Clariant, a global leader in specialty chemicals, reported a decrease in organic sales for the second quarter of 2024, with a mixed performance across its various business segments. The company's EBITDA for Q2 stood at CHF 166 million, with a margin of 15.7%, a decline from the previous year's margin of 24.5%. Despite a challenging environment marked by uncertainties in demand and manufacturing trends, Clariant's strategic initiatives, including the integration of Lucas Meyer Cosmetics and sunliquid operations, show progress. The company remains optimistic about the future, raising its full-year EBITDA margin guidance to around 16% and expecting flat to low single-digit sales growth in local currency for 2024.
Key Takeaways
- Clariant's Q2 organic sales dropped by 3% year-over-year, mainly due to a decrease in Catalysts business, partially offset by growth in Care Chemicals and Absorbents & Additives.
- EBITDA for Q2 was CHF 166 million, with a reported margin of 15.7%, and excluding exceptional items, the margin was 17.7%.
- Operating cash flow in the first half of 2024 was strong at CHF 112 million.
- The integration of Lucas Meyer Cosmetics is progressing well, contributing CHF 23 million in sales for Q2.
- Clariant expects a challenging environment but remains confident in medium-term targets, with a net debt-to-EBITDA ratio of 2.7 times.
Company Outlook
- Clariant raised its full-year reported EBITDA margin guidance to around 16%.
- The company anticipates flat to low single-digit sales growth in local currency for 2024.
- Confidence in achieving a margin of 17-18% by 2025.
Bearish Highlights
- Catalysts sales declined by 18% in local currency.
- Care Chemicals segment experienced a decline in volumes in Q2.
- The Absorbents business was down due to a client shutdown, impacting revenue.
Bullish Highlights
- Additives business saw a significant increase in EBITDA margin.
- Positive outlook for durable goods and potential recovery with interest rate cuts.
- A new activation line for the Absorbents business is starting up in Q4.
Misses
- New build business decline now represents about 15% of overall business, leading to order book volatility.
- Expected exceptional costs related to the closure of biofuels and Lucas Meyer integration in the second half of the year.
Q&A Highlights
- The adjusted EBITDA margin for 2024 is expected to be around 16%.
- Corporate line costs increased slightly in Q2 but are expected to normalize.
- Interest rate expenses have been lower than anticipated due to favorable financing terms.
Clariant (CLN) continues to navigate a complex market landscape, balancing strategic growth initiatives with the realities of fluctuating demand and manufacturing trends. The company's commitment to its strategic priorities, including the successful integration of Lucas Meyer Cosmetics and the advancement of its sunliquid operations, positions it for potential growth despite current challenges. As Clariant looks ahead to the rest of the year, it does so with a cautiously optimistic outlook, underscored by a conservative yet hopeful guidance for the future.
Full transcript - None (CLZNF) Q2 2024:
Operator: Ladies and gentlemen, welcome to the Clariant Second Quarter First Half Year Results 2024 Conference Call and Live Webcast. I am Sandra, the Chorus Call operator. I would like to remind all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Andreas Schwarzwalder, Head of Investor Relations. Please go ahead, sir.
Andreas Schwarzwaelder: Thank you, Sandra, and ladies and gentlemen, good afternoon. My name is Andreas Schwarzwaelder. It's my pleasure to welcome you to this call. Joining me today are Conrad Keijzer, Clariant's CEO; and Bill Collins, Clariant's, CFO. Conrad will start today's call with providing a summary of the second quarter development, followed by Bill, who will guide us through the group's financial for the period. Conrad will then conclude with the outlook for the full year 2024 and the medium-term. There will be a Q&A session following our presentation. At this time, All participants are in a listen-only mode. I would like to remind all participants that the presentation includes forward-looking statements, which are subject to risks and uncertainties. Listeners and readers are, therefore, encouraged to refer to the disclaimer on slide 2 of today's presentation. As a reminder, this conference call is being recorded. A replay and transcript of the call will be available on the Investor Relations section of Clariant website. Let me now hand over to Conrad to begin the presentation.
Conrad Keijzer: Thank you, Andreas. Good afternoon, everyone, and thank you all for joining this call. In the second quarter of 2024, we generated sales of over CHF1 billion, a 3% organic decrease in local currency versus the second quarter of 2023. Our top line performance was impacted by an expected decline in Catalysts, offsetting growth Care Chemicals and Absorbents and Additives. Reported EBITDA in the quarter was CHF166 million, resulting in a 15.7% EBITDA margin versus 16.1% in the prior year, which included a CHF62 million gain from the Quats divestment. Excluding the Quats gain, we delivered a strong underlying margin improvement of more than 500 basis points. This positive development stems from the successful implementation of our leaner customer-focused operating model and continued execution of our performance improvement programs. As a result, we benefited from improved operating leverage as we achieved growth in Care Chemicals and Absorbents and Additives while maintaining pricing discipline. I'm also pleased with our improved cash generation in the first half of the year, resulting from higher underlying earnings, our continued focus on cash flow optimization through active working capital management and CapEx discipline. We recorded operating cash flow of CHF112 million compared to CHF78 million in the first half of 2023, reflecting a free cash flow conversion of 42% for the last 12 months, which is in line with our medium-term target of around 40%. Looking at our top line development in more detail. In the second quarter, we delivered sales of CHF1.056 billion, representing a 3% organic decrease with no impact from scope or currency. Pricing decreased by 3% as flat pricing in Catalysts was offset by a 4% decline in Care Chemicals, primarily due to formula-based pricing adjustments and a 3% decline in Adsorbents & Additives. Our priority remains to defend pricing in a deflationary environment as we experienced a 10% year-on-year decline in raw material costs in the second quarter. Volumes were flat overall as strong growth in Care Chemicals of 7% and Adsorbents & Additives of 5% was offset by the expected year-on-year volume decline of 18% in Catalysts against a very high comparison base. In fact, the second quarter of 2023 was an exceptionally strong quarter for the Catalysts business. While we continue to see slight improvement in output and capacity utilization rates, uncertainties over underlying demand remain. The European Chemical Industry Council, CEFIC, has reported that a strong recovery in 2024 remains unlikely, given most of the chemical industries' downstream users continue to show downward trends and order books still reflect limited demand. The European manufacturing PMI in July was 45.6% and thus continued to trend well below 50. S&P Global (NYSE:SPGI) projects flat chemical production in Europe in 2024 versus 2023. In China, the largest chemical market, S&P Global expects chemical production in China to grow by 5% in 2024, fueling global growth of chemical production of 3.2%. However, the manufacturing PMI in China dropped slightly below 50 to 49.5 in June. According to the American Chemistry Council, chemical production in the U.S. increased