Hello, and welcome to the IMCD and the Q3 2023 Results Analyst Call. My name is Laura, and I will 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. However, you will 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 question. If you require assistance at any point, please press star zero and you will be connected to an operator. I will now hand you over to your host, Piet van der Slikke, CEO, to begin today's conference. Thank you. Thank you, Laura, and good morning, ladies and gentlemen. Hans Kooijmans and I welcome you to our analyst conference call on the third quarter of 2023. With us this morning is also Valerie Diele-Braun, who will take over from me as CEO as of January first. She will briefly introduce herself after my remarks. Before commenting on our results, I would like to give some context about the economic environment we are operating in. From the Q3 presentation of BASF, we learned that world chemical production without China decreased with more than 4%. Perhaps more important for our business is that the manufacturing indexes of the Eurozone and the United States have contracted for respectively the last 16 and 11 months. It shows the difficulty of the economic environment we are working on. Despite this, our European results and our results in APAC actually performed quite satisfactory, but we saw a decrease in orders in our industrial segments in the third quarter, and particularly in the Americas. I would like to remind you that we grew our EBITDA in the first nine months of 2022 with 51%. After the first nine months of this year, EBITDA decreased with 6% Forex adjusted. This shows the remarkable resilience of our business model as we are able to hold on to most of the growth we made last year. We remain optimistic about the near future. IMCD has strengthened itself considerably with the acquisitions we made so far this year, and we have expanded our product portfolio as well. We're also very encouraged by our digital progress. IMCD is unique in this respect. We have a global ERP and CRM platform. Keep investing in digital solutions. This all results in very encouraging customer adoption and will drive cost-efficient organic growth. I'm confident to state that our IT infrastructure and cloud-based solutions are leading in the industry. Finally, we expect fourth quarter results to be better relative to the previous two quarters. Now I would like to invite Valerie to introduce herself. It is a pleasure for me to be with you today and to have started with IMCD as part of the management board and as designated CEO, taking over from Piet in January. Some of you might already have come across my name during the various functions I have had in the past 27 years within the specialty chemicals industry. Having started with Unilever at the Quest International Division, which was later acquired by ICI and then by Givaudan, I worked with large key accounts and with the development teams in Europe, Asia, and Americas across many divisions and product groups. After a stint as consultant, where I focused on services, I then joined DSM as part of the personal care management team, including their e-commerce initiative, and then moved on to become president of three of... of two of the three divisions of Archroma, a carve-out by private equity firm, SK Capital, from Clariant, where I developed sustainable product portfolios and new business areas. In 2018, I took on the position of CEO at CABB Group, a contract manufacturing company, mostly active in Agchem, pharma, and personal care, and one of the key producers of monochloroacetic acid in the world. In my five years as CEO of CABB Group, I substantially increased EBITDA, acquired and integrated the Apus Química business, and completed two successful refinancings. In 2020, I joined IMCD as supervisory member and was always impressed by the talent and professionalism of the company and its diversified and asset-light business model. Joining now fully, I'm happy to state that from the inside, IMCD is even more impressive. Based on IMCD's deep technical expertise and extensive lab network, its best-in-class technical and IT infrastructure, and excellence in M&A execution and integration, I'm looking forward to build further on these pillars and to discuss this within our next call. For today, I will, however, leave all questions to Piet, and I'm excited to meet you again, albeit virtually, in Q1 in my new role. Thanks. Thank you, Valerie. And, as usual, Hans will lead us now to the numbers. Hans? Thanks, Piet, for the hand over. And, good morning, ladies and gentlemen, and I will briefly summarize IMCD's first nine months results, before we go to the Q&A. And as usual, I would like to start on page 9 of the, of the presentation that we put on the web. As you can see, Forex adjusted revenue decreased 1%, and Forex adjusted gross profit was more or less equal compared to last year. And when looking at gross profit development, we report a combination of 4% organic decline and a 4% increase as a result of the first time inclusion of acquired businesses in 2022 and 2023. Gross profit in percentage of revenue increased with 0.2% to 25.3%, and this increase is the result of changes in local market conditions, combined with various local gross margin improvement initiatives. Further currency exchange