Welcome everyone, and thank you all for standing by. At this time, all participants are in a listen-only mode until the question and answer session of today's call. To ask your question, please press one followed by the number one. Today's conference is being recorded. If you have any objections, you may disconnect now. I'll turn the meeting over to your host, Kenny Chae. You may begin. Hello everyone, welcome to our Q3 updates. Earlier this morning, we published a press release to provide an update on our Q3 outlook based on the heightened macroeconomic uncertainties. Thierry will walk you through a few slides on our Q3 updates, and both Thierry and Maarten are happy to take your questions after the short presentation. The slides are also available on the investor relations section on our website. Please note this call is being recorded and a replay will be made available on our website. Before we start, I would like to remind you about the disclaimer at the back of this presentation. Please note this also applies to the conference call and answers to your questions. Now handing over to Thierry to start the presentation on slide two. Thanks very much, Kenny, and good morning to everyone on the call. The world around us is definitely continuing to evolve rapidly. In Q3, the macroeconomic uncertainties have further intensified, especially in Europe and China. Consumer confidence in those regions has fallen to near historical lows, resulting in incrementally weaker demand, while customers and channel partners in Europe and China are proactively destocking in anticipation of lower end-market demand impacting the paints and coatings industry. In this challenging macroeconomic environment, our Q3 volumes are trending lower than we had anticipated. Despite us holding share in our markets, we now expect Q3 volumes excluding M&A to be down mid-single-digit percent versus prior year. For decorative paint volumes, Latin America and South Asia are strong as expected. The European Deco do it yourself channel sellout continues to be at 2019 levels, but saw further destocking in the quarter. While Deco China channels are impacted by lower consumer demand. For Performance Coatings, our Marine and Protective and Automotive and Specialty businesses continue to recover sequentially. Economic uncertainties are impacting our Powder and Industrial businesses. The silver lining to the macroeconomic developments in Q3 is that the cumulative raw material market prices are indeed clearly starting to decline. The raw material impact on our P&L is at its highest point in Q3 and will continue to be offset by pricing initiatives. With the decline in raw material prices, we expect a negative impact from inventory revaluation starting this quarter, followed by margin benefits in our P&L starting in early 2023. We currently expect our adjusted operating income to land in the range of EUR 195 million-EUR 250 million in Q3, before the impact from hyperinflation accounting in Turkey. Based on expected current demand trends to continue into Q4. Given the challenging macroeconomic environment, we continue to take proactive actions as outlined by our Focus 2 initiatives to drive improvements in cost and working capital in Q4. On slide three, we see the latest demand trends for the current quarter. In Q3, we see heightened macroeconomic uncertainties in Europe and China. In Europe, ongoing geopolitical tension and high energy prices have led to near historical low consumer confidence, along with deterioration in economic outlook. This has led to customers and channel partners in both paints and coatings proactively de-stocking, anticipating lower demand. In China, COVID lockdowns continue to persist, and extreme weather during the third quarter has led to restrictions on power usage for industrial activities. Meanwhile, the declining real estate market and significant weakening of consumer confidence has led to lower consumer demand overall during this quarter, which is outweighing the benefits from our geographic expansion for Deco China. In North America, we are still experiencing supply and logistics constraints. While the situation is improving overall, we are still faced with unexpected incidents and force majeures, such as a fire incident at Allnex, a resin supplier which occurred in July and resulted in significantly constraining several of our coatings businesses in North America. The overall demand for paints and coatings in Latin America and South Asia are strong as expected, while sequential recovery continues in marine and protective and automotive and specialty. In summary, the macroeconomic uncertainty and outlook in Europe and China have deteriorated more than expected in Q3. While this is a challenge for the entire paints and coatings industry, AkzoNobel will continue to focus on initiatives to reduce cost and improve working capital while continuing to drive our successful pricing actions. With that, I'll now hand over to Kenny to open the Q&A session. Thank you, Thierry. This concludes the formal presentation, and we will now be happy to address your questions. Please state your name and company when asking a question, and limit the number of questions to two per person so others can participate. Operator, please start the Q&A session. Thank you. We will now begin the Q&A session. Participants, if you would like to ask a question, please press star followed by the number one. Please unmute your phone and record your name slowly and clearly when prompted. Your name is required to introduce your question. To cancel the request, you may press star and then the number two. Our first question is from Mubasher Chaudhry from Citi. Your line is open. Hi, guys. Thank you for taking my question. Just a couple to start with, please. Could you comment on the net