Yes. Thank you very much, Alexandra, and a warm welcome to everybody to our Q1 '22 conference call from my end as well.

As usual, I have our CEO, Matthias Zachert; and our CFO, Michael Pontzen with me. Please take notice of our safe harbor statement.

I would like to flag that against the backdrop of the Russian war on the Ukraine and the persisting uncertainties, we have decided to postpone the Capital Markets Day to the second half of the year. This should also enable us to provide more tangible information on strategic steps, which we are currently working on and which might be further advanced in the second half of the year.

With that, I'm happy to hand over to Matthias for a brief presentation. Afterwards, as always, the Q&A.

Matthias, please go ahead.

Thank you, André, and welcome, everybody, on the call. I would like to start the presentation on Page 4 immediately where we address highlights and challenges on the past quarter, Q1.

All in all, we can say we had a strong start into 2022. And we clearly walk the talk on addressing where we were lagging behind last year and that was pricing, pricing, pricing.

As far as top line is concerned, we increased sales by 44%. I've not seen that in my professional life before, that is amazing.

EBITDA increased versus previous year strongly, 32%. Also, this is a, I would say, very strong start to the year.

As far as the segmental contribution is concerned, all segments contributed in Q4. In March, I got the question from one of the analysts, why did Specialty Additives lag behind, and I said they will catch up in Q1, as they did.

Of course, a strong punch in Q1 more than normal, and therefore, I don't expect that this is going to continue for the next 3 quarters, but Additives should do well. Q1 was exceptionally strong.

Finally, it should be said that we managed a very volatile environment. We managed inflationary input costs and disrupted value chains, which eventually led to the financial P&L strong performance.

Last but not least, I would like to say in Q1 we addressed through our focused crisis management everything that needed to be done. And today, I would say we are prepared for liquidity storms, for cost inflation, for gas embargoes, energy price inflation.

We have addressed really in the last 2 months whatever can be addressed. And therefore, we feel as a team that's pretty strong on our crisis management that we put in place from 24th of February.

Challenges. Inflationary environment, of course weighs on input costs.

It's strong when you can pass that on to the customer one to one, which we did. But arithmetically, if you add €0.5 billion on sales, keeping bottom line stable or even increasing it, overall, your margins suffer.

Challenges. Again, working capital for 2022 that the current price level remains a challenge for sure.

But if you look into overall, our cash flow developments, we have built up working capital by around about €400 million, €500 million. If you blend that out, you see that our underlying operational cash flow came in pretty strong.

But in light of this inflationary environment, of course, after last year, there was a clear add up in working capital. There will be an add-up in the first half of 2022, and then it will most likely -- seasonally reduce again.

And then we should see a clear release in working capital in the second half of the year. Let's turn the attention to Page 5.

Key financials, I would like to comment here that we have shown Q1 '22 versus '21, price, 30.1% price increase. That's the message.

Of course, that led to an increase in sales of 400 -- €500 million. Wow.

We kept volumes stable in light of the fact that Q1 last year was a relatively strong volume quarter, I think this is sound. Of course, the portfolio we added.

EKC comes into the P&L and with a very positive performance. EBITDA, the increase of 32% I flagged, with €320 million, this is one of our strong quarters.

And according to what we see, momentum should continue in a robust way also in the second quarter. EPS adjusted 40% roundabout up, strong one.

And liquidity, I mentioned that before, we were early in the process to decide, let's beef up safety liquidity because we -- in February, March, did not know how financial markets would react, if markets would close up. And for that very reason, we decided liquidity is always good to have in the backdrop, ample liquidity, safety liquidity.

And I think with this, whatever comes, LANXESS is prepared. Today, I have to say we used the right timing.

Banks provide feedback and said we were the early ones in the chain. We did not have to queue up.

Now the feedback we are getting, the industry is queuing up, but now at clearly higher rates. We issued a 6 years note, €600 million, at 1.75.

If you would issue this today with the BBB flat rating, you would say 100 to 150 basis points more. So also here, I would say good timing.

Now ladies and gentlemen, let's come to Page 6. We will address here energy, and also potential gas embargo.

We don't see that as of today, but we got a variety of questions on both topics. And for the sake of transparency, we would like to provide that to you.

And hopefully, this gives you a level of comfort that things are under control, addressed and implemented. Let's move to Page 7.

Here, you see the gas price development basically over the last decade. And you see that gas prices in Europe, but also in Germany, all in all, were relatively stable.

We assessed that various times over the last several years, and we always came to the conclusion going for financial hedges does not make real sense. And if gas prices should go up, our portfolio should be able to mitigate that through price pass-throughs over the quarters.

When we saw, of course, that energy and gas prices started to explode in 2021, basically from the second quarter, I indicated already last year, from Q2 onwards, that we are going to address that, that we have long-term contracts in place that are definitely locked in on a yearly basis, but most of them running even 2 to 3 years. And with the quarterly lag effects, that would be a theme or that would be something impacting us in 2021.

So that was the situation last year. That was the situation on prices.

And now let's come to actions that we started taking in 2021. And basically, from Q2 onwards, page number 8, we basically started globally to get -- we had transparency, of course, but not globally on side-by-side, product line by product line.

When we saw that energy products were going through the roof, we basically established global transparency. Also getting globally, clearly contracts on the table, on duration, on energy clauses included or not included.

Once this was done, we developed concept by business units that were predominantly impacted the most, and we flagged them to you on the conference calls as well. And then, of course, we went business unit by business unit to customer, key contracts, conveyed the message to the sales force how we would like to do that, and we clearly didn't took the approach -- didn't take the approach of just passing that on through a neutral letter, with the take it or leave it.

We wanted to explain, we wanted to win our customers over, get ownership. And here, reinforce the strategic partnership that we have with our key customers.

In most of the cases, this was understood. We started to negotiate with customers, amended contracts where legally possible, either through price clauses or through price adders.

