Good day and thank you for standing by. Welcome to the LANXESS Q2 2025 Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our speaker today, Andre Simon, Head of IR. Please go ahead. Yeah, thank you very much, Sandra, and a warm welcome to everybody to our Q2 Conference Call from my end as well. Today, I have our CEO, Matthias Zachert, and our CFO, Oliver Stratmann, with me. Please take notice of our safe harbor statement. Matthias will start with a short presentation, and then we will open the floor for your questions. With that, I'm happy to hand over to Matthias. Please go ahead. Thank you very much, Andre, and welcome to everybody on the Second Quarter Conference Call from LANXESS. I turn my attention to page number four in the distribution we have dispatched and start to comment on our key financials. Overall, it has to be said that Q2 was the expected tough quarter. When we look into the end industries that have reported by now, tough momentum in the automotive industry, tough momentum in capital goods, and of course, chemicals have all faced tremendous pressure in the second quarter due to the high level of uncertainties in the global industry. I think all of us and all of you know the reasons behind that. Demand has been depressed, high volatility, very, very short order pattern by our customers. This sees the reflection in sales different to first quarter. Second quarter left its mark on volumes, nearly being down by 4 percentage points. In some of our segments, notably Intermediates, we clearly see increased pressure coming from China products, which no longer find their way to North America and are more or less being dumped in the European area. Of course, Urethane divestitures leave its mark in second quarter as well. All in all, this business generated EUR 50 million of EBITDA last year and of course also absorbed some central costs. If you look into the second quarter, we do lack the sales and of course the EBITDA contribution. EBITDA second quarter is down EUR 150 million versus EUR 181 million in last year. The reasons are driven by volume, price, and portfolio effect. If we look at working capital, this might come as a positive surprise to you. We have kept working capital in the second quarter pretty stable. Notably, our inventories did not follow the normal pattern because we kept high attention on the inventory side. Q2 on the absolute inventory level is as low as Q4. You see that we have room for improvement here, room to pick up when we see that demand moves up again. We see also at our customer level that they have cleaned up inventories. All in all, by many of our industries, we see low levels of inventories, which normally is a positive thing. It also reflects that everybody is pretty cautious and therefore keeps the balance sheets in order like we are doing. The decline on working capital is basically being driven by receivables reduction, and here positive. If you look at our KPIs like DSO, you see that we have improved here. Oliver and his team were pretty fierce on receivables collection, thanks to the finance organization in this regard. Of course, lower sales also lead to a receivables reduction. Working capital was down in Q2 and predominantly driven by receivables. On cash flow, I think all of you know that Q1 and Q2 normally are quarters where we rather absorb cash. This is something which we, due to tight working capital management, turned to the positive. EUR 31 million of positive free cash flow in Q2. This was one of the reasons why net debt went down. The primary reason for the net debt reduction from EUR 2.5 billion to roughly EUR 2.1 billion is driven by the Urethane sales. I think in hindsight, one can clearly say this was a strategic and financially excellent deal, which becomes visible now in the balance sheet. Now let's turn to page number five. We have started already around about six months ago a review on our overall production network and have looked very carefully at what we can further improve in order to improve the overall platform of our company. I'm happy to say today that our teams worked hard to accelerate the hexane oxidation plant closure. Originally, we had stated that this would be closed by March 2026. Now, contracts with customers and contracts with suppliers could successfully be renegotiated in the meantime. Today I can say that this is a fait accompli. We have closed the hexane oxidation by the end of June. There will still be some remaining costs that will be incurred in Q3, but from Q4 onwards, you will see the first savings supporting the P&L. The overall annual savings will, of course, be then visible next year in full, roughly EUR 10 million of cash and profitability improvement. By the way, hexane oxidation had a high CO2 footprint, and this is therefore also contributing to our overall sustainability targets. As far as Leverkusen is concerned, we looked at our agrochemical plants and have realized that further optimization can be done here on the efficiency side. That also is being addressed and will be implemented in the months to come. Let's move on to the U.K. We will close our small plant in Widnes. The products will be allocated to other plants. Widnes was underutilized from the outset and has not become better. That's the reason why we will reduce complexity, reduce costs, and improve profitability. Eldorado is one of our big sites. Of course, here we know that the end