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Earnings Transcript for EVK.DE - Q4 Fiscal Year 2021

Operator: Dear ladies and gentlemen, welcome to the conference call of Evonik Industries AG. At our customers' request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode. After the presentation, there will be a question-and-answer session. [Operator Instructions]. May I now hand you over to Tim Lange, who will start the meeting today. Please go ahead.
Tim Lange: Thank you very much and good afternoon to our Q4 Earnings Conference Call. With me as usual are our CEO and CFO, Christian Kullmann and Ute Wolf. And I will hand over directly to Christian for the introductory remarks.
Christian Kullmann: Thanks a lot, Tim. And also very warm welcome from my side and thanks a lot for being with us today. Under this, let's keep it like the very special and varying circumstances. There's one Europe. This was hardly imaginable until a few days ago, but now in the year-end now, it is our reality. Less than two flight hours away from Germany, people are dying from tank and missile fire. Immediately after the attack on Ukraine, we, at Evonik, have set up a task force to assess the situation on an ongoing basis. Evonik has 59 employees in the region, three in Ukraine and 56 in Russia. We're in constant exchange especially with our colleagues in Ukraine via SMS, or social media. We will do everything we can to support our employees, and, if necessary and possible bring them to Germany. Our first priority now is to alleviate human suffering, and provide help where we can. And that is exactly what we will do. I hope and I will pray for the people of Ukraine, Under these circumstances, it is really difficult to switch to daily business and a conference call on financial figures. We will nevertheless try to do so for the next hour. As a disclaimer right at the start, our outlook and forward-looking statements are based on our currently observable, positive sales and order book development. As anybody else, we are currently not able to assess the impact on the war in Ukraine on the overall economic development. For our company, the different business impact is limited with only 1% sales share in Russia and Ukraine, of which the biggest part is from signing. With no production in the region we are not impacted by any direct tensions. We are monitoring the situation closely on all levels
Ute Wolf: Thank you, Christian, and good afternoon from my side as well. Let me start with Chart 14 has a good summary of the fourth quarter. We had to master some challenges during the quarter. There was a power plant outage in Marl that has cost us €20 million for externally sourced energy. A further sharp increase in raw materials impacted especially our two divisions, Specialty Additives and Smart Materials. Additionally, Specialty Additives was hindered in volume growth due to raw material and supply chain shortages and deliberately the business decided to be a higher logistic costs to secure reliable customer servicing. The Smart Materials division continued to cope with higher fixed costs like linked to the PA12 ramp-up. And Baby Care had another most likely the last quarter of unfavorable contract prices. The good news about these negatives is that all of them are fading out, but even turning positive throughout the current year. And on the other side, the positive trends observed in Q4 will continue or even accelerate in 2022. One of the very positive trends are the healthy volumes across virtually all businesses, as well as the continuous and further accelerating pricing campaigns in Specialty Additives and Smart Materials. In Performance Materials, we see a normalization in butadiene. But the other product of our C4 chain, namely Butene-1, OXO products, and Specialties are expected at sustained positive spreads into 2022 and they stand for 70% of our C4 chain. And as you know, Performance Materials and the product spreads benefit from a higher naphtha price; this is the natural hedge in our portfolio against higher oil prices. Nutrition & Care had a strong finish of a very successful year 2021. The three drivers behind that were the ramp-up of lipid sales, the outstanding sales growth of more than 50% in active cosmetic ingredients, as well as rising prices at healthy volumes in amino acids. And again, all of them will even accelerate in 2022. So fading negative and accelerating positive, this is a nice headline for the year 2022. Let me spend some more time on raw materials and pricing initiatives. On Group level, our own price increases amounted to around €600 million in Q4 after €450 million in Q3. They already overcompensate the cost inflation effects. This was mostly visible in Performance Materials and Nutrition & Care and explains their strong performance in Q4. In Specialty Additives and Smart Materials, both the Specialty character of the business as well as another sharp increase in raw materials like siloxane or silicon metal resulted in a gap to yet fully compensate the higher costs. Nevertheless, we have reached already around 80% in costs on in Q4. The negative gap in 2021 will turn into a positive gap in 2022 or to put it differently, the EBITDA burden in 2021 would turn into a positive EBITDA contributor in 2022. On the cash flow side, we came out at €950 million and received conversion rate of 40% in line with our long-term target level. Free cash flow in Q4 came out well below last year's level. This had two main reasons. First, we observe the expected higher tax prepayments adapting to the higher earnings levels. Second, clearly lower net working capital inflows. This on the one hand was caused by valuation effects in inventories based on the inflated price levels. On the other hand, inventories and goods in transit were tied up in the system due to inefficiencies in logistics, and to avoid the risk of shortages. The latter we were in 2022 and turn into a clear free cash flow support. Taking the full-year perspective on cash flow again, we were able to grow significantly in absolute terms for the fourth consecutive year, and by more than €230 million compared to the pre-crisis year 2019. With that back to Christian for the outlook.