By now, Q1, I would like to say that more than 50% of our relevant key contracts have been addressed. Further work is in costs, in action, and here and there still need some convincing.

But that we are able now to show a completely different financial performance than last year, where we were lagging and running behind. I think, started to be visible in Q4, and clearly is visible now in Q1, because Q1 is on a different pricing level than Q4, which was already sky-high.

So on Page 9, you see the results. We don't have to shy away.

We feel proud of what we have done, and this gives us a level of comfort in the current situation where energy prices have moved up further in -- sorry, in February and March and of course, will spill over into the second quarter. And you've seen our second quarter guidance.

Q2, we'll see a catch-up on energy prices from Q1 because we basically have most of our contracts, a 1-quarter lag on energy costs. So Q2 is going to be a toughie.

But from the guidance we have provided to you, this should give you a level of comfort. Now let's go to gas embargo.

I got this question -- dear me, nearly in every investor discussion that I had over the last 6 weeks. And as a matter of fact, at that point in time, we couldn't make a clear statement on this because we started the gas embargo analysis, which we consider still as unlikely, I clearly have to say that on both sides, on the political side, in Europe and Berlin.

But also, I don't expect -- but who can make projections on an insane mass murder? I don't expect actions from the other side either, but you don't know.

So in case of question, you simply should better get prepared. We started the analysis 1 week after the aggression war started.

And it took us some time because you have to really go site by site. You have to look at chemical reaction by chemical reaction.

You have to see the batch, is it continuous production? You have to see is it digital?

Or can you reduce the reduction, the chemical synthesis and therefore simply do less, but still run the reaction? So this was quite an intensive work.

And several weeks ago, we did not know if it's 40%, 50%, 60% impact on our plants, 100% of our plants impacted to be assessed. I have to say, I'm very proud of the team.

We did a fantastic work. We'll work worldwide, and I would now like to show you the reactions and the analysis.

But let's address shortly on Page 11, the overall approach. Page 11, task force was implemented 10:00 a.m., 24 of February, where we decided at Board level to assess in a transparent way our complete risk exposure, sales-wise, asset-wise, liability-wise, we developed crisis scenarios.

Half of our back draw plans for OpEx, CapEx. We don't see right now that markets implode, not at all, momentum is healthy.

But it's always good to be prepared. We are prepared.

On the procurement side, we assessed all open questions on sourcing and have, therefore, put this on from alert to no alerts, but of course, the situation might always change. But I would say, we have done our job to get transparency and to be prepared.

As far as liquidity is concerned, I made my statements. The liquidity, we have ample liquidity now, €1.8 billion.

That should suffice for whatever comes acquisition-wise, liability wise, we have incremental liability. And on top of that, undrawn revolving credit facilities, so liquidity is not an issue.

Gas was the remaining question mark. And here, transparency was developed.

And after transparency had been developed and technical analysis on reactions, chemical reaction was done. We then basically went on prioritization should a complete -- and I'm stressing this clearly, a complete gas embargo on Russian gas be put in place.

So Page 12. All in all, eventually worldwide, we are using gas everywhere.

But in many regions, it's not an issue. Like in the United States, there's enough fracking and natural gas in place.

Of course, we use gas in Belgium and the Netherlands as well. But also there, it can be addressed.

It's not critical, as such critical -- criticality, clearly is in Germany. And here, because Germany is most exposed to Russian gas, it has been reduced by a smart Minister over the last 2 months.

But still, it's a dominant energy source. And therefore, if there is an issue, it will be in North Rhine-Westphalia on gas and basically for the conversion into steam.

Oil embargo, we don't consider as an issue. Pricing-wise, of course, it's not nice.

We will deal with this. But volume-wise, oil will be there.

So if it boils down to something, it is gas, gas, gas. And here, you have 2 sources for which you use for electricity.

Again here, no red flags because electricity you can get from other sources as well. You can source here in Europe.

They're not from gas factories, but then from nuclear power plants or from other sources. So here, we feel at ease.

It boils down to gas and steam. And the analysis we have done was basically then here focused on Germany and here predominantly on our 53 plants in North Rhine-Westphalia, highlighted on Page 13.

And when we did all the assessments with chemical reactions, so the technical reaction on the synthesis reaction process, when we assess the intensity for steam, and then also teaming that up with our profitability analysis, we basically came to the conclusion if a complete gas embargo would happen, there's 1 plant that we would shut down entirely. It's a heavy steam machine.

But because of this, of course, more profitability over the last 2, 3 years turned softer. It was a stronger contributor in the past, turned softer.

But here, we would turn that off completely. There would be a few further sites.

Our assumption is 3, but if everything again goes against odds, it would be 5 that we would most likely run with 20%, 30% less production, but they will still be onstream. All the other plants, notably 48 or 49, would run full throttle should demand be there.

And luckily, these are the plants that are heavy profitability hitters. So all in all, when we went through the technical analysis, we came to the conclusion -- well overall, we had feared that a gas embargo would be impacting us from a profitability standpoint quite heavily.

This is, I would say, now our assessments on the direct impact of a gas embargo. So we conclude that this is not nice.

It would hurt us probability -- from a probability standpoint, but it wouldn't hurt us massively. And this is fully a positive.

Of course, we cannot assess the indirect effects of downstream and upstream. But I think it's pretty cool that you have good transparency on your own turf.

So we've put to management, now a process in place should something nasty like a gas embargo happen. We exactly have our game plan in the drawer, we know how to decide.

And the good thing is I've asked my Board member in charge for production and engineering, et cetera, to basically talk to the 4 to 5 site heads already, so that they know, one, immediately instantly, what they have to do should within a few hours one has to decide on slowing down or shutting down. So basically, we are prepared.

And still, I don't think this is going to be the likely scenario but I always love to be prepared. And therefore, we are prepared.

So now let's come to the outlook on Page 15. Good start.

