Operator: Good day and thank you for standing by. Welcome to the LANXESS AG Full Year 2024 Results Webcast and Conference Call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Andre Simon, Head of Investor Relations. Please go ahead sir.

Andre Simon: Yes, thank you very much Sharon and a warm welcome to everybody to our Q4 full year '24 conference call from my side as well. As always we begin by asking you to take notice of our safe harbor statements and with me today is our CEO Matthias Zachert and our CFO Oliver Stratmann. Matthias will start with a short presentation and then we will open the floor for your questions.

And with that I'm happy to hand over to Matthias. Please go ahead.

Matthias Zachert: Thank you so much and welcome to all of you to our fourth quarter conference call. I start the presentation on Page 4 and give a summary on how we look at 2024. All in all, it was a challenging year.

Markets have not been benign but due to our successful cost savings program called FORWARD and due to the acceleration in the implementation process we were able to get more savings implemented in course of the last 12 months and this definitely supported the increase in profitability. Different to 2023 when we massively reduced working capital despite having consequently negative impacts on the utilization we were able in 2024 to again put more emphasis on cash flow but profitability increased so the higher utilization contributed to profitability improvement as well. Oliver and I stated very clearly at the outset of '24 that we will again deliver on cash flow and focus on further debt reduction and I think we clearly can state we walked the talk. Solitary cash flow despite still modest profitability and by the way we also secured long-term financing with a new sustainability linked revolving credit facility maturing in five years from now. What I'm delighted to confirm today that our portfolio transformation as far as focusing on chemicals and letting go of polymers is accelerating as well.

We have now received all clearance from all global institutions and therefore can close the transaction in course of April this year. So here we are also faster than originally communicated. The cash proceeds that we will get in April will be used to immediate deleveraging. Noteworthy however also that we had to fund our restructuring program FORWARD, so we had cash outs in course of '24 and all in all we have to state that macroeconomic weak demands is clearly visible in '24 and we only see a very modest improvement in course of '25. Noteworthy also we were faced or confronted with a massive destocking in the agro industry in '24, our assumption is that destocking is no longer a theme for our industries including agro in '25 thus some modest volume improvement should become visible.

Let's turn our attention to Page number 5 here the headline numbers EBITDA is up 20%. We guided at the outset of '24 for an improvement of 10% to 20%. 12 months ago this guidance was perceived as somewhat ambitious and I think we can now clearly say that our guidance at that point in time was the right one. Free cash flow, I mean we had a through the entire year '24 ups and downs on a quarterly basis on free cash flow which is pretty normal, but we clearly stated our focus will be on either improving cash flow or keeping the cash flow at the same level or improved level than '23 based on improvements on operational performance. But if we can achieve a positive free cash flow we will do our utmost to get there.

As far as safety performance is concerned we can clearly state that we are here top-notch in the European industry with 0.6 as far as MAQ is concerned we achieve here a clear top ranking and this is by the way the third time in a row. As far as financial debt is concerned another decrease of roughly €100 million so minus 5 percentage points, so you clearly see we walk the talk. If you look at 2025 with the cash proceeds coming in from the Urethane’s transaction, we entered back into good territories as far as financial leverage is concerned. Now I move to Page number 6. We know very clearly that '21 '22 we are not satisfactory at all as far as cash flow generation is concerned.

We clearly stress here the reasons behind it. We would clearly however like to stress this company has over the years been a free cash flow delivery company and in the last two years '23 and '24 we generated roughly €700 million. '23 the P&L was impacted by that. '24 we were by and large net nets on the same level as far as working capital is concerned and therefore despite weak macroeconomic environments I think we finished the year on a strong cash flow basis. Now ladies and gentlemen let's move to Slide number 7.

We clearly give here the indication that we are fully on track on after the levering up in the acquisition phase. We are levering down we have done that many times before in our company history so here we are executing as we speak and once the Urethane proceeds come in I think you see that we are then entering again into territories which should be considered as more normalized. But three times net debt to EBITDA is not our target. We will go back to levels that we had before and I think you all know that we have a 40% participation in one of the global polyamide leaders in the world Envalior and I'm looking to you know models. I'm quite frankly sometimes very surprised to see what I'm reading there.

In majority cases the valuation on the Envalior stake is taken from our balance sheets, the accounting methodology where the book value of Envalior resides some even take further discounts in this regard. We always stressed that Envalior is being priced or is being evaluated at a multiple and EBITDA. And if you look into the Standard and Poor’s publicized reports of the 13th December 2024 you can take the EBITDA and the net debts and everything out of it and come to a better calculation than if you look at technical accounting valuation which is not reflecting the guidance of our company. With this I move into our segments and here I reference Page number 8. Full year 2024 has shown weakness in consumer protection solely driven by Agro.

