Hello, welcome to the AkzoNobel Quarter Two Results. My name is Caroline, and I'll be your coordinator for today's event. Please note this call is being recorded, and for the duration of the call, your lines will be on listen-only mode. However, you'll have the opportunity to ask questions at the end of the call. This can be done by pressing star one on your telephone keypad to register your questions. If you require assistance at any point, please press star zero, and you'll be connected to an operator. I will now hand over the call to your host, Kenny Chae, to begin today's conference. Thank you. Thank you. Good morning, and welcome to AkzoNobel's Investor Update for the second quarter of 2023. I'm Kenny Chae, Head of Investor Relations. Today, our CEO, Greg Poux-Guillaume, and CFO, Maarten de Vries, will take you through our results. We'll refer to the presentation covering the most recent quarter, which you can follow on screen and download from our website at akzonobel.com. A replay of this webcast will also be made available following the event. There will be a Q&A session after the presentation. For additional information, please contact our investor relations team. Before we start, a reminder of our forward-looking statements disclaimer on slide two. Please note this also applies to the conference call and answers to your questions. I will now hand over to Greg, who will start on slide three of the presentation. Thanks, Kenny, and good morning, everyone. Our Q2 results were in line with expectations, and I'm pleased to report solid year-on-year growth in both profit and return on sales. Q2 volumes were resilient, down only 1% versus Q2 2022. Europe, in particular, showed signs of having bottomed out. Revenue was up 3% in constant currencies. Pricing was up 5%, with coatings resisting better than anticipated, helping us to achieve the top end of our pricing guidance of 4%-5%. Raw material deflation also finally started at group level during the quarter. While pricing and raw material deflation resulted in margin expansion of EUR 149 million in the quarter, our profit continued to be partially held back by adverse currency effects and operating cost inflation. Adjusted operating income was up 25% to EUR 311 million, or EUR 325 million, excluding the accounting impact of hyperinflation. We had a solid first half of the year. Half-year revenue grew by 5% in constant currencies. Pricing versus raw is of EUR 209 million in the first half means that we are well on track to deliver near the upper end of the full-year guidance range of EUR 250 million-EUR 450 million. The resilient pricing and better-than-expected volumes achieved during the first half resulted in an adjusted EBITDA of EUR 702 million, this despite EUR 38 million of negative Forex impact. We are therefore increasing our full-year EBITDA guidance, as we will see later. Finally, our leverage came down from 4.2x in Q1 to 4x, and we are on our way to deliver on our target to achieve a ratio of below 3.4x, including the Kansai acquisition cash out at the end of the year. Moving to slide four. This quarter, we continue to demonstrate our technological leadership in performance coatings. We're continuing to drive innovation in packaging with the launch of an internal coating for beverage can tops that does not use BPA or bisphenol-based epoxies as part of its manufacturing process. This product completes AkzoNobel's full can offering and will help our customers to meet the surge in demand for safer and more sustainable coatings, supporting our leading market position. Importantly, our new product integrates easily into customers' existing manufacturing processes disruption. Our marine business continues to capitalize on the sustainability leadership to gain momentum. We secured supply to several new-built LNG carriers in Asia, which will utilize our high-performance Intersleek systems. Intersleek is a biocide-free foul release solution, which delivers fuel and emission savings for owners and operators and helps to support the industry's decarbonization ambitions. Our best-in-class technology continues to support significant wins and share gains. Turning to slide five. We'd like to provide an update on how we see volumes progressing across our businesses at the half-year mark. After a better-than-expected first half in Paints EMEA, with volume stabilizing, especially in the DIY segment in West Europe, we now see further improvements to our full-year volume projections. Volumes for the year are now forecasted to be down low single-digit% as we lap easier year-on-year comps in the second half of the year. While demands in China were mixed and softer than anticipated in the first half, we retain our expectations of double-digit growth for the full year on the back of depressed volumes during the second half of 2022. Volume trends for Paints South Asia were mixed in the first half, as growth in India was partially offset by market weakness in Vietnam. Volume trends in Latin America were also mixed, with underlying demand in Brazil, challenging in Argentina because of its economic context. We now expect the combination of these two markets to be up low single digit for the full year. Within Coatings, first half trends in both industrial and powder coatings are largely expected to continue in the second half. While