00:00Will you reclaim, and we'll get to the earnings in a second and your outlook, but actually
00:04right now, will you reclaim any overpaid tariffs from the U.S. given the recent Supreme Court ruling?
00:13Yeah, it is a very recent ruling. The Supreme Court has said the tariffs are illegal, that we know.
00:20We know that they're no longer in place since last Tuesday, that we also know.
00:25What we do not know yet is any procedure to reclaim tariffs, so we're expecting that clarity
00:32from the U.S. government in the weeks ahead of us.
00:36Are your customers expecting the money back?
00:41This is obviously one of the challenges we have. Our customers would expect these tariffs to be paid back
00:48because as a company overall, last year, we by and large have been able to pass on these tariffs
00:55to our clients.
00:57So have you gotten any guidance actually on this from the Swiss government? I know Switzerland has
01:02been so impacted, and we're hearing more and more chief executives really trying to figure out what
01:06they should do next.
01:09Yeah, we're trying to get clarity from the U.S. customs clearing agencies. This is primarily also
01:15about the new tariffs that are in place right now, the 10%, because we have products shipping in and
01:22out every day. We're trying to get that clarity from the customs clearance agencies in the U.S.
01:28I will say for us overall as a company, this is a manageable impact. We've indicated last year we have
01:36an
01:36annual run rate of roughly 20 million Swiss francs of tariffs that we're paying. By and large, we supply
01:43local for local. We have 68 factories globally. And in the U.S., we typically produce in the United States
01:49for the United States. But still about 20 million of tariffs that we paid last year. And like I said,
01:55by and large, we have passed this on to our customers.
01:59How do you see overall the environment developing for chemicals in Europe?
02:06Yeah, overall, the environment for chemicals in Europe still is challenging. If you look right now
02:11at the chemical industry in Europe, last year, production rates were still roughly 20% below the
02:17last year before Corona. Worldwide, chemical markets have recovered from Corona. In Europe,
02:23we're still 20% below. And the key reason for that is the energy price. So even at current gas
02:29prices,
02:30which are relatively low, again, around 30 euros per megawatt hour, that's still double the price of
02:37energy, double the price of gas from what we had previously with the cheap piped-in gas from Russia.
02:45How's business going in China?
02:50Business in China, we are seeing a slowdown. Last year, overall, if you look at chemical markets,
02:56China still showed growth, roughly 7% production volume growth. The expectation is for a slowdown.
03:04We do see a weaker sentiment right now. There has been a significant capacity built up in
03:11specifically in chemicals in recent years. So markets are at the moment oversupplied. You see
03:17that primarily in commodity chemicals and petrol chemicals. In specialty chemicals, we still actually
03:23see a good environment where we also see good margins for our products in China.
03:30Mr. Kaiser, I mean, overall, your business seems to be performing well. The share price maybe hasn't been,
03:36you know, quite catching up to your expectations. Are you frustrated by that? And what can you do to
03:41to maybe align those matches?
03:45Yeah, there is an overhang on the share price from ethylene litigation, which is a past legacy item.
03:52If you look at the operational performance of the company, it is actually the third consecutive year
03:58where we've increased our profitability. So last year, we finished the year at 17.8% EBITDA margin.
04:06That's an increase from 16% in the prior year. And that already was an increase from 14.6%
04:12in the year
04:13before. So we finished three years of consecutive profitability improvement, both in EBITDA margin,
04:20as well as in absolute EBITDA. So for us, we focus on what we can control as management,
04:25as leadership in the company. And that is trying to continue to outgrow our markets and increase
04:31profitability year on year. And that's what we've delivered.
04:35Is any strategic move actually possible before litigation is resolved?
04:42Yeah, we have a lot of liquidity. We have very healthy balance sheets. We have a very strong cash
04:48generation. In fact, we increased our cash conversion debt to EBITDA from 30 to 40% last year.
04:56So we're well funded. And if there would be strategic opportunities, we definitely
05:02would like to pursue those. Our strategy is first and foremost about organic growth,
05:08margin improvements. But we certainly are open for hold on acquisitions like the Lucas Meyer acquisition
05:14that we did actually. Those are perfect fits. But we will be disciplined. We only would add
05:19companies that basically strengthen our core businesses that would deliver real synergies.
05:27How much money do you have to actually spend on acquisitions? How quickly do you think you could
05:31potentially make them? And is there anything that you'd be selling off?
05:37Yeah, we have obviously a pipeline of targets. And if you look at those targets, they're typically
05:43smaller bolt on deals, which also typically yields good synergy. None of these are capital
05:51constraints. So we have a healthy balance sheet. Our leverage has actually come down further last year.
05:57So we're in a good position to acquire companies if and when the opportunity would present itself.
06:05I mean, if the sector is prone to consolidation, as you say, is there a danger? Or actually,
06:11do you think that US and other foreign companies would come into Europe and buy some of our assets?
06:19Yeah, if you look at the sector overall, we haven't seen a lot of M&A activity in recent years.
06:27But it's fair to say that if the outlook for growth is modest, and it is very modest right now,
06:33there is little or no growth right now, that historically always has triggered a wave of
06:39consolidation in the chemical industry. We are expecting that also, actually in the coming years,
06:46that a level of consolidation will occur primarily in Europe, primarily in the US.
06:54What's your, I mean, when you look at the next five years, again, what do you think is the most
06:59important chemical strand for Europe to keep? I don't know if any of some of the chemical companies
07:04are strategic for national security or even defense purposes, but how do you see that?
07:11Yeah, well, I think it's a great question. The chemical industry is, per definition,
07:16very strategic. It is the mother of all industries. If you look around you in the room where you're
07:23sitting right now, Francine, roughly 95% of the products has some form of chemicals in them. So,
07:30for Europe to have a competitive manufacturing base, it also requires a competitive chemical industry.
07:38You cannot make electric vehicles competitive if you're not also have all the chemical products
07:43that get into these cars competitively made within the region.
Comments