by 0.7% year-on-year in June. The manufacturing PMI the U.S. also dropped below 50 to 48.5% in June. S&P Global projects a 0.5% increase of chemical production in North America in 2024. The International Data Corporation, IDC, expects global notebook and PC production to return to gross of 5% in 2024 compared to a minus 11% in 2023. For smartphone shipments in 2024, the IDC is forecasting growth of 3.5% compared to a 4% decline in 2023. There was no impact from scope on our year-on-year sales as the acquisition of Lucas Meyer Cosmetics offset the divestment of the Quads business. Moving on to our performance by geography. Sales in the Americas declined by 1% organically, where strong growth in Care Chemicals and a slight improvement in Adsorbents & Additives were offset by lower sales in Catalysts. In Europe, Middle East and Africa, sales were flat organically versus the second quarter 2023, with volumes up in all business units compensating for lower pricing in Care Chemicals and Absorbents & Additives. Pricing in Catalysts was flat. Sales in Asia Pacific were down 8% organically. In China, sales were down 6% organically as the project cycle-driven decline in Catalysts more than offset strong double-digit growth in Care Chemicals and Absorbents & Additives, the latter benefiting from the new flame retardant plant as customer qualification progressed. In terms of profitability, reported EBITDA in the second quarter decreased by 5% year-on-year to CHF 166 million. Last year's figure was positively impacted by CHF 62 million gain from the Quats disposal. Excluding this gain, the underlying EBITDA increased by 47% with a margin of 15.7%, over 500 basis points higher than the prior year's underlying margin of 10.4%. This improvement was supported by growth in Care Chemicals and Absorbents & Additives, which drove operating leverage as we continued to execute on our performance improvement programs, delivering CHF 9 million in the second quarter, a 10% decline in raw materials and an improvement of CHF 8 million in the negative operational impact from the sunliquid bioethanol activities also contributed to the positive margin development. Moving on to our strategic priorities. On April 2, 2024, we completed the acquisition of Lucas Meyer Cosmetics. With this acquisition, we are taking another significant step forward in our purpose-led growth strategy, further strengthening our position as a true specialty chemicals company. We are pleased to confirm that the integration and business combination remains well on track. The second quarter 2024 operational performance of Lucas Meyer Cosmetics was in line with our business plan with CHF 23 million despite the challenging environment. Together with our new team members, we are excited for the growth opportunities that lie ahead as we combine our Personal Care ingredients portfolio with Lucas Meyer Cosmetics to leverage a leading position in the high-value cosmetic ingredients space. In the second quarter, we also saw several key developments related to sunliquid. The operational restructuring and downsizing are well on track. We have reached an agreement to sell the Podari plant assets. We sold our Straubing demonstration plant. We signed a severance agreement for the Planic site and successfully terminated multiple contractual relationships. Given these developments, we now expect the financial impact to be CHF 20 million lower than originally anticipated. We continued to deliver on our performance improvement progress with CHF 9 million savings achieved in the second quarter. We are well on track to achieve our increased savings target of CHF 175 million by 2025. Clariant's purpose-led growth strategy reflects our ambition to create value with inoperative chemistry and a focus on sustainability putting our customers, employees and the planet at center of all our activities. Our talented people turned this ambition into action with exciting, innovative solutions as highlighted here. The growing concern over the environmental and health impacts of PFAS chemicals, particularly PTFE, will drive a significant shift in the coatings and packaging industries. Over the last 18 months, we have been launching a comprehensive portfolio of PTFE-free solutions for metal coatings, inks, and plastic packaging applications. Our new offerings provide market-ready solutions that match the performance of their PTFE-containing predecessors while enhancing sustainability. Most recently, in June, we successfully launched a PTFE-free processing aid for packaging polymers at Chinaplas in Shanghai. These PFAS 3 editors contain no inorganic content or silicon components and preserve high performance while meeting current and anticipated regulatory requirements. With that, I now hand over to Bill for further details on our business performance in the second quarter and our group performance in the first half.
Bill Collins: Thank you, Conrad, and good afternoon, everyone. I will now discuss our second quarter development by business unit, starting with Care Chemicals. Care Chemical sales increased by 3% organically in local currency and by 4%, including Scope. Volumes increased by 7%, driven by industrial applications, Personal & Home Care, Oil Services and Mining Solutions, offsetting declines in Crop Solutions and Base Chemicals. Sequentially, volumes were lower following the end of the aviation season. Pricing was 4% lower year-on-year, primarily due to formula-based adjustments linked to raw material prices. Sequentially, pricing was flat. By segment, we recorded strong double-digit organic growth in Industrial Applications and mid-single-digit growth in Personal & Home Care, Oil Services and Mining Solutions. Base Chemicals and Crop Solutions both declined double-digit. Reported EBITDA of CHF 98 million resulted in a 17.3% margin versus 24.5% in the same period last year when the margin was positively impacted by the gain from the Quats disposal. Excluding this, EBITDA before exceptional items was CHF 100 million with a corresponding margin of 17.7% versus 14.2% in Q2 2023. The strong profitability development was supported by the positive impact of volume growth on operating leverage and lower raw material costs. Now I will provide a more detailed update on the acquisition of Lucas Meyer Cosmetics. We are pleased that the integration and business combination is well on track. As Conrad mentioned, performance of CHF 23 million sales in Q2 was on track with our business plan. In particular, Lucas Meyer Cosmetics recorded good performance in China and with and with indie brands while business was softer in Europe some order shifts to Q3. Underlying profitability was also as expected before the impact of IFRS-related inventory revaluation which negatively impacted profitability by around CHF 5 million. We expect a similar impact in Q3. In the second quarter, we booked CHF 464 million in goodwill, CHF 299 million of intangible assets and CHF 3 million of direct transaction costs. Finally, we successfully refinanced our acquisition bridge facility, adding substantially lower interest rate than originally expected via a dual-tranche senior unsecured bond and certificate of indebtedness. Catalysts sales declined by 18% in local currency and 20% in Swiss francs against an exceptionally strong comparison base. Volumes declined by 18% versus the prior year due to lower new build activities and prolonged refill cycles while pricing was flat in all segments. Sales declined in all segments, the most pronounced being Specialties, which recorded a mid-20s percentage range -- rate decrease. Sequentially, sales in Catalysts increased by 16% in local currency as volumes have picked up. Regional dynamics were driven by the project cycles related to new build activities and the