markets in flame retardants, construction are tough and continue to be tough at least for the next 6 to potentially 12 months. For that reason, we have analyzed in detail for quite some time now and will improve efficiencies here also on the process side. That is the reason why also this, without adjusting capacities, will lead to process improvements, and we will implement that in the course of 2026. Further measures are being taken to counteract economic weakness. Let's now move on to the segments. Here, let's start with consumer protection. From what we see today, and I have to stress, this year is marked by high, high volatility. It leads to the uncertainty, I think, everywhere. All companies comment on that, not only in the chemical space but also in the other process industry. We are no different. From what we know today, we give guidance on the segments. consumer protection, our view is that profitability will be slightly above prior year. Additives, by and large, on the same level. Additives, which rebounded nicely last year, are facing next to a tough market environment on volumes in Europe, pressure especially from China. We do see that Chinese goods are impacting, especially the European and Latin American industries. When we look at our segments, Intermediates are the most impacted. Additives are somewhat, on average, impacted. consumer protection is the least impacted. Everywhere, we see that Chinese goods are being dumped in Europe as they don't see respective entry routes into the United States. We got questions from investors and analysts. What about a pickup in the second half due to German government stimulus? My feedback to you is government stimulus, we don't expect in the second half to occur. Nevertheless, we do face two tough quarters: Q2, Q3. Also, Q3 will be impacted by the uncertainty. All the volatility, uncertainty, tariff escalation, la, la, la, la, that occurred in Q2 spill over into Q3. Companies take adjustments on production, and there are summer holidays in July, August. All of that, we will, of course, see in Q3. Even though we see that customers also start to prepare for Q4 in order to be prepared for volume pickup in 2026. This is something where we turn a little mildly, cautiously positive for the fourth quarter. Let's face it, Q2 and Q3 see the terrible uncertainty impacting industries across the globe due to the escalation on tariffs and what have you. Now, let's come to guidance, page number seven. Here, like many other companies in the industry and notably in chemicals, we adjust our earning projections for 2025. I think the macroeconomic in general, I don't need to comment further. That should be crystal clear to all of you. Let's come to LANXESS. Guidance being adjusted to EUR 520 million up to EUR 580 million. Even though the chlorine force measure by one of our suppliers here in Germany, most of you know who I'm talking about, has not been finalized in its assessments, we've tried to get our best understanding on all facts that are available. Within our guidance, we factor in a shortfall of EUR 10 million. Noteworthy to know for your side, we are protected should that be higher because, of course, we have insurance and our self-deductible is at EUR 25 million. Therefore, the EUR 10 million we consider as realistic for the current analysis that we have, and it's reflected in our assumptions. Consideration for Q2, take note of the fact that Urethane is gone. You need to adjust your models for the divestitures. That is now happening also in Q2. As far as Q3 is concerned, please understand it will be sequentially, due to the reasons I've mentioned, lower than second quarter. Let's finish the presentation before we open up for the questions you have with a glance on page eight. We are ready for demand picking up again. Our assumption is, at least from the German government stimulus program, we should see, following also many of your macroeconomic insights from your macroeconomic departments, that Germany and the German economy will pick up in 2026 again, coming out of its trough and therefore having also a positive impact on the European economy. We also assume that 2026 will see more stabilization on the high tariff escalation debate that is currently leading to uncertainties. Our assumption is that 2026 will have a demand pickup, and we are prepared for that. Our inventories are at low levels. Our portfolio is solid. We have obtained and gained through the transformation over the last few years, leading market positions in all of our business units. We have a regional footprint, a very lean, improved cost structure. If demand comes back, we are ready and, of course, are prepared for whatever comes along. Ladies and gentlemen, with this, I would like to finish the presentation, and Oliver and I are prepared to take all your questions. Please go ahead. Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Please stand by. We will compile the Q&A roster. We will now take the first question from the line of Martin Roediger from Kepler Cheuvreux. Please go ahead. Yes. Hello. Thanks for taking my three questions. The first question is on the agro business. In Q1, you provided some slight optimism about agro as you mentioned positive volumes and higher earnings versus a weak prior year, especially in consumer protection, where Saltigo sits. I hope that the challenging agro environment, which affected already Q1 but is in place for several quarters already, would fade at some point in time. Now, in Q2, you reiterate the persistently challenging agro environment in consumer protection. What is going on in agro that this trough lasts so many quarters? Is the low demand linked to the fact that there are not many launches of innovations at your customers? Or B, that a key customer of you is now sourcing more and more volumes from other suppliers? My second question is about the intended closure of your site in Widnes, U.K., where you produce aroma chemicals for the flavors and fragrance industry, but also for cosmetics and consumer care. I understand that the demand is low while competition is tough. I wonder whether the recent approach by your competitor, Croda, in the U.K., which is buying market share via big price concessions, has been the tipping point for your decision to give up that plant, or is it primarily linked to rising Chinese competition? My third question is for Oliver. Sorry to bother you with the same question I asked you at the Q1 conference call. It is again about energy costs. In your handout, you mentioned four times that energy costs are a burden at group level and also at all three operation segments. At the conference call of Q1, you said that for a longer period of time, you're able to pass on energy costs where they really matter and that deviations are possible on a quarterly basis. Do you think that you can catch up in the second half, or should we wait until next year? Thank you. Okay. Let us go through all three questions. Thank you for raising them. I'll take the first two. Oliver will take energy. On agro, we stay tuned. We, of course, follow the communication done by our agro clients, and most of them are listed, so you can follow their transcripts and presentations as well. We are happy to see that there's a more tonality on the positive by some of the agro companies. Normally, this should, with a time lag, also be visible in our order book. At this point in time, they are still modest in ordering. That's the reason why on the order book side, we keep patient and can therefore, at this point in time, not confirm that our order book and volume are increasing. That's basically the communication we see on agro. We do see a high activity on innovation in the agro companies. I can tell you that in many of these innovations, we are participating. For the mid and long term, we are not negative. We are positive, but the agro industry is a cyclical industry. I know this now for more than 20 years, and it takes some time to rebound. When it rebounds, it normally rebounds reasonably strong. On Widnes, I have to adjust your assumptions. This has nothing to do with Croda or whatever. When we made our announcement on the Emerald Kalama acquisition, and if you think it was 2022 or 2021 when we made the announcement on Emerald Kalama, you might find in these transcripts of that communication day that I highlighted already at that point in time that we acquire three plants, and one plant is subscale, which might lead to an adjustment going forwards. I was conditional at that point in time, but Widnes was clearly compared to our remaining four sites subscale. The other four sites have the broad product portfolio. I think this is the time now when you take tough measures. The plant was always low in the utilization, around about 50%, 60%. We tried to fill it up with other chemicals. At the end of the day, this never led to a utilization that we aspire in our plants of 70, 80, 90 percentage points. When we now reviewed our entire production network and have made sure that we can re-specify the products that are being produced in Widnes in our other sites, we took the decision to reduce complexity, reduce costs while keeping the product portfolio alive. That's the prime reason for closing Widnes. Now I pass on the ball to my partner, Oliver. Go along. Matthias, I'm picking up the ball. Martin, thanks for the question. Look, indeed, energy costs are a burden in terms of competitiveness. If you look at the, let's take as a proxy, the natural gas costs. If you compare the U.S. to what we have to pay here in euros, specifically in Germany, we are comparing on an apples-to-apples basis. In euros to megawatt-hour, prices are around EUR 7 or EUR 10 in the U.S. You can track the gas price here, which is in the magnitude of, let's say, EUR 30 - EUR 40, recently EUR 35. There is a competitive disadvantage. You're also right that indeed we have, after the energy crisis, implemented contracts wherever energy in the production played a major role for the product to pass those burdens through to our customers. Matthias, I think in a lot of detail has outlined how competitive the situation is right now. In such a situation, every competitively disadvantaged cost burden is worth mentioning. This is why we put it out. Just as a little final example, only in the first half compared to the first half of last year, we had energy costs that were higher by EUR 30 million. Of course, we are pushing that through. Whether it will be possible by year end to no longer point to these energy costs, we'll have to see. Thank you. Thank you. Next question, please. We will now take the next question from the line of Andres Castanos-Mollor from Berenberg. Please go ahead. Hello. Thank you for taking my question. I would like more clarity on the consumer protection results. Firstly, it