Executives: Ulrike Rockel - Head of IR Matthias Zachert - CEO and Chairman Michael Pontzen - CFO
Analysts: Lutz Grüten - Commerzbank Martin Rödiger - Kepler Cheuvreux Stephanie Bothwell - Bank of America Merrill Lynch Paul Walsh - Morgan Stanley Andrew Benson - Citi Andreas Heine - MainFirst Megan Yang - Raymond James Markus Mayer - Baader Helvea Peter Spengler - DZ Bank Martin Evans -

JPMorgan
Operator: Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining the Q1 2016 Results Conference Call. I would now like to turn the conference over to Ulrike Rockel, Head of Investor Relations. Please go ahead.

Ulrike Rockel: Good afternoon to everybody and welcome to our first quarter conference call.

And as always I'm happy to have with me our CEO, Matthias Zachert; and our CFO, Michael Pontzen. And I will immediately now hand over to Matthias and just kindly ask you to be aware of our Safe Harbor statement.

Matthias Zachert: Dear ladies and gentlemen, a warm welcome from my side as well. And I will turn my attention to Page number 4 of the presentation that has been dispatched this morning all over Internet regarding first quarter 2016. As you can see we are executing our transformation program with focus and speed, while 2014 was definitely the year of restructuring and execution of its in 2015 was left to performance improvements in underlying trading.

Of course the last few months were very much concentrated on getting ARLANXEO operational which eventually was achieved on 1 April onwards. So the start of ARLANXEO technically went well and operationally went well as well. We announced our first acquisition small medium sized accretive from financial perspective, accretive from the strategic direction. And we think that in the next few years to come we will further upgrade our business profile and financial portfolio, overall portfolio of the company. So we are well on track to move this company towards the new lengths as we have described being more profitable, roving reliance, less cyclical, cash generative and eventually all flow on the side of ARLANXEO with integrated supply chain.

The real value of this will unfold hence the first quarter is just one step in this direction. With this I will turn my attention to the financial performance of Q1, and you'll see that from a operational standpoint the increase of - around about 14% to €262 million in EBITDA with a margin improvement through 13.6% as a reasonable starting base. Net income improved visibly but also in light of less one time charges. I would like to highlight your attention to the operational improvements we notably achieved on high performance materials. I know that some of you are still describing this business as a capital business, well as financial performance would then be close to zero that would be at capital business and we have posted now for the second time visibly with separate financials, a strong engineering plastics profitability.

Of course it is helped by underlying raw material improvements but I think here the true value of this business were show itself as its now isolated reported and showing its underlying performance. Also as regard to performance chemicals, we took a strong stands in the first quarter after a good trading already in 2015. Our view is that this business would be stronger in the years to come operationally. If we go to topline numbers, we'll give you the clarity on price volume and currencies on Page 6 so all in all due to softer raw material pricing of course we sold price decreases as well on net sales. The positives element was coming from the volumes sides after we start the year more or less in a very soft environment January and especially February.

We saw that volumes were picking up in March and coming back to a reasonable level especially as far as Asia is concerned, where we started the year until Chinese New Year and rather moderate environments and after Chinese New Year order book clearly picked up and is moderately continuing in a benign environment. So, of course we saw sales overall declining due to raw material prices growing volume, but also as indicated already in March we also faced pressure as far as some rubber grades are concerned here notably butyl as indicated due to pre-offerings starting from other competitors in the marketplace. As far as EBITDA is concerned, you see the positive impact coming from the volume side especially playing out nicely in our performance chemicals and Advanced Intermediates business but also showing nice improvements in the high performance materials division. Price input costs, I have alluded to the fact that's - and most of our businesses were able to have a wash however in performance polymers, we took a hits in our rubber grades. With this, I’d like to hand over the words to Michael Pontzen who will now lead you with energy through the financials.

Michael?

Michael Pontzen: Thank you, Matthias. Hi everybody from my side as well. As Matthias was mentioning we are reporting a nice set of results. Matthias gave you the highlights in the previous slides so, just let me quickly comment on net financial debt. We posted net financial debt basically flat compared to year end number which was good development, please keep in mind that we recorded the €1.2 billion which we received from Aramco only on 1 of April.

