Earnings Transcript for EVK.DE - Q4 Fiscal Year 2020

Tim Lange: Ladies and gentlemen, good afternoon this time to our Q4 earnings conference call on the rainy day and we try to bring some sun into this call at least and Ute and Christian will try to do so, so with that I handle directly to Christian for the short introduction.

Christian Kullmann: One thing is for sure I will try my very best thanks a lot Tim and also very warm welcome from my side and thanks for taking the time to be with us today. First of all I hope you and your families are in good health and managing well both personally and professionally in these persisting difficult times. Today we're reporting a solid performance in to say the least a very unusual year 2020 and I will share with you the strategic progress we've made and Ute will guide and provide you with our financial achievements and we will give you our perspective on 2021 in other words a year in which we are set for growth. Ladies and gentlemen, when I look back at the last year three headlines come to my mind; delivery, quality and progress. First it was another year in which we managed to extend our track record of promise and deliver and this despite the very difficult environment this second is not a coincidence, but harvesting the fruits of the improved portfolio quality we have built over the recent years. Third I'm proud. I am proud to see the progress we have achieved on our strategic path in the last year and at the same time we have set ourselves ambitious targets and we will not stop here. We will continue to work on our strategic agenda with similar speed and consequence also in this year. Now let me give you some more color on each of the three headlines I have provided you with a minute before. I really think, I do not have to elaborate on the macro environment we had to cope within 2020. Global GDP at minus 4% says it all. Thanks to immediate and strict actions taken we were able to protect the health of our employees while still reliably servicing our customers. Consequently we again delivered on our targets. We guided as one of the very few an EBITDA at the midpoint of €1.9 billion already back in May, kept track all year and finally delivered spot on. On free cash flow we even increased our guidance twice and finally significantly overachieved our goal. Also we continue to steadily work on our sustainability targets for example like cutting Co2 emissions by half until 2025. We're fully on track and have already reached a reduction of 44% at year end 2020. This delivery on our targets was only possible thanks to the increased resilience of our portfolio. 95% of our total earnings are generated by the current heart of our portfolio; our three high quality growth divisions. Their growth is supported by two elements on the one hand the high share of sustainable solutions and on the other hand our new product and solutions from our innovation growth fields. Both elements clearly differentiate us in the market and in the offering to our customers. This portfolio quality is reflected in our numbers. Our growth divisions finished the year only and it is worth to repeat it only 3% below the prior year level. During the pandemic we did not refrain from pushing forward our strategic agenda. On the contrary we made good progress across all dimensions. We implemented new our organization to improve the effectiveness of our innovation efforts. We drove forward the integration of [Indiscernible] and on the cultural side, we stood together as one Evonik to navigate the company through the crisis. You could even say that the crisis was to a certain extent a kind of booster for our efforts on the cost side. Last but not least, I would like to highlight an area of progress which often does not get the necessary attention although it has been part of our DNA for long, idea saying since ever. Our advancements on sustainability. Sustainability is deeply embedded into the reason why Evonik exists. For example into our purpose leading beyond chemistry. Thus, we take responsibility for our environmental footprint like reducing our Co2 emissions from Scope 1 to 3 or our absolute and specific energy consumption but for us sustainability is not only a responsibility. Even more so it is an important element of our business model and a growth driver for our businesses. These two aspects responsibility on the one side and profitable growth on the other side are two sides of the same coin. When we talk about sustainability as a growth driver, we talk about our next generation solutions. They are in other words our handprint. The environmental and social benefits in the use of our products and solutions and the outweigh by far our footprint. In 2020, we were able to conclude the sustainability analysis of our entire product portfolio and the results are quite remarkable. 90% of Evonik's products have a positive sustainability benefit. That is at or above the market reference. 35% of our portfolio are even clearly superior, clearly superior to the products of our respected competitors. These applications offer above average growth potential. Our aim is therefore to further increase the sales share generated by the sustainability winners. Therefore we have to find four sustainability focus areas which will target with our next generation solutions. Fight climate change, drive circularity, safeguard ecosystems, ensure health and well-being. On slide 8, you will find one product example for each sustainability focus area. Materials for electric batteries. Products from our strong biotechnology platform like our biosurfactants or drug delivery systems, Messenger RNA is the latest and most prominent delivery technology here and there are many more product examples. Over the next month we will integrate sustainability even deeper into our management processes across all elements of our strategy that means sustainability will become an even more important factor in portfolio management, capital allocation and innovation management. With that I hand over to Ute for the financial perspectives.