positive of the pricing and volumes in the third quarter, and if there's any guidance on volumes for the fourth quarter? That'd be first question. The second question is just a comment around Powder Coatings coming off and ICO coming off. It seems like Powder Coatings is heading back to kind of the 2019 levels, whereas ICO is still significantly above 2019 levels. Should I be expecting the ICO decline to carry on back down to 2019, or is there something a bit more stickier in there which so that it remains at a high level? Sorry, just finally, you mentioned in your opening remarks that the volumes down for the group should be now mid-single digits, which would be. Which is, I think in the second quarter, you did about -8.6%. So I'm just wanted to confirm whether that's the actual case, i.e. 5%-6% is the volume downgrade that we should be or volume down year on year is what we should be expecting for the third quarter. Thank you. Yeah, Mubasher, thank you for your question. The line was extremely bad, so some of it we may have to guess what you were asking. Let me start with the ICO powder question, although of course this is now the third quarter call, so probably not good to go through all of the segments here. Then maybe, Maarten, you can actually give a view on the pricing versus the raws. Yeah. Because that was, I think, the initial question. On ICO and Powder, and again, I wanna stress that for, in fact, the whole business. In fact, the consumer confidence is extremely low, as you all know, and what we do see, and that is a bit bizarre, in certain cases, the sellout is not exactly at the end of the channel down, but the whole channel is expecting that markets are gonna go down. We saw the continuation and probably a bit of the ending of the destocking in Deco, but also in Powder and in ICO, we see destocking in the distribution-oriented channels in there. That is actually in the whole channel. It goes, in fact, all the way from the person who sells the final coated element to the coil rolls that are sometimes distributed in the distribution channels. Basically it means that there's less product being bought from us. It is really a channel dynamic at this moment of time, more than that we've seen really the demand already drop. There is a significant pessimism in China, and there's a significant pessimism in the European demand, with as a result that basically people are trying to get their inventories as low as possible, which is, by the way, also something that we are doing to our suppliers who supply to us. In Powder and ICO, it is mostly driven, Mubasher, by the dynamics of the destocking that's happening, and then you have all the overlays of the very punctual situations that are in there. Hopefully that gives you some of the answers on ICO and on Powder. Maarten, maybe you can- Yeah. Handle the price versus raws. Yeah, on pricing versus raw material, maybe a few comments. First of all, pricing, we continue our pricing initiatives and we reconfirm what we said when we came out of the second quarter, that we will see pricing between 12%-14% in Q3 versus last year. On the raw material, I think it's important to mention, and Thierry mentioned it earlier, we see raw material at its peak, in fact in July, and we see now raw material from an incoming prices to go down. Overall, what does that mean? That likely in the range we gave, the EUR 260-EUR 290, we will sit at the top of that range. I think it's also good to mention that we will start to see kind of dynamics of negative stock revaluations, which probably gives some timing issues in terms of how our margin will develop. That depends, of course, on the steepness, how the input prices, how it comes into our stock will decline in the months to come. Overall, I think it's also important to mention that what we said at the end of Q2, and it's still true, that the positive offset in the third quarter is significantly lower compared to how it looked like in the second quarter. The good news is it's a positive offset, and the good news is that we are looking at kind of a significant pricing over the seventh-quarter stack since early 2021. Does that answer your question, sir, Mubasher? Yeah, just on the final one, just a clarification around the mid-single digit guide. A mid-single digit volume down versus last year in the third quarter. Did I hear that correctly, sorry? Yeah, yeah. Correct. Correct. Yes. Okay. Thank you. Yep. Thank you. Our next question is from Gunther Zechmann from Bernstein. Your line is open. Hi. Good morning. A couple of questions, mainly on the revenue line, please. Firstly, was September particularly weak month, year-over-year? I know it's seasonally very important, but did trends deteriorate during the quarter quite significantly, and what are you seeing in your order books into October? And secondly, just following on the top line then, with Q2, we were still talking about order backlogs, as we were for most of the year. I think the number was EUR 120 million. Is that still there or have these orders got canceled? What should we expect there going forward, please? Gunther, thank you for your question. In fact, when did you see it in the quarter is a little bit dependent from business to business, to be honest. In Decorative Paints, the destocking, again, I wanna stress that for Decorative Paints, the trade business continues to do very well, insofar as Europe is concerned and that the do it yourself business, the sell-out is firmly at 2019 level. I don't wanna create here all sorts of negative speculation. It has mostly been destocking. We talked about destocking already in the second quarter. That seemed to alleviate in the countries that were destocking, in effect, was to a large extent the U.K. Went a little bit on into the beginning of 2020 of July. Frankly, other