But if you would deduct the €1.2 billion you received we were basically on a pro forma basis net financial debt free at the end of the March or beginning of April. The other KPI would like to highlight is the development on networking capital the new - the usual pattern which we have usually in the first couple of quarters we see a rise in networking capital as we did previous year we do see this year. So the increase in networking capital is a usual pattern and is not causing any sleepless nights at this end of the tail. Turning to next page running through the segments, Matthias gave some quick highlights but let me just dig a little bit deeper when looking into Advanced Intermediates. Advanced Intermediates had a very good quarter margins, were kept stable beside the fact that in the first quarter in '15 we had tailwind from [Roth] [ph] and at that point in time we given indication that we're talking roughly about €10 million.

So obviously we were able to compensate that to a larger extent and to a larger extent due to the nice volume increase which we recorded in both business units. Performance Chemicals very strong quarter, very strong margins probably one of the best quarters especially first quarter for Performance Chemicals. All business units delivered a higher EBITDA compared to previous year numbers but Matthias was mentioning there was some support from raw materials, some middle support and some support from emerging market currencies which did devaluate to a large extent for example in Argentina but all in all a very, very sound and good quarter for Performance Chemicals. Same is true from HPM, very good start into the year. The investment and the focus and the downstream product is paying off.

But here is well as same story like in Performance Chemicals, we recorded some smaller support from the raw materials side but nevertheless again overall a very nice and solid quarter. Turning to ARLANXEO, here just the opposite happened with regards to raw materials so the price pressure remains which we are reporting since some quarters now and we expect price pressure to increase in course of the second half of the year into 2017 as well due to the new capacities which are expected to come on stream from our competitors. The volume increase was nice even though we only posted an overall volume increase by 1% but we had a nice mix effects, we were able to sell more grades from butyl rubber and from NdBR rubber and some less volume from E-SBR, which we are producing into a larger extent selling in Latin America and this is why Latin America was as well volume wise down to a little bit. But please keep in mind Matthias was mentioning that as well, we recorded some pre-buying from the customers to - let's say raw material swings which were recorded throughout the first quarter. So all in all, all segments developed nicely in line with expectation to some extent a little above driven by especially some little raw material support namely in chemicals and HPM.

Turning to Page 9, this is something which we decided here at board level some few days ago and that is another - let’s say promise on our delivery and our promise. We told you that we will use the proceeds which you received from Aramco to reduce our total debt position by $400 million. We earmarked €200 million to payback the bond which is due in September. But we also now took the decision to reduce our or let’s say to increase the pension funding for our German pension plans that will not only reduce volatility on the liability side of the balance sheet, it will as well support the P&L to some extent due to the expected IFRS interest rates benefit which we will hopefully see this year and which is not to be underestimated, it is a very strong sign into our German labor force because especially in Germany we have these days discussions about the quality of pension schemes especially when it come from the state but as well from the corporations and this is a clear sign of the management to a flow, give credit to the workforce here in Germany. That's it from my side, Matthias.

Matthias Zachert: Thank you, Michael. And of course based on the better funding we are doing, we are now also optimizing our future pension schemes which I think is just the practice instruments to be used when you increase your funding ratio and that will help improving further the balance sheet in the years to come. So on Page number 10, we've given outlook on macroeconomic environment and full year guidance, as far as the Advanced Intermediates concerned, the segment should perform above prior year level and so of course here we benefit nicely if proven through the profitability, through the largely diversified end industry where we clearly have technology and leadership position. So for that reason we remain very competitive in this period. The one area that we would like to flex known to most of you the agro customer industry remains soft.

Our customers indicated to us that it will further soften on their buying sides. So our second half is expected to be clearly weaker than the first half hence from indications onwards the agro industry should remain soft until most likely midst 2017. Overall, I think we performed reasonably well due to here in the employee segment over broad diversification which helps us to show resilience and to deliver on the guidance in this segments. As far as Performance Chemical is concerned, also here we consider that full year will be above previous year level. Hence for 2016 I think the clear sign of strength was shown on first quarter and should continue in the quarters to come.