Ute Wolf: Thank you Christian and a warm welcome from my side as well. Indeed the consistent execution of our strategic agenda is bearing fruit also on the financial side and our progress on free cash flow is probably the best example. In 2020, we have increased our free cash flow and the cash conversion rate quite substantially and that despite lower EBIT and higher CapEx. The higher CapEx was partly COVID related as we had to cope with some disruptions in material supply chains and implement additional hygienic standards at our construction sites. Also bear in mind that 2020 was the fifth year for our polyamide 12 investment project with a total CapEx volume of well above €400 million. Over the next years we will manage our CapEx volume to a sustainable level of €850 million which will result in further free cash flow potential for the next years. Also for the longer term we have made significant progress on the free cash flow side. Within only three years we managed to double our cash conversion rate. This is quite an achievement and reflects the strong focus we have put on this area not only me as CFO but the whole organization. What are the main structural improvements behind this? Firstly a strict work in capital management. We are holding the networking capital to sales ratio at a very satisfying level of around 16% also in times when sales are decreasing. Secondly strict focus on CapEx optimization. We reduced the level from above €1 billion some years ago to around €900 million currently and we have further potential to go down to the €850 million. Thirdly, our pension cash out benefits from the CTA reimbursement we have started two years ago. This gives us a sustainable relief of more than €100 million per year. These structural improvements will underpin the strong cash conversion level of 40% also for the next years and I am optimistic that we will even achieve some further gradual improvements over the next years. Another very visible result of our progress on the financial efficiency side are our admin costs. You will remember we promised you 200 million of SG&A savings back in 2018. And if you look at our P&L today you will find very visible and tangible savings of 200 million and this is even a net number. We have completed more than 1,000 individual measures across all SG&A functions. Strict project management and regular monitoring on board level were the main success factors for this achievement. We will now make sure that the cost improvements are sustainable. Therefore, we have just completed an SG&A benchmarking with an external consultant to measure the success of our SG&A program. Overall we are broadly in line with peers in most functions but have also identified some areas for further savings potential. We have made good experience with our continuous improvement program OpEx on the operational side. We will now transfer that mechanism to the SG&A side. The target is to fully neutralize factor cost increases on the SG&A side plus some additional net savings on top and we will do this without larger programs or without any larger restructuring costs. Let's now have a look at our operational performance. A main pillar for the proven resilience in 2020 is the division specialty additives with more or less stable earnings and a sustained high margin level of 27%. Across virtually all applications our additives are back to or even above prior level in Q4 and even the lubricant additives which so far were lagging behind the recovery showed a clear recovery trend. Crosslinkers had a strong year also supported by government subsidies in the wind energy sector in China and favorable supply demand picture. Overall I have no doubt that our leading additives portfolio and our strong market and technology positions will continue to be an important pillar for our resilient and attractive growth in the next years. Our second resilience pillar is the division nutrition and care. Nutrition and care earnings are up year-on-year by 20%. This is supported by the robust growth of our end market. We have experienced an unchanged strong demand especially for active ingredients in care or for our pharma polymers. On the efficiency side as well all businesses have structurally lowered their cost base. Examples are the adjust 2020 project in animal nutrition or the [OLIO] 2020 project in care solutions and there's more to come on the cost side. In animal nutrition we observe a growing contribution from solutions for sustainable healthy nutrition like the latest probiotic in tablet form for rapid use via the drinking water system or our GAA product guanamino which supports the energy metabolism of livestock. Smart materials have shown a nice sequential improvement in the second half of the year. Operationally Q4 EBITDA is back to prior year levels. Inorganics for hygiene, personal care and environmental applications are already exceeding prior year levels. Our innovations in 3D printing and membranes for energy efficient gas separation are nearly unaffected by the pandemic and show ongoing strong growth already accounting for combined sales volume of close to €100 million. In the auto related business silica for tires shows a clear sequential recovery and the same applies to PA12. The division performance materials suffered from trough levels in 2020 and we are far from the prior year results. Since November though we record improving demand and corresponding volumes. Additionally, a favorable environment for Butane 1 and Oxo products signal positive prospects for the start in 221. However, MTBE remains under pressure and the recovery in Butadiene seems to be rather temporary and driven by competitor outages. So far from my side. Back to Christian.