countries in Europe where there were LSOs, etc., have basically been correcting their inventory, and that happened basically through June, July, August. For what Deco was concerned, you would say that in fact it looks a bit more normal right now, but okay, well, we had to absorb it during the quarters. On the revenue line, the sellout lines, we are not actually not that concerned for the time being on what the sellout is. For the other businesses, it's been a bit all over, to be honest. What we have seen in certain cases is customers who were typically operating in July closing because they probably were destocking, didn't have enough orders or whatever, or their customers were destocking. That has been a bit depending on the businesses. Again, this is mostly Powder and Industrial Coatings, not the two other parts of the business. They're doing quite well. We've seen, in fact, depending on the segment, it has been sprinkled a bit throughout the quarter. September is actually an okay-ish month, but okay, that can't make up for things that happened in the first two months of the quarter. Hopefully, it's clear, though, Gunther, I wanna stress that it is actually more the destocking. People anticipating that markets may be weak, and probably also anticipating that the inflationary cycle is a bit at its maximum. That actually has basically triggered quite some destocking in the channel. Everywhere where we look at final demands for the time being or our share in that, the final demand is actually okay and our share is definitely okay. It's really the destocking element that is overwhelming in the channel. Does that answer your question? Yes. On the order backlog, please. The order backlog is still there. Again, the order backlog was mostly sitting in, for example, our Marine and Protective Coatings business in North America. Less so, I would say, in China and less so in some of the businesses in Europe. Ironically, the backlog is still very much there, was not helped by the fire and explosion at a major resin supplier for us in North America that had to declare force majeure, which impacted us badly during the third quarter and still probably in a part of the fourth quarter, specifically in North America. The backlog is still there. Thank you. Thank you. Our next question is from Matthew Yates of Bank of America. Your line is open. Hey, good morning, gentlemen. Thanks for taking the time to do the update today. Perhaps a question for Maarten around the cash flow. The Q2 results, correct me if I'm wrong, but I think you mentioned EUR 300 million or so of working capital relief in the second half. In light of the update today, is it taking longer to work through that inventory you have or the proactiveness in reducing your own orders from the supply chain, is that compensating? Just any indication on that second half working capital evolution would be helpful. Maybe one for Thierry, just around the process of forecasting. You know, you've put a lot of emphasis on the segmentation and the systems you've put in place in the company over the last couple of years. Yet with the benefit of hindsight, it seems like your volume assumptions were some way off. The reason I mention this is PPG seemed to give a much more prudent outlook for European Deco when they reported, talking about volumes being down, I guess, closer to 10%. Was there something that when you look back, you've learned in the forecasting process, or is it just the viciousness of the destocking just makes it very difficult at moments like this? Thank you. All right. Thank you, Matthew. Maarten, you want to start? Yeah, Matthew, on the working capital, it's a good point. Yes, we are aggressively bringing our inventories down. If you look at the cash flow, most of that will be visible in the fourth quarter. Of course, the current environment and what we've seen in Q3 doesn't help. We are focused to bring our inventory down because we have to also make sure that this doesn't become a kind of a liability for us in 2023, given the fact that prices are starting to come down. The visibility will be more in the fourth quarter because also whatever we do initially, it is of course communicating vessels with payables, and then it will start to be structurally showing up in our cash flow. Yeah. Then on the forecasting, Matthew, in fact, this is gonna sound a bit strange, but our forecasting actually was doing pretty well. If you look at the biggest disruptions here in volume, to a large extent is the China market that frankly got hit with new lockdowns, and that is a bit difficult to forecast. The reaction that happens in the market, in consumer confidence, et cetera. Those are relatively big volumes that all of a sudden were out of the system, and that was difficult to foresee. If you go to the differences within Europe, I would say if you talk about PPG, they do have a bigger exposure to Poland and to France, which were markets that were down significantly, which are not such big markets, in fact, for us. What happened is that when the Russian announcements were made around shutting down gas to Europe, that in fact triggered almost on the spot de-stocking, where actually people went into cash management pretty quickly. Again, there's a de-stocking in the channel because frankly, the selling out from those channels into either the trade business or the consumers actually was not changed. Those were in fact very difficult to foresee. I can assure you we're taking all the learnings we can for that, but frankly, punctual I would say macroeconomic announcements that are happening are a bit difficult to foresee going into a quarter. Those are actually in volume the biggest disruptions that have happened there. The same that happened a bit in powder coating. Powder Coatings, although we have