The two flagship businesses should benefit here either from the new setup that the business had achieved and this is notably true for the additives business - Additives Rhein Chemie businesses we see that the combination of our additives clearly show incremental sales and incremental profitability so a lot functional here, and the market is strong and its beneficially received by our customers. And as far as IPG is concerned, here the new limbo facility with new specialty grades we have come to the market which has kind of unique new color shades and they are very well received by our customers. We went through the testing and new colors that are unique in this market worldwide had their beautiful shinning color and colorful price. So this is something we should gradually see ramping up from third quarter onwards and then of course taking full swing in the years to come. As far as high performance material is concerned, we alluded to the fact that by 2020 this business will have a different structure and some of you were already surprised in March when we showed you to the profitability improvement 14 to 15 and I think the first quarter should give you another sign of improvements.

We have sold more engineering plastics to the OEM industry but of course our player like to point out that underline market momentum in Europe and North America most. Benign was robust overend industry especially the OEM industry posts goods growth rate as reported by the respective automotive groups in these regions and of course this is an area where we post underlying growth rates as well. I would like to highlight at the same point in time that here the big increase in profitability was also stemming from the raw material side so we have both ends industry good compounds enhancements but also raw materials that we position nicely the profitability so this should be taken in the consideration leading however all in all through a very good year 2016 for this division as well. And as far as ARLANXEO is concerned, key points have been made. We compete in this challenged end industry, rather end industry reasonably well.

We take no different view on full year compared to last guidance, so second half should see continued pricing pressure. But all in all, I think we will defend ourselves as the leader in this business - clearly we will defend ourselves nicely and for that reason we think that the business is well pretest to whether the next two to three years of difficult market environments. Based on the outlook for the four segments or the three segments and the one joint venture, we upgraded our guidance mildly to 900 and 915 and would now like to open the call for your questions. Please go ahead.

Operator: [Operator Instructions] First question comes from the line of Lutz Grüten of Commerzbank.

Please go ahead sir.

Lutz Grüten: Yes, thanks for taking my one question - from volumes again. You have been able to report higher volumes in each and every segment in the first quarter. You also stated that restocking was part of the explanation here why volumes have been up. But what’s the other part.

Can you also give us its feeling about the underlying demand of what offsets volume increase was really underlying and what off the volume increase was in speculation and restocking? Thank you very much.

Matthias Zachert: Mr. Grüten the restocking question is for my point of view pretty much associated to March. We had softer trading clearly and rather frustrating from especially the Asian region in January and February and we saw then notably as far as the rubber is concerns, a stronger order pattern in the Asian region and in some Western countries. So the restocking element was one that was more visible in ARLANXEO whilst in the other three segments there was not a big tendency to what’s restocking due to the contractual arrangements that we have in Advanced Intermediates - anyhow price clauses embedded and for that there reason here we saw simply very good end industry momentum, however, one industry being softer which is our goal.

The same holds for Performance Chemicals. I think here due to the broad diversification we simply saw that Europe and North America had underlying goods markets dynamics and I think the point on our performance materials I have made. So the one area where you should assume volume momentum coming from restocking was basically our rubber joint venture.

Lutz Grüten: Is this trend also true for April?

Matthias Zachert: Well we are not giving now wonderfully breakdown because we just like to keep from attention also for the remainder of the quarter, but let's put it like this based on Q1 and based on the start of Q2, we mildly upgraded our numbers so would everything only be associated due to restocking we would kept over guidance as is. So we made mild upgrade of our guidance in light of the strength that we think that the overall company is on the right track, employees and as leaders in our organization worldwide are doing their best to migrate this company to full acceleration and I think the last two years and first quarter have shown you that we are capable of doing that.

Lutz Grüten: Very clear. Thank you very much.

Matthias Zachert: Most welcome. Next question

please
Operator: Next question comes from the line of Martin Rödiger of Kepler Cheuvreux. Please go ahead.

Martin Rödiger: Thanks for taking my three questions and good afternoon. Firstly, on the tax rate of 44% in Q1 obviously even higher than the average in 2015, and I guess it's related to the relatively low earliest level in rubber and your inability to benefit from that tax holidays in Singapore. With the list of force measure by your raw material supply in Singapore changed anything in the tax rate and if so what would the tax rate look like? Second question is on high performance materials. You targeted to decrease the exposure of copper of merchant markets towards the level of 10%. Can you mention what is your exposure to merchant market today at this point of time? And thirdly, on networking capital which increased 13% despite the sales drop.