Christian Kullmann: Thanks Ute. Ladies and gentlemen let's dive into our full year outlook. The direction is clear, maybe crystal clear. After having proven our resilience in the last year we are set for growth in 2021. With ability has improved but with a pandemic anything than behind us still remains slower than usual. The underlying assumption for our 2021 guidance is a continued and steady micro recovery over the course of the year. Looking at the latest micro indications and our good start into the year this is realistic although not without risk as we adjust at the beginning of the year. Based on the assumption we have set ourselves a clear growth aspiration for the year. We aim to achieve earnings well above 2020 in the range of €2 billion to €2.3 billion. This is not a particularly conservative guidance I would say it is a more realistic one. It is a sign of confidence to the external world and an ambitious aspiration level for the internal organization and as of today I can say that with a pretty good start into the year that is what gives us confidence; confidence to deliver clear year-on-year growth already in the first quarter. The driving force behind that our three growth divisions. The specialty core parts of our portfolio. So this is not only a micro driven commodity recovery. We expect an adjusted EBITDA of at least €550 million for the first quarter despite an already including negative effects from the adverse weather conditions mid-February especially in Germany and in the United States. As Ute indicated the high cash conversion rate achieved in 2020 is not, definitely not a one-hit wonder but a level we want to sustain going forward. Accordingly we guide for a stable cash conversion on the high prior year level of around 40%. Based on the guided higher EBITDA level this translates into a higher absolute cash flow number for 2021. Ladies and gentlemen let me close our session with some saves the dates. Last year has shown very drastically how dynamic and uncertain the environment around us can be. Thus it is of utmost importance to have a clear strategy and to stick to its consistent execution. We will continue to work on our strategic agenda going forward and will continuously involve and adapt it to the changing environment. Therefore, we thought it is a good idea to give you an update on our strategy. So on October, please forgive me, so on October 7, this year my board, colleagues and myself will invite you to condensed capital markets day. On this occasion we will give a strategic update but please do not expect a revolution rather an evolution; an evolution of the successful strategy over the last years plus we will focus on two growth dimensions of our portfolio. First, sustainability and second innovation. I understand that this is still a long time to go and you probably can't wait to get this update from us. So to shorten the waiting time over the first half of this year we will be hosting a division spotlight series. The head of our three growth divisions [Indiscernible] together with colleagues from the management teams are looking forward to highlighting the growth potential of their specific divisions and some of the most promising areas of growth. With that we thank you for your interest and for your time so far and now we are happy to take your questions. Thanks a lot.

Operator: Ladies and gentlemen we will now begin our question-and-answer session. [Operator Instructions] And the first question we received is from Charlie Webb of Morgan Stanley. Your line is now open. So please go ahead.

Charlie Webb: Thank you. Hi Christian, Ute and Tim. Thank you for the time. Three questions for me if I can so first off could you perhaps provide a little bit more detail some of the key building blocks for the guidance range just better on so we can get a better understanding where we sit within that what gets us to the top end of the range, what gets us to the bottom end of the range and perhaps some additional color by division. I know you gave some kind of qualitative comments. Any kind of further thoughts there would be helpful. Second question just on your healthcare business. Recently you put out some I guess ad hoc news around your biolipids business and the opportunity you have with BionTech on the vaccine. Could you provide us perhaps with any kind of details in terms of what that business should contribute in 2021 and what we should expect in the years ahead? How significant could that become given the investment you're making and then finally just I guess tying back in a little bit to the guidance, but what methionine price assumption are you making for 2021 in your guidance range and how is that shaping up? It looks like it's been quite a strong start of the year so just any kind of comments or thoughts on that market as we look through 2021 would be very helpful.