It's always good to have a quarter in the bank for the year, which we have now with Q1, and therefore, the start has been strong. And if everything continues, as we've seen in Q1 despite heavy inflationary environment, that would be a pretty good year for our group, and we will catch up on what we have lost in 2021.

And that's clearly the ambition that we have. Now let's look at the economy.

I mean this is pretty volatile out there. The stupid aggression war that is ongoing leads to uncertainty.

And I think all of us will be confronted here with uncertainty. And you can pretend that you know everything.

We don't. We think this leads to an uncertain economic environment where things can change on a daily or weekly basis.

And our trump card is we are agile, we are prepared, but we don't pretend to know where the world is going in the next 9 months. China's zero-COVID policy is clearly on the alerts.

However, most likely, I will get questions on this. Please take note of the fact, this had a impact in our Q1 financials, but not a big one.

We have around about 10%, 12% of sales to China, but our production base is clearly lower. So the direct impact is there.

I have that on my table. I have business units that are impacted, like our disinfection value chain.

I mean, what a mess. Disinfection market is the biggest in China.

Our production is in the United States, our finishing is in Europe. You can't imagine what a mess this is, getting products from Memphis, Tennessee to Europe, to blend them, to finish them and then ship them to China, where Shanghai is completely congested.

You don't get volumes to the biggest market. But hey, that's life in COVID times, and we are not happy about it, but we live it.

We live with it and try to mitigate as much as possible. So China is clearly also on my agenda for Q2 because we still see that China logistics are disrupted, but it doesn't lead to a triple-digit million impact in our accounts.

Now ongoing challenges. I mean, energy and raws are high.

I alerted you to the lag that we normally have in many of our business units for Q2, where we will get the higher energy costs fully in the P&L, and therefore, that will be a challenge in Q2, no doubt. But we think we will be able to manage this.

And disruptions, they will at least continue until the end of 2022. And hopefully, at least what I'm hearing from the ocean logistic companies, situations should start to improve through additional capacities in '23 onwards.

Let's hope for the best. For the above-mentioned reasons, we have decided to be firm on Q2 in terms of quantitative guidance and clearly stress €280 million, €350 million.

€280 million gives you the clear sign we want to be better than last year despite all challenges, that last year's second quarter was good one. So we want to be better in Q2 than last year.

If things go better, we will do better. And therefore, upper end €350 million, cool -- that's a big number.

It would be one of our best quarters in our company history with a completely different portfolio. Last time we got into this range was with rubber, rubber, rubber.

But rubber is gone. Now we have good stuff in sight, which is clearly far more resilient.

So this is the guidance for the quarter, and we stick to the full year guidance we should be significantly above previous year. Please take note of the fact that year-to-date, we are €80 million ahead of last year, which gives a good cushion, I would say, to get to where we want to be.

And these numbers are without IFF. And here, we need to say the expected closing in 1 of May is delayed.

By now, we have got all antitrust approvals, which is positive. However, the other closing conditions are not yet fulfilled by IFF.

This basically relates to the carve-out. And of course, we can only take something on board once it's fully operational and carved out.

If the selling sites have delays, we need to accept them. And that's the situation where we stand.

The 2 parties assume that closing conditions will be fulfilled in the third quarter of this year. And then, of course, closing can be done.

So ladies and gentlemen, that's all from our side in terms of providing you transparency on questions you've raised over the last few months. I understand from our bankers that we are pretty transparent, especially on energy and gas.

So this should give you a level of comfort, numbers on Q1 and outlook for Q2 should give you a level of comfort as well. And we now open up the floor for your questions.

Please go ahead.

Just a couple for me. Maybe just first off, what -- maybe you can just kind of walk us through and run us around what you're seeing in underlying demand trends?

Any signs, any pockets of weakness? Any risks that customers are perhaps building some inventory or some safety stock over the last couple of quarters in light of all this inflation as they kind of continue to buy more than they maybe need?

I'm just trying to gauge if you can get any sense on that as you kind of think about demand. That's the first question.

And just the second one around the issue in Consumer Protection from Currenta and the issues they've had from the outage. Just trying to understand how -- does that linger into Q2?

Can you kind of help us quantify how much of a headwind that was for the business in the first quarter? That would be really helpful.

Charlie, thanks for your two questions. Underlying demand overall in Q1 was, I would say, good, positive.

And we see that underlying demand in second quarter continues in a positive way. We see some slight softening, but not a strong softening, a slight softening on the automotive value chain, which by now has after divestitures of -- also the Leather chemicals business has gone further down and it's below 20% than where it used to be.

So therefore, we don't flag that as material. But we see basically -- all in all, that Q2 order book is healthy.

Otherwise, we wouldn't have provided for the guidance on EBITDA that we've done. In the last 4 quarters, I would say, customers could not stock up.

So basically, they ordered immediately what has been ordered was going into production. My assumption is that second quarter, the industry will be able here and there to start stocking up again because inventory channels are pretty low, and they haven't been replenished according to the overall demand.

So that's the feedback on your first question. As far as Currenta is concerned, we had an impact.

I would say that was single digits in millions. We still have to monitor, because Currenta is supposed to come back onstream as far as the waste water -- no, sorry, the ancillary is concerned, that has been not promised.

But at least the indication has been given that it will come back now onstream. And we now have to wait for that.

Eventually, the official decision on this, I assume, will be taken the next 2 to 4 weeks. So that's basically feedback on Currenta.

And with this, I've answered to your questions, I assume.

Yes. No, it's really helpful.

Maybe just one really quick kind of follow-up on Consumer Protection then, as we think about the Q1 performance. Are you at a stage now where you are more than recovering the volatile inflation with pricing actions?

Or is this an area where there's still a bit more work to do? Just trying to get my head around that.

Well, raws are not an issue in Consumer Protection, and I wouldn't make too big of a story on 1 quarter. Eventually, I provided feedback to you on Editors last quarter.