construction-related segments remain soft, there are bright spots, and powder and coil continues to perform better than anticipated. As such, we're heading towards the better end of our previous full-year range of down to down mid-to-high single digits for these combined businesses. There are strong first half for marine and protective, a dynamic market currently, we see upside to our previous projections. Despite tougher comps in the second half of the year, we now expect combined volumes for our marine and protective, and automotive and specialty businesses to be up mid-single digit, increase from low single-digit growth in the previous guidance. In summary, despite continuing macroeconomic uncertainties, the stabilization of volumes in the first half gives us confidence to update our forecast for volumes at group level to be more or less flat for the year. I now hand over to Maarten to go through the numbers on slide six. Thanks, Greg, and good morning to everybody on the call. In the second quarter, our reported revenue was down 4% versus the prior year, and up 3% currencies. The volumes were 1% lower and better than anticipated as market demand in Europe stabilized. Pricing continued to hold up well at 5%, and M&A added 1% to revenue growth, with partial contribution from Grupo Orbis, which closed in late April the prior year. FX reduced revenue by 7%. This is a much larger impact than what we have seen in previous quarters and was mainly driven by weakening currencies in Turkey, Argentina, and China. Hyperinflation accounting reduced revenue by 2%. Adjusted operating income, including the adverse impact from hyperinflation accounting, was EUR 311 million, up 25% year-on-year. Excluding hyperinflation accounting, adjusted operating income would have been EUR 325 million. Return on sales increased by 260 basis points to 11.3%. Revenue in decorative paints was up 5% in constant currencies, mainly due to higher pricing, which was up 6% in the quarter. Revenue in performance coatings was up 2% in constant currencies, mainly due to higher pricings. Volumes were 1% lower, with growth in marine and protective, offset by continued soft demand in industrial coatings. Pricing in coatings continued to hold up better than anticipated, up 4% in the quarter. I'm pleased to report that both paints and coatings achieved solid year-on-year growth in adjusted operating income in the quarter, driven by better than expected volume developments and resilient pricing. Over to the profit bridge. Adjusted operating income in the second quarter was EUR 311 million, an increase of EUR 62 million from the prior year, mainly as a result of pricing, which delivered a benefit of EUR 144 million. The volume impact of EUR 70 million reflects a 1% fall in volumes and indicates a stabilization of trends seen versus previous quarters. The effect of mix was primarily related to our paints businesses, including geographic mix impact in China. As Greg mentioned earlier, we saw the first benefits of raw material deflation in our P&L at positive EUR 5 million for the quarter. Combined with pricing, the overall margin expansion in the quarter was EUR 149 million. Operating expense and other one-offs reduced adjusted operating income by EUR 90 million. As anticipated, underlying OpEx was higher year on year, with costs rising due to inflation, along with our response to better than expected volumes. While our savings programs are executing as planned, we now expect higher OpEx year on year in the second half, given higher inflation and improved volume projections. The impact of depreciation in currencies, namely the Turkish lira, Argentinian peso, and Chinese renminbi, reduced our adjusted operating income by EUR 27 million. The negative impact from hyperinflation accounting came in at EUR 11 million. Moving now to slide eight. The second quarter marked a pivotal point as we realized the first benefits of raw material cost deflation in our P&L. We captured EUR 5 million of deflation in the quarter, a small but promising number. We believe we have finally turned a corner on this important metric. Our pricing of 5% in the second quarter was at the top end of the guidance range provided in the previous quarter. This represents cumulative pricing of 25.5% over the 3-year period. Moving now to slide nine. Our adjusted EBITDA for the second quarter came in at EUR 397 million, an improvement of 18% versus prior year. In the first half of the year, adjusted EBITDA was up 7%, reaching EUR 702 million. In the second quarter, we started realizing improvements in our working capital position. We reduced inventory by EUR 82 million and raised payables by EUR 140 million sequentially. Overall, our working capital as a percentage of revenue decreased from 18.6% in the first quarter to 17.5% in the second quarter. Higher EBITDA and the release of working capital supported our free cash flow, that turned positive and totals EUR 249 million in the second quarter. As expected, our leverage improved to four times EBITDA from the peak of 4.2 times in the first quarter. This is a result of EBITDA growth and gradual working capital unwind, that were partly offset by our final dividend of EUR 268 million, paid in the second quarter. We remain on track to achieving a leverage ratio of below 3.4 times, including acquisitions, by the end