Christian Kullmann: Thanks a lot for your question. Maybe I would try to give you something like an overview about our expectations for 2021 and then Ute would give you some more color and would go into some more details. Let's start like this. Last quarter of the last year most of our businesses have already been back to prior year’s level and it is worthwhile to mention that several of them have done even better so and this trend that is what I could really provide you with is that this trend is still ongoing, this strength is continuing. So in other words and let's keep it very simple it is fair to say that we had a pretty good start into this year and despite the fact that the uncertainty around is somewhat still high we are committed for growth and therefore we have set our sales to gain a higher level of growth in 2021 and having said this Ute will now provide you with some more details about our divisions. Ute?

Ute Wolf: Yes. Absolutely. Thank you very much Christian for introduction. Yes I will discuss a little bit the divisions and then give you an idea what drives or what would drive the EBITDA towards the higher end of the corridor. So maybe that is something you can then work with and we said it several times the visibility is still really limited and the macro environment remains really difficult to predict but again I think there are a lot of positive indicators for growth and this is how we see the world. If we look at specialty additives to start with they had a strong and resilient year in 2020, stable pricing EBITDA really very close to pre-crisis levels. Going forward we see good growth potential across the division for all of the businesses but we should keep in mind that there were some extra positive influences last year for Crosslinkers for instance they had a very strong year 2020 with the specific benefits from the subsidies in China for renewable energy. The government stimulus will be lower this year but of course depending on how strongly Chinese players will then build renewable energy, wind parks and so on of course there is also an upside. We were here on the more realistic side, but of course if the renewable energy in China remains or remains a strong momentum of course there is also upside for this business. So that to give you one example comfort insulation very good year. I think very good prospects. So that is overall why we say we expect earnings around strong prior level. I think the upside here is clearly very much in the renewable energy market in China. We will see how that materializes. I think the rest of the businesses are in good shape and continue their growth strikes. Nutrition and care, the structural trend shows really resilience here in the end markets; healthcare, personal care, even animal nutrition. This will continue in 2021. Of course the division will continue its work on the cost efficiency side. So we will close our German methionine plant by end of March so that is yet to come in our overall P&L just to give you one example. The healthcare mRNA business is one example for further growth. So I think this year that will be a smaller impact as the production of vaccines is just starting and I think there's more to come in the next years and I would like to point out that mRNA is used in many-many other medications as well. So we started for the long time ago in that field where vaccine was not on the horizon yet. So overall nutrition and care is expected to deliver slightly higher earnings. As I said a lot of these businesses are very resilient so not so much fluctuation with the economic development. Smart materials also here many of our products have shown a resilient performance throughout the year if you think of our active oxygen or catalyst business. On the other side we had in our automotive export business like high performance polymer or silica really some decrease last year. Here we see really an improved environment in plate Q3 and of course they are set for strong growth in this year. So there is a very clear upside potential for smart materials in 2021. I think they can also really go to pre-crisis levels so that I think is from the momentum here a very strong upside here. Performance materials of course they suffered the most in 2020 due to the oil price drop, lower volumes and spreads. Now with higher oil prices of course this helps them and they are also very sensitive to economic developmentso the stronger the economic recovery is the stronger and the quicker they come back to their normal levels. That is also something which can or which will influence the overall level and can bring us to the upper end of the range. So that is really the upper end of the range is also would be fueled also by businesses that benefit from economic upswings so are a little bit more volatile now in the positive sense. So this is what we see for 21. I hope I have given you some color how the positioning can be in the range.