seems like the majority of the pricing reductions of the group sit fixed in this division. I wanted to ask why and understand to what extent this, which is the most valuable business division, is isolated from Chinese competition. Also, on this division results, I would like more comment on the mix improvement that you mentioned. The adjustments that apply here, I assume they are related to the closure of the Widnes plant, but would love to hear. Finally, on the insurance adjustment, it's the third quarter, if I'm not mistaken, that you have received a payment. Is there more to expect on this front? Is this related specifically to the chlorine force majeure, or is this about some other event? Thank you. Great questions. Oliver and I will share that. I will address consumer protection. If you look into consumer protection, let's address business units. Here, we do have material protection and the water purification business. Of course, here and there, we have competition from China as well. We are in many of our product grades in higher, more specified, and data-protected or registered specifications. Of course, here, the pressure by competitors is lower. Therefore, the profitability of these two business units is clearly more resilient. If you go to Saltigo, this is the one that is impacted the most right now because of agro weakness. We are not really directly impacted in Saltigo on the molecule sides. On the competition sides, in the molecules we sell, we do see that our end customers are facing pricing pressure and, in some cases, volume pressure. Thus, they either hand over the volume reduction to us into the order book or sweat out inventories and are very fierce in the pricing negotiations. Therefore, in Saltigo, we see that our customers are impacted on the competition side. That's the comment on consumer protection. All in all, this segment is less impacted by Chinese competition, which is, I think, the natural conclusion you would also have. In return, our intermediates are eye-to-eye competing with Chinese competition. I hope this clarifies your consumer protection question. On the exceptionals for consumer protection, this is basically Widnes. Oliver will give more color on this in absolute numbers and will address insurance as well. Oliver? Yeah, Matthias. On insurance, you may remember that we had an incident. Actually, we didn't have the incident, but in the bottleneck side of our business unit, flavors and fragrances, the steam provider, AVR, had an incident, couldn't supply us. This is in the aftermath, a payment. I remember we received the question also on Q1 whether there is more to be expected. The point is simply that the process that you run through as an insurer doesn't give you clarity on what will qualify as a covered impact. I was not in a position in May to signal that. Now, looking forward, there could be tiny payments which will not rock the needle to the extent that we've seen a high single-digit amount here. Indeed, with regard to exceptionals, the Widnes site, and I think you see that in our quarterly report also, quite neatly, with the EUR 60 million, EUR 61 million value is for the closure of the Widnes site, as Matthias has mentioned. Thank you. Okay, all questions answered, my friend. Thank you. We will now take the next question from the line of Peter Spengler from DZ Bank. Please go ahead. Yeah, good day. Thank you for taking my questions. I have three. First is you reported positive free cash flow in the second quarter. Could you provide an outlook on the expected free cash flow development in the second half? On your production network, you have already taken steps to optimize your production network, obviously. What are further opportunities? Do you see, let's say, more levers that you can pull actually to increase efficiency further? Last question, what do you expect from the German government and E.U. Commission to improve your situation in Germany and in Europe competitive-wise? Thank you. Our Chief Cash Flow Officer, Oliver, will address your question on this one. Let me take network and German government. I mean, you see that we ongoingly address productivity where we find it. On the production network, we basically started end of last year, beginning of this year, and now come to a conclusion. We reviewed also side by side everything in Germany and have at least seen here that there is no plant that we need to address at this point in time, but we accelerated the hexane oxidation. You see that we really review side by side and will, of course, do that on an ongoing basis. That is operational optimization work that you should do, and we are doing it. Of course, I mean, in such an environment, my clear ambition is in tough times, you have to take always the opportunity for sizing opportunities. You should not assume that with the actions we have announced today, we stop going for further opportunities. Technologies are evolving. We see a lot of new technologies through especially artificial intelligence that is more and more entering our industry. Of course, if you work on AI, you need to get the algorithms to work, feed with data, and then see what opportunities arise out of that. We have done the FORWARD! cost reduction and SG&A. We are now addressing network opportunity. You can be assured that if we find further opportunities, we will make them happen. Now, on the German government, I am extremely happy