refill business. Volume increases in the Europe, Middle East and Africa region were offset by larger declines in Asia and the Americas. In the quarter, reported EBITDA margin increased to 19.8% and mainly due to CHF 18 million improvement in the negative impact from sunliquid and flat pricing in a deflationary environment. EBITDA before exceptional items was CHF 41 million, resulting in a margin of 18.5% versus 18.4% in the prior year. When excluding operational and exceptional effects relating to sunliquid, Catalysts EBITDA margin in Q2 2024 was 19.5% compared to 21.3% in the prior year period when sales were significantly higher. On a sequential basis, excluding the sunliquid impact, margin increased from 16.1% in Q1 due to the pickup in volumes. On sunliquid, we made significant progress in executing on the closure of the plant and downsizing of related activities. As Conrad mentioned, we reached an agreement with International Chemical Investors Group to sell the Podari plant assets for €9.7 million in cash at closing. We also sold our Straubing assets for €1.0 million, signed a separate agreement for the Planneg site and terminated multiple contractual relationships. In the quarter, the operational impact was negative CHF 2 million brings, lower than the CHF 5 million negative impact recorded in Q1 2024. Progress outlined resulted in an overall restructuring below budgeted costs and thus allow the release of some provisions. We now expect a lower negative operational impact of approximately CHF 10 million compared to up to CHF 15 million previously. Total exceptional items are expected to be up to negative CHF 15 million from CHF 30 million previously and cash outflow between CHF 80 million CHF 100 million compared to CHF 110 to CHF 140 million previously expected. Moving to Adsorbents & Additives. Sales increased by 2% in local currency, with volumes up 5%, while pricing decreased by 3%. Sequentially, sales in the business unit increased by 7% in local currency, driven by increased volumes while pricing was stable. By segment, Absorbents sales declined by a low single-digit percentage as both price and volume were slightly lower. In the Additives segment, sales increased by a low-teens percentage rate due to strong volume growth as key end markets showed some improvement against the prior year. We also attracted strong interest in our new flame retardant facility in Daya Bay with many target customers qualifying the plant and its material. Pricing in the segment was slightly negative Reported EBITDA margin increased to 16.7% compared to 6.8% in the second quarter of 2023. Profitability levels reflect the increased volumes in Additives, which supported by organizational structure improvements implemented over the last 12 months resulted in significant operating leverage. Deflationary raw material and energy prices also contributed positively. EBITDA margin before exceptional items was 16.0% versus 9.5% in the prior year. We delivered cost savings of CHF 9 million in the second quarter from our performance improvement programs. We remain on track to deliver our increased savings target of CHF 175 million. Thus far, savings of CHF 155 million or just under 90% have been realized from efficiency and rightsizing measures as well as the initial savings from the implementation of our new operating model. For this year, we expect to achieve savings of CHF 32 million, bringing total cost savings to CHF 167 million by then. Let's now move on to cover the first year, half year half year financials. In the first 2024, sales were CHF 2.07 billion, declining by 7% in local currency, 5% of which was organic. This was mainly attributable to the decline in Catalysts versus the very strong comparable base last year. Pricing had a negative impact of 4%, while volumes were down 1%. Selling, general and administrative costs increased by 12% versus the prior year due to disposal proceeds in the first half of 2023, the integration of Lucas Meyer Cosmetics and partially offset by the benefits from our performance improvement programs. Group reported EBITDA increased by 1% to CHF 339 million against the prior year when we recorded the gain from the Quats disposal. Despite the absolute decline, the corresponding margin increased to 16.4% from 15.0% supported by lower raw material and energy costs and cost savings from our performance improvement programs. The CHF 16 million improvement in the negative operational impact from the sunliquid bioethanol activities also contributed to the improvement. In the first half year 2024, the net result from continuing operations was CHF 176 million, decreasing by 23% year-on-year, predominantly due to the gain from the Quats disposal and positive tax income in H1 2023. The cash generated from operating activities for the group increased to CHF 112 million from CHF 78 million as a result of higher earnings. The last 12 months free cash flow conversion increased to 42% from 36% reported at the end of 2023. Group net debt increased to CHF 1.644 billion from CHF 755 million recorded at the end of 2023, largely due to the acquisition of Lucas Meyer Cosmetics. The resulting net debt-to-EBITDA ratio stood at 2.7 times at the end of the quarter. And with this, I close my remarks and hand back to Conrad.
Conrad Keijzer: Thank you, Bill. Let me conclude with the outlook, starting with 2024. While we see a continued easing of the inflationary environment, we see no significant economic recovery in 2024 with macroeconomic uncertainties and risks remaining. As of June 2024, the manufacturing PMI of the key regions, Europe, 45.6; US 48.5; and China, 49.5 are now all below 50, indicating a relatively weak outlook for industrial production for the second half of the year. We now expect flat to low single-digit percent sales growth in local currency as growth in Care Chemicals, including the impact of the acquisition of Lucas Meyer Cosmetics and in Absorbents and Additives is expected to compensate for second half year uncertainties in the Catalysts recovery phasing while we see the positive long-term trends for Catalysts remain unchanged. On profitability, we have increased our full year reported EBITDA margin guidance by 100 basis points to around 16%. Half of this improvement is supported by the strong performance in the first half of the year and other half related to the reduced total sunliquid impact. We will continue to focus on defending pricing in a deflationary raw material environment, and as mentioned, expect ongoing cost benefits from our performance improvement program of CHF32 million this year. Moving to our medium-term outlook. As end markets recover and growth normalizes over the next two to three years, we are well positioned and remain confident that we will deliver on our medium-term targets. We also confirm our expectation that 2025 will be a year of solid progress towards these targets with continued growth and profitability improvement. Finally, I'm pleased to announce that we will be holding an Investor Day on November 4, 2024. This in-person event will take place at the Andaz Hotel in London, and you will hear from myself and Bill as well as Clariant's Business Unit Presidents. We are looking forward to seeing you there. With that, I now turn the call back over to you, Andreas.
Andreas Schwarzwaelder: Thank you, Conrad, and thank you, Bill. Ladies and gentlemen, we will now take your questions. We will kindly ask that you please limit the number of questions to two, thus providing more participants the opportunity to ask a question. Thank you for your understanding. We will now open the line for questions. Sandra, please go ahead.
Operator: We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Jonathan Chung from Morgan Stanley (NYSE:MS). Please go ahead.