Christian Kullmann: I take the next question it is about the mRNA. For me, for us, mRNA is something like a revolution in the pharmaceutical industry and that translates in business terms into tremendous growth options and opportunities and we do have a very strong position in this value chain with our for example with our lipid nanoparticle technology. I would say this mRNA technology can't work, can't heal without our lipid nanoparticle technology because we are something like the ferryman or maybe more a business-wise formulated we are producing the [Indiscernible]. So having said this we do see a sales potential of clear triple digit million in the midterm and so it won't be any kind of surprise for you that having said this we have extended our strategic partnership with BionTech for example and we have started to extend and expand our healthcare facilities down here in Germany. For this year we do expect an attractive growth but already not or maybe we will not yet be able to reach this triple digit level but there is a very attractive opportunity for us and we are keen on making use of it by extending expanding our position by deepening the partnerships for example with BionTech and here it is a promising situation for us. The next question was and for sure and that is what will be true, what holds true at any time and for any time what is a good talk, could it be a good talk a good conference call not talking about the methionine expectations. So I really appreciate this question. What do we see in methionine? The sentiment, the market sentiment has changed started in the last weeks of last year from somewhat long market towards a higher supply security approach of our customers. So from long to becoming more short. This momentum let's call it positive momentum has extended into the first weeks and months of this year. So bringing straight to the point for 2021 we do really expect another solid and successful year for methionine. This positive momentum I have tried to describe and to provide you with that is what we do see for sure for the first half of this year with good demands and a gradually increasing global contract price. Why do I underpin contract price? It is worth to mention ladies and gentlemen that if I look to feed info and they provide you with information that the volatility is high that holds true for spot prices and no doubt that is right but in here we talked about a range of $0.70 but it is totally wrong talking about global contract prices. Here we do talk about the range of give or take roughly around $0.30. So in other words here we talk half of the spot price range. So I guess this was your methionine question. Thanks a lot for your attention.

Charlie Webb: Brilliant. Thanks a lot guys.

Operator: The next question received is from Gunther Zechmann of Bernstein. Your line is now open. Please go ahead.

Gunther Zechmann: Hi good morning, good afternoon rather Christian, Ute and Tim. On your cash flow guidance the midpoint of your earnings outlook that implies a further 10% increase year-over-year which sounds impressive especially if I assume the re-acceleration in volume growth as well as the rising raw material costs that you guide for. Can you talk about what you assume for working capital this year? I think Ute you mentioned earlier 16% of sales being a good number to look at and if there are any other drivers other than the CapEx that you've already guided for please?

Ute Wolf: Yes absolutely. What are the main moving parts for cash flow in 21? Of course we will continue with our strict networking capital management, higher sales of course on one hand side and higher raw material prices are some challenges here. So if you look at our cash flow statement the last years we had a positive contribution from working capital. I think that will not be the case this year so it will be a slight outflow but also on the other side higher raw material prices bring higher payables and that helps on the other side a little bit as well. CapEx will be a lower year-on-year so we said around 900 million maybe even a little bit below that we'll see but that gives another 50 million and we have introduced since many years for instance for projects in healthcare or other bigger projects that we have some customer prepayments to really support our CapEx. That is something you do not see in the CapEx line that is in other assets so there you see you it is included you don't see it explicitly. The CTA reimbursement will keep the pension cash out low of course. We also had some contributions in last within some local schemes like the U.S. or UK so that will not reappear. Cash taxes they are maybe a little bit higher bonus payments on similar low level. So like 2020 so from that point of view I think with higher EBITDA so then that should help the cash, free cash flow and the conversion rate I think if you put this together you will also come to that conclusion.

Gunther Zechmann: Thanks Ute. Can I just follow up on the cash in from the customer financed investments? You mentioned 50 million in the press release. Can you describe in a bit more detail what's behind that seems new to me and what your outlook for that number is as well please?

Ute Wolf: It's not really new. We started with that in healthcare some years ago where we really had quite high investments for a longer term supply contract and then we were able to negotiate with our customer to say well give us some upfront payment to make it better workable for us. We also applied that principle in our PA12 project. This is really a big project a lot of CapEx for us and of course there are some customers that we also sell intermediates to so that there is where we also applied that. I think it's hard to project a number going forward because it depends really on the nature of the project. So as we are still above our 850 million normalized level I think it's very necessary to have those prepayments or participations once we are in a more normal state that might be lower. So from that point of view I think let's focus on the net number and I think that helps then in the end.