low temperature coatings, do use some energy. In those areas we saw some people really getting very cautious about how much they wanted to have in inventory and how they were opening or closing their plants. We've done, as you might expect, a very deep dive on where what happened, what can we learn from that. Frankly, it goes back to very much punctual things which are linked to geopolitics or macroeconomic decisions. Thank you both. Thank you. Our next question is from Charlie Webb of Morgan Stanley. Your line is open. Morning, everyone, and thanks for you know taking our questions on this pre-release. Maybe just in terms of you know the volumes for Q4 will look somewhat similar. Maybe could you just provide a little bit more color you know how are you kind of seeing Q4 shape up from a demand perspective? You know, how long do these destock cycles typically last for? Obviously, as you say, you know, we sort of started to see some of these destocking effects take place in Q2, continued in Q3, and obviously just varies by region and product. But how do we kind of see that panning out into Q4? First question. Second question, in terms of the self-help, how should we think about that on a net basis, and will we see any of that this year? It feels like it probably wasn't very present in Q3. Just wondering any, if any of those self-help measures and how much we should really anticipate to start to materialize in the fourth quarter. Are we still on track, you know, heading into 2023 based on your expectations there? Then final one, maybe a bit more of a kind of industry one, but how does pricing look? How disciplined are yourself and peers being in this weaker volume environment when it comes to pricing? Are you seeing any signs of anyone giving up pricing and chasing volume? Good question, Charlie. Let me handle the first and the last question then. Matt, you can maybe do the self-help situations. On the reason why we talk about the demand trends probably being similar in the fourth quarter, what Deco is concerned, the de-stocking actually looks like it's over. I think it's interesting that stock levels in the channel seem to have gone back to 2019 levels. In fact, that is corresponding in Europe with the 2019 sell-outs that they have. This is back to 2019, I would say. That seems to be pretty steady now for a while already in the quarter. China is a big question mark. I think China has a lot of elements. They have the heat, they have the COVID lockdowns, everybody's waiting for what's gonna happen, what the direction of the economy is. China is a bit difficult to foresee on how they react, because they really go from one high to one low, I mean, and back again. That's why we actually think it's prudent to say it's probably gonna be about the same demand trend for those two regions. Again, Latin America and Southeast Asia are going strong, and we don't expect that to change anytime soon either. If you then go to the coatings businesses, we do expect Marine and Protective and Automotive Specialty Coatings to continue on strong as they are, by the way. With industrial coatings and with powder, we believe there is still probably in the channel, and this is not even at the people who buy the powder coatings from us, it's often at their customers or their customers' customers, that there may still be that de-stocking happening as such. We do believe that is actually the basis to say why we believe it's gonna be similar demand trends as we saw in the third quarter. If you go on pricing, Charlie, the answer is no. I think the pricing as we can see it, we're really holding to the pricing. It's been very successful. We may actually go for additional pricing given the fact that the energy costs is hitting us also. We are a small energy consumer, but besides that, even the direct cost is a significant uptick, so we may wanna offset that. We have relatively good data on share in all sorts of segments, and frankly, there we're doing very well, and we don't see anybody breaking rank. Would also be somewhat bizarre because everybody sees the same energy costs, sees the same raw material costs still in their numbers. In addition, you know, dropping your price for more share is a very short-term victory because then a couple of weeks later, competitors drop their price too, and it's also back to the same point. In that sense, we see no signs that is actually changing at this moment of time. Maarten de Vries, on the self-help? Yeah, on the self-help, and that talks also to our Focus 2 initiatives as we have outlined that in our Q2 communication. Thierry talked about pricing. I earlier talked about what we do in working capital and the inventory reduction of EUR 300 million by the end of this year. The third pillar is really on the cost, the OPEX, the EUR 50 million reduction. That will be mostly visible in Q4, and the focus is really on a run rate basis that we are in a strong position to enter 2023. As we have said already earlier, it's a continuous challenging environment to battle some of the inflation coming into our cost and offset that. Again, to your question, that mostly will start to be visible in the fourth quarter. Helpful. Thank you very much. Thank you, Charlie Webb. Thank you. Our next question is from Laurent Favre of Exane BNP Paribas. Your line is open. Yes, good morning, all. Two questions for Thierry, actually. The first one, I was wondering, as you've clearly said that, against your own forecast, the main issue was destocking. I was wondering if there was any area left where you hadn't seen destocking to this point, and we could still see destocking, as it seems that this is really what you have got for Q3. The second question, Thierry, I think your successor will start next week and you'll have a handover period. I was just wondering