So networking capital the sales ratio was up substantially. You said you have no sleepless nights, but what can you do to get working capital sales ratio down to more normalized level. Thank you.

Matthias Zachert: Thank you Mr. Rödiger, I would take the HPM questions hence all other two questions are related to financial, so Michael will take care of that.

So let me please first of all address HPM. Today's exposure on copper, first of all let’s make clear copper we have 220 kilotons capacity it’s the biggest capacity in Europe, which is run on one trends with extremely competitive and we wanted full throttle. So I think as far as competitiveness is concerned, our raw material [indiscernible] enters the chain in the most competitive way. And of course here what we have indicated over the next few years it will be completely absorbed by our balanced value chain because we have already today round about 200 kilotons in the polymerization. So the delta of this is round about 20 kilotons and that is merchant market exposure.

By 2020 the 200 kilotons of polymer would be fully absorbed by the engineering plastics, the customized compounds for the automotive industry, electronic industry. And then you will see the full stability and the full margin that will come clearer. Hence I think the 2015 and 2016 business will give you good indication in the direction of where the margin will go. And with this I hand over to Michael.

Michael Pontzen: Margin, with regard to the tax rate there is no change in guidance, so we stick with the guidance which we gave for the full year.

With regards to networking capital and networking capital to sales, I can only say that we are on a comparable basis as well when it comes to sales, of course you always have to keep in mind when comparing to sales, that sales number as well to some extent diluted by the raw material price. But if you look into the details of the networking capital on the one hand side, the increase in receivables which we were recording the same story every first quarter of the year, you compare basically the sales in the months of December with the sales in the month of March, Matthias was mentioning that March was a very good month with lot of higher volume, so therefore receivables were up significantly over December which is the usual effect. And the same is true to some extent for inventories you see and we reported that we had high utilization rates, we see increase in inventories and with regard to inventories please keep in mind that we closed our assets and mall, we have stocks for mall to provide to the customers which will melt down over the next quarters to come. And therefore, I'm not getting any sleepless nights to manage our inventories and therefore I feel very comfortable with the numbers provided.

Martin Rödiger: Maybe one follow-up on the tax rate.

Is there any effect in the tax rate from this force merger by shale?

Matthias Zachert: It isn't corporated in our numbers.

Martin Rödiger: Thank you.

Matthias Zachert: Most welcome. Next question please.

Operator: Next question is from the line of Stephanie Bothwell of Bank of America Merrill Lynch.

Please go ahead.

Stephanie Bothwell: Yes, good afternoon and thanks very much for taking my questions. In synthetic rubber you mentioned earlier on the call that you had seen free offerings particularly in butyl grades over the course of the first quarter. Can you give us a sense in terms of when that began and the quantum of volumes that you've seen in the market thus far this year? And then the second question just in terms of the Q2 and Q3 force measure, are you able to give us a quantification in terms of the financial impact of that which will have over the next few quarters? Thanks.

Matthias Zachert: Well, I'll start with the second one.

We've not given a value tickets to this. We simply say that this is embedded in our financial projections for full year. Hence we allude to this so that's transparent information to our shareholder base and in the space. And second you should break that into the second quarter and third quarter performance respectively. So that of course leads to some softness or softening as far as profitability is concerned in Q2 and Q3.

Now as far as the first question is concerns, we can only tell you what we hear from our customers, but of course we cannot tell you what volume amounts, at what prices are given through customers. I think here you would have to talk to your - to our competitor directly, hence its privileged information for them not for us.

Stephanie Bothwell: Okay. Thanks very much.

Matthias Zachert: Most welcome.

Next question please.

Operator: Next question comes from the line of Paul Walsh of Morgan Stanley. Please go ahead sir.

Paul Walsh: Thanks very much, afternoon guys. And just one simple question please, Matthias, Michael.

If I look at the last 8 years, 7 out of those 8 years, Q2 EBITDA has driven higher than the first quarter which doesn't mean anything in isolation but seasonally it's normally a strong quarter. So I just want to check on the seasonality that you're baking into your new full year guidance range. It looks to be sort of more or less like a 60-40 split. I guess the upper end of the range will depend on the degree of seasonality you see. I just wanted to check.

A, whether or not you felt you could continue to grow EBITDA in the second quarter, and B. whether or not my crude mathematics is broadly okay in terms of the implicit HI/H2 split in the new EBITDA range?