Q – Jonathan Chung: Hi. Thanks for taking my question. I've got two, please. The first one is on your guidance. So you raised your reported margins outlook to 16% from 15%. But in your Slide 20, you keep your 25% margin target unchanged. Just wondering what headwinds do you see for 2025 that led you to increase margin target for this year, but not next year? And also related to this one, I understand the 16% is the reported margin. I think in your Q1 communication, you also got around 16% target on an adjusted basis. Could you comment on what you expect for 2024 margins on an adjusted basis? So, that's my first question. My second question is on your Additives margins. I think you mentioned better volumes and operating leverage and also efficiency program. But when I looked at your Q1 margins, it is down sequentially around 300 basis points. Could you unpack some of the moving parts here and just give us a bit more color on why the margin is down sequentially? And what do you see into sort of Q3 and second half? Thank you.
Conrad Keijzer: Yes. Sure, Jonathan, thanks for your question. So, on the guide, we increased it from a reported EBITDA of 15% to 16%. If you -- basically your first question, and I'll let Bill comment a little bit more on the moving parts here, but if you look at the guide for 2025, yes, that's unchanged. We're still expecting a further pickup to 17% to 18% EBITDA margins. The building blocks basically are unchanged for 2025, but we actually have delivered some of that earlier than expected. But basically, the building blocks are unchanged. So no need for us at this moment to basically change the 17% to 18% margin. It's not that we see new or additional headwinds. Maybe Bill, you could give a bit more flavor then I'll comment on the Additives margin pickup after that.
Bill Collins: Yes, I think just to echo on what Conrad said, we still feel very comfortable with the 17% to 18%. I mean, some of the kind of self-help items, the adjusting items that we had mentioned in Q1 for the 2025 guidance, some of those have been accelerated. So, we were able to pull some of that benefit into 2024. So, overall, those self-help measures, whether it's completion of our cost improvement programs, a procurement program that we have ongoing actually yielding quite some benefits even this year already, those have been accelerated and we then will continue to see the development in terms of the full impact of Lucas Meyer Cosmetics. As absence, as is what I'm looking for, the full absence of Biofuels in 2025. So, we're very much in line and I think on track for that 17% to 18%.
Conrad Keijzer: Yes. Then maybe some further comments on the pickup in margins in Additives. And I guess, underlying, you're also asking how sustainable are these improvements? So, we were very pleased with the performance of the Additives business in the second quarter. As you saw in the numbers, we saw an increase in EBITDA margin from 6.8% to 16.7%, which is basically driven by the elements that you mentioned and I would also add raw materials. So, yes, this is driven by a pickup in volume. This is driven by a significant cost takeout in the business, and that's both SG&A as well as supply chain costs, but it's also driven by lower raw materials. So, if you sort of look Q2 versus Q1, it is -- Q1 was a comparison for Additives versus a very strong prior year. Q2, I think, is a much more realistic year-on-year comparison that we're seeing there, and we see basically a double-digit pickup in volume, which sits very much if you look in Additives, not only in Coatings and Adhesives, but we're also seeing actually flame retardants now picking up, especially with the fill of our new plants in China.
Jonathan Chung: Sorry, can I just follow up on your -- the adjusted EBITDA margins guide. So in Q1, you guided to around 16%, excluding some liquid impact for 2024. Any sort of comment based on the current new guidance we reported?
Conrad Keijzer: Problems into guidance – the reported EBITDA guidance.
Bill Collins: Yes. Well, you mentioned an adjusted EBITDA figure. I mean, what we were actually referring to is a figure that is without sunliquid. So we had said previously, that on a 2024 basis, we would be at around 16% without the sunliquid impact. And right now, we would make estimate that without sunliquid, we're around 16.5%. So again, the move from 16.5% to 17% for 2025 is very plausible.
Jonathan Chung: Okay. Thank you.
Operator: The next question comes from Christian Faitz from Kepler Cheuvreux. Please go ahead.
Christian Faitz: Yes. Good afternoon, everybody. Two questions, please. First of all, would you believe that demand from agrochemical makers is coming back in H2 as their destocking should be over at some point during the next two quarters? And second question for Bill. Can you give us some guidance on your annualized interest rate expenses now that Lucas Meyer is acquired and financed? Thank you.
Conrad Keijzer: Yes. Okay. Christian, on your question on agro and Bill will obviously then comment on the interest rates. Yes, in terms of the demand pickup in agro, and maybe first, sort of, a broader comment on agro. The volumes have been weak. This has been in H1 still a level of destocking. But I think we should also look at it that basically crop prices are now down to a three-year low. So if you look at the weather conditions, they've actually been quite good. So there was actually sufficient humidity, I would say, in EMEA and in North America. That is also partly the El Niño effect, which actually is causing draught in Asia, but that's where we have much less business. So I think the conditions -- the weather conditions for crop have been good, but what is driving volumes down, to some extent, is the low crop prices where then basically farmers are cutting back on crop protection as well as fertilizers. So as far as your question in terms of the pickup in the second half, we don't see an immediate recovery in crop and food prices. But what we are seeing at some point is that this destocking really should be over. So this is more back end. This not so much yet in the numbers in Q3, if we look at our order books, but it's fair to say that the destocking really is largely behind us and we should see some level of pickup.
Christian Faitz: Thanks.
Bill Collins: Actually, then on the interest rate topic, Christian, I'm actually really glad you brought that up because it's something we're actually quite proud of, especially recently. I know that there were some concerns when we did the Lucas Meyer Cosmetics bridge loan that the interest rate was relatively high. But we have managed to do the takeout financing for that with basically, as I mentioned in the opening comments, CHF 350 million dual tranche senior bond which is around 2.5%. And then about $500 million of euro-denominated certificates of deposit, which are around 4.9%, which didn't give us about a blended rate of 3.8%. So that is much, much lower than what was anticipated actually at the time of announcement of Lucas Meyer Cosmetics over across the entire debt portfolio, we're going to probably be a little under the 3% just because of prior tranches of debt that we had taken on at lower interest rates. But we're really, really quite happy with how that financing scenario worked out. Thanks for asking.
Christian Faitz: Okay. Great. Thanks very much both.
Operator: The next question comes from Katie Richards from Berenberg. Please go ahead.
Katie Richards: Hello. Thank you for taking my question. My first question is on the corporate line. If I'm correct, it has marginally edged up since Q1. Is there a noteworthy reason for this? And would this quarter be representative of the rest the year? And my second question is on Catalysts. Obviously, we've seen a large decline in Catalysts volumes this quarter, which consensus is largely expected. So there have been tentative signs of improvement recently – recently, namely, global utilization rates have been marginally coming up since the beginning of the year. So do you see the volumes have bottomed in Q2? Or do you expect these headwinds this to a little while longer?