that they do not only talk and make big statements like we have seen before or make further laws and rules that nobody needs like we have seen before. They take action. Of course, in the media and press, there is always in Germany a lot of criticism. In Germany, you always have criticism on everything. From an economic standpoint, it is the first time that we see that actions are happening. We also see that this is now entering into the doings. The new government has announced their plan. They are now implementing their plan. They have passed respective approvals. Now we see that they are pushing hard to get that into the industry. Of course, that takes some time, but the infrastructure projects right now are being started. Before that ends in the order book, it will still take one to two or three quarters. We see that the government is clearly here on the acceleration path. Therefore, I am, first of all, very happy that Germany is taking actions again. I think you guys in Europe, in London, Paris, Switzerland, wherever you sit, you suddenly see that our German Chancellor is again doing something and not hiding himself. He's active. He wants to contribute. He wants to solve problems, turn them into solutions. The same we see from the industry sides. Things are happening. Of course, it takes always some time until actions lead to reactions and momentum. The positive thing is we see that here, fortunately, things are moving in the right direction. With this, again, I pass the ball to Oliver. Go ahead. Matthias, thank you. Hi, Peter. I'd like to emphasize two or three points here with regard to free cash flow and specifically your question on the development in the second half. I think in the second quarter, it was pretty apparent, and Matthias has mentioned that in the beginning, that we are indeed putting a lot of focus and a lot of effort into tightly managing the cash flow here. You could see that with regard to our collections, with regard to the volume management in our inquiries. I cannot, however, close my eyes when I look at the fact what the operational environment is currently. If I compare it to last year, also seasonality has to be taken into consideration. If you look back in the numbers, we had a negative free cash flow in the first half last year as well, ended last year with a positive free cash flow of EUR 188 million and had a huge seasonal inflow in the fourth quarter. We'll be working with a lot of energy into the direction of showcasing a positive free cash flow here. With the uncertainty that is out there, I hope for your understanding that I cannot give you a precise guidance. Thank you very much. Sure. Peter, looking forward to doing a roadshow with you in Frankfurt. We see you next week. Thank you. Me too. Next question, please. Thank you. We will now take the next question from the line of Chetan Udeshi from JP Morgan. Please go ahead. Yeah, hi. Thanks for taking my question. I was listening, Matthias, to your commentary, and it seems you highlighted the competition point from China, imports, etc., to a different degree across all your divisions. I'm just curious, you talk about demand weakness. This is not just relevant for LANXESS, but probably for the whole sector. How much of the weakness we see in the sector is a function of just higher competition rather than just maybe not as bad a demand? If that's the case, why would that change next year? I think I made the statement that first, customers no longer order on a two to three months approach like they have done for decades, with a few exceptions, financial crisis, Southern European debt crisis, and pandemic. All of them lasted basically one or two quarters. What we see right now is that, and this is obvious, when you have tariffs of 145%, 50%, what have you, you basically don't order. You wait for better tariffs to come. Therefore, orders and order books have moved from a two to three months pattern to daily, weekly patterns. I followed my colleagues in other industries in their reporting season. I followed some of my peers in the chemical space and talked to a few guys here and there. This is pretty much the same everywhere. We see that from the customer side, people are reluctant and are very conservative. They don't buy more. They buy rather less. It's being bought on short notice. Second, I've stated that inventories are being reduced nearly everywhere. People produce less in uncertain times. Also, consumers buy less in uncertain times. We see that saving rates in many countries are on the high sides and not on the low sides. Of course, it needs positivism. It needs certainty, etc., to ignite again spendings. Spending levels are low on the consumer side, on the industry side. That's the reason why we clearly consider that this current order pattern is not the new normal and that it's going to improve in the years going forward. We need to have a little bit more positivism. That's the name of the game. I hope that clarifies your question. Thank you. Next question, please. Thank you. We will now take the next question from the line of Christian Bell from UBS. Please go ahead. Hello. Firstly, can you hear me okay? I hear you loud and clear, Mr. Bell. Thank you. I just have a couple of questions. If I could ask the first one and then maybe come back to me for the second one, that would be great. It would be good to get a clearer picture of your outlook for the second