Matthias Zachert: I think the most qualified person to talk to on this is Michael.

Michael Pontzen: Thank you, Matthias. Paul, yes indeed, I’d say that it’s still a true ratio to have the 60-40 split which we basically recorded over the past 10 years for the group. So therefore I can confirm.

Paul Walsh: Okay, brilliant. And around second quarter Michael? I think Q1 feels like is continued into Q2 a bit.

Michael Pontzen: You know that we are giving the guidance which we are giving and I can’t see that we gave any guidance on Q2. Sorry for that, Paul.

Paul Walsh: That's very clear.

Thank

you
Operator: Next question comes from the line of Andrew Benson from Citi. Please go ahead.

Andrew Benson: Afternoon, and thanks. Three questions. For the whole year in businesses where you've got a very strong balance sheet now.

You've made the CMOS - agreed to the CMOS transaction. Can you give us just an idea of the - as far as you feel that you can that sort of scope of the opportunities that you all are considering that could benefit the group over the medium term. And for the ARLANXEO, now again, you've targeted it to grow by acquisition but also you need the management to bet down. Can you give us a sense of the ambition you have for them to participate in consolidation within the confines that needs perhaps a little bit of time to bet down. Just sort of what time you’d perhaps at end of – when do you expect to make some moves or what sort of timeframe? I know you can’t pin down too much on that.

And lastly on the volumes, you've got fair amount of - as per capacity, I know you are managing that situation particularly in the ARLANXEO areas. But I was wondering when you felt that you might see perhaps something of an acceleration of volume growth clearly its 5% in advance materials but it needed at 1% in the other areas. So it doesn’t look exactly sort of consistent with ramp and stock building in the first quarter at least. So I just wonder when you felt that the business was able to drive volume growth. Thanks.

Matthias Zachert: Thank you for your questions. Andrew let me take them one by one. As far as M&A activity is concerned for ARLANXEO portfolio, basically excluding rubber – I'd come to rubber in a second, we are now in a situation where we can look at M&A activity. And CMOS is clear sign to you that we have started analyzing potential strategic moves basically already 12 months ago. So we have clear overview on what we would like to look at, what our strategic analysis has unfolded and therefore, we clearly assess worldwide the markets and at the end of the day, there has to be a clear, compelling strategic logic which I think in the CMOS deal was apparent.

And then there has to be a financial hit. And if we see that both are aligned and especially where we find synergies and expansion possibilities in businesses that we consider fitting on your strategy, so then we go out and strike. We do this in a very focused way. We don't feel under pressure, and therefore this is something you should simply assume will happen in the next 12 months, in the next 1 to 2 years. But eventually, there has to be a fit on both sides strategically, financially.

So the one that we’ve just made is I think in nice targets and it could be nicely repeated but eventually size-wide it always depends on strategic and financial rational and something that is balanced for our group so, that we don’t just go for size we go for enhancement of the portfolio from strategic and financial perspective. As far as ARLANXEO is concerned, the joint venture partners are clearly the lines we would like to seize opportunities, but I think here its rather in the years '17, '18 and of course then we need to find right targets at the right price. And I don’t consider that this is something where we would see activity already in 2016, the joint venture should be up and running. Find the processes, find its adjusted business model, go for some restructuring here and there that is still to be implemented and once this is done I think you might see here in '17, '18 activity on that end as well. As far as the volume is concerned, I think the volume momentum in advanced materials was good and in the other two segments I think the volume momentum can come back at more reasonable levels for the industry where we've guided that it can grow with GDP or above, but I clearly would like to allude to the facts, '15 has been not a good year for chemicals and '16 hasn’t started in a very strong volume momentum.

And I think with the volume growth that we have seen in Q1, we are very well on track compared to peers even doing better compared to the some specific peers. So - but in the industry we clearly saw that January and February was weak and that lets to rather modest volume in performance chemicals and high performance materials which an essence should be the businesses that volume wise should go stronger in a better chemical economic environment.

Andrew Benson: Thanks very much.

Matthias Zachert: Most welcome, Andrew. Next question?

Operator: Next question is from the line of Andreas Heine of MainFirst.

Please go ahead sir.