Gunther Zechmann: Great. That's very helpful. Thanks Ute.

Operator: The next question we received is from Matthew Yates of Bank of America. Your line is now open. Please go ahead.

Matthew Yates: Hey good afternoon everyone. A few hopefully short simple questions. Firstly on smart materials, how are you factoring in any startup costs for the big PA12 plant in the second half of the year? Is that something we need to be conscious of for margins in the back half? The second question really just across the group. Obviously there's a lot of raw material inflation at the moment. Are there any particular business areas where you have to work quite hard to pass that through and in particular I'd be curious to get an update about how the profitability of baby care is evolving? And then if I can ask a third one around cash flow. The pension deficit is now a close to where it was prior to the old top-up payments. Does that mean at some point we have to think about putting new top-up payments into the pension to keep the deficit under control? Thanks.

Ute Wolf: So I hope we wrote all the questions down here. So if we forget something please give us a hint. Maybe I start with the pensions. The pension deficit is a balance sheet representation number. So this is really an actual value of cash out in a very-very far future. So from that point of view of course if interest rates goes down that goes up. That is in the balance sheet. It is a liability for us but it does not influence payments in the nearer term. So the payments stay the same regardless what the pension discount rate is. From that point of view our reimbursement works fully fine because those cash flows are known for a long-long time. To have further voluntary funding I think that is also one part of your question. I think at this time would not be very efficient for us as of course the interest rates are so low. We try to really mirror in our asset management strategy the liability profile of our pending liabilities. We are around two-thirds which is a good funding ratio and we are really very well set for the reimbursement scheme so nothing has really changed there. So from that point of view I think we are in a good position and can keep it like this. Then you asked for the startup cost PA12. They are of course already our guidance and they are have already started in last year because we had to employ people. We have already parts of the overall. Facility are already finished and are running. So there are some part of that is already included in last year. Then you asked on raw material prices. Yes raw material prices were down last year quite dramatically but in our case it was mainly driven by the raw materials that are used in performance materials. So everything which is oil and oil derivatives in specialty additives and smart materials the raw materials only decrease by a couple of percent. So from that point of view I think it's really a very differentiated picture. For 21 we expect a rebound in raw material prices and we have incorporated something between 10% and 15% here on group level. However, that will all mainly materialize in performance materials where we have of course price pass on pricing mechanisms so that overall we think there is not a big risk to our guidance from raw material prices or even further we have incorporated that and we see in many-many markets that prices pick up so that even if there should be some smaller price increases we are ready to cope with them and we even compensate them.

Matthew Yates : Thanks Ute. The only one I'm sorry I know I asked a lot the only one we didn't touch on was the baby care performance at the moment.

Ute Wolf: Yes. I think baby care is still a difficult market environment now. so the market is still over supplied so from that point of view I would say stable on relatively low levels.

Matthew Yates : Thanks very much.

Operator: The next question is from Andreas Heine of Stifel Europe. Your line is now open. Please go ahead.

Andreas Heine: I've got two questions the first is the pension outflows you have. They were pretty low in 2020. Can you elaborate whether they can sustainably that low I think they were only 14 million - 15 million the year before slightly 60 million - 70 million. Is that the range you should look for the coming years over something special here and looking on your order book can you give already a flavor how you expect that start in the second quarter. So we learned that who one was very strong. Do you have already…

Ute Wolf: Christian on the second quarter.

Andreas Heine: …for slightly 60 million - 70 million he said so we've learned that who one was very strong do you have already any favor from your older book and how this will continue?

A – Ute Wolf: Okay Andreas. Thanks for the question. So the pension payout will stay on low levels. That was exactly what we were targeting with the change of the strategy in our pension payout scheme. So the reimbursement is designed for many-many years and as I said even with the low interest rate that is all very robust and stable. So yes it will stay on this low level and now it's Christian on the second quarter.