rate developments played a role and the usual fluctuations in our product mix and product portfolio. Forex adjusted operating EBITDA declined 6% to EUR 400 million, a EUR 43 million decrease compared to the same period of last year. The conversion margin, as you know, EBITDA and percentage of gross profit, was 46.8%, which is 3.4% below the record year, 2022. However, 1.8% better than the same period in 2021. Forex adjusted net result and earnings per share both decreased 16%. The decrease on cash earnings per share, so after adding back the non-cash amortization and net of tax, is 9%. On free cash flow, we report a EUR 115 million increase compared to last year, to EUR 364 million. Cash conversion margin of 89% was higher than the same period of last year. Reduced working capital investments were the main driver of this increase. The relatively low working capital investment was primarily driven by a slight decrease of our business activities, and further, we report a little improvement on working capital days from 67 last year to 66 days this year. And then on the last line of this page, you will notice a 12% increase over a number of full-time employees. It's, it's fair to say that the majority of this increase is the result of new employees as a result of acquisitions that we did. On the next slide, slide 10, you will find a summary of a few key figures split into the various regional operating segments. In EMEA, the first column, we reported solid numbers, given difficult market conditions, quite some currency headwind, and challenging comparable figures of last year. We were able to further increase gross profit percentage to 27.4%, and this margin increase helped us compensating for the impact of lower sales in the last two quarters and to grow the amount of Forex-adjusted gross profit. Forex-adjusted operating EBITDA of EUR 188 million was 2% lower than last year. Inflation-driven own cost growth was the main driver of this small decrease, and this cost impact is also reflected in slightly lower ratios for both EBITDA and conversion. The second column, the Americas, and in this segment, we report the most significant negative difference on most of the lines compared to last year. As a positive, we could keep our average gross profit margin at 24.1%. When comparing the 2022 Americas numbers with last year, we should remember the extraordinary growth that we reported in Q2 and Q3 of 2022, resulting in a 57% EBITDA increase in 2022, and a 6% increase in conversion margin in last year's year-to-date Q3 figures. So the 47.3% conversion ratio reported for 2023 is lower than the outcome of last year, but still about 1.5% better than 2021. Asia-Pacific, the third column, reported 11% gross profit growth and 4% operating EBITDA growth at constant currencies. Operating EBITDA and percentage of revenue and conversion margin are still the highest in the group, and the decrease that we report in gross profit percentage is mainly the result of acquisitions in this region. Then in the last column, the cost of the holding companies, and this includes all non-operating companies, like the head office in Rotterdam and the regional support offices in Singapore and the US. Reported cost remained stable at 0.7% of revenue. Then on page 11, a summary of IMCD's free cash flow. As mentioned earlier, EUR 115 million higher than last year. The cash conversion ratio improved to 89.1%, mainly as a result of lower working capital investment, and I already mentioned, lower level of business activities as the logical reason for the lower working capital investment. CapEx was low as usual, in line with our asset-light business model. Then on page 12, a short update on net debt and leverage. Compared to the end of December last year, net debt increased with about EUR 325 million, and this increase was a combination of positive operating cash flows on the one hand, combined with cash outflows as a result of acquisitions done and a EUR 135 million dividend payment. Our net debt includes EUR 300 million bonds with a coupon of a low 2%, and further, it includes a new EUR 500 million, 5-year bond that is successfully issued in September this year at a coupon just below 5%. Reported operating ratio—leverage ratio, including the full year impact of acquisitions, was 2.4x EBITDA. A nd leverage based on the definitions in our loan documentation was 1.8x EBITDA. Then last but not least, on page 14, you will find the outlook for 2023, where you could read that we expect the outcome of this year to be below last year. However, IMCD foresees its performance to improve in the fourth quarter relative to the prior two quarters. That was a short summary of our year-to-date financials, and Piet and myself are happy to answer any of your questions. I'd like to hand over back to Laura. Thank you. Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star one on your telephone keypad. Thank you. We'll now take our first question from analyst Leonie Linn at Morgan Stanley. Your line is open. Please go ahead. Hi, good morning. I have three questions, please. So firstly, on your comment, around performance improving in the fourth quarter, could you elaborate a little bit of more on what that means? Is that a pickup in volumes? Is that better profitability, better margins? And as a sort of a related point, do you have any comments on how, your performance has developed you know, through October relative to the third quarter, that gives you the confidence to make that statement? And then secondly, sort of a related question. Based on your conversations with customers and the visibility you have in the order book, do you expect this sequential improvement in the fourth quarter to also continue into the first quarter? And then lastly, just a quick one on China. Your peer, who reported yesterday, noted a slight uptick in performance in China, and noted you also slightly better pricing. Are you seeing that as well in your business in that region? Thank you. Yeah. Thank you very much. As to the first question on the fourth quarter, what we're saying is that we see that the fourth quarter will show improvement relative to the other two quarters, where we saw quite a significant decrease. We cannot totally forecast how that will end in terms of percentages, but I think that we see some improvement on the volumes. I think margins are quite robust so far throughout the year. I think that's quite remarkable, and we even improved our margins somewhat. Let's see how the fourth quarter develops further. Whether or not this continues in the first quarter of next year, I will not comment on. We will have to see that, and I leave that also to my successor next year. On China, I think it's very anecdotal. I think I should not comment. I think the product mix of the companies that we're talking about is different. We still see some weakness in China, but you know, I find it too anecdotal to comment on individual countries so far. Okay, understood. And just as a follow-up on that first point, so your comments are predominantly relating to volumes improving in the fourth quarter relative to the second and third quarter? Yeah. Yes. Okay. Thank you very much. Thank you. And we'll now take our next question from Suhas ini at Goldman Sachs. Your line is open. Please go ahead. Hi. Hi, just wanted to clarify again on the outlook, please. Appreciate the commentary on volumes, but you normally talk about EBITDA growth in your outlook or EBITDA change in EBITDA for the year. So, when you're seeing the performance to improve in the fourth quarter relative to prior two quarters, are you effectively saying that you expect the declines in Q4 on EBITDA to be better than the declines in EBITDA that you saw in Q2 and Q3? That is exactly right. That is exactly right. Okay, perfect. Thank you. And I think just to follow up on that, please. I think in Q4 last year, you did have a write-down of inventory, which was double-digit EUR millions, and that flowed through to EBIT. So, when you are talking about the declines in Q4, do we need to adjust last year's number for the inventory write-down, or just keep it off the 111 EBIT that you reported last year? Ooh, that's, that's a very detailed question. Sorry. Very good that you remembered that one, by the way, so well done. But, yeah, what you always see is that when you are making up your annual account, you always have all kind of pluses and minuses, finalizing the year and on stock provisions and on bonus accruals and so on and so forth. So I think the reason that we mentioned the additional stock provision last year is because it had a severe impact on the result of Asia Pacific in the last quarter. And there, we wanted to stress it had nothing to do with what I would call commercial performance. It's a one-off. I don't expect such a one-off this year. I think it's too early for me to say we should normalize for that number, because you always have these type of potential pluses and minuses when finalizing the results. We got it. That's clear. Thank you. And just one on if you think about pricing and volume trends. I think you've always maintained that pricing has never been an issue, and you don't see what some of the chemical companies report on price deflation. Is it possible to clarify that that is still true for you today? And the second one is on volumes. Obviously, volumes per order have come down. Has that stabilized sequentially? And if all else equal, if we assume that this volume per order continues into 1Q, and I appreciate I'm not asking for an outlook over here, but if that continues at these levels into 1Q next year, does it still imply declines in volume on a year-over-year basis? Well, I'm not sure if we ever said that prices are not relevant. I think if you look at the, let's say, total range of our products portfolio, which is of course wide, and goes from very specialized pharma products to maybe a little bit more volume-driven coating products, then of course there is a bit of a difference in terms of how price-sensitive products are. But if you, I think it's important to emphasize again, that we very much focused on specialties and that as a whole, of course, makes us more price robust. But we see in certain segments, of course, some price deflation. And I think the other question was on. Yeah, the average order size that we see, and what you typically see in an environment that is more uncertain than maybe the environment that Piet reflected on at the start of this call, is that customers typically have a tendency to order smaller quantities per order. I think the average order size more or less stabilized but