if you could talk about what are the key priorities for this handover and where you will point your successor to in terms of what he needs to focus on first. Thank you. Yeah. Now, your first question, Laurent, that was interrupted. We heard you introducing it, and then we heard you at the end. Could you repeat your first question? Sure. Are there any areas left where we could see destocking and where you haven't seen destocking so far? There may be segments where the destocking continues, and I alluded to that in the Powder Coatings and in Industrial Coatings, 'cause again, those are businesses that have a distribution part to it. In fact, most of that was actually what we saw was in, of course, in the distribution part of things. I think in areas like Powder Coatings and Industrial Coatings, coil parts, et cetera, you might expect, and that's why we say we think that Q4 dynamics will be the same as the Q3 dynamics, but there you might see some destocking ongoing. Again, don't forget that the fourth quarter for Deco, for us, is a small quarter. I think that might actually be more on normal course, but of course, it becomes in the fourth quarter a pretty smaller part of it. Does that answer your first question, Laurent? Yes. Yes. Yeah. The second thing is around where am I gonna point the successor or where am I not gonna point him towards? I think there's a lot of things to be done. There's a couple of elements here. I think fundamentally, the company is doing quite well. This is a big dislocation in the end markets, and I wanna stress that it's in the end market. It has nothing to do with our share, nothing to do with our pricing, it has nothing to do with what we do internally. Now, of course, it's a very long supply chain to get the stuff in. So on the working capital, Maarten has explained that we often have to order our material two, three months ahead of time. Sometimes it's a month on the road to our plants. If then you have a significant dislocation that we have, it is all hands on deck to keep our working capital under control as our sell-out, in fact, is impacted by destocking at customers. It's on the working capital. I think on the costing, obviously, that is still in the whole industry, by the way, is things to come around energy costs, indirect costs. If I look in euros, our costs are up, but of course, there's an enormous impact from currency, that, if you translate everything to Europe, to European currencies. Last but not least, I would say, Laurent Favre, given that Greg comes out of a different industry, I will definitely point him to the point not to be confused between pricing and volumes, because in fact, our volumes are in many of our markets that we talked about before, are relatively insensitive to price and definitely to hold on price. That is the margin expansion that's happening next year. We get impacted in all the numbers we just mentioned by negative stock revaluations because of the raw materials starting to trend down. That has to flush out of the systems, and that might still be flushing out in the fourth quarter. In fact, this is good news for the third quarter. I think the discipline on pricing is extremely important to finally benefit of this horrendous 18-month cycle we went through with the industry. Does that answer your question, Laurent? Yes, it does. Maybe if I can sneak in one last one. You mentioned trades being still strong in European Deco. I was wondering if you had a view on backlog of the painters. So do you have a sense that this is also going to be holding up, or are you actually seeing a deterioration there? We definitely do see no deterioration. Typically, in the industry, there is about two, if you're lucky, three-month view on what projects are, and there is no sign that that would be changing anytime soon. That's about as far as we can see, in fact, with some confidence, the order book of painters. Thank you. Thank you. Our next question is from Jaideep Pandya of On Field Investment Research. Your line is open. Thanks. The first question really is around price versus raw material dynamics. If I go back to 2019 and assume that ballpark-ish volumes are roughly these days at 2019 levels, you guys had, like, EUR 300 million-ish benefit from pushing prices versus sort of a benign-ish raw material environment. Now, most of the raw materials are roughly around 2019 levels now. Do you think as a thumb rule, EUR 300, maybe even more than EUR 300 is a good starting point to think about in terms of the raw material price benefit for 2023 versus 2022? The second question is really around marine and protective. Could you give us some information around the backlog? I mean, there are quite a few LNG carriers up for delivery in 2023, and one of your key competitors is actually giving you credit that you've won some share in China as well. He starts with a P, the competitor that Thierry loves so much. Any information around marine would be great. Final question really to Thierry is, and maybe also Maarten, I guess, you guys have done a lot internally to improve your systems. It sort of relates to Matthew's question, actually. You know, the raw material cycle or even the demand cycle, last year, you sort of thought everything of this is fundamental, and now things have just sort of been a bit abrupt, and you're even seeing inventory devaluations. How can you improve your forecasting better in a sense? 