Christian Kullmann: Hi Andreas. Highly appreciate your question but it is not my intention to skip the conference call for the second quarter. We do appreciate inviting you and having you and having you on the press conference and the analyst conference for the first quarter. Having said this yes the starting into the year is a pretty good one and we do see a good for example ongoing good momentum from the cosmetics industry. The demand for specialty additives, think about coating, think about our consumer goods it's really good and we do see and we do have a very strong push here in this areas, in this business areas in China and from China and also our lubricant additives they have suffered a little bit in the last year from the market environment. They do have a pretty nice recovery and they have active oxygen. Think about active oxygen’s and our specialty applications here in this area. They continue to grow and they're saying they're really blossoming up here. So it's great to see. High performance polymers they are already back to the pre-crisis level think about 3D printing, think about the ongoing recovery in the automotive area. So here we are good on track, pretty good and track, silica, if you think about silica you have to think about the situation that they are already as of today above prior year’s level. Pretty nice fostered by the strong growth in China and so having said this these trends we do see, we do like, we enjoy might be in the first quarter these trends we could observe and that is what I could provide you with these strengths are going to continue into the second quarter. I hope you are a little bit satisfied about the quality of the answer.

Andreas Heine: Yes. Helpful. Thank you.

Operator: The next one is from Sebastian Bray of Berenberg. Your line is now open. Please go ahead.

Sebastian Bray: Good afternoon and thank you for taking my questions. I would have two please. The first one is on the margin within nutrition and care. I think Evonik has in the past been on the record as saying that it makes an over 20% new EBITDA margin within methionine, within animal nutrition. I'm just wondering is this the case and if that is so is health and care EBITDA somewhere in the mid teens at the moment? The reason I ask this is because it's quite clear that the company is doing fairly sophisticated chemistry in health and care and I'm wondering why the margin isn't higher. Is it just for you being generous to your customers? Is there a prepayment issue to take into account here in the healthcare business? To what extent could this change? My second question is on CapEx. One of the big growth projects that Evonik post polyamide facility and related to that could we have an update on mRNA? Am I right in saying that there are about €60 million to €70 million of annualized sales from this project? Thank you.

Ute Wolf: Okay. I'll start with the margin question on -- if you look at healthcare it's a very diverse portfolio. We have on one hand our pharma polymers which is really a very specific drug delivery product and we talked about the lipid nano technology which of course is even more sophisticated and on the other hand we have more like exclusive synthesis products. So this is really active ingredients on one side and base products on the other side. We are developing our pipeline since many years more towards the active ingredients and higher of course, higher value products but there is still some portion more in the base product space. So from that point of view then the overall margin is not so high as you would expect if you were only producing active ingredients, but very clear the track is more towards higher share of active ingredients. We described some very-very exciting projects and we also did some technology acquisitions in the last years exactly in those fields of active ingredients and drug delivery.

Christian Kullmann: Okay. And I take the average one the GB, we do have with DSM is a pretty good and fruitful one. That is for sure and before I mentioned, talking about the specific project it is that sales and utilization is as of today further ramping up and we do expect 150 as mentioned to €200 million sales from this JV facility with an above average margin that is for sure and that is what's holds also true for today and in the perspective. As those biotech processes they do not ramp up very linear that means in other words you have to consider to this but nevertheless everything is here well on track. We have started in the meanwhile to become more diversified here in this business. So we have adjusted our focus and building up presence for example in the pet food area and expanding our footprint into for example warm water fish and shrimp areas and that is what is developing pretty nice. Let's keep it like this. But you have to be aware of the fact that because of the COVID-19 and the impact COVID-19 has for example for hotels, restaurants, catering businesses the major sell market is here also touched, has also been touched by this in the last year. So for 2021, for this year message one is we will further increase our sales and that is definitely in line with increasing capacity, utilization and message two is that we are confident and convinced that this business is an attractive one and that we're overcoming the pandemic that we will see here, very attractive margins and good growth.

Sebastian Bray: Perhaps it is I'm staying my welcome but I had a question on if there are any substantial growth projects of note as in of €100 million plus scale post the completion of the polyamide facility on the CapEx side.