is still at a lower level compared to the same period of last year. Got it. Okay. And it has effectively, sequentially come down, right? The volume per order from the beginning of the year. Yeah. Yeah. Got it. That is what we saw. Got it. Thank you very much. Thank you. We'll now take our next question from Matthew Yates at Bank of America. Your line is open. Please go ahead. Hey, good morning, everyone. Piet and Valerie, nice to hear from you. Look forward to, seeing what you say next year. Couple of questions, please. The first, just on the Americas performance. Understand what you're saying about the comparison base. Can you just disaggregate a little bit for me, the performance in North America versus South America? And I guess the reason I ask that is that yesterday, we were talking about competitive pressures in their South American business, wondering whether that is specific to them or something that you are also seeing more broadly. Then the second question, sorry if it's a bit pedantic, but just on the working capital. So, group sales are down 4%, but you still increased working capital by just under EUR 40 million. Is the way to understand that it's the consolidation of the acquisitions that you've done? Otherwise, I'm just surprised working capital hasn't come down a bit more, given the generally lower activity levels. Thank you. Thank you, Matthew. I will take the first question. We certainly see these pressures in Latin America, LatAm. I think we should also realize that last year, of course, we saw extraordinary and unprecedented price increases in certain segments in LatAm, and yeah, that has reversed. So, in that sense, we see the same pressures as somebody else reported earlier this week. But also in the United States, I would say, and I refer to the decrease in the manufacturing index that we see also in the coatings construction, but also in the advanced materials, aerospace industry. We saw a decrease in orders in Q2 and Q3. So, so both regions, North and South America, have pressures in particular in these segments. Hans, do you want to- Yeah, Matthew, perhaps to, on from the working capital question. And what we typically do at the end of September is we compare the end of September position with the end of December last year. And there is what I would call the usual cycle during the year, that the December numbers are always the lowest working capital position during the year, due to typically low sales and relatively low stock positions. So low sales in the last quarter, typically December, resulting in low debtor positions and also slightly lower stock positions at the year-end in most companies. And therefore, the highest point in the working capital cycle during the year is always in the summer period. It comes slightly down at the end of Q3, and the lowest point in the cycle should be December again. So, if this trend continues, you typically should expect a slightly lower working capital position at the year-end, and then the December versus December should show the impact that you were just referring to. Does that make sense, or did I make it too complicated? Yeah. No, I got it. Thank you, Hans. We'll now move on to our next question from Rikin at BNP Paribas. Your line is open. Please go ahead. Thanks for taking my questions. I've got two. First is just to follow up on pricing. So again, some of your peers have spoken about GDP units, stabilizing towards the end of Q3, and into the beginning of Q4. Just wondering if you could confirm whether you have also seen the same trend and how that differs in each different region? And secondly, on M&A, could you give us a sense of what the contribution could look like in Q4? On my numbers, I have a back-end weighted year in terms of the M&A contribution. So just wondering if you could provide any color, that'd be helpful. Thanks. Thanks. I think I can confirm that, let's say, the prices—and again, I mean, we have a wide range of products, so it's always a bit difficult to generalize this picture, but that there's more stability in the market on that front. So, I can confirm that. And Hans, anything on the M&A? Yeah. So, so what we, we reported, 14 acquisitions having an impact, and out of the 14, we closed 13, so the only one we didn't close yet is Euro Chemo in Malaysia. And then based on the press releases, if you, look at the revenue numbers that we disclosed, you should expect about EUR 100 million revenue as a contribution from these, these acquisitions. So the one that we acquired this year and full year impact of the acquisitions that we did in the last quarter of last year. Okay, thank you very much. Yep. Thank you. We'll now take our next question from Thibault at KBC Securities. Your line is open, please go ahead. Good morning. I have a question with respect to the gross margin developments in Q4, with respect to the seasonality. How should we look at the seasonality? Is there a seasonality component in Q4, or will it mainly be the product mix which will determine the gross margins in the fourth quarter? That, I can confirm. It will, it's product mix, but there's no specific Q4 effect. Okay. Looking at the FTE base going forward, can we expect a slowdown in hiring, given the pretty significant increase in FTEs? Or how should we look at the FTE evolution? Yes. Well, the