of 2023. Back to Greg. Thanks, Maarten. We had a solid first half of the year, mainly driven by stabilizing volumes, robust pricing, and the first effects of lower raw material costs. This provides a solid foundation and sufficient clarity for us to update our full year guidance, despite a macroeconomic environment that remains unclear. We now expect to deliver adjusted EBITDA of EUR 1.4 billion-EUR 1.5 billion, towards the top of our previous guidance range. As previously explained, this reflects our updated guidance of flatfish volumes for the year and margin expansion towards the top end of our previous guidance of EUR 250 million-EUR 450 million. Our leverage ratio guidance of less than 3.4x by year-end remains unchanged, we're executing well on our priorities. We look forward to updating investors on the progress and objectives of our industrial transformation with our Q3 results. I now hand over to Kenny for information about upcoming events and the Q&A session. Kenny? Thank you, Greg. Before we move to the Q&A session, I would like to highlight the date of our third quarter results, which will be on October 25th. This concludes the formal presentation. We would 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 that others can participate. Operator, please start the Q&A session. Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. We will take the first question from line, Christian Faitz from Kepler Cheuvreux. The line is open now. Please go ahead. Hi, Christian. Christian? Operator? We have missed the line. Hi, can you please select star one on your telephone keypad to ask questions? Operator, let's come back to Christian if there's issues. Let's move on to the next person then. Sure. Noted. Apologize, there is some technical issue on it. I would suggest all of you to signal for questions by pressing star one on your telephone keypad. Thank you very much. Apologize for the inconvenience. If you would like to ask a question, please signal by pressing star one on your telephone keypad. Thank you very much. We will take the first question. What's going on? Hello, we can hear somebody. Good news. Please ask your question. Mm-hmm. Peter? Yeah, I, you can hear me? Good. Amazing. Something's happening. I've got two questions to follow up. The first one, I just want to be clear that you're getting the full benefit now of the raw materials. The high cost raw materials have been worked through. Following on from that, it's obvious to see the mix effect in deco, obviously, with the lower margin areas growing faster. I just want to turn that around and look at the performance coating side, where obviously, you've got the stronger growth and you're forecasting stronger growth to come, on the auto, the aerospace and the marine and protective. I just wanna get your thoughts on the margin progression as we go through the second half into 2024 on that performance coatings, because obviously that's a support against the lower margin business, not doing so well in that particular segment and offsetting what's happening in deco a little bit. Thank you. Thanks, Peter. We are getting the effect of raw materials. As you know, raw material prices started dropping in the second half of last year. We've seen raw material deflation in our P&L already in some of our businesses, like our industrial coatings business that has a short supply chain, or our deco business in China and Southeast Asia. In a large part of our portfolio, we were still waiting for that impact. The +5, the tailwind of EUR 5 million that you see in Q2, is the first sign of raw material deflation overall at group level in our P&L. That will only continue going forward because we've turned a corner in some of the businesses that had a longer lag, like our deco business in Europe. We expect increasing raw material deflation in the second half of the year. We expect less help from pricing in the second half of the year because the market is stabilizing in terms of pricing, and we are lapping the price increases of last year. What you'll see in terms of margin expansion in the second half is more raw material deflation, less pricing, and you had the opposite in the first half of the year. We will still be, we'll still have positive price increases in Q3 and in Q4, but once again, that will be more limited, and the story will really move to raw material deflation. In terms of your question of the mix, we have mixed effects in both the deco and the coatings business. In the coatings businesses, as you said, we've got a lot of growth coming from aerospace and automotive. We also have a lot of growth coming from the marine business. As you guys know, the marine business is a business that is ramping up quickly for us. That is also rebuilding its profitability profile for us, and therefore there's a, there's a slightly dilutive effect on the overall base when marine is growing faster, but that is an issue that will get resolved over time because profitability in marine is building back up quickly. Hopefully, I answered your question. If I haven't, please ask a follow-up. Yeah, no, that's fine. That's fine. Do you have much backlog left in auto and aerospace, or is it washing out now? I think, well, I guess what the industry calls the backlog, Maarten, is the orders that we have that we haven't fulfilled. We still have in