Ute Wolf: Yes I think on CapEx where we invested well into growth in the last year. So I think it's now also time to make use of the new capacities. Also the setback of the pandemic now gives a new view, a different view on our capacities. I think one work stream is to really use existing capacities more efficiently. This is possible where you do not have a continuous production but more batch productions. I think that is a very important task that is now carried out. If we look at what might come in new products I think we talked a lot about our bias affectance that will not be a 100 million projects or maybe it's not the size that you have in mind but of course that is a very-very exciting new product. It really pays on into everything in sustainability. It's very well received by the customer. So I think that is definitely a growth project which is more or less in front of our doors.

Sebastian Bray: Thank you for taking my questions and congratulations on the results.

Operator: And the last question for today is from Sebastian Satz of Barclay Capital. Your line is now open. Please go ahead.

Sebastian Satz: Yes. Thanks very much and good afternoon everyone. Three quick ones please and first ones just coming back to methionine again. Just wondering what effect do you think the import duties in the U.S. will have on your prices and then potentially the competitive intensity in other regions and second one's quickly coming back to your guidance and especially additives. We don't expect any growth even though volumes were down quite a lot particularly in the second and third quarter. So you should have relatively easy comparables. That really only do to Crosslinkers and if it's only Crosslinkers is that just the China renewable energy demand that you've pointed towards or are there also some issues on the supply side and potentially with raw materials and just lastly could you give us some quick update on the baby care disposal base?

Ute Wolf: Yes. I'll start with the second question guidance on specialty additives. You really have to see that specialty additives had a very good year in 19 and 20 as well relative to the background. So from that point of view I think it is also not very realistic to see that they will produce a very strong growth from that very strong basis. So what we see really in Crosslinkers are two things one is that the subsidy schemes in China, the wind parks are a little bit adjusted, are little bit changed and in last year there was really a very tight mark situation in Asia as we were more or less one of the very few who could deliver. Now we will have one who are re-entering the market so that this supply demand situation will normalize further and that will influence earnings. We will have a resilient growth but of course we will not have this very specific situation of a shortage or a perceived shortage in material. For Q1, however, of course we see a fair chance for slightly higher earnings for the division but I have to admit they were already last year a little bit affected from the COVID crisis in Q1. They were a little bit the early movers in our portfolio. So this is more or less what we can say to that.

Christian Kullmann: I checked the second one it was about baby care doing M&A means it's all about timing and having said so it is first to say that the market growth in this business area is definitely intact. We just see year-in-year market growth about give or take 4% and what we do see too is that the recent expansions in this area have been very limited. So we do expect having said this we do expect only very limited capacity expansions until 2022. First. Second, is yes our work streams are pretty well on track and so it is that we stick definitely to our timeline and that means in other words that the separation as we have announced it will be finalized as mentioned mid of this year and thereafter and it is prudent thereafter to evaluate any kind of options and all options like for example selling or for example finding a partnership for this business. That is what we will see if we come to this bridge. If we come to this point. And then there was a third question I guess it was about it methionine and it was about the anti-dumping investigations the American authorities have started. What does it mean for Evonik? Let's keep it like this first of all it is to say that those companies who do have sites and plants in every growth region all over the world like Evonik we do have one in the United States of America. We do have one in Europe and we do have one in Asia they are from this geostrategical point of view in a preferred position and that is for Evonik now paying off because we are in the American market and therefore not touched by these anti-dumping investigation measures. So for us and for our market position in the U.S. it is to be very honest it is helpful and if you look to our cost leading world scale side we do have in mobile. We are confident that we could in future expand and extend our cost position and therefore our market position in the U.S. so far.

Sebastian Satz: Thanks very much.

Operator: Ladies and gentlemen, we will now close the Q&A session and I hand back to Mr. Kullmann.

Christian Kullmann: Yes. Ladies and gentlemen it was pleasure having hear you for Ute, for me and for the investor relations team. That is thanks a lot for your attention today and there is one thing we do wish you from the bottom of our heart and that is stay healthy and take care and having said this goodbye.