Andreas Heine: Yes, good afternoon, some small questions if I may. First on the commodity prices, which I think increased a lot, could you say whether the leather chromium part, chromium mine has profited from this and also may be some background information how the iron oxide pigment business is exposed to potentially higher raw materials, SCR and oil prices were up. And then you were referring to additives having seen lower volumes because of change in distribution, could you just tell us what - this is about and how this was going to change. And then lastly on Saltigo where you highlighted that the agro demand is less.

I think you were quite successfully in Saltigo to be very strong and new molecules which usually even grown in weak market. Could you say how the mix is here whether it an absolute terms of volume is going down for Saltigo or whether you can wait the slowdown in the agro market this year product mix. Thank you.

Matthias Zachert: Thank you so much for all that questions. I would take these Saltigo question, and Michael will address pricing and raw materials.

So let me come to Saltigo first of all I think we have communicated to you in March already that Saltigo will do 2016 reasonably well and therefore our feedback clearly is, Saltigo is very much focused on the agro business and agro and the fungicides we have a few big products of course that are doing extremely well and this communication is unchanged. But of course we have also some products in our portfolio that are more exposed to softness in the market and therefore we clearly would like to indicate that we see this as well. So we are not blind, we are very knowledgeable about what is happening in the markets. We have some other benefits however we indicated that products called Saltidin is posting very strong volume in take and therefore all in all Saltigo will do reasonably well. But clearly conformation on the end industry, there is one end industry in our Advanced Intermediates portfolio that clearly shows softness and therefore its embedded in our guidance and we would like to make you aware about this that here is also in this second half like usually the case in Saltigo we would face softer performance momentum in 2016 as well.

And with this I hand over to Michael on the raw materials and pricing side.

Michael Pontzen: Hi Andreas, thanks for your question. With regards to leather and chromium prices, yes there was some improvement but still the level of chromium prices is not great it was in the past. Leather was as I indicated - as well still distributing additional EBITDA to the group but that was to a larger extent driven by emerging market currency namely the Argentinean Peso and the South African Rand. With regards to IPG and looking to the raw material build, we do not really enclose in detail the raw material but we saw some ups and down and you were referring to one or the other but on the other hand, if you look into ARLANXEO for example, there was some release as well in course of the first quarter compared to first quarter 2015, why in IPG as well we saw some little relief on the total raw material build compared to previous years supporting as well the EBITDA of IPG, still IPG developing very nicely operationally as well in the first quarter.

And with regards to ADD, yes there was a change of a distributor, so that is one-time effect that we changed the distributor in course of the first quarter. The new distributor was not fully on board still it is - or let’s say still at the end of the quarter there was a minor effect on the volumes therefore we posted it but it should be again in line in course of the second quarter of this year.

Matthias Zachert: The only one amendment I would like to make on chrome, you've seen that in January and February chrome ore prices went further down but recovered in March basically due to the momentum in China and you also see here I think not from the steel industry that prices are - or the momentum in the industry is modestly improving and therefore that is of course then another indication that end industries here are a little bit improving and that of course helps chrome pricing. But the only uptick in chrome pricing, we saw from March onwards, it continues now in second quarter. So that's basically giving you the full color and here I don’t think it's restocking, it's basically with very modest improvements, the steel industry seeing a little bit more momentum on their end industry as well and that of course benefits chrome pricing.

Andreas Heine: Thanks.

Matthias Zachert: Next question please.

Operator: Next question comes from the line of Megan Yang of Raymond James. Please go ahead.

Megan Yang: Hi it’s Megan on for Patrick Lambert.

So we have two questions first one on Performance Chemicals, can you provide more granularity on the EBITDA bridge between first quarter 2015 and 2016 in terms of raw material impact and mix as well as FX. And then the second question is really similar on ARLANXEO, particularly on mix effect among different products, so we are trying to gauge really the growth differentials there and also the FX impact and the spreads please. Thank you.

Matthias Zachert: Let me take the first question on Performance Chemicals. I mean here clearly I would like to say the underlying business, the businesses do well, point one.