increase, of course, is mainly the result of acquisitions, but you are right. We will be extremely cautious in hiring going forward, and given the economic circumstances. But most of our increase comes from the acquired companies. And then a last question, with respect to the prices, but on the supplier side, how are the conversation going with suppliers based, looking at the prices? I would say as usual, of course, also here, you cannot generalize. Some suppliers have quite some difficulty in, let's say, also on their end, in terms of prices, and, yeah, that has an effect on us. But as you can see, that we can hold on to our margins, percentage margins, that we are successful in translating that to the market. I can, let's say, also emphasize that the relations with suppliers are always very transparent and strong, and that we have mature discussions about these issues, as we, you know, are strategic partners of our suppliers. So I would say that all these discussions always go harmonious, and our objective is to let's say secure the strategic position of our suppliers, but also to maintain or increase our margins. Okay, that's clear. That's all for me. Thanks. Thank you. We'll now take our next question from Nicole Manion at UBS. Your line is open, please go ahead. Thank you. Good morning. Just a follow-up question, please, on the cost base. It looks as though your SG&A was flattish to slightly up year-over-year and sequentially in Q3. How should we think about that going into Q4? And in general, how are you thinking about that balance between savings and investments? Thanks. I'm trying to understand the question. Yeah, so I don't expect a change in the trend on the numbers that you saw. But and what Piet earlier indicated is we are very careful in filling vacancies and adding people to the structure, like we have been also in the previous quarters. And basically, we only add people if there is also a business rationale behind adding people to the structure. So if there is new suppliers coming in or yeah, then basically you need to top up, if needed. And maybe to add to that, we of course look at productivity, and that is a major yardstick of whether or not we can add people. But as said earlier, we are extremely cautious in this environment to do that. Thank you. Thank you, and we'll take our next question from Quirijn at ING. Your line is open. Please go ahead. Yeah, good morning, everyone, and welcome, Valerie. I have three questions. First of all, anything that you can still say about the destocking, is there anything visible in that, in your numbers still? Then the second question is about, you speak about inflation in your cost. Can you maybe elaborate on that? Is that wages, is that other costs? And my final question is about, let me see. If I remember, your—the previous call we had after the second quarter numbers, you saw some light in the U.S. market, and it looks like that the third quarter was disappointing. Whereas we're now seeing that EMEA, in fact, was doing better than, in fact, you expected, at the end of July, beginning of August. My question is, is there any specific reason, or was, for example, September quite good in EMEA? And what is the risk that, let me say, we will see some setback, as in U.S., as we have seen in the U.S. in this third quarter, that it also happens in the EMEA, let me say, in the first quarter of 2024. Quirijn, thank you for your very, very bright questions. First, the destocking. I find that I think it's safe to say, and I think you also see that in the chemical industry at large, that probably that's part of, let's say, the issues that we faced earlier this year are more or less done. And I think that generally, the stock levels at our customers are sufficiently, let's say, destocked, so to say, to hopefully not expect further consequences of that. The inflation question, of course, also a good question, and what we have seen, of course, is pressure on, of course, our employment costs, and that's... We have seen that everywhere. I mean, inflation is high, has been high, and we have had to adjust it accordingly, the employment conditions of our employees. So, I would say that is the main factor in the increasing costs. Then, my remark, apparently, my memory gets getting vaguer and vaguer, Quirijn, about the Americas, last time we spoke. It shows you again how careful you have to be. I think what we saw in the Americas in the third quarter, and particularly in LatAm, as I spoke before, is these pressures on the industrial segments. I don't think that you can see the same thing again in the fourth quarter in terms of misjudging that. But, it shows you again how difficult it is to look into the future. And on the risk of EMEA, maybe a word? Let me say that, so EMEA was better than expected, and that is, and that is also a, I would say, an industrial part with plastics and coatings, et cetera. So, what is the reason- Sure. that, that was somewhat better than expected? Yeah, true. But I would say that if you look at total EMEA, that certain parts of Europe have performed quite, quite strong and others a little bit less strong, depending on the product mix also. Yeah, so very robust, in particular, also in the more southern parts of Europe, Turkey, also very strong. So we hope we expect that that will continue