Ladies and gentlemen, thank you for standing by. Welcome, thank you for joining the LANXESS conference call. I would now like to turn the conference over to Eva Frerker. Please go ahead. Thank you, Steven. Good morning, ladies and gentlemen. Thank you for joining today's call on such short notice. We apologize for any inconvenience this might have caused. As always, please pay attention to our safe harbor statement, which you can find in any of our presentations. I'm here today at an investors' conference today in Frankfurt, and right here with me is Matthias Zachert, CEO at LANXESS. Michael Pontzen, CFO, is, of course, dialed in as well. Matthias will start with a quick intro, and then we will open the floor directly to your questions. I will now hand over to Matthias. Please go ahead. Thank you, Eva. Welcome everybody on this call. LANXESS went out yesterday evening with a profit warning. We would like to give an early heads-up as quickly as possible to the financial community. Second quarter is considered to come in with a profitability of EUR 100 million EBITDA. We will also adjust our full year guidance to EUR 600 million-EUR 650 million. As a matter of fact, this assumes no pickup in demands whilst focusing further on net working capital reduction. Nearly all industry markets are impacted by weak demands and destocking. I think you have seen a series of profit warnings in neighboring industries or in the chemical industry already. This feels like Lehman too. We clearly see that even markets that normally tends to be very stable and close to the consumer industry are impacted. With Q2, we've also seen that agro starts to weaken. Construction and electronics industry show substantial decline, this is not only true for Europe but also for Asia. China does not rebound. We are now seeing into Q3 order book. Our assumption was that latest Q3 order intake will improve. It does not happen, and therefore, our assumption in our guidance is that China will be weak for the entire year, 2023. The current demand situation is abnormal, and it's very pronounced, and we see this as clearly the aftermath of 2022, which now materializes in its entirety in 2023. We will continue the path that we have started in 2023. We will focus on cash flow and year, especially on further inventory reduction this year. Of course, this negatively impacts our EBITDA. We have to absorb more idle costs, and therefore, the focus on net working capital reduction is going to continue. Also clear heads up, whilst we do this profit warning on second quarter, cash flow with EUR 100 million of EBITDA, and second quarter is the quarter when we pay, the variable bonus worldwide. With bonus payments and the dividend payment that we have, issued, of course, you should make the calculation that cash flow in second quarter will be impacted. In return, on the basis of this financial projection, there will be no bonus variable pay that will be paid for this year. Positively impacting cash flow next year. I would like to finish with a clear statement that we are doing everything to counteract. We are addressing costs, investments, and of course, we'll take here respective measures to change our structural cost base going forward. Whatever we can do for 2023, we are already implementing as we speak. Of course, we will also address structural cost measures in order to mitigate any further weakness in demand for 2023, but predominantly 2024. LANXESS is experienced with crisis management, and therefore we will also address this crisis with swift actions and in a professional way. With this, I would like to open the call for your questions. Thank you. Ladies and gentlemen, at this time, we will begin the question- and- answer session. Anyone who wishes to ask the question may press star one one on their telephone. If you wish to remove yourself from the question queue, you must press star one one again. One moment. The first question. One moment, please, whilst we were getting the first person on the stage. The first question comes from Andreas Heine from Stifel. Please go ahead. Thanks. Pleasure to have the honor to ask the first questions. The first is really on cash flow on a full year base. Of course, you, with the lower earnings, you will even focus more on net working capital reduction. Could you outline this a little bit more and what you can achieve? Last year, you outlined that you had safety inventories of EUR 200 million, of which EUR 60 million were reduced in Q4. That would leave EUR 140 million, but as you said, it's an unusual situation, and business activity is below normal, so inventories could also run below normal and prices are falling. That's the first question: What can you achieve on net working capital? The second is on the structural issues. You have large sites in Advanced Industrial Intermediates, in Inorganic Pigments, and in rubber chemicals in Germany, which, to my understanding, are all very energy intensive. What can you really do to change this structural disadvantage, which you outlined in the press release yesterday? Lastly, looking on the profitability and the balance sheet, including pensions, the financial leverage