aerospace, we still have a fair bit of backlog that we have to execute also in auto. That is still a trend. We haven't worked those numbers down to the extent that we'd like. There's still a little bit of catch up for us to do in order to fulfill these orders. Thank you. Thank you. We will take the next question from line, Tony Jones from Redburn. The line is open now. Please go ahead. Yeah, good morning, Greg. Morning, Maarten. It's Tony Jones from Redburn. I wanted to back up a bit and just sort of, like, talk about some bigger strategic issues. Greg, now you've been in the business for a while. I once wanted to sort of understand how you're thinking about things. Raw material deflation is fine, but it's not really a long-term equity story. Apart from, like, the near-term pluses and minuses, what do you actually want to do with the company? Thank you. Thanks, Tony. Well, what we want to do with the company is, get the company to perform industrially at the level that it's capable of. As you said, we're in the part of the cycle where we are expanding margins because pricing has gone up significantly last few years, and now more raw materials are deflating. As you said, the raw material stuff is more macro than anything Akzo related. The pricing side of it is really important because it goes to our ability to essentially price our products and maintain that pricing. As you know, this is not something that AkzoNobel has done well historically. We've had a tendency to sacrifice pricing for volume, quite easily, probably faster than most of our peers in the industry. This is something that Maarten and I and the rest of the team intend to change. The first visible aspect of our management philosophy at AkzoNobel is gonna be our ability to hold pricing. One thing we're making clear, is that we will not use pricing as a tool to drive volumes. We fully intend to hold on to our pricing and to drive volume through the competitiveness of our products and our offerings. That includes some of the sustainability aspects that we've been talking about in the examples that we gave in Q2. Beyond that, AkzoNobel is not a business that has functioned very well from a supply chain perspective historically. We've made it clear that we have a lot of production facilities around the world, that the capacity utilization is not as high as it should be, and we are inefficient because we are not agile and we have too many formulations and too many raw materials. These are things that my predecessor, Thierry, had already undertaken, and there were already initiatives underway. What we're doing is pulling all of that together to essentially propose a plan that will increase the efficiency of AkzoNobel from an industrial perspective, and will have a measurable bottom line impact within three years. We'll come back with more meat on that with the Q3 results. We're already pretty well started on the deco side of things. Deco is gonna be mostly a focus on Europe. That plan is already underway. We'll detail it in Q3. On the coating side, it's Europe and the U.S., that's gonna be the focus. We're pretty efficient in the rest of the world. We also see significant potential from that perspective. Price discipline, industrial efficiency, and beyond that, portfolio management, because once again, we have about 70% of our portfolio 70% of our revenue that's generated from number one or number two positions. We have to figure out whether we can build these these winning positions in the rest of our portfolio or whether we're the best owner for some of these businesses. This is also something that we'll look at in the next few years. Tony Jones, did I answer your question? Yeah. No, that's really helpful. Can I just ask, a short follow-up? Yeah, please. Where do you think margins can get to over the midterm? With Thierry, we had the 15 by 20, which, I suppose is like ex corporate costs. Do you think you can surpass that over the next, like, two, three, four years? Well, I've exercised great discretion in my first year in the job in terms of giving midterm or long-term guidance. I think I can only get away with that until the full year results in February. We'll be more explicit on where we think the business can get to as we announce the full year results in February. Really, this year is about rebuilding our credibility by delivering on commitments and showing the pricing discipline, and essentially getting our industrial transformation under way. I apologize for not being more explicit, Tony, that will come with the full year results. I'll just make it clear that 2023 is by no means the end of the profitability increase path for AkzoNobel. We've got carryover from pricing, and we've got raw material deflation into next year, and then we've got the effects of the efficiency program we're gonna have on the industrial side, and all of that will contribute to building up margins, profit and profitability in the next few years. I'll put numbers on that. Maarten and I will put numbers on that with the full year results. Sounds good. Thank you, Greg. Very helpful. Thanks. We will take the next question from line, Chetan Udeshi from JP Morgan. The line is open now, please go ahead. Yeah. Hi, thanks. I was just curious, you know, this time you've not given us the quarterly expectations of pricing and raw materials that