There's a lag and now you see what I meant with this. Consumer Protection, the contribution or the development is all in all, okay.

I'm not excited by it. Definitely, it is not the case.

Raws have been passed on. We have in Q1 on Consumer Protection, two topics that are not great.

I'm not excited about this. We have one customer in Vertigo that is still resisting our energy price increase.

I know work is being done on this, and it's going to -- at least from what I see, it's going to come. Otherwise, we have to highlight that we will not anymore shift and then a blockbuster product will be at stake.

I don't think that is going to happen. And therefore, this is -- you want to have a good customer relationship and this is what is important to us.

And therefore, I assume that the energy surcharge, which is on a yearly basis, I would say, a €10 million tickets will come. The question is when it's going to come.

And the second is not Currenta related. That would be the third one.

The second topic for me in Consumer Protection is disinfection. I mean, disinfection is one of our highest margin value chains.

It's really mouthwatering. And I alluded to that earlier on.

I mean, the intermediates, the Oxone is being produced in Memphis. The formulation is done and factory here in Germany.

And from the formulation, it's good that we have 2 formulations sites, but they're both in Europe. And the final -- the biggest market on disinfection is eventually China.

And if you have disrupted logistics in the United States and the harbors to Europe, then you have disrupted ocean logistics from Europe to China, you see the lag in profitability. So this is visible.

I don't like it. The business unit tries everything to mitigate, but we cannot fix ocean traffic jams.

We have to wait for, here, the situation to be more stable. And then, of course, the performance will be clearly better.

Right now, we are clearly lagging behind, and we don't get volumes to the customers. Add to that, disinfection, any kilo ton is big money.

So this is something that I don't really like. But I know it's not an internal topic.

It's a market situation that will, at some point in time, ease out. And therefore, I don't put a lot of scrutiny on Consumer Protection, the 2 businesses, but of course, I monitor the situation.

Start with the energy market. And Matthias, thanks for the disclosure on the crisis planning if the worst were to happen.

Can I just understand how you keep open 40, I think you said 48, 49 plants. Is that because of the grid availability in the region?

So obviously, showing my complete ignorance of the German power supply situation. But if you can help me on that, I'm assuming you have renewables in the region.

So hence, the limited impact. And then on the EBITDA impact you've usefully provided, do I assume you didn't put in any potential benefits from price improvement that may come outside of your affected regions?

So I'm asking that because, of course, we've seen that across the sector where often we've overreacted to local production problems, given how tight global supply is. So long question, apologies, but hopefully got the gist of that.

I have a second question as well, if I can follow up.

You have a second question. The first one already -- first one, Andrew already has a few sub-questions.

So let's address the energy, first of all. So let's -- I mean we have -- Andrew, we have, as you know, a variety of production sites in Germany, 3 big ones in North Rhine-Westphalia.

Then we have Brunsbüttel, we have Brilon, we have Bergkamen, we have Mannheim. So the 53 are the ones in North Rhine-Westphalia.

And the others -- I mean if you look at [indiscernible], this is not really gas-based. And therefore, you don't have to make detailed analysis.

The ones that -- the chemical reactions that need gas are in -- the most heavy hitters are in North Rhine-Westphalia. Now in the 3 sites that we have Leverkusen, Uerdingen, Dormagen, you need to distinguish.

Each site has different energy sources. Some are very strongly -- and we are talking about steam, as I said before, are very strongly still based on coal, others are based on gas.

Dormagen, for instance, is pretty much gas-related, while Uerdingen and Leverkusen are less gas dependent, they are more coal-dependent. Therefore, you need to go through energy by energy and simply, we went through the grids.

In our gas grids, we have gas from Russia, we have gas from Norway, we have gas from Netherlands. Eventually, this is blended.

And the entire infrastructure and industry is being supported by this. Our assumption was when the gas-intensive sites that we have, basically are running with roundabout 50% lower volume.

And therefore, Russian gas is completely disappearing. And you only have the gas coming from the Netherlands, Norway and LNG.

Then of course, the allocation to the sites will be lowered. In Leverkusen, our assumption was we will not get 100%, we will get something like 50% or 60% of the original volume that will be allocated then to the respective users.

And our assumption was when there will be a reduction of around about 40%, 50%, our reduction will go down likewise. So drastically reduction.

As a matter of fact, the industry evaluations that are running by the governments, and the government is orchestrating this right now to get prepared, having not as drastic scenario. So we really take a double-up, take the worst-case scenario and see what would we do is we basically would have, by site, a reduction of entire volumes coming from Russia.

And then, of course, you need to achieve this reduction by production site, i.e., Leverkusen, to addressing fuel sites. And then, of course, you try to go for the biggest gas consumptions and cut them out completely in order to protect and allocate the remaining gas that you get from Norway and the Netherlands and LNG, to the one -- to the sites that you would like to keep running.

And that was basically the approach we were taking. And I stress it again, the German network, electricity institution are running plants and are running scenarios, they are running different scenarios.

We have taken the worst, worst-case scenario simply to see what kind of implications this has. That was basically the approach.

And of course, there would still be molecules, gas molecules that we would get. But these gas molecules, we will allocate to the products with the highest margin, with the highest return on gas molecule.

Point one. That was the first question.

Point two. You're right, Andrew.

We haven't factored in pricing mechanism. I mean we know -- and for that very reason, there is a dynamic process.

The current 1 plant that we would completely shut down, which is pretty gas intensive, we know the value chain is behind them. We know that there are 2 customers, which by most of this production plants, and that would have severe implications.

So my assumption would be today, if we shut down, then we will talk, of course, before to our customers. When our customer tells us the pricing would change dramatically, we might reprioritize.

And that is something, however, that we have not factored into our financials, because the financials we provide to you are the financials in our hands. When the customer certainly pays more, this, of course, changes the priorities and then we'll readjust and we can readjust pretty quickly because we have transparency now on the status quo, and then we simply need to change the arithmetics and allocation.