Chemicals and Saltigo, Saltigo reported a record year in 2023 when the agro industry was at its peak. Facing however in '24 severe de-stocking so we were hard hit in Saltigo as well. The other three business units despite difficult macroeconomic environment all improved. Our assumption is that Saltigo will improve in '25 versus '24 and therefore the segment will be better off in '25 compared to '24. As far as additives are concerned an improvement to '23 we are still definitely not satisfied where we are.

Construction industry was still a drag in 2024 and therefore the biggest business unit polymer additives was hit hard but could through cost savings make first steps in the right direction. Advanced intermediates, I would not stress that this is back to normal profitability levels. We have seen clearly higher profitability by the segments in previous years but compared to '23 which was toxic in '24 intermediates business recovered but still needs to improve further. So ladies and gentlemen with this I move to Page number 9 outlook for the three segments. More pronounced improvements is expected from consumer protection.

As far as additives is concerned modest improvements like we convey for the intermediate space. So let's come to the guidance of the entire company and here I start off with reported '24 numbers 614. Please take out the profitability pro rata of Urethanes. All-in-all Urethane Solution achieves an EBITDA of roughly €50 million in '24. If you take it out for three quarters, you have to deduct €40 and we communicated that in Q4 that was one of the reasons for the positive profit warning on 20th of January that we did better in fourth quarter.

We delivered more profitability than you had in your models and we had expected because we saw that in December which normally is the weakest month in the fourth quarter we saw a clear uptick in many of our business units so we consider this as a kind of pre-buying and therefore if you adjust for around above €20 million you come to like-for-like improvements '24 to '25 of roughly 10 percentage points and that is the guidance operationally. The headline numbers are €600 million to €650 million with one quarter of Urethane being included. So Page number 11 summarizes everything. We don't consider macroeconomic noise a significant pickup in demand only modest improvements. I think I don't need to stress that we are living in quite turbulent political and thus economic times.

Making predictions today where from one week to the other fundamental changes can or could occur is always quite challenging but nevertheless on what we see today we give a guidance of €600 million to €650 million reported EBITDA numbers and as far as Q1 is concerned we would like to be more specific. Here we consider an improvement of 25% to 35% vis-à-vis our first quarter last year. Ladies and gentlemen, this is it for the presentation and I'm delighted to open the floor now for all your questions which Oliver and I will take.

Operator: [Operator Instructions] We will now go to your first question. One moment please.

And your first question comes from the line of Thomas Wrigglesworth from Morgan Stanley. Please go ahead.

Thomas Wrigglesworth: Mathias thank you very much for your presentation. Two questions if I may. The first is on consumer protection.

You've given this a darker green arrow than the other divisions in your Slide 9. Should we therefore expect faster growth in consumer protection here than in the other divisions and could you help me understand the drivers of that growth given there's quite a mix of businesses? I'm wondering in particular if Virkon's doing well in the light of avian flu outbreak in the U.S. My second question is about free cash generation. You obviously deliberately haven't given us a guide for 2025 but clearly the free cash flow conversion in '24 has you know normalized to a better level as you point. Can we assume that free cash flow conversion from EBITDA that's now the kind of base case and we can assume that going forwards for '25? Thank you.

Matthias Zachert: Thank you very much Tom and as cash flow is one of the top priorities I pass on the word immediately to Oliver to get first things first. Oliver?

Oliver Stratmann: Fantastic Mathias, thank you. Tom on free cash flow you will remember last year that I said we will put full focus on generating cash and then I was reluctant to speculate on working capital developments. Now looking back hindsight I think we've proven that in the year '23 and '24 amidst very difficult conditions we have proven to put cash flow first and we've been able to generate a nice free cash flow here. You should assume that that is our topic going forward as well and I would just like to point out and stress what Matthias has said before.

Please look at the full year and not so much at the individual quarters and be aware that there are seasonalities also reflected in our cash flow. So typically in the beginning of every year you can assume that working capital is being ramped up in order for example to cater maintenance turnarounds in the latter part of the year so we will have volatilities there but we are targeting cash as we did in previous years.

Matthias Zachert: Great thank you Oliver and now let's come to consumer protection. '24 in consumer protection was down basically because of Saltigo and I stressed that before Saltigo was coming from a peak year falling substantially in cost of '24 to levels that Saltigo had not seen in the last five, six, seven years. So that was really a massive hit driven by the massive destocking happening in agro.