'Cause clearly, you bought a lot of raw materials at the peak of the cycle. I appreciate it's difficult to do these things or manage these things, but what could your successor, Thierry, do in this regard? What would you have done had you stayed longer to achieve the EUR 2 billion target that you love so much? Thank you so much. All right. Jaideep, I think I'm looking at Maarten here because we're not sure if we can follow your mathematics around the price and the raws. I mean, by the way, the raws are not at all back at 2019, neither in supply, consistency and definitely not in pricing. I think we're at 1.7- Yeah. Sorry, Jaideep. I mean, if you look at the raw material since early Q1 2021, raw material, and it's including freight inflation, went up with EUR 1.7 billion cumulative. Meanwhile, we have compensated that with EUR 1.7 billion in pricing. I don't get exactly your math versus 2019. Because if you take Q3 versus 2019, raw material in the Q3 2021 versus 2019 was up EUR 280 million, and we're now talking about another 200, closer to 90 for Q3 2022. We're talking in total at what is it? EUR 570 million on a quarter Q3 versus 2019. I don't get your math exactly on that point. Sorry. Let me rephrase the question. My apologies. What I was basically referring to is that 2023 is sort of expected to be a similar year where you're supposed to see a pretty big positive delta on price versus raw material. The last year that you saw this positive delta was 2019 as a reference point. Okay. Yeah. Yeah. That was roughly EUR 300 million. Is that a good starting point for us to think for 2023? That's really what I was trying to ask. Sorry. We'd actually prefer to talk around 2023 more on the quarterly call list, but I think that would be conservative, I would say. Again, it's this geopolitical stuff, et cetera, that actually always throws a wrench in the whole thing. That would actually be at the lower end of what should drop to the bottom line, definitely. We're just one energy crisis away of that being refuted, as such. That would be at a low limit of what we would expect to happen in 2023. By the way, the inventory revaluation is a fact that the raw materials are dropping. Of course, accounting-wise, it means you have to revalue whole stock at a lower value. That is kind of a negative that we'll have accounting-wise until, well, definitely the end of the year. That's in fact. That is actually the beginning of what would happen in 2023 then. Maybe if I can quickly answer your question on Marine and Protective. Marine and Protective, indeed, the demand signal is actually pretty healthy in that. Now, the raw materials that go in there are often a bit of the issue to follow. We are, of course, as you know, our big strength is indeed into complicated vessels and oil and gas installations. Of course, the LNG pickup and the acceleration of those projects is helping us. There's actually more a question not of the demand. It's a question of can we actually get all the supplies in to actually fulfill those orders. Marine and Protective is actually a pretty positive environment where we're in. On the systems and the forecasting, Jaideep, I take the criticism. But I also would have to say it's a little bit unfair because if you would look at data until March, all our customers, their forecasting and the forecasting of their customers was spot on what it is. After an infamous announcement in events that were happening in March and April, all of a sudden things went down a lot, which in fact, I just want to point out specifically in Decorative Paints, the whole channel had stocked up very healthily for what was gonna be a fantastic season and then made a turnaround, after the geopolitical situations happened. By the way, if you then wanna look at another inflection point, it is in fact when the announcements came around, shutting down gas for Europe. It was another significant destocking wave that happened, people practically taking that into account. Now, I'm not sure if there's any forecasting system that has to look three months out that actually can foresee those things. The only thing we can then do is actually take quick reactions on it. I think we did this number fast enough, but I do believe that we are like many. In fact, we're surprised by some of these events and what impact it had throughout the channel. We are self-critical, and we will be looking at what can we do better. In fact, we had sessions the last two days around what we have to put in our internal in integrated business planning. I do ask for some forgiveness around the dislocation that happened there. Again, the consumer demand is not necessarily down yet. It's the reaction of all the channel between us and the final consumer, both in coatings and deco, that actually and the destocking that it entailed that is the biggest impact, yeah. Linked to two regions that are geopolitically and macroeconomically a bit more challenged at this moment in time. Just one follow-up on the inventory devaluations. Is that, like, north of EUR 100 million for the second half this year? I don't think we're gonna give a number at this moment of time, Jaideep Pandya, because whatever we say now may be wrong. It really depends on what the inventory, what the incoming prices are. What is obviously happening quite clearly is as our customers are destocking, the paints and coatings companies are destocking. There's some of our suppliers that see significantly lower demand because we also wanna work to an inventory that was built up in times when it was difficult to get the stuff. That is happening. That, of course, has an impact on an accelerated drop of raw material pricing when the demand goes down, and you start to see that happening already. It is at this moment of time, I don't know, Maarten, I would be careful to put a number on it, but it will be significant as we go to the next months, because that is the reset then it needs to have this margin expansion in 2023. Again, I think it's very much to how the curve will look like of the raw material decrease, and then it is more if these are more timing effects, ultimately. Yep. Okay. Thank you so much, both. Thanks, Jaideep Pandya. Thank you. Our