But you have to start with a set of numbers, and that's what we conveyed to you.

I've got a much shorter follow-up question. On working capital, is there anything that you can do in terms of remedial action?

Or is it a case of sitting there and hoping your inventories and receivables follow a deflationary path at some point? I'm thinking of the IT investments that you've alluded to in the last 12 months.

Yes, Andrew, on the -- I mean, on IT, I mean, the -- we have done some safety stocks in preparation for Q2 because we changed systems as we speak here in Europe, predominantly Germany, which is, of course, a heavy exercise. But from what I'm seeing, it's running well.

So that should, of course, reduce safety stocks going forward, definitely from Q3 onwards. You will anyhow see a seasonal decline in working capital Q3, Q4.

But let's face it, I looked at the financials of the other chemical companies and other process industries in light of inflationary environment, in light of energy costs moving up through the roof, every chemical company that I've seen has had negative or severe impacts on working capital. We are no different.

The positive -- for those of you that are really interested in operating cash flow, looking to our buildup of inventories and receivables, I can only give you the number. We had an increase in raw materials of €400 million.

Another €100 million of energy gives you €500 million, bloody increase in working capital through price inflation, price inflation stemming from raws and energy. The €500 million you don't see in the working capital.

We had a positive working operational cash flow last year in the double digits, we turned €177 million negative. Based on €500 million buildup in working capital, this shows you that the underlying operational cash flow substantially improved.

I think I would recommend that you look into this a little bit further. Working capital from my point of view will not escalate dramatically further.

We've taken the big chunk. Can it go up another €50 million, €100 million of gas embargoes, oil embargoes and whatever embargoes are in the market?

I cannot rule that out. But I don't think that price escalation will be again severe from the level that we have seen now, and that should then gradually lead in the remaining quarters, especially Q3 and Q4, then to a better working capital and operational cash flow performance.

Yes, a number of smaller questions I have. The first is on Specialty Additives, indeed a very strong outcome.

You highlighted that it was unusually strong. Maybe you can highlight what might be different in the coming quarters.

In the commentary, you said -- it is mentioned that lubricants did better, I guess that's more a volume play. Whereas in plastic additives, it is driven by prices.

In former conference calls, you highlighted whatever we see in the bromine spot prices is not necessarily what you see in your bromine-related business due to the contract structure. Is it fair to assume that now these higher spot prices, which have been higher for a long time, are now kicking in, in your more longer-term contracts, and that your profitability, especially in the bromine-related projects will be on a sustained level, be higher?

That's the second. And then on the guidance, it is broad, which I obviously understand with the uncertainty in the market in the second quarter.

Is it fair to assume if what you see in trading condition in April and what you have order books for May, if everything runs normal, then it would be very much to the upper end? And if you see disturbance from all the uncertainties, then it only would go to the lower end?

And the very last, only for clarification. Did I get that right if it comes to the acquisition of IFF biocide, you have received already all globally, all antitrust approvals, and it's -- the only missing thing is the carve-out?

These are basically my questions.

Well, [indiscernible], Heine, I would take them one by one. Let's get the first one out, IFF antitrust worldwide.

Done. So we had a variety of jurisdictions, but all of them have been cleared by now.

So it's no longer, I would say, externally related. This is pure internal IFF.

And I mean, we take a business on board, if everything is on board. And that means you have to do worldwide carve-outs.

But all operational businesses in a separate legal entity then get the approval, so that from day 1 onwards, you can maneuver. This is called a carve-out, and we have done that many times before.

We know what that means, and we know our requests. And here, we are waiting for it.

Everything, operating license approvals, operating permits, trading permits, systems, IT systems, [indiscernible]. This is a lot of work.

And once this is done, I mean, we are ready, but we are dependent here on the seller who needs to do this job. So that's basically it.

Now on guidance, so I basically do backwards answering. I would say, normal -- if everything goes normal, we would be in the midrange of the guidance, which would be, according to my arithmetics, 315.

So that would be horrific above previous year where we posted 277. And please take note of the facts in Q2.

We will not have a big catch-up in Specialty Additives. I mean, the big hitter in Specialty Additives we've seen in Q1.

Second you know the arithmetics in Advanced Industrial Intermediates. There's the lag on raws and energy always in the following quarter, then you catch up in the next quarter.

So we had a good Q1. Q2, again, we will take the hits of the cost inflation in Q1.

Should raw materials, energy be high in Q2, we will then pricing-wise get the positive catch-up in Q3, the normal thing, as you have seen in the last 10 years. It always surprises the markets.

But as a matter of fact, it's the same arithmetics that we've seen in the last 10 years, and you can put your clock on it. So if you factor that into the P&L, I would say, if we -- if everything goes normal, we reach midpoint of the guidance, it would be in light of the set -- of the just said words, a pretty good quarter.

And that would mean if we hit two, 315, that would be another €35 million, €38 million better than previous year, then we would be arithmetically €110 million after second quarter ahead of last year, which is pretty good. For the current environment, I would say, pretty good.

It shows the catch-up versus '21, which was, as I stressed in March, a pretty tough year where for the first time, we had a variety of operational screw-ups like blizzards, like disrupted value chains, like force majeures, like chemical park explosions, whatever you have. We had it last year.

And this year, therefore, if everything goes normal, that will be a good year. And we show it through Q1 and want to show it through Q2.

If we have screw-ups, we will be at the lower end. If everything goes to the blue sky scenario and Michael is behaving like a good CFO and Oliver does not tease me all the time, then we might have a better performance.

I'm pretty sure that our business guys will do everything in order to punch hard. And just to be very clear, I had a little bit of humor in my words, which I just conveyed.

So that's the second question on guidance. Now let's come to Q1.

I would say here, we have the following situation. In Q1, Specialty Additives.