you normally do. Just curious, why is that the case? Maybe if you can give that sort of color on the call right now. I think it's fair to... Is it fair to assume that within your second half guidance, given that second half EBITDA guidance is higher than first half, and Q4 tends to be a smaller quarter, just seasonally. It feels like you are assuming Q3 to be probably, you know, nicely ahead of third quarter. Is that a fair assumption? The second question was on the net interest cost. You know, it seems to have ballooned quite a bit in Q2, and I just wanted to check if that's a run rate that we should be looking at going forward for the remainder of the year and also into the next year. Thanks. Yeah, maybe first on your on your first question related to specifically Q3. I mean, if you look at the various elements, Greg mentioned it earlier, we still do expect positive pricing, and it will be kind of a low single digit pricing. On the other hand, indeed, as also Greg mentioned, raw material deflation starts to kick in. Where the first half was very much based on pricing, but raw materials still going up, the second half of the year will be much more related to raw material deflation, but a much lower pricing impact. Overall, if we look at Q3, sequentially, Q3 will be probably slightly better than what we saw in Q2. That's the way you need to look at it. From an interest cost perspective, yes, that went up. Interest rates went up. Of course, our leverage is still relatively high. We are bringing that down. Over time, of course, interest will come down, but for the short term, we expect it to be at this level. Again, the focus is to bring leverage ratio down to below 3.4, and to bring leverage ratio down further, also beyond this year. Is that helpful? That's clear. Thank you. Thank you. We will take the next question from line, Christian Faitz from Kepler Cheuvreux. The line is open now, please go ahead. Yes, good morning. I hope the system is working now. Can you hear me? Yes, we can. Good morning, Greg. Good morning, Maarten and Kenny. Also as a follow-up on the leverage, I have two questions, by the way. Can you please elucidate the measures you are taking to reduce the leverage from here on? I mean, I appreciate the roughly 200 basis point decrease versus Q1, isn't it still a stretch to come towards two times post 2023? On the pricing side, coming back to your pricing strategy. I mean, first of all, congrats on still positive pricing in Q2, I appreciate your comments on still slightly positive pricing in Q3. I mean, your customers are also reading the newspaper, and for sure, have also seen your EUR 5 million deflation effect year-on-year in Q2, the first deflation after several quarters. How do you expect current pricing discussions with your customers to turn out? Thank you. I'll take the pricing discussion. Yeah. Maarten will take the leverage discussion. On the leverage ratio, Christian, this year, it's very much driven by the unwinding of our working capital, which we start to see and will continue in the second half, together, of course, with the improvement of our EBITDA levels. Here, I think we are ultimately the goal is to get to a working capital level, which is 13% or even below 13% of revenues. We will make a step this year, but we will make a next step into next year, on top of the further growth of our EBITDA level. That combination will bring us to what we've indicated, to bring us closer to the two leverage ratio. I think it's also important to mention that the leverage ratio at the end of this year, the below 3.4, includes the acquisition of Kansai Africa, which is a kind of a EUR 550 million cash out in the fourth quarter. That is included in these numbers. That's on the leverage ratio pricing, Greg? Yep. Pricing on the deco side, we've seen pricing come under slight pressure in deco in Asia, for example, because the raw material impact, the raw material deflation started kicking in much earlier than it did in Europe. It stayed within kind of low to mid-single-digit ranges, and there hasn't been very aggressive moves from any of the players. I think the market is trending down a little bit, but not massively down. We don't have very difficult discussions on pricing yet in Europe. You know, the raw material basket in Europe has deflated a lot less than anywhere else in the world, and therefore, we are continuing to hold the course in Europe. As you know, Europe is a big chunk of our business. If you take the coating businesses, you've got businesses that are growing currently, and where the industry is supply constrained. You know, if you take the aerospace business or marine protective or Vehicle Refinishes, these are segments where there's volume growth and if we could make more product, we'd sell more product. We really have no reason to take pricing down in those. Areas where you have a bit more pricing pressure in terms of customers asking questions, or areas like powder coatings or packaging or coil, you know, areas where the volumes are not trending up currently, although coil is doing okay, but packaging and powder have been under some volume pressure. In some of these contracts, you actually have price indices. These are soft indices. These are not hard formulas, but these are guiding discussions. We're expecting to have to take down pricing in