is now very high. How comfortable are you that you can go through this difficult situation without any additional need in equity? Let's address that one by one, Andreas. As far as net working capital is concerned, we still see that there is clearly the potential, notably on inventories, to reduce here net working capital by a few hundred million EUR. If you look at the normal seasonality, this will definitely be a driver for third and fourth quarter. We started with this already beginning of the year. Second quarter is always the most cash-intensive outflow because of dividends and variable pay. Therefore, whilst we achieved free cash flow Q1, the focus on free cash flow with delivery would be rather again, in third and fourth quarter. As far as the energy-intensive plants with intermediates are concerned, you reflect Advanced Industrial Intermediates and organic pigments. Last year, we gave an overview on the 53 production plants in Germany, highlighting 2 plants that are quite energy intensive. Definitely these plants that are more energy intensive are being analyzed at this point in time, and markets position and competitiveness are being assessed. Then we will take the decision if we keep them on stream or rather off stream. Definitely here, if we see the need for making adjustments, we will do them. On financial leverage, in with all respect, if you look into the maturities of the company, we have no maturities in the next 2 years. Exclamation mark. Second, we have undrawn credit facilities of around EUR 2 billion that are unconditional. There's no financial covenants, no nothing associated to it. Of course, in this year, with the suppression of EBITDA, the multiples or the leverage moves up, but it's nothing that we consider as a concern due to no liabilities maturing, and second, ample of financial credit facilities undrawn in our hands. I hope that clarifies everything. Very. Yeah. Thank you very much. You're most welcome, Andreas. Next question, please. We are now going over to our next question. The next question comes from Georgina Fraser from GS. Please go ahead, ma'am. Hi, good morning, Matthias. Thanks for taking my questions. The first one is, the 2Q guidance is nearly half of what we saw at Q1, which was already a very weak quarter. Could you say a little bit more about what has really deteriorated into the second quarter? If you can give us an indication on how volumes and pricing levels are looking. Then my second question is, just in the context of thinking about the leverage, and you've got those undrawn credit facilities, how are you thinking about the risk of another gas spike materializing at some point later this year, and, you know, how do you think that you would manage that? Could there be further downside risk to the EBITDA guidance that you've given? Thank you. Thank you, Georgina. Well, let's come on Q2. We've basically not seen any trading change in April, May, June. Originally, at the outset, beginning of May, our assumption was that May would turn in a little stronger and with further upticks in June. As a matter of fact, this did not materialize. May remained soft, June is clearly no major change as far as trading pattern is concerned. As a matter of fact, in from May, June onwards, we saw that also agro starts to soften, therefore, from the end industry perspective, volumes are brutally down. We know that volumes are clearly stronger down than consumption level is in the industry, therefore, we clearly see that the stocking is continuing. We still clearly also see that worldwide demand is soft. Destocking at some point in time will end. When this is going to be the case, nobody has the crystal ball. The indications originally from our customer base was that they would come back in Q3 with orders. At this point in time, we don't see that. For that very, very reason, we clean the bar now on our macroeconomic assumption. Volumes are, is what is missing. Pricing-wise, we basically maintain prices wherever possible at the level that we have established prices at. However, of course, with energy clauses being in place, in many of our contracts, declining raw and declining energy prices will mechanically run through, as they have last year run up respectively. On gas, we didn't hedge for the last 10 years. At current levels, where TTF is in the 20s and in the 30s, we definitely will not go into the winter unprotected. Of course, here we are sequentially adjusting our position. We see right now that storage in gas storage is already reaching 80%. This is far better than anybody had anticipated. We might come to 100% gas storage earlier than October, and therefore, there might be a further pressure to oversupply gas on the markets. This is something that we definitely have in our game plans to then take further respective protections, so that we have a clear risk mitigation should we have volatility in Q4, Q1, in winter season. I think from the gas side, this year, definitely we will be better prepared, not only through our contracts, but also through taking an active risk protection. I hope that answers your questions. Yes, thank you, Matthias. Is there any way that you