There was a catch-up for last quarter, volume-wise, things have been delivered that was, therefore, positively contributing with a very nice volume development, but overproportionately strong due to the catch-up in Q4 where not everything could be shipped. Now the second part of your question related to pricing.

And here, very clearly, yes, we had some yearly contracts that went out end of December '21. They have been changed.

And pricing for brominated products is definitely currently at a higher level than it was before. We couldn't address that last year because we had to wait, and we are legally compliant to the contracts with our customers.

That has changed pricing level this year, will most likely be at a higher level compared in brominated products compared to last year. But on top of that, we also addressed phospho, phospho turns tighter in terms of phosphor supply, therefore volumes are more constrained.

We cannot produce in the phospho derivatives everything that we want. So this impacts negatively volumes in course of 2022.

But we catch up and mitigate basically through pricing. And therefore, we'll also address -- we will also address the phospho derivatives in the markets where volumes are scarce.

And when volumes are scarce, pricing should be higher, and that's also contributed to the Specialty Additives performance. And with this, I think all questions have been answered.

Thank you for taking my two questions. First is on your acquisition.

IFF is not included in your full year guidance. Do you expect significant EBITDA from IFF already this year or just revenue contributions?

And the second question is on your very good overview of the gas supply, many thanks for that. So currently, a potential Russian gas embargo would cost you between €80 million to €120 million per year.

How would it look next year? Are you preparing for other energy sources?

You mentioned something about it. Maybe you can give us a trend or so for next year, significant lower or same number, something like this.

Thank you.

So on the first one, IFF. Well, we currently assume that the deal will close in July.

And -- but of course, we wait and see. Again, this is not in our hands, it's dependent on IFF.

Should it close in July, I hope I've said July before, so first of July is our assumption. So should it close on the first of July.

Then of course, first of all, in the very first month, you have to address the technicalities like PPA, inventories, et cetera, that leads P&L-wise it's mark. And therefore, the contribution of IFF, should it come from first of July onwards for the remainder of the year, will be definitely higher on sales and modest on profitability.

And that will take then a few quarters, 1, 2 quarters until PPA, especially on the inventories are ironed out, and then the contribution moves up further. So here, of course, we first of all would like to look into the books once we get it.

But that would be the technical assumption once you close it. But first of all, we have to close.

So that's the feedback from IFF. And for that very reason, we just blend it out in our financials and make our projections based on all closed transactions that we have.

Now on gas supply. I mean, we've given you the indication €80 million, €120 million per annum.

That's what we see today based on -- I mean, this is a virtual discussion Herr Spengler. Please take that into consideration.

We provide clarity and transparency that I have not seen with any other chemical companies so far. And therefore, based on what we know today, that would also be our projection for next year.

But let's face it, this is done based on what we know as of today. In 12 months, a lot can happen.

We are not assuming now a change in -- a major change in volumes and substantial increase in gas. If there's a substantial increase in gas, I don't know where it's coming from.

On LNG terminals, that is the -- basically one source that would be opening up over the next 12 months. But from the feedback that I've been provided -- I'm in discussions with the CEOs of energy companies, they basically tell me incremental visible supply will only be there notably from '24 onwards.

And therefore, I'm still humble in my statements on gas. And therefore, we simply assume the toughest scenario, which is complete 100% Russian gas embargo and take it from there.

Yes, I think with this, we have answered your questions.

I wanted to ask on CapEx. The figure this quarter appears low.

I wanted to check that everything has being executed on time and that it will catch up later this year towards your guidance of €500 million.

Michael will take that one.

Thank you for your question, Andres, and hello as well from my side. Yes, your observation is right.

We were a little bit behind the number which we had last year, but we are still in plan. And we are, let's say, fulfilling our spending curve as we expected.

You know we have seasonality in our spendings. There is a smaller amount in the first half of the year and a much higher amount in the second half of the year, peaking in fourth quarter.

And that is why you will see the spending curve accordingly, and we stick to the expectation at this point in time for the CapEx budget for the running year.

Yes, there was a reduction versus previous year in Q1 because in February, we decided also to run CapEx tight. And we keep it tight should there be a continuous good development.

We will keep the CapEx at the level of previous year despite incremental acquisitions. So we are running CapEx tightly to improve cash flow.

But of course, we have increasingly tightened the belt in Q1 in light of the Ukrainian war situation. And of course, if business momentum continues where it is right now, we will not overdo on CapEx reduction.

We will release CapEx according to the plan and budget that Michael has just explained.

So a follow-up. Maybe you feel comfortable about the occupation of the facilities you're running and the ability to cover demand, if there's a spike in terms of volumes?

Do you feel comfortable, Michael?

I pretty much do.

So do I.

Apologies for asking this, but I just want to understand how important is share price for you guys? Because Matthias, you joined in 2014 and done a fantastic job in repositioning LANXESS.

And when I look at the compensation for management, appreciate share price is a component, but it's a 2:1 ratio to, at least your compensation, if my numbers are right, in terms of what cash and bonus you get versus share options. And the share price is basically flat since you've started.

So in the light of upcoming strategy update, just want to understand how important is share price performance for you guys? And if at all, if I may ask, what is it that, in your view, is why LANXESS is undervalued on the stock market?

That's my first question. The second question really is around free cash flow.

I mean I appreciate you guys have a target, I think, of 40% conversion. But -- and I appreciate your current situation is ridiculous on raw materials.

But when will we really start to see structural de-gearing in LANXESS and free cash flow performance, which used to reflect when you were a Chief Financial Officer? Sorry to bring this, but -- I'm sorry to be direct.

Well, let's address them one by one. Share price, I mean, it's relevant.

But if you rewind 12 months ago in March, April last year, I think we were at 65. So that gives you the volatility in capital markets.

Now we are at 37, I think, which, of course, is surprising. And -- but again, we've seen distortions on share prices ever since, not only with us, with others, with other companies, too.