some of these situations towards the end of the year. It is really about explaining what kind of inflationary pressure we're under, and it's more than simply raw materials. You know, there's wage pressure, there's freight pressure. These are active discussions with our customers, and as Maarten said, we expect pricing to still be a positive in Q3 and in Q4. These numbers are becoming small numbers because, once again, we're lapping the price increases of last year, and there aren't that many new price increases coming in. It becomes a lot more about raw material deflation, as as we previously mentioned. Does that answer your question? Yes, absolutely. Very helpful. Thanks, and good to hear. Thanks, Greg and Maarten. Thanks a lot. Thank you. Thank you. We will take the next question from line, Jaideep Pandya from On Field Research. The line is open now. Please go ahead. Yes, I have three questions. Firstly, on Marine and Protective, Greg, could you just give us some color on the EUR 100 million improvement that you've been discussing about in light of the current sort of order book, in terms of aftermarket as well as new build? I mean, has that, because of the momentum you see, is that something faster that is achievable, or it's gonna take a couple of years to achieve that? Second question is on China. We've seen a very strong 15% or so completion numbers in the buildings, which are sort of incomplete, and there's a strong push from the government on that. You know, if we take your view, how does that reflect on Akzo's business in China in terms of, you know, volume growth, and where are you positioned to benefit from that? The third question really is just the answer to the question you gave earlier. You know, when you look at these industrial footprint rationalization, you know, what is the scope, especially in coatings, for you to increase sort of, let's say, flexibility, where you could make an aerospace coating and a marine coating in one plant, which helps you sort of, you know, cater to these ebbs and flows in, on a cyclical basis between end markets? Is that even possible, or is that something which is not possible? Thanks a lot. Thank you. Thanks for these good questions. I'll start with the third one, and Maarten will take China, and then I'll take your marine and protective question. The idea of having, you know, aerospace coatings in a marine factory or, you know, kind of deco and powder coatings, I mean, I'm using extreme examples. We've tried, and that doesn't work very well. What works well is we have industrial sites where we have, you know, deco plants and marine or powder plants, but these have to be separate facilities because they have very different processes, and the success factors of winning in these industries are very different. Some of these businesses are, you know, made to order, some of them are made to stock, some of them are high volume, low value, like, you know, industrial coatings. Some of them are low volume, high value, like Vehicle Refinishes. If you try to apply the same formulas within the same buildings and the same processes, you'll end up suboptimizing. It's not so much about combining facilities as it is looking at our formulations, looking at our industrial footprint, and trying to rebuild agility by rationalizing the raw materials, rationalizing the formulations, and allowing us to have the agility to essentially do load balancing from one facility to another. If you take our deco business in Europe, for example, despite the number of facilities that we have, we have very little ability to transfer production from one place to another when we have an issue in one of our factories, or one of our factories is less competitive. It's, don't look for, you know, sort of futuristic hybrid plants. That's not where we're heading. Look at things that are much more, I would say, pragmatic and tested in terms of rationalization of formulations, rationalization of raw materials, and load balancing and a better utilization of our facilities. Which means that if we have better utilization of our facilities and that ability to balance load, we probably need less production facilities also. That's what I can tell you at this point. We'll talk more about that in Q3. Maarten, China? On China, and your point on the real estate and completion rates. I think it's important to mention that if you look at our deco business in China, we are much more skewed to retail than to the project business. Project business is related to new real estate projects, and the project business for us is less than 20%, and we are playing more kind of with the regional, local, real estate players. Our focus is more on retail and what we've seen, and in fact, Greg and myself were two weeks ago, we were together in China, and tier one and the tier two cities, you start to see a shift more to renovation. Less, new build and more renovation, which plays, in fact, in our favor. You see some of the home decorative centers coming up, where we have a strong position, apart from, of course, our retail channels. For us, this is not on topic. It's much more renovation and our stronghold in the retail in China. I'll take the marine protective question, which is an important question. marine protective is a business that Akzo, for a very long time, had a strong leadership position