next question is from Chetan Udeshi from JPMorgan. Your line is open. Yeah. Hi. Morning. Couple of quick questions. Just on this inventory revaluation topic, is it fair to assume that when the raw material prices were rising, there was clearly a substantial inventory valuation gain at that time, which is now sort of to some extent step-by-step reversing? If that's the case, are you able to give us any sense of how much that revaluation gain could have been in the last four or five quarters of inflationary trend? I mean, just to you know, do the underlying numbers then. The second question, you know, given all the key moving parts, et cetera, I think one place where, you know, clearly we've seen in the earnings bridge quite a big negative number has been the OpEx inflation. It seems at least the wage inflation is strengthening in parts of Europe. How do you see that OpEx inflation in general before any mitigation measures that you will take next year? Is that gonna be still a substantial, at least starting point negative number in terms of inflation, which of course we'll try to mitigate from all of the actions that have been previously announced? Chetan, I mean, the second question was also interrupted, so we didn't hear fully of it. I think I got the gist of what you were asking. First of all, on the inventory revaluation, I think don't forget that this was built up gradually over almost a two-year period and now just comes out. It was in fact month per month not such a big thing, but it now comes really oozing out in a relatively short period of time. I don't think we are ready to give the exact numbers, I mean, because we're still in the middle of the quarter. It is in fact the balloon was inflated gradually and now basically the air comes out of it pretty fast. That's probably the best picture to keep in mind, but that's probably more for the later results. On the OpEx, indeed, we do see wage inflation. We see specifically non-product related and out-of-pocket expenses, which we actually curtailed quite a lot. We already started doing that because in fact, not only the amount of travel, but actually the prices of a ticket have gone up quite significantly, so it compounds. Wage bill is the same. There's all sorts of measures we have to do for our employees. We are with Focus 2. We have launched initiatives to offset that and actually to get back on where we need to be. Of course we are obviously stating the obvious, we're in a highly inflationary environment. If you then look in euros, it looks even more spectacular because we have a lot of costs in the U.S., et cetera, that then basically translates back in euro in our P&L and looks, of course, pretty strong. Not sure if I answered your question because you were interrupted. On the OpEx, we are not waiting till next year. We actually have put the measures in two-three months ago already. That was not only Focus 2, but actually kind of a hiring freeze and then basically the real clamping down on any out-of-pocket expense to curtail the inflationary environment on our own, in our own costs. That's clear. Thank you. Yep. Thank you. Thank you. Our next question is from Alex Stewart of Barclays. Your line is open. Hello, good morning. I think somebody asked about the inventory devaluation in the second half. Can you just confirm whether there's any of that in the third quarter guidance? I assume it's in your adjusted EBIT, but if you could just quantify the impact in Q3. No need to talk about Q4 yet. That'd be really helpful. Then you talk about your customers destocking and the sell-out volumes being okay. If your customers are destocking in expectation of lower demand, then surely the next stage in this cycle is that the sell-out volumes fall. I'm surprised about your confidence that volumes will improve once the destocking is over. It seems like the destocking is just the opening chapter to this cycle. Could you possibly tell me why that theory is wrong? Would be interesting. Thank you. Yeah. Now, Alex, in an uncertain environment, any theory holds merit, I would say. We can only tell you what our channel partners are indicating and what we are seeing in the market. Maybe tackling the second question. If I look at the decorative paints, for example, in EMEA, our sell-out, and we do that by sub region, and we review that every week. The sell-out is in line with 2019. Certain places slightly above, some places slightly below. If I take a bellwether market, it has been pretty consistent on 2019 numbers now on sell-outs for a number of months. Now, you and I over a beer can discuss what the Brexit is gonna do, the new government initiatives, what the impact is going to be. I can only tell you what we see and the fact that our channel partners are having their inventory right-sized in line with 2019 because they also have sales in 2019, and then we'll take it as it comes on the economy. That's a bit where we are. On the inventory revaluation, I just wanna make sure that everybody realizes this is not the Q3. We actually don't have all the results yet, by the way. It's not the Q3 results call. There, I think we probably would rather do that in a quarterly call than giving some estimated numbers. I think it's fair to say, Martin, that what the outlook we give has some estimation of what an inventory revaluation would be as such. A downward revaluation, by the way. Yeah. There's a negative impact in our numbers that should be included in the number we gave. It's included in the range. Yeah. Okay. There is some impact from devaluation in the new guidance range, but you can't say how much it is? Yeah. Yeah. Yeah. Correct. Yeah. Well, we're not at the end of. Okay. Is there any way you can tell us whether it's closer to EUR 10 million or EUR 40 million? Any sort of sense, because obviously