At this point in time, clearly, I think this is completely overdone and completely distorted. My assumption was that energy price escalation, inflation, gas embargo would be a drag on us.

We provided transparency on this. But share prices can change within 3 to 6 months dramatically.

I've seen that last year when we rebounded to 65. And therefore, sometimes capital markets are volatile and other long-term shareholders then make use of that.

And I assume that if we deliver according to what we currently see, we would be at different share prices going forward. So share price, of course, is part of our remuneration.

I've also invested around about €2 million out of my net taxed income into LANXESS shares. They are currently completely underwater, but I'm patient.

I know what we are doing and fundamentals always, in the end, come through. That's the share price question.

Free cash flow, you would have seen a strong rebound in free cash flow this year if you blend out working capital inflationary environment. So we clearly said last year, we will make strides in the right direction, and strides in the right direction will be through maintaining tight CapEx despite increase, substantial increase in organic portfolio through the acquisitions we have done.

So CapEx will be relatively lower compared to our company size. We also stressed that 150 exceptionals will rather go down to 100, and therefore, we will reduce exceptionals as well.

We clearly indicated that '23 will be a further improvement in terms of cash outs being lower, the proceeds being higher, EBITDA being higher. So therefore, on free cash flow, I think we will now show you that this will turn to the positive sides.

But of course, in Q1, you see the cashouts because of working capital. And therefore, you are smart enough to figure that out.

And as far as your third question is concerned, I have a great CFO to my side. It's not him who decided on M&A, it's the entire management board.

We decided for 2 M&A transactions that were costing us more than €50 million one-timers last year. That's not the fault of Michael.

It's eventually my fault and the entire management board. Inflationary environment, I had not to deal with an inflationary environment of that nature when I was CFO, that we had €500 million cash absorption in working capital last year.

you should know that we also have a substantial working capital outflow because of inflationary environment is happening this year. That's not Michael's fault.

It's something that the industry is dealing with. We will deal with this, and we will move this company to a cash-generating company that we have promised.

It's on our radar, and we will execute it accordingly.

Just if I may ask one follow-up on the HPM. But just one follow-up on the HPM update in light of the change in macro environment.

Do you still expect -- or should still expect something this year? Or the current changes in the macro environment could deter this?

I appreciate your honesty and clarity on the question.

Well I have to -- Jaideep, I have to be pretty virtual and hypothetical on this one. You know that we do a carve-out globally.

This is a work in progress. There are several things in the industry happening that are not -- I mean, that we look at.

I don't want to be specific, but also this is somewhat a reason why we delayed the capital market, because we think this will be all loose ends. From our point of view, will somewhat come together in the next, I would say, 2 months.

And we might be part of that. And if we are part of that, then we would like to give clarity because it would be another big move for our company going forward.

And that was also one reason for delaying the capital markets to later in the year. Because by then, I think we have clarity also on what we will do with HBM.

And at this point in time, I look at this positively. So I think we also -- here, we are well prepared.

We are doing our apts operationally in the business, but also from the strategic side. We are prepared to move in all directions.

So yes, I mean, Tim is doing a good work on this. Jaideep, believe it or not, we are doing our running event in June, 12 of June, I think last time you flagged, you could be willing to participate.

So don't remember -- don't forget us and give a call to Oliver. He takes all logistics on a shoulder to make it happen.

You promise to sell HBM, well, then I'll come.

Well.

I'm kidding.

Just one left for me. On full year guidance, can you just remind us what contribution you're assuming from EKC?

I think last time you mentioned it would be around €80 million, but just curious if the view there has changed in the last couple of weeks or months.

Well, we have not given a contribution on a yearly basis now going forward. We basically said it's €80 million on an acquired basis.

That was 2021. And then there was some incremental EBITDA coming from our own business, and that was basically it.

But for 2022, now we don't guide on acquisition by acquisition. You will see that consumer protection, in absolute terms, will grow EBITDA-wise.

And former EKC, of course, will be a good contributor to it. And that's basically what is embedded in our second quarter guidance and also for the full year.

A couple of questions from my side. I was just looking at the -- I'm sorry, maybe this was addressed previously, but I just wanted to dig a bit deeper.

The Specialty Additives, the EBITDA is swinging from €58 million -- sorry, it was €100 million in Q3, it went to €58 million, now it's gone to €136 million. This is a more downstream business, more specialty in nature.

Can you maybe address why are the earnings swinging so much in this business from 1 quarter to the other? I understand all the moving parts, et cetera, but it's the magnitude of the swings is clearly something which surprises me.

And the other question I think you mentioned about the impact of raw material prices on working capital, especially on inventories, et cetera. Did you guys also see some benefit on earnings in Q1 on EBITDA from devaluation of any of that inventory, which was probably bought at lower raw material prices a few months back?

Yes, Chetan, let me address Specialty Additives. Your comments are solid.

But I mean, don't look just on 2 quarters. We've grouped additives together now and reported since, I guess, 2016, 2017.

So you haven't seen this volatility in the past periods. Now you see it, and there are 2 drivers for it.

And the one I mentioned before. When you have globally disrupted value chains.

And if you look to the additives, the brominated products, we source them from El Dorado, El-Do, and ship them across the globe. So these things, the product likes to travel.

And traveling these days is cumbersome, especially if you need ocean ships logistics and containers. And therefore, what we clearly flagged in Q4, we had volumes that were stuck in the harbor.

And that was big money, double digits. And they were not -- they were not shipped.

They were stuck. No sales, no profits.

That was dealt with in Q1, and therefore, you have a clear impact from Q4 to Q1, and that is volume related. Now the second, I stressed also earlier in the call, in Specialty Additives again, in the flame retardants business, and here again, in phospho and brominated products, we had yearly contracts, and some of them were running last year at old pricing, with old energy costs, old raw material costs, old market costs.

And of course, market prices went up. Energy went up, raws went up, everything went up.