When we now look at the agro industry we think that destocking is over. If you look at the four out of the five companies that are driving the agro industry you see still a muted tonality but you see that all of them are definitely seeing improvements versus 2024. So '25 will not be a great year for agro and I give you the feedback please look into what the listed agro companies have communicated. The tonality is still muted but it should be a better year than '24. So if Saltigo is improving and assuming that the other three business units improved like they've done last year the segments consumer protection should report a better momentum than the other two divisions in our portfolio.

I hope that clarifies everything Tom.

Thomas Wrigglesworth: Everything is clear. Thank you very much Matthias.

Matthias Zachert: Thank you Tom and then next question please.

Operator: Thank you.

Your next question comes from the line of Martin Roediger from Kepler Cheuvreux. So please go ahead. Martin Roediger : Yes, thank you for taking my three questions. Regarding your guidance for Q1 2025. Do you see that volumes in Q1 are really missing after the pre-buying in Q4? In other words, do you see in your data Q1 is almost over that volumes are soft in Q1 keeping in mind that the comparison base is still rather low? Second is on politics, with almost 100% likelihood we will get a debt orgy by the upcoming German government.

Do you think you can benefit from the €500 billion special fund for infrastructure or in other words how much of your 15% exposure to the construction industry is related to building of streets, schools, railway tracks et cetera? And then finally just one clarification question on Saltigo. You had in the past especially with one key customer problems with demand so volumes were particularly in some cases zero. Do you see that this customer is now coming back and that is the reason why you are more confident or is it more related to the statements you have heard from the listed companies? Thank you.

Matthias Zachert: Thank you Martin. I would be very crisp on the three questions.

Q1 I think we've been very transparent in where we see profitability 25% to 35% up. We will not dive down into giving you percentage terms on volume, pricing, FX, et cetera. That would be all done with Q1 reporting. So the transparent guidance what we do is to flag out where we will be in Q1 from profitability standpoint and I hope this is information and comfort enough for your models. Then to the second question politics.

The €500 billion -- I mean first of all they need to be decided. This is not put in place yet. It's being announced and the first step on the approval process has been taken. Now it still needs to pass the Bundesrat and then we need to have a new government in place to decide on how they are going to spend. So my assumption is €500 billion for the German economy is a big booster for sure.

Is it going to ignite growth in Germany and with positive spillover on Europe? Yes, I think this is definitely likely. But of course it will from the time the government is formed until it's being seen in order books and then volume momentum, I assume that this will rather be an element of '26 and not an element of '25. The good thing however is now we have most likely a government and no longer three parties but two parties and apparently two parties that are able within two weeks to decide on something fundamentally positive. We need this kind of approach now in Europe and we need the big countries who join and therefore if there's Germany coming back to growth for the Eurozone that will always be a kick start for the entire Eurozone economic development. So I hope that finally after two, three years we are coming back on track.

And if the German economy is going up, if construction is going up, lengths will definitely benefit. Now on Saltigo my comments on more improvement in Saltigo is based on the fact that the stocking is simply over. We will not comment on granular customer contracts or orders. Our belief in '25 is that despite still soft agro overall market dynamics we will see an improvement in '25 versus '24. If it comes better, we rejoice but it's beginning of the year and I think at the beginning of the year one should always be modest.

Martin Roediger: Thank you.

Matthias Zachert: You're most welcome Martin. Next question please.

Operator: Thank you. Your next question comes from the line of Matthew Yates from Bank of America.

Please go ahead. Matthew Yates : Management, thanks for taking the questions. A couple if I can. Matthias, I wanted to revisit something you said at the round table just before Christmas and you were saying that in order to LANXESS to achieve a sort of specialty type margin the company would somewhat need to shift its product offering and its customer service capabilities. Can you talk a little bit about what the incremental cost and timeline for achieving something like that would be? And then the second question, as you brought it up in the introductory remarks, I'll give you the chance to just elaborate a little bit on the Envalior discussion.

If I look at that latest S&P report their forecast for EBITDA in 2025 is around €400 million. They're saying the business has gross debt of €4 billion so it's 10 times levered. I assume net is a bit lower. Can you help me understand better why there is equity value in this business or is that premised on the idea that profitability can be much higher than the estimates that they're putting out there for just 2025? Thank you.

Matthias Zachert: Thank you for your two questions.