could give us some kind of quantitative guide on the volumes? Is it a similar mid-teens decline that we're seeing in 2Q or worse in Q1? Let's do that, let's do that in August when we report Q2 data. This is, I mean, it's not very often that companies make conference calls when they do ad hocs. We want to do that for all clarity and openness to the capital market. Of course, also we are restricted on what we are saying. We will give full-fledged data as usual with our August Q2 reporting that we will convey. Okay, appreciate that. Thank you. We're going over to our next question. The next question comes from Konstantin Wiechert from Baader Helvea. Please go ahead. Yeah. Hi, Matthias, thank you very much for taking my questions. My first question would also be around the HPM joint venture. If you could maybe I know we haven't talked about this today, but if you could also maybe shed some light if there's anything that changed to your previous estimates and if there's any debt program that might be at risk here as well. In my second question would also be because we heard that quite some time now from some investors, that at this price levels you might also become an interesting takeover target. How would you stand to this, and would you be open for takeovers from strategic investors? To be very crisp on both questions, this is not a call on HPM or the Envalior joint venture. Envalior has gone through the long-term refinancing, therefore, syndication is completed. That was done in April. With this financial matrix, financial capital structure for the joint venture has been established. As far as your second question concerns, I mean, this is up to the markets. We are a company that will definitely go for value creation in the coming years, repositioning the company further, therefore, we will run the company as professional as possible, and then markets will judge on the valuation. Okay. Thank you, Matthias, very much. Maybe, on, I just think about one add-on question, previously on the Advanced Intermediates. I guess we will see some further impairments here this year. Is this already on the table, or, still nothing that we should think about? Well, as far as impairment testing, definitely an exercise that is done in all companies, also in ours. The normal impairment exercise is done in our case at the end of the year, in cost of Q4. Of course, we will look at the business plans, at the cash-generating units and see if impairment needs is on the table or not. In the past, this was not the case. Of course, with this year's financial performance, we will have to look into this. It's nothing for the second quarter. Should we do an impairments, I mean, we will do an impairment test in the second half of the year, as in previous years. Should there be a need for an impairment, we will communicate that in due course, but it's nothing that we currently need to evaluate. Thank you. Next question, please. We're going over to the next question. Thank you. The next question comes from Matthew Yates from Bank of America. Please go ahead. Hey, good morning, everyone. Just one question, really, back on leverage and the balance sheet. I appreciate we don't have the full context yet of how tough things are across the sector. Matthias, you're absolutely right that some of your peers have given negative updates in recent days. I'd like to ask a little bit more about the implications of this warning on your balance sheet. Firstly, can you confirm whether you redeemed the hybrid bond that was callable in June, and how significant losing that equity credit is to the metrics that the rating agencies look at? I'm sure those rating agencies would take into consideration where we are in the cycle and what they think the more normalized level of earnings could be. When are you planning to next sit down with Moody's? To protect an investment-grade rating, do you anticipate now having to make some concessions around dividend cuts, disposals, or possibly even an equity raise? Thank you. Well, the hybrid bond has been called, and we basically did not have to do any liability management, so we just called the hybrid bonds. That will reduce interest rates and cash outs by around about EUR 25 million. This is a clear benefit to net income and also cash generation. It was our most expensive debt maturity with 4.5% fixed coupon. We are now at average costs between 1 and 1.5 percentage points, I guess. The financing, which is put long term, is secured. That's point 1. Point 2, of course, we are sitting regularly with rating agencies. We have finished our rating reviews this year already. They are normally organized in April, May, and we have done that by now. The hybrid is an instrument that is normally very high in the ranking, methodology-wise, with Standard & Poor's. It's not the same approach that Moody's takes. Therefore, it's clearly a different emphasis as far as this is concerned. The last question, we have been investment grades since the spin in 2004. I think we know what it takes to defend investment grade rating, and this is something that we definitely will strive for and protect. We currently see that we have all measures