We changed prices. And if you now compare Q1 versus Q4, you basically had a double whammy.

One stems from delayed volume and the other stems from delayed pricing, the delayed volume will not come in Q2, Q3, Q4. I hope so, at least, assuming normal logistics.

The pricing -- higher pricing level, you should see in the forthcoming quarters as well. And therefore, from everything that we see today, additives would be a rock solid division for the full year '22 based on the data we currently have.

That should answer your Specialty Additives question. And now Michael will address net working capital.

Yes, Chetan. The days are basically over where we have major impacts coming from the revaluation of the inventories.

That was still the case when rubber was part of the group, where we had often very huge or big swings in the butadiene market, which was rather volatile. And as of today, as the portfolio changed, as the rapid changes in the raw material is, let's say, smoothening out as well compared to the butadiene prices, we no longer have that large swings in the revaluation of the inventory.

And that is why we do not see major impact here coming from any revals.

I've got three of those. Firstly, when you look at the wage increases for this and probably also for next year, which number would you pencil in, in your costs tables, given that inflation seems to run really rampant at least for the time being?

That would be my first question. I appreciate all the things you do for, let's say, to rein in the risk of short-term disruptions in regard to gas supply and crude oil supply or of -- basically the products derived from crude oil.

But -- if you look at the problem from a longer-term perspective, seems like Europe seems to switch from Russian gas and oil supply to basically -- to other suppliers that have longer transportation routes, that don't have pipelines to ship the goods, but are relying on ship transport and so on and so forth. It seems like we have a structural increase of costs in regards to natural gas and, let's say, oil derivative supplies here in Europe.

What do you think that does to the competitiveness of your sites in Europe? That was the second question.

And thirdly, can you give us an idea of the working capital tied up in all those, let's call that, logistics pickups that leads to longer lead times, that leads to, let's say, goods stuck in the harbor for several days or even more. If that all would go back to normal, how much working capital would that basically -- that free in your balance sheet?

All good questions, Oliver Schwarz. Let me address the first 1 and the other 2 afterwards.

Wage inflation. I mean with the agreement that the Chemical Union made in Germany, and I'm only addressing now German environment, globally, of course, you have to go country by country.

But Germany, we have roundabout 40% of our workforce or 50% even. The agreement that has been fixed, which is running this year is basically roundabout 3% price increase for the German workforce, if you blend that down on a yearly basis.

So that should answer the first question. What happens then in the second half?

I mean, the Union did a, I would say, a smart approach, pragmatic. They basically said, let's not make a long-term contract.

Let's make yearly payments and then meet again in October, November and rediscuss 2023 because then we know where the economy is going to go. So it's a pretty pragmatic approach, and that speaks for the rational approach in our industry.

Oil and gas, my feedback to you is oil is not so much on my radar. I mean I look at that, if I look at the sources where we -- that we use, we basically depend on the harbors, Rotterdam, Antwerp and the like.

Eastern Germany is depending on pipelines from Russia. We don't.

So I don't see this -- I mean, oil is not a direct raw material. It's going through the value chains.

And if you look at the chemical plants here in Western Europe, most of them are rail or harbor related. And therefore, the oil embargo will lead to a -- potentially to an increase in pricing.

But at the same point in time, increase in prices, I see that at least the national states, including Germany, are doing everything to open up other sources that in the past, were potentially rather denied. So I wouldn't be surprised if even countries that currently are still under scrutiny will be addressed, and you will see further sources of oil coming on the market in the next 1 to 2 years.

And therefore, is it the current topic? It should be, everybody should look at that.

But I'm not -- from everything I know, I'm not that concerned. Gas is a different issue.

Gas, we have pipelines. Germany has pipelines, everybody knows this, and that will take us according to all data that I've seen, and I did quite a lot of work on that, educated myself on gas supply, grids, pipelines, suppliers, la la la.

From everything that I'm seeing, it's currently, of course, in the capital market, a big issue. If you look into the financial markets, you see that the TTF contracts, which is the best indicator for European gas going forward, already goes down quite heavily in 2023.

So no longer triple-digit costs per unit, but double digits. And then even fading down further.

So that is what the market is conveying. And as you rightly say, the market -- financial market is always wide, right.

So there a lot of the financial markets are projecting going forward. My personal assumption, however, is that gas will only ease '24 onwards.

Because then if you look into the different contracts that have been made by the German government, if you look at the investments in LNG terminals that have been made, the agreements that we are doing with the other states in the Western area is all geared towards beefing up gas supply from '24 onwards and then accelerating '25. So I don't think that the current gas price will be a long-term high price.

If it is a long-term high price, we will have to look at value chains. Of course, here, the name of the game is completely right, globalization versus regionalization.

At this point in time, we are still having a clear tendency towards regionalization that started with COVID-disrupted value chains. People are still focusing on local supply more than 2 or 3 years ago.

In the last 2 years, we went towards regional supply. So therefore, this is still the overwhelming effect.

The implication of energy will be something that has to be on the agenda for the next 2, 3, 4 years, but I don't see that this is going to have an impact for this year or next year because we are still living in disrupted value chains. We are living in a trend where customers tend to localize or regionalize and not to globalize.

So -- but this is clearly something that would be strategically on the agenda. I hope I gave you enough color on our thinking.

Now on your third question, logistics implications, net working capital. I mean, Michael help me on this.

I've looked at the numbers last year and the safety stocks that we had built up were between €100 million and €150 million. They might be now due to pricing at €200 million, but that would be wiped away if logistic constraints would ease.

What's your view?

No, that's pretty much what the actual data say. So nothing to add.

Is there any open question? I think we've answered all.

Simon looks to me and says everything is addressed. If this is so, I thank you for your participation to today's Q1 conference call.

We look at seeing you all at -- in our road shows that we do physically and virtually. And yes, have a good continuation and look forward to speaking to you in the second quarter again.

All the best. Bye-bye from LANXESS.