in. We've allowed that to slip away a little bit over the last few years, for reasons that I'll explain. We've gone from being having a marine business that had operating profitability in the sort of mid-to-high teens, to being low single digits. We're rebuilding that fast, and we're rebuilding that by essentially, we'd abdicated our position in new builds, particularly in China, because we felt that was a dilutive market. What we've established to our expense over the last few years is that the drydocking business is directly linked to the new build business. Your capture rate of dry docking, if you're the OEM paint maker, in terms of the construction of the ship, the first dry docking is something like a 70% capture rate. We have to be in new build, and we have to be in China, and the market lends itself to our reentering that market, not by going after everything with a pulse, because at the end of the day, there are more technical ships that necessitate more technical solutions, and there are, you know, commodity ships that are less attractive to us. If you look at some of the more technical vessels, you know, one of the examples we use in the presentation that we showed you today is a win on LNG carriers in China. What's really interesting about that is that the Chinese shipyard went for a biocide-free antifouling. Essentially more technical products, more sustainable products, in which AkzoNobel invested well ahead of the curve and has a leadership position. That allowed us to win that order on a very competitive basis. Essentially what we're doing is we are rebuilding our position in new build. We're doing that by capitalizing on our more technical products for more technical vessels, and that will take the profitability of the marine business from, you know, it was low single digits last year, it'll be high single digits this year, and it'll be back in double digit next year. Then it's a multi-year process to get back to where we should be. If you apply these percentages to the kind of volume that we do in marine and protective, you see where that EUR 100 million comes from. That EUR 100 million, if you use last year as a baseline, is probably an understated number. Hopefully, that answers your question. I can't give you a more explicit answer without giving you the P&L. No, that's already very clear. Thank you so much. Thanks a lot. Thank you. We will take the next question from line, Lawrence from BNP. The line is open now, please go. Hi, yes, good morning. I've got two questions. The first one to clarify, it sounds like you will give us financial metrics or targets in February next year. You also mentioned that you would be unveiling something in Q3. I was just wondering what exactly is the difference between what you will say in Q3 and what you'll say when you report Q4? That's the first one. The second one, between Kansai and Sherwin, could you give us, assuming that the Kansai acquisition happens with no remedy disposals, what kind of EBITDA contribution would you expect combining those two acquisitions for next year? Thank you. Yeah, on the first question, what we will do with the Q3 results, we will talk about our industrial transformation and give more details where we are and what the plans are, and how this will pan out for the coming three years. That is one, and Greg alluded to that already a little earlier. With the Q4 results, we will come back with more midterm guidance or midterm targets. That will be the sequencing. On Kansai, we are still in the process as part of the second phase. No change there from what we have communicated earlier. We do expect still closing to happen before the end of the year. By that time, we will be more clear what that means for our business in terms of financials. There is no contribution baked into your guidance at this stage for this year? At this stage, we are, the current guidance is fully excluding Kansai Africa, apart from, of course, the cash out, which we have indicated, which is included. Yeah. Yeah. Thanks, Maarten. Yeah. Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. We will take the next question from line, Aron Kecskes from Berenberg. The line is open now, please go ahead. Hello. Hi, good morning. Thanks for taking my question. I have two. The first one is on gross margin. When I look at AkzoNobel in the five years pre-pandemic, this was a business that was running at around 42%-43% gross margin, compared to what we're seeing today, which is 40%. When I look at consensus estimates for the next two years, it implies a 40% gross margin, remaining flat, considering we still have to see the impact from lower raw max. Is there anything structural at this stage that could prevent gross margin to go back to the 43% we saw in the past? This is the first question. The second one, it's really about what we've seen in China in terms of pricing. we started to see, raw max deflation and pricing going down in China. What really makes you confident that we are not going to end up to a similar situation in Europe, next year or 2025, when raw max start to go down massively? Thank you. Maarten will take the gross margin question. I'll take the China versus Europe question. Maarten? Yeah, on the gross margin, so your observation is correct, and in fact, Greg already earlier talked about it. What we see for the second