half, particularly by segment, based on the midpoint of full-year guidance of EUR 550 million and currently applying the commentary by segment. I think that implies for the second half, an Intermediates weakness is anticipated to persist through the second half, which I can understand. In a dditives, that's expected to show improvement or at least remain flat. In consumer protection, there's a notable slowdown from the first half. Could you either confirm or correct me if I'm wrong? In either case, provide your thinking on the assumptions for the second half, particularly for a dditives and consumer protection. If you can break that into third and fourth quarter, that would be even better. Mr. Bell, thank you very much for your question on volumes, momentum by segment, and by quarter. We don't do that in general. We've given a company guidance on the entire group. I don't guide by segment on pricing and volume. These communication details we always provide for the quarter. I've given you qualitative guidance by segment how we see profitability. I think that should give you as much color as possible. Please look into the presentation and reassess again how we qualitative-wise have commented on consumer protection, Additives, and Intermediates, and how we addressed our full year. I think with this, you have the best information we provide at group level at this point in time. Okay. Are you sort of interested? You called out auto, agro, and construction as being the most impacted in-market through the first half. What are you expecting from those in the second half? Is it some sort of recovery or largely a continuation of what the current environment is? Outside of those segments, what are you expecting there? I come back to what I stated earlier on. We do assume that Q3 will be another very tough quarter, driven by the normal seasonality you have in the industry. The third quarter is always one where you have, due to the holiday season in July and especially August, less momentum because many of our end industries like car industries go for production shutdowns in the course of August. Therefore, you have always a more milder activity, production activity in the third quarter. I've stressed very clearly that the tariff escalation that basically occurred within Q2 still leaves its mark in the order pattern of the third quarter. I alluded to the fact that in the fourth quarter, we should not see government stimulus coming from Germany. We see that already one and the other customer are starting to prepare for an order pickup in 2026. Therefore, we do assume that there will be an order uptick in the fourth quarter in some of the industries that would benefit from what is being decided at this point in time. That's the communication I've made earlier in this conference call. Okay, great. Thank you for that. My second question sort of relates to the margin deployment additives and intermediates in the second quarter there. Are you able to sort of explain what a typical EBITDA drop-through would be for like what a typical EBITDA drop-through would be on incremental sales? That would potentially help give a sense of how much of the fall in EBITDA was due to operating leverage versus other impacts such as energy cost. Oliver, you want to take this? Yeah, unfortunately, that is also a question where I prefer not to provide a drop-through to EBITDA rule of thumb here by segment. I'm referring to what Matthias has already stressed. We're happy to take that up in the aftermath with you, trying to build a bridge to help you model your expectations, but we won't get to the point where I guide you to a segment or a business drop-through on EBITDA. Okay, thank you. Thanks for answering my question. Thank you. We will now take the next question from the line of Tristan Lamotte from Deutsche Bank. Please go ahead. Hi. First one is, there's a peer who reported yesterday that July was a bit better than June. I'm just wondering, is that something that you're echoing? Is there a potential that Q2 saw some destocking, which therefore might not continue into Q3? The second question is, I was wondering about the outlook for Envalior. I'm just wondering how much we should read across from the weak forward-looking outlook Solvay gave, if you could comment on that. Thanks. Tristan, thank you for both questions. We'll take them one by one, and Oliver will step in if he has something to add. I will not be specific now on month trading, how was July or the first week of August. My feedback to you is, as we have guided Q3, we communicated we'd be weaker than Q2. I've given the reasons behind that. We might have seen some pre-ordering in March Q1, which burdened potentially a little Q2 at the beginning. By and large, we do see that Q2 and Q3 are the tough quarters for the industry. If there are differences, one exception making different comments, so be it. Our view on the industry is Q3 is going to be another tough quarter for the industry. I think this is the reason why most CAMs and automotive companies, capital goods companies have adjusted their guidance for the full year. If all of them would have seen that suddenly strong momentum is there, I think most of the companies would not have taken down their guidance. The opposite is the case. I think most of our end industries see Q2, Q3 are tough quarters. That led to the fact that across industries and specifically in CAMs, most of the