And I think we’ve structurally made good decisions as far as the setup of one strong additives business unit is concerned. So we clearly see that operationally vis-à-vis the customers this has been a sound operational decision. As far as our pigments business is concerned, your point is these are inorganic pigments nothing to do with organic pigments. Inorganic pigments we have achieved over the last years that we became the undebated industry leader with the broadest product on the lowest industrial cost curve, strong technology market leadership and therefore we now reap the results of really good managements of this business over the last several years by a very strong team. Having said this, we also would like to allude that we have a very strong momentum in our water purification units and also in our bioscience business which did an excellent job this quarter as a matter of fact posting the best underlying operational improvement here in its business lines which makes me positive for the CMOS integration because the platform is now rock solid.

We're on the little bit humble on this as Michael has indicated it's leather, the organics business is doing very well, in chrome we've benefited basically from currencies. So, having said this I gave you I think a very broad array of flesh for operational improvements. But of course, I'm grounded enough to look at the margins and basically say there was a win for profits from raw materials to certain extent as well. And therefore let's see if we can stick to this, but I would clearly assume that some - whatever a few million single digits of raw materials win for profits on the P&L embedded. And if we can keep that or not, we are doing everything to protect, but if we can - not keep all of that in course of 2016 you shouldn't be surprised business reality in the chemicals business.

Michael would you like to take ARLANXEO I know we have some technicalities to be addressed here for 2015.

Michael Pontzen: Yes. Megan so as I said earlier, we had in the first quarter of last year the ramp up of the new assets in Asia, why our P&L was hit by roughly $25 million. That is of course, one element to the EBITDA bridge. We are of course not getting any guidance on the mix effect and on the level of profitability of high performance rubbers like butyl or NdBR and for the purpose or general purpose rubber like E-SBR, which we recorded in the quarter.

Yes we do have an ethics effect as well in ARLANXEO, because you know we have - we are dollar, U.S. dollar along in that business, we saw $0.03 increase Q1, 2016 over 2015 with recent stronger U.S. dollar which did have a little bit and did support the EBITDA you know that as we have production, larger production facility in Brazil and I was referring to emerging market currencies, which were devaluating. That gives you I think an indication about the cornerstones of the different elements. But please accept that we are not giving any further details on the numbers.

Megan Yang: Okay. Thank you.

Operator: Next question comes from the line of Markus Mayer of Baader Helvea. Please go ahead sir.

Markus Mayer: Two questions - there are many questions, hopefully u have covered this in the beginning [indiscernible].

Firstly thanks for this - you slipped of the New LANXESS relatively had so much secured - is it now fair to say to potentially what next victim over give more to odd numbers on the New LANXESS, but CapEx to sales ratio to the LANXESS going forward should be assume between 4% to 6% and also more on the maintenance CapEx depart always that to be around €300 million to €350 million. Could you give us a kind of a guidance both new maintenance CapEx spending for the New LANXESS might be in future?

Matthias Zachert: Markus, thanks for your question. We are of course preparing the numbers for ARLANXEO. We just started the separation 1 April, it all went smooth, we are recording the numbers, we thought it might be of help for you guys if you already as of today work hard to disclose this where the Q1 numbers. So we provided the numbers, but please allow that it takes a couple of further months for us to work and then give more glance and more details to the numbers of ARLANXEO and New LANXESS.

Markus Mayer: Okay.

Operator: Next question comes from the line of Peter Spengler of DZ Bank. Please go ahead.

Peter Spengler: Good afternoon ladies and gentleman. I have a follow-up question on that - the other in Reckon will it continue to be part of LANXESS rather than New LANXESS.

And can we expect [indiscernible] to change significantly after April 1. And then on ARLANXEO, will it disclose Press Releases or Investor Relations news as separate entity within old guidance and quarterly reports or is it all kind of non-disclosable material?

Matthias Zachert: Peter, thanks for your question. Yes ARLANXEO is part of the financial account and the financial group of LANXESS. LANXESS will report all the financial data of the ARLANXEO group as well as it is recorded in our statement. Nevertheless, obviously as ARLANXEO is a group on its own, it is addressing operational use to customers.

There will be news flow being provided from ARLANXEO but the entry for you guys remains the Investor Relations department of LANXESS. With regards - and therefore the reporting in the future, there will be hardly any change in the reporting so you’ll further see the effect of the reconciliation as a total number in the LANXESS Reckon segment, and therefore not give any - let’s say, a net number on ARLANXEO, still you will of course receive the minority share of the Saudi Aramco share within the ARLANXEO group and that is then calculated on the net income of the ARLANXEO group results. And that is the information provided. Besides that, we will probably, over time, release more and more information and give an indication what the share, as well of the reconciliation segment is. But for the time being, we keep on with our guidance that is €150 million underlying for the overall group including the share of ARLANXEO.