Conrad Keijzer: Bill, why don't you take the first? I'll respond on the Catalysts one.
Bill Collins: Katie, well spotted on the corporate line, you're right. I mean, we did see an increase in corporate costs between Q1 and Q2. What you see in Q2, which is only slightly above where we were Q2 last year, we have our half year result accrual updates, which is probably the biggest item that lends some variability from one quarter to the next. So like I said, versus same quarter 2023, we're only slightly up. But I would probably use -- I would use that CHF 19 million, CHF 20 million is more of a normalized framework going forward than the CHF 11 million that we saw in Q1, which was impacted by some other adjustments.
Conrad Keijzer: Okay. Yes. So Katie, on your question on Catalysts and the weakness that we're seeing in the quarter and actually in H1. So first of all, we have guided for weakness in Catalysts. So what we're seeing here is the biggest reductions in orders coming in are in the new build area. So we have seen an unprecedented amount of new build plants, particularly in China in recent years. We benefited from that with our CATOFIN business, our propane propylene catalyst but also, for example, in the specialties segment with Catalyst for new builds maleic anhydride plants in China. So if you look at our current run rates for new build, it's roughly half of what it historically has been. And maybe to give a bit of color here, historically, new build was about was about one-third of our business and refill business was about two-thirds. We now have seen the new build to drop to, let's say, roughly 15% of our revenue. So we do see that slowdown. We did guide for that. As far as the refill business, you're right, this is where catalysts are consumed by our customers in their chemical production. And when operating rates are lower, what you see is that the refill cycle gets longer. So it takes longer and later for these orders to come in. And we are seeing now the delayed impact of the low operating rates in chemical industry from last year, especially in Europe. What we're expecting is for new builds not to pick up quickly, but we are expecting actually a solid return of our refill business at some point in time. And for next year, we're targeting growth again in our Catalysts business.
Operator: We take the next question from Ranulf Orr from Citi. Please go ahead.
Ranulf Orr: Hi there. Thanks for taking the questions. To continue on Catalysts for a second, if that's all right, sort of struggling to understand the change in communication despite what you said so far. I mean, at Q1, it felt like everything was fine and things were going okay for the business for the rest of the year. You previously talked about a very long order book for the division 9 months or so and then suddenly it seems things have deteriorated quite significantly for you to reference such uncertainty in the outlook. So any further detail would be appreciated in understanding why that is not going as well as it appeared to be. Second question is just on the guidance. I mean, to me, it appears pretty conservative. On my estimates, the sort of the adjusted EBITDA guide is about CHF 700 million for the year. You did basically CHF 350 million in the first half. Catalysts should be sequentially better in the second half. A&A looks like it's getting better in the second half. Lucas Meyer should offset the strong deicing business in Q1. So maybe that's flatter. So what are we missing? Why is second half EBITDA not better than first? That would be my two. Thank you.
Conrad Keijzer: Okay. Ranulf, I'll let Bill comment with some detail on the guide. I think you did have most of the elements there, but I'm sure Bill will add a few things there. As far as Catalysts, so if I understand your question correctly, is what has happened and why is the outlook deteriorating, so if you basically look at the Catalyst business, we're not saying that we have certainly a very problematic outlook for Catalysts. We have adjusted the outlook, as you will have seen basically also our speech. So we were previously guiding for mid-single-digit decline this year. Now what we're saying is mid to high single-digit decline. Now what this is, is a delay in the refill business. So the refill business is there. It is actually typically a reliable piece of business. I mean you will have to refill the reactors with catalysts at some point in time. But there is actually a direct link to operating rates. And if you reflect on it last year, we had actually weak operating rates in the chemical industry, especially in Europe, but to some extent also in the United States. And in China, we have some overcapacity. We have still good volumes, but also lower operating rates. If you look what has actually happened in the first half and if you specifically look at operating rates, in Europe, we're still at a low level. So the overall average for chemical plants in Europe is sitting at a roughly 17% operating rate. So it has not picked up yet. We are expecting this to pick up. We are expecting also, broadly speaking, growth to pick up in Chemicals. But what really is needed basically durable goods spending -- consumer spending on durable goods to pick up again. So you still see right now industrial production rates negative in Europe, fairly flat in the U.S. and it's only strong in China where it's basically even outperforming GDP. So it's not that we see a major deterioration. What we're seeing is weaker new builds as we guided for and a delay in refill, but it will come back. Maybe, Bill, you could comment sort of on the third one.
Bill Collins: Yes. Ranulf, thanks for the question. Let me start by just reiterating a few numbers. So in the first half of this year, we were around 16.4% reported EBITDA margin. What we've done now is increase our guidance to 16%. So you're right, that does imply a slightly lower reported EBITDA margin in the second half of the year. What I would start by saying, though, is that if you look at the performance of the underlying businesses, so most notably the EBITDA before exceptional items, that is actually consistent first half versus second half. So we're looking at a EBITDA by around 16.7%, 16.8% in the first half and the second half. The part that is probably missing for you are the expected exceptional costs that we will have in the second half of the year, specifically related to the closure of biofuels and of Lucas Meyer integration. And both of those amounts are very much as previously anticipated, it's just that they were and are second half-loaded. And that's what is the main driver between what you see as kind of the first half EBITDA figure and the second half EBITDA figure.
Ranulf Orr: Right. Okay. Thanks.
Operator: The next question comes from Chetan Udeshi from JPMorgan (NYSE:JPM). Please go ahead.
Chetan Udeshi: Yes. Hi. Thanks. I think the first question I had was on Care Chemicals performance. When I compare the second quarter numbers to first quarter, it seems your top line is down somewhere between CHF 15 million to CHF 20 million sequentially, but your earnings is down more than 20% sequentially. Now I understand there is a CHF 5 million impact from BPA, but still, why is the drop-through of lower revenue so much higher? It's almost 100% on EBITDA in the second quarter when I compare to Q1. Is there something specific going on? Is it net pricing maybe not as good as was the case in Q1. But some color there will be useful. And maybe can you just remind us, and apologies if this was already mentioned by you, but just wondering to get a sense of what you actually see by your different business segments as we look into second -- sorry, third quarter trajectory versus Q2? I mean, do you see anything, which is getting worse, anything better especially given that you also have some exposure to autos in your Adsorbents & Additives business, and clearly, there has been some concern around autos more recently. Thank you.