companies took down their yearly outlook. We are no different. In Envalior, if you look at the year-to-date numbers that we have reported, and I here can only allude to the equity consolidation line in our P&L, we posted last year a negative number of EUR 73 million. If you look at the first half, 2025, it's a -EUR 59 million. From that number, you should conclude that Envalior has improved. I backtest that with the analyst reports of three credit rating agencies that have all communicated Envalior is going into the improved profitability direction in course 2025. If I look into my financial numbers in what we have reported to you, this is pretty much confirmed. I hope that clarifies your question on Envalior. If there's anything else, please let us know. That's helpful. Thanks a lot. Most welcome. Next question, please. Thank you. We will now take the next question from the line of Thomas Wrigglesworth from Morgan Stanley. Please go ahead. Thank you very much, Matthias and Oliver. Two questions, if I may. Firstly, just on clarification around the guidance and the free cash flow commentary. It sounds like there is some optimism for 2026, and therefore, the business will be positioned for growth for 2026. You are not going to run aggressively hard on inventories into year-end because you want to pick up that 2026. Is that the message that I've received? The second one is just, sorry, there's an alarm going off in the background. The second one is on credit rating agencies. Could you just give an update as to the discussions you're having with credit rating agencies? What are they looking at? Are they giving you any leniency for the uncertainty, which is obviously unprecedented in the market today in terms of how they look at the cash flow potential of the business? Thank you. Tom, wow. On working capital, you are raising a very operational and to some extent also operational strategic and resource allocation question. That's exactly the discussion you internally have to deal with and to discuss. Our view is, and we get signals from customers that some of them are preparing for more momentum in 2026. Exactly this discussion we are going to have internally if we are prepared for supplying this in a speedy way. Of course, you have to be humble on further reduction on inventories. If you see that the momentum remains depressed, you can clean up the balance sheet at year-end. This is exactly the discussion we are going to have with our business, I would say, starting in six to eight weeks from now because then we take the call on with what kind of inventory levels will we end fiscal year 2025. I think you've heard our saying on how we look at Q3 and Q4 and how we look into 2026. Exactly on the inventory side, this decision is going to be discussed or prepared and then finalized in around about October this year. On credits and credit rating, rating agencies, I mean, who's the best expert in the room? Oliver, go on. Matthias, thank you. Hi, Tom. We do have a very close exchange and frequent exchange with the two rating agencies, Moody's and Scope, covering us. The way it normally works is that you have quarterly discussions, and then you have a longer, more in-depth discussion, typically over the summertime, which we have already had. I think when you look at the Scope rating, you have seen a change in that rating just a week ago. They have withdrawn our negative outlook and upped our rating. I think the fact that there is free access or at least payable access to the research also from Moody's, and when you read that, you can conclude that they recognize and appreciate the improvements that we've achieved in our portfolio, in our cost structure, and they also see the efforts and success with regard to cash flow. The fact that we have been provided with the negative outlook, with the typical grace period, and the agencies are apparently looking at us and are appreciating the improvements speaks for itself. That's as much as I would like to answer that question. Great. Thank you very much. Sure. Thank you, Tom. See you in London soon. Thank you. Next question, please. As a reminder, if you wish to ask a question, please press star one and one on your telephone. We will now take the next question from the line of Oliver Schwarz from Warburg Research. Please go ahead. Thank you for taking my two questions. Our first one is on regional sales distribution. A couple of your peers reported on a bit different regional pattern than you did. They said, and it also showed in the numbers, that business in Asia was holding up, I wouldn't say pretty well, but wasn't as affected as other regions by the downturn. That doesn't seem to be the case when it comes to LANXESS, especially when looking at Q2 results. Can you fill me in what's the reason for that? Is that due to the divestment of the Urethane Systems? Is that product-specific? In general, what's your outlook on your Asian business, please? The second question would be about the outlook. I appreciate that the uncertainty has been mounting up during the year, and hence, with seven months in, the spread in the brackets of your new guidance has become even a bit larger than at the beginning of the year. However, could you fill me in what would bring you to the upper end of the guidance versus the lower end of the guidance range? Thank you. Let me take them one by one. I think our comments have been on the regional