also in the fourth quarter. Thank you. Thank you. Ladies and gentlemen, as a reminder, once again, if you would like to ask a question, please press star one on your telephone keypad. Thank you. And we'll now move on to our next question from Chetan Udeshi at J.P. Morgan. Your line is open. Please go ahead. Thanks, and morning, all. Maybe if I can clarify the comment from Q4, because I think we all got confused, and clearly that wasn't the intention. So just to clarify, so when you say improving trends versus second quarter and third quarter, if I'm not mistaken, as I understand it, it's more referring to maybe the year-on-year organic decline getting smaller, just because the comps are easier, as you also referred previously. Yes. Or are you also assuming Q4 absolute EBITDA goes up versus Q3 and Q2? No, I think the first part of your observation was right, similar to what Goldman Sachs asked earlier. Okay, that's clear. The second question I was wanting to ask is just looking at your M&A contribution in third quarter, because if my math is correct, I get to about 2% contribution from M&A in Q3, which is well below the 5%-6% run rate you had in first half of this year, despite more acquisition in Q3 as we can see in the cash flow as well. So, can you explain why have you seen that decline, almost halving of the contribution from M&A in third quarter versus what we saw in the prior two quarters? And the last question I had was, maybe it's for Hans. Just looking at the gross debt on the balance sheet, if I, again, calculate it correctly, it sits close to EUR 1.6 billion, give or take. You mentioned there are a couple of bonds, 2%, new bond, just under 5%. So, can you just remind us how much is the sort of interest cost going to change next year, versus this year on weighted average basis, roughly speaking? That would be useful. Thank you. Yeah, but perhaps first, your remark about Hans. First, your remark about the decline of M&A contribution in Q3. I don't think the outcome of your calculation is correct. But looking at the M&A contribution, talking about the revenue, it was slightly higher than the quarter before, and similar on the EBITDA. So perhaps we should have a chat there offline. On the debt side, if you look at the debt profile that we have, the interest on the three bonds that we have is, of course, fixed for next year. And so we have EUR 600 million at 2% and a bit, and we have EUR 500 million bonds at 4.875%, so just below 5%. Another big component in my debt profile is about EUR 300 million related to deferred considerations. And these deferred considerations, of course, don't trigger cash interest, although under IFRS, I need to discount them back to the net present value and then add a bit of interest every year. And then we have a little bit of revolver swings that basically vary with if we do acquisitions or not. So, the impact on our interest cost is basically, I think, easy to calculate on the basis of the data points that I just mentioned. That's helpful. Thank you. Thank you. We'll now have a follow-up question from Quirijn Mulder at ING. Your line is open. Please go ahead. Yeah, Piet, one follow-up question from my side. With regard to remark on, let me say, to be cautious on hiring people. If you are optimistic are, about your business model and the outlook for this industry, and you are hiring not people for, for a couple of months, for a, but for a longer time, do you think that is the, the correct decision here? Because, maybe this, the, the, the war for talent will, return, let me say, in 2024, second half, 2025. Yes, but I think it's a good question, and of course, that's why we are extremely, let's say, diligent to keep our talents in-house and also develop new talents. But we also have, of course, to look at the general economic environment and keep our costs in line with our productivity goals. So, as Hans, I think, also pointed out before, actually, Wim, that when we get new business, and we are constantly, of course, working on that and new product lines, then we will hire. But we also want to keep our cost base as efficient as possible, for example, by investing in digital solutions. So I fully understand the war on talent. I think we make our company as attractive as possible, so I'm really confident that we can attract talent, but we have to do that at the right time. Thank you. Thank you. There are no further questions in queue. I will now hand it back to Piet for closing remarks. Thank you. Yes, well, thank you very much, all, again for listening to us. This was my last analyst call, and I will dearly miss you all. Not your difficult questions, but it has been, since 2014, a privilege to do these quarterly analyst calls. And I wish Valerie, my successor, all the success in the coming period. I think she put it well in her introductory remarks about the strength of our business, the quality of our business, also the strength of our business model, also again, during these challenging economic circumstances. So I'm pretty sure that she and Hans and Marcus and the whole team will do great. I wish you all well, and maybe we see each other somewhere, sometime. So thank you very much. Thank you, Piet. Ladies and gentlemen, this concludes today's call. Thank you for your participation. Stay safe. You may now disconnect.