Peter Spengler: Thank you very much. Very clear.

Operator: Your next question comes from the line of Martin Evans of JPMorgan. Please go ahead.

Martin Evans: Yes, thanks.

Just following up really on Andrew's earlier question about acquisitions. Just going forward given, I guess, even the merger are emerging from the difficult spell, acquisition prices are high, I think that’s kind of widely acknowledged. What I need to be sure about is that even with the cash coming in and the balance sheet sort of restore, you don’t feel sort of pressure subconsciously to go out and get bigger again by buying businesses. And that is going to be more of an opportunistic philosophy if and when reasonably priced assets become available rather than possibly - you need to buy something, because in this market obviously prices and synergies can be quite hard to come by. So if you can just help me understand going forward, the sort of acquisition philosophy of LANXESS.

Thanks.

Matthias Zachert: Well Martin with delight, and as you know, we've been very focused on our first acquisition, striving for an acquisition not of big size but where it fits extremely well. And as you know, with good growth rates, high profitability, and synergies, in a niche area. Therefore, it’s a clear sign that we are not striving for glory, we are not striving for size, we strive for clear portfolio upgrades. What we have shown over the last 2 years was a very, very focused but fast execution and it was, I think, also taking a clear handwriting by the entire management board that is clear financial discipline associated to it.

I tried to earlier explain that we are looking at a strategic and financial fits. And therefore if they fit on both sides as there, then of course, we look at opportunities. But M&A always has to be opportunistic and the timing is always very important in order to get strategy and financial KPIs, the lines. That’s what we try to achieve and let us see if in the years to come we can deliver on this like we have delivered on everything else in the last 2 years.

Martin Evans: Good.

Thanks very much.

Operator: Next question is from the line of [indiscernible]. Please go ahead.

Unidentified Analyst: Yes, good afternoon. I have two quick questions on high performance materials if I may.

The first one is regarding the polyamide plant you have inaugurated I think by the end of 2014. I’m interested if we still can expect volume growth out of this plant or is it already rather filled, any indication would be most welcome. And secondly on the profitability in this segment and sorry if you answered that before but you have mentioned couple of times the raw material tailwind, are you trying to suggest that EBITDA might have peaked in Q1 in this unit or can this raw material tailwinds help to keep up for little bit longer. Thank you.

Matthias Zachert: Well, thank you very much for both questions.

As far HPM is concerned in the polymerization just went on stream basically around about 9, 12 months ago. So we have – and because of 2015 rented up but it was not fully utilized, the new polymerization units. And of course 2016 is the year it will move up to and [indiscernible] utilization that chemical plants normally have i.e. in the area of 80% plus. And for that the reason the polyamide unit is one that’s came on stream end of the year 2014, ramped up in quarter 2015 but of course is further ramping up now in 2016 and as such you'll see the profitability increase.

Otherwise, if this would be still a lot copper merchant markets profitability in copper is very limited and only because of effect that we have fear, a nice engineering plastics, nice engineering compounds, polyamides the business is at different profitability levels but please take into consideration of course we had positive raw materials in the chain as well coming from the benzene value chain. As far as Performance Chemicals profitability is concerned, this business is always at higher profitability levels beginning of the year. If you look at the seasonality throughout the year, Performance Chemicals is always weaker in profitability in the second half and 2016 will be by no means different. So higher profitability margin wise in absolute terms in first half and second half of course is milder. So seasonality doesn’t change.

Unidentified Analyst: This is very helpful indeed. Thank you very much.

Matthias Zachert: We try to do always all the best especially by the IR Department trying to do it an excellent way and we as management board want to reach the same high standards that IR is setting to us. Ladies and gentlemen, I understand from [indiscernible] who is heading a smile on our face that no questions are outstanding. With this the LANXESS team is thanking you for your attention to this call.

We are now starting the Road Show and looking forward to see you all on the Street. Thanks a lot. Take good care and bye-bye.

Operator: Ladies and gentlemen, this concludes the LANXESS conference call. Thanks for joining and have a pleasant day.

Good bye.