side. For the group, already at the March reporting or in May reporting, that if you look into the regions, we used to have a good momentum in the United States. We had a weak demand in Europe, and we had a weak demand, especially in 2024 and 2025 in Asia, while Asia modestly stabilized and then modestly improved. I think that was the tonality we had. This all in all has only changed for the United States. Here we see softening. It's still positive, but softening. Europe remaining weak. In Asia, the picture is different in terms of countries. We see good momentum in India, good growth. Whilst in China, we see pricing erosion. Please take note of the fact our local production in China is very humble. We export to China. Through the exporting to China, look at, for instance, our flame retardant business. We don't produce locally. We sell to China. Of course, here from the United States, you had a lot of turbulences on tariffs. If margins erode when you export to China, you are more humble in your distribution. Therefore, all in all, if you look into Asia, we see that there is market-wise a very modest improvement if you look at entire Asia. If you look specifically into Asia and to the two great countries, you clearly see the positive momentum in India, and we hear reasonable local production. As regards to China, I think I made my comments. As regards to the guidance, upper or lower end, I would look to Oliver and let him comment on this. Typically, you know with the uncertainty, the general answer would be the earlier we get stability in the tariffs dispute, the more it would help us because it would probably fuel some demand. If there is a further escalation in any of the geopolitical tensions or there are new negative ideas that are being discussed in the tariffs, it would rather burden us and bring us to the lower end. Should the European Union decide to speed up anti-dumping processes, for example, against Chinese products, it would help us. There are many factors that we can talk about that would bring us to the upper and lower end. The fact that we've decided to expand the bandwidth just gives you a feeling for the uncertainty that indeed we're feeling here. Many, many factors, Oli. Thank you very much. Thank you. We will now take the next question from the line of Reuben Scherzer from AMG TimesSquare Capital. Please go ahead. Hi. Good morning. Thank you for taking my call. Can you hear me? Yes, Reuben, we can hear you. Okay. My question is, what's been the overall group capacity volume reduction from the period before the FORWARD! action plan cost-saving program was put into motion and what it will be after the cost-saving program announced today will be complete? If you could ballpark it, I'm sure like down to exact percentage is unreasonable, but is it like a 25% volume reduction or is it less, more? Let's be specific. FORWARD! was predominantly an SG&A exercise. With FORWARD!, and I think I've stressed that at that point in time, we clearly stressed that FORWARD! is not reducing our capacities worldwide, but it's improving our productivity and is reducing our admin costs, which was visible in the P&L in the functional line administration. With FORWARD!, of course, we announced two potential site closures. One was hexane oxidation and the other one was chrome oxides. On chrome oxides, we said this might be divested or closed. Eventually, we decided last year to keep it running because we basically reduced our entire admin costs in this business by 20%. This was a severe cost cutting we did in that area. On top of that, we renegotiated a supplier contract of a big raw material, sodium dichromate, by a substantial amount of money. The business, which was completely underwater, turns into good profitability and is contributing from now on. Chrome oxide capacity was not adjusted. The business was not sold by caps. With hexane oxidation, we have now announced that this will be closed. Hexane oxidation is a capacity of around about 30, 35 kilotons. In the overall picture of Advanced Industrial Intermediates, this is not a big number. For the business itself, we basically destroy a business that had no cash returns, that was by and large EBITDA zero or even slightly negative. Therefore, we improve profitability. We reduce cash absorption, but we don't significantly change the capacity. As far as Widnes is concerned, which is now announced for closure, I've stated that the plant was underutilized in the past. We reduced the capacity in the markets, but still take the products in our remaining sites. It does not reduce our structural profitability level. Eldorado and agrochemicals are efficiency gains but not capacity adjustments. I hope that clarifies your question. Thank you. Welcome, Reuben. Any questions left? There are no further questions on the phones. Please continue. If there are no further questions, then I thank you for your participation. We are, of course, there for you. I know it's, in most of the cities, summertime, so enjoy your summer break. Oliver and I are ready to take your calls. Investor relations is there. I will be on roadshow next week. If there's any further follow-up and need for discussion, we are prepared to answer all your questions. Thank you for your attention. Bye-bye. See you on the roads. Until next time, thank you from LANXESS. This concludes today's conference call. Thank you for participating. You may now disconnect.