half is raw material deflation starting to kick in. There will be, for sure, for going into next year, further carryover of the raw material deflation. We don't have specific additional pricing actions planned for now, but currently, we are still in a phase of restoring our margins, coming out of a period of two and a half years of extremely high raw material inflation, hitting, of course, the percentages, it's a mathematical exercise. Your observation that from a percentage perspective, our margins still should further improve is in the correct observation. If I take the pricing China versus Europe, and are we gonna see the same thing in Europe? The first point I'd make is that prices have decreased in China, but they haven't massively decreased. You know, it's That effect is visible, but there's no price war going on in China. There's just a little bit more aggressivity that is being enabled by lower price raw materials. The difference between the Chinese market and the European market is that China is still a land grab. The brands are less established, the market positions are less established. They're moving around quite a lot. If you look at the top players in the industry, essentially the top three players in the industry in decorative paints in China are Nippon Paint, AkzoNobel and Skshu Paint. If you look at the market shares in the last few years, what you've seen is the big guys taking market share away at the expense of the local, kind of, domestic players, some of the regional guys and some of the smaller players. Therefore, there's still a lot to fight for and a lot of land grabbing. There's a push towards the tier three, four, five, six cities, you know, the smaller Chinese cities that are less developed in terms of distribution and where there's still market share up for the grabbing. This is what's driving more aggressivity on the China side, because what China is undergoing is an accelerated version of what happened over the last century in Europe in terms of market share, and brand stabilization. If you take the European markets, at country level in the U.K. and France and Spain, the market shares don't move around that much because consumers have a tendency to go for the brand. You know, there's brand power, there's pricing power to the brand. The painters are also very loyal to the brands, and therefore, dumping pricing in Europe to grab volume has, hasn't proven to be a winning strategy. God knows that Akzo can probably be accused of having done that a few times in the past. It doesn't really work. The market shares don't move around much. Therefore, there's no great incentive to try to go for land grabbing because there's not that much land to grab. Once again, the brands are established, the positions are established. There's a lot more loyalty. Does that answer your question, or you want to follow up? Thank you. No, that was very helpful. Thank you. Thank you. We will take the next question from line, Jo Fahy from UBS. The line is open now, please go ahead. Good morning. Thank you. I just have one quick question. I've noticed that the inventories on the balance sheet have only come down by about, I think, it's EUR 86 million from the beginning, the end of last year. Does that mean that there's more destocking that you have to do of raw materials? I f you look at our inventory position, then we have taken, in fact, the inventory is down versus because you were talking about last year, versus Q2. At the end of Q2 last year, we have taken them down with more than EUR 200 million. we currently, if you look at our inventory, relatively, the raw material inventory has come down more, relative to the finished goods inventory, which gives us a good position, a starting position, going into the second half of the year. overall, we are currently at a 100 plus days total inventory level, and we target to get to the end of the year to be at a 90 + days. We still have further steps to go to further build down our inventory level and to get to a more normalized situation. Is that an answer to your question? Jo? We'll take that as a yes. Oh, sorry. Yes. Okay. Thanks, Jo. Thank you. Other questions? Operator, do we have more questions? Thank you. There's no further question at this time. I'll hand it back over to your host for closing remarks. Thank you. Thank you, operator. This concludes the Q&A session and our Q2 2023 investor update. Thank you, everyone. operator- Just to wrap this up, you know, a decent start to the year. We feel good about the direction of the business. We'll have less pricing in the second half, more raw material. We'll have flattish volumes for the year, and we'll have a Q3 that will look like Q2, but a little bit better. Maarten called it slightly better than our three eleven for Q2. The volumes will look kind of similar in Q3 than Q2, and once again, the mix in terms of the margin expansion will be a little bit different. There'll be more raw mass and less pricing, but slightly better than Q2. On those words, thanks a lot for your time and attention today. I know we were competing with some other companies. We wish you happy holidays, fun vacation, if you guys are getting ready to head out. Thanks again. Thank you, everyone. Operator, please close the call. Thank you. Thank you very much for joining today's call. You may now disconnect.