it makes quite a bit of difference. I think it's best to deal with the details questions on the Q3 results in the Q3 call. Thank you. All right. Thanks, Alex. Thank you. Our next question is from Geoff Haire of UBS. Your line is open. Yeah. Good morning, Thierry and Maarten. Just a quick question. I think you mentioned in the statement something around the adjustments for hyperinflation in Turkey. I was wondering if you could talk a little bit about that and give a sense of how big that is. I was also wondering, you've mentioned at the group level, volumes will be down mid-single digit. Would you be willing to sort of give some guidance as to what you think that will be for, coatings and paints, please? Yeah. On your hyperinflation question, I mean, this is per the accounting rules. In fact, if there is an over in three-year periods, the cumulative inflation is higher than 100%, which is the case in Turkey, that triggers hyperinflation accounting. In fact, only year on year, the inflation is roughly 80%. That means that we have to look at the purchasing power at the end of the period, and that makes this a retroactive correction of EUR 15 mllion-EUR 20 million, which will be visible in the Q3 results. Your second question was to try to give a volume split between paints versus coatings. Is that what your question is? I think I have to look at. Sorry. I think you said that the group at the group level, volumes will be down mid-single-digit precent year-on-year. I was just wondering, is there any difference in what you're seeing in the coatings and paints business? It's about the same. On year-on-year basis. Yeah. It's about the same. Of course, it's different than between regions and between sub-businesses, but it's about the same, I would say, for paints and for coatings. Thank you. Maybe one element on that. On the coatings side, I think we have a sizable business also for coatings in China. It is actually part of the whole China and Europe story, which is the story, frankly, that was developing not very well during the third quarters. That also has the impact on our coatings business. Thanks. Yep. Thank you. Thank you. Our last question is from Adrien Tamagno of Berenberg. Your line is open. Hello. Hi, good morning. Thanks for taking my questions. Just coming back to the inventory situation for Do It Yourself. In your view, what is the floor for these inventories? That's the first one. Secondly, if you can remind us how to think about your electricity cost headwind for this year, and if you have any long-term supply agreement that would protect you from any increases in electricity prices. Thank you. Yeah. Let me maybe handle the inventory question, then Maarten, you can do the energy cost question. On the inventory floor, in fact, what happened, and I'll take some of the big LSOs, because that's frankly where the bigger impact was. In fact, I just wanna stress that all of them in Western Europe went pretty enthusiastic into inventory for the year. In fact, if we look at the inventory in the channel until about March, it was significantly higher in liters than what it was in 2019. That was based on everybody expecting a very strong season. By the way, probably also a little bit of hoarding because materials were not always easy to achieve. There was, I wanna be on the safe side, I have enough material, and it's probably gonna be a good season. Stuff happened geopolitically, and then you saw the unraveling of the inventories happening, which basically has been there at the end of the second quarter, and in the third quarter, seems to have now been absorbed by the system. But frankly, if you look at the graphs, the inventory in the channel is almost exactly tracking now the 2019 numbers. Of course, the inventory goes down, because we go out of the season for paint, so people then hold less. The current inventory line is almost exactly since the last couple of months now overlapping with the 2019 numbers. Does that mean it's the floor? It very much looks like there is an inventory level that people wanna have that corresponds to the sell-out that they have, which is also the 2019 type of sell-out. I do believe that we've seen where Deco is concerned, most of it. Coatings is a bit more difficult because it's often not our inventory. It's often the coated part or the object that has the coated part of it that comes. There's three or four steps of that separation, then you really go to consumer demand, which is a bit more difficult to grasp how much over different three, four steps in the channel is in there. That we'll have to see in the fourth quarter what's happening. Maarten, on the, Yeah, Adrien, on your energy question, for us, total energy is just less than 1% of sales, energy cost for ourselves, so just less than EUR 100 million in total. What we're seeing this year is, first of all, we have 100% renewable energy in Europe, and we have also kind of term contracts. The impact this year in terms of energy inflation, we see some, but it's still limited. You talk about a year-to-date impact of, yeah, probably in five to ten million. But the impact will be more visible next year, as of course these the contracts we have, they will be renewed. That is then the action for ourselves. Earlier, Thierry was talking about the price increases, which we still will deploy, and that will be part of the price increases to compensate for the energy inflation for next year. That's more the early next year pricing initiative. Does it answer your question? Yes. Thank you very much. Thank you. At this time, we don't have any questions in queue. Speakers, you may proceed. Well, this concludes our Q&A session. Thank you, everyone, and please contact our investor relations team for further questions that you may have. Operator, you may now close the call.