Conrad Keijzer: Yes, Chetan, thanks for your questions. I'll let Bill comment in a bit more detail on the Q1 versus Q2 in Care Chemicals. I'll answer your question on sort of the broader outlook for the different segments. Let me start by saying that, yes, overall in Q2, we saw flat volumes. But obviously, we are extremely pleased with the 7% growth in volume that we saw in Care Chemicals. We were very pleased with the 5% volume growth that we saw in Additives & Adsorbents. And based on our analysis, the 7% volume growth in Care Chemicals clearly is better than what the overall markets are doing in that sector, and likewise, the 5% for Additives & Adsorbents. It was unfortunately compensated all by the 18%, 1-8 percent, decline in volumes in catalyst. If you look at the outlook for these segments in the coming months, what we are seeing is actually also quarter-to-quarter. We see the pickup clearly in Additives. We're very pleased with that. That's a combination of -- if you look at our additives for Coatings, additives for Adhesives, that segment is picking up. But the strongest pickup we're seeing in additives for Plastics, and here, the big product for us is flame retardant. And I think this is actually, partly the fact that we are actually regaining market share in China for flame retardants. We've started up the new plant. We are working through a lot of approvals with customers and the business is actually coming in, as we speak, in the coming quarters. Underlying, there's also a much more positive outlook. If you look, for example, electronic products, computers, laptops, I mentioned that in the speech, so we're seeing a mid-single-digit growth there when actually that business was down like 10%, 11% last year. We see a positive outlook for cell phones. So that's also a very positive. Last year, it was down mid-single-digits. So if you look more broadly speaking about our segments, what you see is a switch back in consumer spending from services to, let's say, semi-durables, like the examples that I just gave, the real switch back to durable goods. We still anticipate that to happen, but we need the interest rate cuts, two cuts in the US, one in Europe to really see the recovery in housing and construction markets, which will then lead to increased durable goods and people buying new appliances, new furniture and that is obviously where a lot of our products go. So we continue to feel positive about our outlook for next year, the 3% to 5% growth, and then, yes, also the underlying profitability to 17%, 18%. Maybe Bill, you could give a bit of color on the Q1, Q2 Care Chemicals?
Bill Collins: Gladly, though, Chetan, though it's going to be a fairly short answer. I mean, it's really all aviation. We had a very, very strong quarter in Q1 around the aviation business. We had good volumes. We had excellent margins, which, as you know, that the aviation business is seasonal. So we had a great Q1, but that goes away in Q2. Some of the impact was mitigated by the now inclusion Lucas Meyer Cosmetics, but really the big difference in Q1 versus Q2 on Care Chemicals is all aviation.
Chetan Udeshi: Understood. Thank you.
Operator: The next question comes from Andreas Heine from Stifel. Please go ahead.
Andreas Heine: Yes. Thank you. Two questions, if I may. One is again on Catalysts. I'd like to understand a little bit more on how visible it is for you that 2025 will be better? So you've revised your outlook from last quarter to this year as your order book in the refill business is not expanding as you are wishing for. What gives you then the confidence that next year will be better? It cannot be your order book and it is not the new build. So is that, let's say, your experience how long it will take if operating rates pick up? Or what is that based on? That's the first question. And second, Adsorbents was not touched that much on, but usually you report very consistently, very resilient even in very difficult times an increase volume and demand. This was different this time. And you can outline why Absorbents was weaker this quarter and how that looks like for the second half?
Conrad Keijzer: Yeah. Sure, Andreas. Thanks for your questions. So, yeah, maybe even a bit further granularity on Catalysts. There were already a few questions asked about it, but yeah. So if you look at the order booking Catalysts, typically, we have a visibility of, let's say, six to nine months. Now that is a combination of new builds and actually refill business. What I will say is what we see now is that the business on new build is down. I mentioned a figure of roughly 15% now of the overall business being new build. That does mean automatically that we see a bit more volatility in the order book. So refill business, refill orders don't come in with the same lead time as new build. I mean to give you a flavor for a new plant, we can have lead times anywhere from 12 to even 18 months. So it is – our customers work on a certain schedule for a ramp-up. And then at some point in time, they order the catalyst for a new plant. So if you look at the order book, it is more reflective now of a refill business. So what we are seeing is that we see a delay right now. And the question that we're asking all our customers is, well, how much can you delay the order. And at some point, these will come back in. They will come back in. I mean, that will happen. So that's certainly we have. However, it is more back-end loaded than we previously thought and that's why we changed the guide from mid-single now to high single – mid to high single-digit decline this year in Catalysts. To your second question on Absorbents, you're absolutely right. This is one of the most stable businesses that we actually have. What you see is there's basically the foundry part of it, which is a little bit more volatile, but there is also the filtration part of it for edible oils, which is typically very stable. And then there's the growth engine, which is renewable fuels, which is increasing actually in share. So this is primarily renewable diesel in Europe and renewable diesel in the US. But over time, you will see a big shift to sustainable aviation fuel. It's well-spotted. Our Absorbents business was actually down, and this is something that we have very strong visibility on, because it is actually related to a large renewable diesel clients that we have in the United States that actually was shut down for the entire quarter, because of interesting enough, because of a catalyst problem and -- but it wasn't our catalyst. But they're back up and running. So we should see a solid recovery on the Absorbents business. And I will also say that we're starting up the new activation line in the fourth quarter for our Absorbents business, which will be another growth driver for that business moving forward.
Andreas Heine: Thanks.
Operator: The next question comes from Tristan Lamotte from Deutsche Bank (ETR:DBKGn). Please go ahead.
Tristan Lamotte: Hi. Thanks for taking my question. Two, please. The first on flame retardants. Could you maybe let us know how full the capacity is at the moment and how much capacity there is to fill from here? Or how much incremental sales we could expect if volume picks up considerably? And when would you expect to need to invest in new capacity for flame retardants? And then the second question, a couple of follow-ups on the Care Chemicals points. You gave Lucas Meyer sales in Q2, I wasn't sure if you also gave the EBITDA. Did Lucas Meyer do EBITDA, CHF35 million run rates in Q2, or was it slightly below? And then maybe you could also give an indication of a normal EBITDA for Deicing, which I think must have outperformed in Q1. And maybe there was about a CHF30 million change quarter-on-quarter that. So what should we expect for a normal year? Thanks.