I will take them one by one. Your reference made on product upgrades, customer service relates to a statement I've made at the Analyst Round table in London in December. And I basically stressed here not only what you have referenced, I stressed here that in the next chapter of LANXESS our company will now extract the best and the most operationally from our leadership positions that we have. We have fortunately left all commodity and polymer linked products at the time when you could well divest. This job has been done in an incredible speed.

Now we have focused on chemicals and leadership position and now we will get the maximum out and that there's the potential for us to grow in terms of profitability and cash is obvious. We will do that with our investments that we have. There will be no extraordinary investments needed. We will just operationally max out. Now we come to simple mathematics when we talk about Envalior.

You gave the hint to the Standard and Poor's report again. I have it in front of me. You made reference to the Standard and Poor report issued to the market on the 13th of December 2024. If you look at the prognosis of Standard and Poor's, and by the way they are normally always more conservative than management is guiding, their reference on EBITDA to 2025 is €380 million to €420 million. In '26, reference is made at an EBITDA €475 million with €525 million.

Debt being at either 3.7 net debt Envalior has cash or 3.9. If you now multiply roughly €500 million by 12 for instance and subtract 3.9 and then you take very simply 40% out of that, you come to a value which reflects something that we have considered as a base case assumption. I hope with this we clarify everything. Next question please.

Operator: Thank you.

Your next question comes from the line of Andres Castanos-Mollor from Berenberg. Please go ahead. Andres Castanos-Mollor : Hello. I would like to discuss energy costs in 2024, the impact it has had in your P&L and also wondering if in Q1 you have had energy impacts year-to-date, negative I assume, and if they are turning already from Q2 onwards you expect an improvement here? Thank you.

Matthias Zachert: When you saw in energy that costs moved up in January, February, stabilized and then now in March are going down.

So the year started off with an increase in energy and now we have to see where energy will go for the entire year. It will definitely be one that we will track very closely. Is that clarifying everything?
Andres Castanos-Mollor: It is helpful. Can you comment on hedging or if the changes you did to pass through pricing or energy costs are being effective mitigating your sensitivity so far?

Matthias Zachert: Well I would say this has definitely changed compared to a year of '23 where we were unhedged and still we are adjusting our contracts. If you now look at our energy position I would roughly give the guidance, it is a rough guidance, one third is hedged, one third is contractually protected, one third is open and that should give you the indication that energy up and down will no longer be a fundamental driver for volatility going forward.

Andres Castanos-Mollor: Okay. Thank you.

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

Chetan Udeshi : Hi. Thanks for taking my questions and thanks for giving that breakdown of what do you think is the pre-buying in Q4. I was just curious, your Q1 guidance is 130 and if I look at your full year guidance it implies a nice step up from that run rate and we did see that in 2024 by the way but I guess the context was quite different where you were improving utilization et cetera, through 2024. I'm just curious based on your order book, based on your visibility that you have today, can you already see that step up, nice step up in Q2? Or at the moment the visibility is still fairly limited to talk about Q2? Thank you very much.

Matthias Zachert: Well, Udeshi would like to have a breakdown by quarters and most likely next question will be on month.

We would like to give you clear color on Q1 and clear color on full year guidance and with this I pass on the ball to Oliver. Keep on rolling.

Oliver Stratmann: Yes. Chetan, the way I think you should look at Q1 is that we've provided a pretty granular guidance here saying that we're expecting a 25% to 35% growth that you quoted with the midpoint which means to me that from a percentage perspective the growth in the remaining quarters needs to be way lower than that and we have at this early point in time of the year already provided a pretty precise bandwidth here for the full year that again as Matthias outlined includes a growth rate in the midpoint apples to apples of 10%. So that should suffice to go ahead and model what should come out of the year.

Chetan Udeshi: Thank you.

Matthias Zachert: Next question please.

Operator: [Operator Instructions] Your next question comes from the line of Martin Evans from HSBC. Please go ahead. Martin Evans : Yes, thanks.

Going back to Matt's question that I don't think was answered on specialty chemicals. Apologies this might just be semantics but at the Round Table you sort of introduced this idea of you're aiming to become a specialty chemical company because obviously you like the idea of the high multiple and then today you said the transformation into specialty chemicals company is completed. So big picture if we stand back and I think I know what you're saying. You're not saying that you're there obviously because the margins the returns on invested capital for the group particularly outside consumer are quite weak. I'm looking at Specialty Additives and Advanced Intermediates.

