the overall regional business. You could see in EMEA, but that is disclosed in a separate bucket. And that is also located in a part of Germany and that is also a major driver of that.

Operator: The next question comes from the line of Chetan Udeshi from JPMorgan. Please go ahead.

Chetan Udeshi: The first question was, maybe can you help us with any color on what you are expecting for Q1? Typically, your -- if I look at the last five to six years, Q1 tends to be slightly higher than Q4 in terms of EBITA, maybe 2%, 3%, 4%, 5%. Is that something you expect in Q1? Is it stronger? Is it lower than that? I think that would be the first question. The second question was -- I'm a bit confused about what is the expectation around OpEx this year because on one hand, you are talking about savings, but then you also have bonus accruals, plus, I guess you have wage inflation. So, any color on how you see the organic and total OpEx development this year? And third question was, can you remind us how much M&A contribution do you expect this year from the acquisitions you've already done last year? And sorry -- I heard, Christian, you talked about double-digit GP per unit, increase in your Beauty and I think it was in Nutrition as well. And of course, it's good to see that the improvement.

I'm just -- again, going back to the discussions we've had in the past. I mean this sort of moves in GP per unit in this product segment, one would usually associate these, sort of moves with commodity businesses. I'm just curious what is driving these double-digit increases in the GP per unit for these segments?
Dr.

Christian Kohlpaintner: Chetan, thank you so much for your questions. I will take the first one and most likely, the fourth one, the last one.

On -- as I have said previously to Dominic, I don't expect any major difference on the phasing and the quarterly developments in the absence of any geopolitical shock or any -- not short, but maybe a positive upside, which could materialize. So, I would expect to generally rely on a similar quarterly pattern as we had it over the last five, six years. On the Life Science topic, we talked about good improvement on the gross profit per ton in Q4. And that is, I think, the encouraging element we see. I would say there are a couple of reasons for it.

One of it is the pricing margin management we have put into place in 2024 and improving our pricing structures and also how we are supporting the pricing and margin by our supply and supply contracts. And also, we have gained 25 new authorizations, which are quite attractive. From the portfolio, which we are marketing and selling. Fully in line of what I described as long-term measure specialties needs to realize that means upgrading the portfolio quality, which will also lead to improve in the gross profit per unit margins going forward. So those are the moving parts on that side.

And with the expectations on cost and the M&A contribution, I will hand over to Kristin. Dr.

Kristin Neumann: Hi, Chetan. So first of all, M&A contribution, you can expect to have a slow to mid two-digit million amount of additional contribution from our activities already closed last year. In terms of OpEx, you're absolutely right.

There are a lot of moving parts. However, if I summarize that, all in all, we will see a low single-digit percentage increase in our overall OpEx. And the other OpEx go slightly down or will be slightly down or cash flow increase. If you look at it organically, then our cost position should be flat across the full year. I hope that clarifies.

Operator: [Operator Instructions] The next question comes from the line of Nicole Manion from UBS. Please go ahead.

Nicole Manion: Just one follow-up question, please, on the cost base and the moving parts there into 2025. Just looking at the numbers, it seems other operating expenses has obviously been a big driver of the margin pressure you've seen in the last couple of years. I'm looking especially at the development in advisory and audit, which I know it does include some other IT costs, too.

But in absolute terms, that's tracking in the mid-200s compared to €50 million, €60 million a few years back. I just wanted to ask specifically what is in there that you expect to be sticky for DiDEX and other initiatives? And then what costs, if any, are in that line that I guess we should expect to be stopping, i.e., is there anything that's sort of cost off as well as sort of cost out?
Dr.

Christian Kohlpaintner: Nicole, thank you so much for your question. I think I'll hand it over to Kristin to at least give us some -- maybe because you are a little bit hard to understand. If you can repeat some of the questions, would be good because I don't know, maybe -- I hope it's not on our end, but it was a little bit difficult to understand here in this room.

Nicole Manion: Sorry, I can try and ask you again. Let me know if you can hear me a little bit better. Okay, great. Sorry about that. It was specifically about the other operating line, and within that, the development in advisory and audit, which I know includes some other IT costs, too.

But I was just asking sort of what's kind of sticky in that line, maybe for DiDEX and other initiatives? And then what costs are in there, if any, that we should expect to be sort of stopping, i.e., is there anything that cost off as well as just the cost out?
Dr.

Christian Kohlpaintner: Okay. Nicole, thank you. That was much clearer. I think Kristin will answer those questions.

Dr.

Kristin Neumann: Thank you. First of all, of course, in the advisory cost included in the end reporting, there are the part of the DiDEX cost into this for sure, that is not advisory in the sense, it will be hard from external partners to implement everything what we want to achieve with our DiDEX program. So, for instance, if we want to implement Salesforce, then you need the help of an integrator who just helped us to implement the program. And also in the advisory expenses, and therefore, we also see an increase, we have advisory expense for our project for the disentanglement.