Conrad Keijzer: Okay, Tristan. Let me start with your final two questions, because they're relatively easy to answer, but we're actually not disclosing the EBITDA margins at a segment level. So unfortunately, I can't give you those numbers for obviously also of competitive reasons. But you can be sure deicing is clearly accretive in terms of their EBITDA margin. In terms of the Lucas Meyer question that you asked, we did disclose a revenue number for Lucas Meyer in the quarter. I think it was CHF23 million, Just to give you an idea, if you basically translate it to U.S. dollars and then look at what is the annual run rate right now, we actually just -- we're doing that calculation here a week back. So we're actually sitting at US$108 million full year outlook, which is a very positive one if you, yes, recognize that we bought that business when it was actually just under US$100 million. So it is running at a very strong growth rate, a consistent growth rate of roughly 10% right now in terms of the CAGR. In terms of margins, for Lucas Meyer, also no change from the prior reporting, it's in the high-40s and that's the EBITDA margin.
Bill Collins: If I can, add just one thing on that Tristan. So as Conrad said, both the sales and the margins of Lucas Myer Cosmetics are coming in just bang on where we expected them to be. So we're very happy with that. But just to reiterate, we did have this CHF5 million adjustment on the revaluation of acquired inventories. For IFRS, that was about a CHF5 million impacts in Q2, and we're expecting another CHF5 million impact in Q3, then it's done.
Conrad Keijzer: Yeah. Maybe finally, your question on flame retardants, we have actually a significant capacity. Maybe a brief look in the rearview mirror, what happens during pandemic is we did admittedly struggle to supply some of our customers, particularly in China for electronics products for electric vehicles. We did struggle to supply them from Europe, where we previously only have all our capacity at our contact side. So opening up the new line actually last year, gave us a very strong footprint locally in China. And we, first of all, said we need to regain quickly the share that we lost. We see a very positive momentum right now with sort of the 10% CAGR right now that we saw in second quarter that is actually above overall market for flame retardants in that region. There's plenty of capacity right now, so no CapEx ahead of us. So short-term, it's very much a game of completely reestablishing us -- our position, which was a strong position with electric vehicles production in China. And then actually it is also benefiting from growth in data centers more broadly from electrification, what you see as a trend. And finally, and this is the mid-to-longer term, there will be a shift in the market. We're now actually only competing flame retardants are bromine-based, brominated products. We actually have a halogen-free product range, and if when finally we see new reach legislation in Europe kicking in, that will be a big positive for this business, because we are extremely well positioned with halogen-free flame retardants.
Tristan Lamotte: Great. Thank you.
Operator: The next question comes from Georgina Fraser from GS. Please go ahead.
Georgina Fraser: Hi. Thanks so much. Hi, Conrad. Hi, Bill.
Conrad Keijzer: Hi.
Georgina Fraser: Hello. I just got one left. And it's just, Bill, if you could talk a little bit about what's driven this very impressive step-up in cash conversion that that we've seen in the second quarter. If you can remind us about any seasonality we might want to consider for a continuation of that into the second half of the year. And then as I look at your balance sheet in light of good cash performance, if you can remind us about your leverage targets and preferred uses for cash, because that's looking quite good into 2025. Thank you.
Bill Collins: Thank you, Georgina. So actually, on cash conversion, there's no magic sauce. It's a lot of the same things that we've talked about previously, really pushing for as much of a positive impact from the operational cash flow as we can get, which we clearly saw benefit of that in Q2. Looking at the working capital, I mean there's quite a lot of things that we've done within the company to increase the visibility on inventories, on receivables, on payables and that is definitely moving in -- in the right direction. In fact, this quarter, we have had a smaller increase in net working capital than what we saw at the same time last year. So that certainly helps the free cash flow. And then, finally, on CapEx. I mean, we've commented before that the view of the CapEx in the old days was pretty much everybody gets what they want. We spend a lot of money on assets that don't really add profitability and that's not really the case anymore. I mean, we really try to focus on those projects that are bringing something positive to the bottom line. And we're also focusing on, in fact, creating a bit of tension across the business units to make their -- feel like there's a bit of competition for the available cash that we have. So that has had a huge impact. And I think that's probably why we're sitting where we are. With regard to the leverage targets, it is certainly our intent post-Lucas Meyer acquisition to deleverage. We would like to see that get down below two again. And I am confident that we'll make that happen. I mean, we still have ambition around bolt-on acquisitions. And as soon as we can get this delevered a little bit, then we'll have a balance sheet as strong we had last year when we did Lucas Meyer Cosmetics.
Georgina Fraser: Great. Thank you, Bill.
Bill Collins: Thanks.
Operator: The next question comes from Thea Badaro from BNP Paribas (OTC:BNPQY). Please go ahead.
Thea Badaro: Yes. Hi. Good afternoon, everyone. Just a quick question from me. Could you quickly talk about your pricing expectations into the second half? More specifically, in which area do you believe you'll have enough leeway to retain the pricing you've earned amid deflation and without necessarily jeopardizing volume?
Conrad Keijzer: Yeah. Yeah, on pricing, I think it's -- first of all, I would like to comment that we are extremely pleased with our pricing performance that we've seen this year. So as a reminder, we were down 3% overall pricing year-on-year in Q2, but that is against a raw material drop of 10% year-on-year in the second quarter. So pricing clearly has been a lever. We have been able to significantly expand our margins, and it's part of the bridge. It's a significant part of the 500 basis point bridge that we see underlying in the second quarter versus prior year. If you sort of look a little bit more granular by business, we are seeing formula-based pricing in Care Chemicals, roughly 40% of the portfolio. So it's primarily in oil and gas. Here, we do need to give some of the raw material reductions back to our clients. That's one of the reasons you see an overall minus 4% on pricing in Care Chemicals. In Adsorbents & Additives, we were actually also slightly down on pricing, that is actually reflecting significant reductions in raw materials, especially that we saw in the Additives business. Catalysts, we were very pleased that we were able to hold pricing flat in an environment where the metals clearly have come down. Now to your question, what are we seeing in the coming quarters, we are seeing a stabilization if you look at pricing on raw materials. And we're even seeing now for the next quarter and Q4 we see slightly sequential increases in our raw material spend from where we are right now. So we are confident that we will be able to pass on raw material prices and we've typically passed on more than what we see in our raw materials bill. This has really been, I think, a very established capability now in the company moving forward as well.
Thea Badaro: That’s helpful. Thank you.
Conrad Keijzer: Thank you.
Operator: The next question comes from Konstantin Wiechert from Badder-Helvea. Please go ahead.