I think what you're saying is there's not going to be much more M&A you're reasonably happy with the portfolio and you're just waiting for the good times to roll which based upon your sort of relatively cautious comments on the macro could be several years away. So is that correct? Is that on M&A at least there's not going to be any more major disposals or acquisitions because looking at those returns on your so-called specialty businesses it raises the question of how much more capital you're going to put into them if these returns are sort of sub 10%? Perhaps you could help me understand specialty chemicals?

Matthias Zachert: Martin very easily when we say that portfolio transformation to specialty chemical companies over we mean that big M&A activities you should not expect for us to get up in our margins. What we wanted to stress clearly and we stated that in line with the URE divestiture and once this is completed we have no longer polymers in our portfolio. Thus we have now found our chemical home and that's our reference to the transformation on chemicals is now completed we found our portfolio. But now of course the next step is to get the maximum out of it and to get the troops fully in the direction on getting profitability and the further cash flow conversion up that's the direction but you should not assume that we are satisfied with the '24 profitability or margin level.

No, no, the journey is starting now that's the job now of the two years.

Martin Evans: And you did say on this that you're on specialty chemicals you're going to it's all to do with leadership I think was the phrase what does that mean?

Matthias Zachert: We have -- if you look at all our business units and we've gone from 14 business units a few years ago now with the Urethane sales or divestiture we are going down to nine business units and all of these business units are market leaders or belong to the top three market leaders worldwide. This relates to our intermediate division it relates to additives it relates to consumer protection, so they are all in a leadership position. But now of course they need to get their act together in terms of cost conversion or cost competitiveness cash conversion the go-to market approach, the proximity to customers and eventually this should then up and be benchmarked versus peer margins which are substantially higher than what we have today and please take note of the fact we used to be at 14% 15% we definitely want to get back there and as a specialty chemicals company for the next years to come we would not like to stay there but improve further.

Martin Evans: Okay, thanks very much.

Matthias Zachert: Thanks for your question and let's please go ahead.

Operator: Thank you we will now take our final question for today and your final question comes from Georgina Fraser from Goldman Sachs. Please go ahead. Georgina Fraser : Hi good afternoon Matthias, good afternoon Oliver. I've got two questions left.

Just following up on your latest comments Matthias about wanting to improve the margin over time. Could you give us an update on how you're seeing asset utilization rates today and how long you think it would get back to that normalized margin corridor and if there's any comments that you could make about how a lower natural gas price in Europe for example would impact your view that would be very helpful? And then my second question is, could you give us a little bit of color on the demand environment that you're seeing in the United States it seems to be a little bit more positive for LANXESS than what we've been hearing from peers recently and so we'd love to hear what you're seeing there and if you could remind us which of your segments are most exposed to the region? Thank you.

Matthias Zachert: Well thank you, Georgina, on all three questions. Utilization, I mean we have been in the around 60s in '23 we've now moved up to close to 70 in '24. If you listen to the German Chemical Association, the report is that all in all the pharmaceutical and chemical industry is between 70 and 74 percentage points so blend out farmer then you basically see that we are somewhat where the industry is.

Confirmation you have seen by the German Chemical Association that 70% is trophy. Normal utilization rates are reported in the industry at 80-85 percentage points so we are far from normalized level and therefore if we return to normal utilization being at 80-85 percentage points I think you would see another significant visible improvement in the chemical sector of course also for us. Now on your second question, gas, we are not a big direct gas consumer at the end of the day gas determines electricity pricing. I mean it's one of the drivers at least and here energy pricing in total is one which is important for the process industry the chemical industry and therefore that is something that we have on our radar. I made an earlier comment on energy that this is something where we've taken a different approach like in the past so we go for hedging, we go for contracts and we only have 30% remaining in the spot market, so that's the area that can lead to volatility but definitely modest compared to '22 or '23.

As far as United States is concerned we made positive comments in '24 on the United States. '25, I remain humble because there's so much daily or weekly announcements being made that can change the picture completely. We currently see that the United States at least the industry is in a wait and see modus and I think we have to look into the next one two months how eventually all the announcements will either be implemented in trades or not and I think then it's a little bit easier to make a clear guidance as far as the United States region is concerned. The businesses that are more pronounced in the United States is definitely the additive space and the consumer protection business if you exclude Saltigo, so they definitely have stronger footprint as it was in the United States. Intermediates is more European and German based.

Georgina Fraser: Thank you very much for the insight.

Matthias Zachert: Most welcome. So with this I see that all questions have been answered. Oliver the IR team and I will be on Road Show in the coming days. We look forward to seeing you all and take good care until then.

Best regards from Cologne. Best regards from LANXESS. Bye-bye.

Oliver Stratmann: Bye.

Operator: Thank you.

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