in place to defend our investment grade rating. Investment grades, we are currently triple B flat, or in Moody's language, Baa2. Therefore, we have still a good room to remain in our investment grades, even in a cyclical downturn, which we currently definitely have. Okay. Thank you, Matthias. Next question, please. We're going over to the next question. Our next question comes from Angelina Glazova from JP Morgan. Please go ahead. Good morning. Thank you so much for taking my question. I just wanted to follow up on the discussion on the second quarter and full year guidance. How should we think about the guidance of the second quarter? Is it fair for us to assume that EUR 100 million of EBITDA is an abnormally low level? Does the guidance for a full year actually seem some improvement in the third and fourth quarter? The reason we're asking is, if we were to assume the second quarter levels to last through the second half, then we would be coming closer to EUR 500 million of EBITDA for the full year, but the actual guidance is somewhat higher. If you could give us some color on that would be helpful. Thank you. Yeah, Angelina, very clearly, as far as Q2 is concerned, I mean, it's a matter of volumes. We are in second quarter, now below 60% utilization, and this is because of clear demand shock. On top of that, we clean our inventory. Doing this whilst demand is weak, hurts in a double way. Our assumption is for Q3, Q4, that demand is not going to jumpstart. The benefit in Q3, Q4, we should have in Q3, Q4, a lower input cost base. Right now, we are still sweating out our high price inventories of Q4 and Q3 last year. This exercise will more and more be dealt with the further we go into Q3, Q4, but very clearly, we are not factoring in the third and fourth quarter, a rebound on volumes. Thank you. Understood. This is clear. Next question. Our next question comes from Jaideep Pandya from On Field Research. Please go ahead. Thanks. My first question really is on the portfolio, and the resilience point that, you know, you've stressed for the last couple of years. If I just compare, you know, the COVID 2020 result and Envalior Engineering Materials, you know, you roughly did around EUR 700 million EBITDA, and your guiding was EUR 600 million-EUR 650 million this year. What is really? Are you saying that volumes in 2023 are even lower than 2020? Then the follow-up to that is, you know, when you look at the industry, I appreciate everyone is warning this year, but last year everyone had a marked step up in EBITDA, when LANXESS have sort of remained in the sort of EUR 800 million-EUR 1 billion range. Now, you know, you're sort of dropping along with a lot of your peers. Just want to understand, you know, what is really the resilient versus non-resilient part of the portfolio? That's my first question. The second question is, you know, really appreciate around, you know, the utilization point and the inventory point, but could you share some context on how much, you know, under absorption are you actually taking this year because of the high inventories that you came into the year with? The last question is really around the compensation. Just want to understand, what is the compensation policy in these cases where, you know, on a long-term basis, how would the compensation for a long-term effect? Is this not going to be affected because this is really a cyclical downturn, or is this going to be affected because there is some degree of length of specific elements into this? Thanks a lot. Well, let me take them one by one, Jaideep. As far as volumes are concerned, the answer is clearly yes. We see a volume decline, which is steeper, compared to March, April 2020 pandemic crisis, and we even see a steeper volume decline, compared to Lehman because it's lasting longer. Therefore, we are now in a destocking modus in the industry, which basically started November last year, and we are still currently in it, so this is pretty severe. On your second question, 2022, we have shown, despite all the volatility and severeness that was already visible in 2022, we posted a 14% EBITDA rise. Potentially, you did not pay attention to this because net working capital was so very negative, and we clearly take note of that. 2022, we maneuvered P&L wise, relatively strong to a full year. Of course, now this year, that's question number 3, we have to reduce net working capital, and this will hurt the P&L by roughly EUR 100 million. We are going down. If we look September last year, we had inventories at its peak. We will sweat out hundreds of millions of inventories at the sacrifice of utilization, and that hurts, of course, the P&L. As far as compensation is concerned, our compensation, I think from the setup is quite tough. We have clear boundaries. When we are off track in the boundaries, there is no compensation on variable performance, with the guidance we've communicated today, there is no compensation on the variable side for the leadership. I think in good times, you get good pay, in bad times, you get bad pay. I think this is how it should be, and that is being factored into our compensation as well. Thank you. Next