Konstantin Wiechert: Yeah. Hi. Sorry, just maybe a couple of minor ones left. On the crop protection, maybe you could also give some details on whether you expect customers then to maybe also lower prices on the crop protection chemicals after the increases that we've seen over the last years in order to maybe stimulate volumes here? And if so, would that be positive for you due to higher volumes and potentially also some price pass-through clauses or is that in a scenario where you could also become under pressure. And maybe the other one, and I think I just missed that, but maybe if you could comment on that again the volume development in the Care Chemicals on a sequential basis? Thank you.
Conrad Keijzer: Yeah. Thank you, Konstantin, for your two questions, both actually for Care Chemicals. So first, on crop, what we've seen in crop is entirely volume-related. So it would be roughly minus 10% of revenue. It's entirely volume related. We're actually very pleased with our ability to hold prices. We are speced-in here in customer formulations. So if and when volumes come back we discussed about the different underlying drivers, including still some destocking, if and when volumes come back, we will see also solid profitability coming back in. If you look at Care Chemicals more broadly and the sequential volume development, I think, first of all, we obviously need to recognize the inclusion of Lucas Meyer in second quarter, we closed the transaction in April 1 or April 2. So in the second half, we see two quarters of that. But I think what is really positive, if you look at the 7% growth that we saw in volumes is that we are seeing basically across all of these segments in Care Chemicals with the exception of crop and Base Chemicals, we see a broad-based recovery in terms of volumes. Also, actually, if you look at Personal Care, Home Care, so this is a very different dynamic than we saw last year. Last year, we had this so-called inflation shrink where basically the big brands were cutting on their packaging to basically, yes, get basically price increases to you now see the opposite. So, a lot of the large brand owners have shifted their focus on volume. There is like these two-for-one sales going on, not only actually in the U.S. but also in Europe. So, we are seeing actually solid volumes coming through in Care Chemicals. We expect that momentum to continue actually in the quarters ahead.
Konstantin Wiechert: Right. And on the agrochemical question?
Conrad Keijzer: Yes, the agrochemical question, I think I answered that to some extent. So, it is actually entirely volume related the drop in crop protection. So, we've been able to hold our prices really well here. So, for us, if and when volumes come back, we'll see solid profitability coming back for that segment and it's actually accretive for us. It's a very attractive.
Konstantin Wiechert: Thanks. Sorry, if I missed that. Thank you again.
Conrad Keijzer: Yes, thank you.
Operator: Our last question for today comes from Jaideep Pandya from On Field Research. Please go ahead.
Jaideep Pandya: Thanks a lot. I want to ask about -- apologies for this, but I want to ask about your Q4 how you look at it this year, given it's such an important quarter for you. Do we expect a typical seasonality in Catalysts in Q4, i.e., it will be sort of this big quarter? Or do you expect it to be more in sync with Q3 and Q4? And then on the second hand, with regards to deicing, was it just a chain filling from your customers, and therefore, Q4 will compensate for maybe a slower start unless we have a winter storm? Or was it -- that it was cold in Q1, and therefore, if we have even a normal winter, then actually deicing will be fine in Q4? That's my first question. And second question really is on Additives. It's actually the first question I think Jonathan asked about the Q-on-Q margin development. So, it seems like your growth is mainly coming from flame retardants, but the margin uplift or the operational leverage is somewhat lacking a little bit. So, is it that your new customers that maybe you won are negative on the mix or -- versus your previous cycle or previous customers? Or what is it that is holding margins or operating leverage back here in Additives, especially in flame retardants? Thanks a lot.
Conrad Keijzer: Yes. Sure Jaideep. Yes. So, on the last one, the margin uplift in Additives Q1 versus Q2, I think Bill will commented with some granularity there later. So, basically, your question on the deicing and weather and what happens in Q1 and what we expect for Q4 so -- as well as your question on inventory refilling, we didn't see any unusual movements as far as inventory levels. So, the strength that we saw in deicing in Q1 was entirely based on the weather on the one hand, but let's also not forget the margins. So, we actually did see quite some lower pricing on the glycols, some of the raw materials getting into this business and we were able to actually also deliver strong margins. So, yes, what's going to happen in Q4 this is always very difficult to forecast because it is very much weather-related. We're certainly hoping for a strong deicing season, but that is hard to predict. Typically, you need a weather that's high humidity on the one hand and cold on the other side and then that's actually good for our business. Yes, then your second quarter, before I pass it on to Bill, so is on Catalysts and what are we expecting in terms of Q3 versus Q4. Unfortunately, because we don't like that either, but unfortunately, it is very much back end loaded. That is just what we are seeing in our order book right now. So unfortunately, Q3 is still going to be a weak quarter ahead in Catalysts, what we're looking at right now. It is really the pickup is there in Q4. Maybe Bill, you can provide some color on the margins in Additives.
Bill Collins: We'll add to -- so actually, Jaideep, if we go back into the last quarter -- last year, actually, because the volumes were so low, we took a number of actions. One of those actions was to basically put certain capacity basically on a temporary production hold and sell down inventories. And then the other thing that we did in Q3 and Q4 last year was really start to dramatically transform the operation environment that we have within the Additives business. So as you saw us coming out of a relatively low margin base in Q4 of last year and into a much stronger margin base this year, what you saw then is not only the positive impact of some of those operations transformation activities, but also kind of restarting the engine because we had shut down some that capacity in Q4 and we brought it back online in Q1. We had a very strong result in Q1. If I'm looking at the individual segments, I mean, they still performed reasonably well in Q2. So I mean, we're very, very happy with the activities and the actions that have taken place within the Additives business, and we think we're on a very strong trajectory there for improved margin performance.
Jaideep Pandya: Thanks a lot. Just one follow-up. So in Catalysts, should we then expect a very similar Q3 and Q2 development, therefore, in terms of sales and EBITDA?
Conrad Keijzer: Yes. Jaideep, I think that's a fair statement that Q3 will be in line with Q2 and the pickup will be in Q4.
Jaideep Pandya: Thanks a lot.
Conrad Keijzer: Thank you.
Andreas Schwarzwaelder: So ladies and gentlemen, this concludes today's conference call. A transcript of the call will be available on the Clariant website in due course. The Investor Relations team is available for any further questions you may have. We look forward to seeing you in November in London for our Investor Day. And we wish you, and in case you have a holiday season ahead of you, a nice holiday, and then we convene latest with the Q3 results. Thank you once again for joining today, and goodbye.
Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
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