This is reported on below the line. And that is something which we do not foresee to that large extent to continue next year. So if you look at the DiDEX cost, as already disclosed, we would see a slightly lower amount of cost for next year. While the running costs stay at the same level. And if you refer also to the costs which are associated with our cost-out program and disentanglement, which is reported below the line, then you can expect to see an amount of €100 million for next year.

I hope that clarifies.

Nicole Manion: Yes. That's very clear. I'm sorry about the slight issue with the line. Dr.

Christian Kohlpaintner: All good. Dr.

Kristin Neumann: All good. I think it's on our end.

Operator: The next question comes from the line of Christian Obst from Baader Bank.

Please go ahead.

Christian Obst: Just one question concerning the possible divestments. You have an asset held for sale here? Can you give us some kind of an indication what that is? And going forward, so we have discussed over the last two years that you might divest a little bit more going forward. And so how is the portfolio evolving there? And what can we expect maybe in the next 12 to 24 months when it comes to divestments? And what is the framework for underlying earnings or profit expectations to lift a company or part of the Company into these kind of assets held for sale?
Dr.

Christian Kohlpaintner: Christian, thank you very much.

I think what you can expect is not a wave of now, huge divestments. I mean, this would be misleading. What we are doing is similar to what we acquired. We have smaller businesses, which we are now looking at and say, okay, do they really fit to what we want to do as a distribution company, do they fit to our business model, what are the expectations going forward. So, the organization is currently looking into that.

It's a healthily filled pipeline with a lot of smaller divestitures to be very explicit which we are contemplating on and also here and there are geographical corrections where we're saying, okay, this could be smaller countries where we are exiting. So, I don't expect now a massive wave of divestitures. This is not the intent, but it's cleaning up the portfolio and step-by-step improving it and having it very focused on what the purpose of our distribution company. So, that's what it is.

Christian Obst: Okay.

And maybe another question. It's concerning possible impact of AI going forward. So, you have -- or your colleagues have put a lot of effort in improving the underlying IT for your entire business framework and network. Have you filed out so far considered something which might increase the scalability of your business maybe in the time frame also from 12 to 24 months with these new features, maybe?
Dr.

Christian Kohlpaintner: Yes, I think, Christian, we have talked about DiDEX and the artificial intelligence algorithms.

We probably have not put so prominently in front of it as maybe others have been doing, but that's an essential part of DiDEX. Just name one example, which is the customer growth engine. It's an important module where we are reducing our churn rate. And I think we have a little bit talked in the past, but also automization capabilities now in the customer service and how we are executing our order fulfillment and order delivery. So, I think there are multiple dimensions where this is working and playing into that.

So here, we will benefit from the DiDEX investments which we've done in the past, and we're making our data accessible and usable for the various applications. So, this is part of our growth expectations going forward, that these initiatives will, of course, deliver according to our plans.

Christian Obst: Yes. I heard that we talked about that before. So, going maybe another part of the question, so going back a little bit, are you a little bit surprised of what can be done going forward? Or are you a little bit disappointed that not that so much can be done with these features? So, this is either way.

Dr.

Christian Kohlpaintner: I think I believe there's much more potential which we currently can harvest. And the reason is from an IT infrastructure position to really do that. I think we're making good progress in doing that. Still, I believe you know the impact can be much bigger going forward.

But it's too early to tell what additional we can expect. But as I've said, we need to make sure that we are in a position and capable of really harvesting those artificial intelligence impacts on our business. And I think we are on a very good trajectory. This is part of the large investments we have been taking over the last years to be prepared for that. So, in that sense, I feel ourselves quite well prepared.

And despite the higher cost, we, of course, have created by that, but I think we are quite well positioned now.

Christian Obst: Of course, because it could be interesting because over the last one, two years, we have seen this overproportionate increase in personnel costs. And if a rising skill and ability, it should go the other way around. So, we still have to wait for that more or less. So, we have the high investment but not the outcome from this.

Dr.

Christian Kohlpaintner: Yes. But when you refer to really headcount in the Company, I mean, the headcount increase you see is exclusively driven by M&A. So, these are the companies we have acquired organically. We have reduced over two consecutive years, our headcount quite substantially.

So there, you see already efficiency improvements, which we continue to deploy and harvest on going forward.

Operator: There are no more questions at this time. I would now like to turn the conference back over to Thomas Altmann for any closing remarks.

Thomas Altmann: Thank you, Sergen. Before we finish our conference call today, I would like to hand back to Christian for some final remarks.

Dr.

Christian Kohlpaintner: Thank you, Thomas, and I guess we come now to the end of our full year call results call. Again, also, I want to take the opportunity to thank Kristin wholeheartedly for what she has been contributing over three years, playing a key role in really optimizing and shaping our transformation, especially in the finance area. So, thank you very much for that. And I think everybody could observe her dedication and the contributions of Kristin which have made a significant impact on our company.

So, Kristin, on behalf of the entire team, thank you for the exceptional commitment and your leadership. We wish you now, all the best for your future. And ladies and gentlemen, thank you very much now for joining us today. In case of further questions, please do not hesitate to reach to our IR team. Have a great day, and goodbye to you.

Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thanks for participating in the conference. You may now disconnect your lines. Goodbye.