question, please. I'm bringing up the next person to the stage. Our next question comes from Oliver Schwarz, from Warburg Research. Thank you for taking my questions. Good morning, Eva and Matthias. Firstly, just for clarification, Matthias, you said that the impairments that might be a topic for year-end evaluation talks to your auditors and so on, so forth. Just for clarification, the EUR 100 million EBITDA pre in Q2 2023, does that contain, let's say, any kind of one-off drags on profitability that are not reported in under, let's say, one-offs or, but are included in the operating results? That would be my first question. Secondly, on the guidance, as you stated, you are not looking for any kind of volume improvements in the second half of the year from now on. Looking at your guidance, if I would take the EUR 100 million of Q2 and extrapolate that into the second half of this year, I would be significantly below your adjusted guidance of EUR 600 million-EUR 650 million. What kind of self-help measures do you expect to implement to improve the EBITDA level? Not talking about cash flow here, but EBITDA. Could you help me out with that? Thank you very much. On your second question, we definitely will benefit in the cost of goods sold through lower input costs and also lower logistic costs that will kick in in the second half. Normally, our tender contracts for logistics run out in May, June. Therefore, on both sides, conversion costs, but also logistic costs, we will have a lower base in second half. As far as your first question is concerned, listen, Oliver, we made a profit warning yesterday evening. Meaning this is a different view on the markets. The consequences that we or the countermeasures we now take, and the potential one-time costs that this will incur or write-offs, is associated to countermeasures. You can be very, very sure that this is already being followed in our company, but I can only communicate on OTCs associated with countermeasures when countermeasures are communicated. I alluded to the fact that we look at sites that are energy-intensive. I definitely will also look at cost structure. When you have a crisis, normally, as management team, when you're professional, one should use crises to clean the barn and to adjust cost structures and take tough decisions where needed, so that you come out of a crisis reinforced and stronger. That is what we've done in the past, and we will do that going forward as well. Of course, we will communicate what measures will lead to what consequences. Please give us this time to do that in a professional way, as we've done in the past. Fair and square. Thank you so much. You're most welcome. We're going over to our next question. The next question comes from Rikin Patel from BNPP Exane. Please go ahead. Yeah, hi. Thanks for taking my questions. Just had a broad question on destocking and demand. Clearly, this has been tried by a number of your peers. I'm just wondering, have you guys seen any market share losses over the past quarter to half a year? Secondly, just on the consumer business, you flagged softness in Saltigo and Ag. Just wondering if you've also seen a similar slowdown in some of the other verticals within that business, and maybe if you could quantify the volume headwinds during Q2 in those units. Thanks. Well, let me address them one by one. As far as your second question is concerned on market share, we don't really see that. We track export statistics, import statistics. We talk to our customers, and want to understand how they position themselves. Basically, the feedback from our customers are, this goes across the board. By the way, it impacts our supplier as well. When we deploy net working capital, we are not kicking off suppliers. We stick to most of our suppliers, potentially renegotiate contracts here and there now. It's a decline in consumption that our suppliers suffer from as well. Therefore, by and large, we see that market share is where it used to be. The clear feedback is, it's softness and demands, and it's destocking across the board. I think this is reflected by pharma companies these days, so it should not be surprising that chemicals face that at face value. To your second question, Consumer Protection is the least impacted on the volume side, but also here we see softness, as stated earlier on Agro, but also other consumer and exposures. The businesses that are impacted most are definitely intermediaries. Ladies and gentlemen, with this, we see that questions have been addressed. I hope that we could clarify all your immediate questions today. That's the reason why we decided in early hours to do this conference call. Of course, full fetch reporting on second quarter will be done in August. Of course, investor relations team, and ourselves and the management board, CFO, CEO will be always there to address your questions and concerns. Thank you so much. With my best regards from Eva and myself and Michael being on the line, we send our best regards from Frankfurt today. Take care. Bye-bye. Ladies and gentlemen, this concludes the LANXESS conference call. Thank you for joining, and have a pleasant day. Goodbye.