Christian Kullmann: Thanks a lot, Ute. Let's dive into our full-year outlook. Again, let me repeat, the disclaimer from the start of the call. Our outlook and forward-looking statements are based on our currently observable positive sales and order book development. As anybody else, we are currently not able to assess the impact of the war in Ukraine on the overall economic development. But based on the confidence in our resilient portfolio, and our proven ability to manage challenging times, the direction is crystal clear. We are well set for growth in 2022. Resilient businesses like in Nutrition & Care, the positive price trends in amino acids for Animal Nutrition, and to natural hedge in Performance Materials against higher oil prices, support this ambition level despite the uncertain economic environment. We aim to achieve an adjusted EBITDA between €2.5 billion and €2.6 billion. This range expresses our confidence in our strong structural growth in our sustainability and innovation achievement as well as the ramp-up of our pricing initiatives. The narrow range is a sign of trust, of trust in our resilient portfolio quality, and based on the conviction that virtually no business has over-earned in 2021. And as of today, I can report that was a pretty good start into the year. This is reflected in the guidance for the first quarter of at least 10% EBITDA growth year-on-year, which is even above the upper end of the full-year guidance range. On free cash flow; the high cash conversion rate achieved in the last years is the level we will sustain going forward. Accordingly, we guided cash conversion on a high prior-year level of around 40%. Based on the guidance higher EBITDA level, this translates into a higher absolute cash flow number for 2022 for the fifth year in a row. Let me close our presentation with the Save the date. We today spoke about the importance to have a clear strategy and just stick to its consistent execution. Therefore, we continue to work on our strategic agenda and adapt -- sorry and adapted to the ever-changing environment. So on May the 11th, my board colleagues and I invite you to our Capital Markets Day. On this occasion we'll give a strategic update. But you will agree that there's no reason for revolution of a successful strategy over the last years rather than evolution, it is the next transformation period. Going along with this, we will focus in more detail on two main growth drivers of our portfolio
Operator: Ladies and gentlemen, we will now begin our question-and-answer session. [Operator Instructions]. The first question is from Sebastian Bray, Berenberg. Your line is now open. Please go ahead.
Sebastian Bray: Hello, good morning and thank you for taking my question. Good afternoon, I should say. I've a, two please. The first one is on the cash flow. I don't know if this was mentioned in previous quarters. But could you please just elaborate on what the €145 million settlement for previous M&A transaction refers to. Is that all remaining amount that was for the finished plant on PeroxyChem. But I'm not quite sure if it was that magnitude. So what is this amount please? And my second question is on the margin development in Nutrition & Care. This is quite positive if it continues for the next let's say two, three years the specialties continue to take share and so on. Is it fair to say at the moment i.e. in q4, the margin made in Methionine was pretty similar to the margin made in Health & Care? Thank you.
Ute Wolf: Yes, good afternoon, Sebastian. I'll start with cash flow. These are purchase price adjustments from our meticulous sale and another settlement which is a little bit older. When we sold carbon black there was a dispute of the -- in with regard to the U.S. Clean Air Act, which was also settled this year. These two should make up the biggest part of this €145 million.
Christian Kullmann: Okay, and then I'll take the second question. I also from my side good to hear and I guess your assumption is fair to say that the margin development in Methionine and in Health & Care are quite similar. So, yes, I would agree about your assumption.
Operator: Mr. Bray, we couldn't hear you at the moment. Could you please repeat if you had anything else to say?
Sebastian Bray: No. Apologies if you couldn't hear me. I said thank you for taking my questions. I'm happy to pass on.
Operator: All right. Thank you. [Operator Instructions]. And the next question is from Martin Rödiger, Kepler Cheuvreux. Your line is now open. Please go ahead.
Martin Rödiger: Yes, thanks, and good afternoon. I have three questions. First is on energy costs. Can you disclose what has been the active energy costs in the year 2020 and in the year 2021? What is your expectation for 2022? And what would be the level based on today's energy prices if your energy hedges are running out? The second question is on the signing. I was bit surprised to see your announcement about the investment in the U.S. I understand it's a quite lucrative investment. But this is a capital intensive business. So can you please explain how this investment fits to your strategy of focusing on low capital intensive activities? And the third question is on free cash flow guidance. I'm still try to get my head around that you expect significantly lower net working capital outflows. But it should be clear that selling price are further rising, input costs are rising, volumes are rising. So what makes you confident that net working capital will shrink in 2022? Thanks.
Christian Kullmann: Hey Martin, good to hear you, Christian speaking. First of all, it is to underpin that our Methionine business we would take this business as a cash cow. And in this respect, nothing has changed. Second, having said so, it means that we have to constantly and continuously increase the efficiency and to improve our cost position. It is not about being the market leader it is about being the cost leader. And following this idea I would invite you attending tiny revenue into the past that we have closed our Methionine production for example in ethylene that we've started a lot of activities to currently reduce costs coming out of a double-digit million cost savings per annum. And now, I would just say okay, from a strategical point of view, that we do have three main hubs all over the world, one in Asia, Singapore, one in Europe, Antwerp and one in the United States of America, which is in Mobile, Alabama. And here, it is need to better our cost positions over the course of the next year. So in other words, this investment in U.S. cash cow helps us to extend and to expand our leading cost position for Methionine in North America and we will definitely benefit from this nicely. So we will see here significant annual savings of about €15 million more -- a little bit more than €15 million. And it is worthwhile to mention that it will have an increase the supply security, which is needed to make sure that we could provide our customers with a sufficient amount of Methionine. So to sum it up, no change of strategy in this respect but because following the strategy we have given to you that in Methionine is a cash cow. It is time by time niche to better hear our cost position. And this is a good opportunity we're going to tackle. With this, I do hand over to Ute.
Ute Wolf: Yes, thank you, Martin, good afternoon. First, on the energy cost. We had energy costs in 2021 of around €700 million. The comparison with 2020 makes only limited sense as 2020 with COVID, of course, was not a normal year. I think for this year, we will see another €200 million €250 million increase maybe a little bit more depending on the overall gas price and market situation. We are hedging three years in advance. Of course, the first year has a very higher hedge rate. And then the following years has lower hedge rates. We have increased the hedge rates a little bit already back in last year. So from that point of view, I think we're pretty well-positioned here. Please keep in mind that the discussion on high gas, particularly the European one, in the U.S. or in America, and in Asia, we have a different picture. So and of course we will always see, we have to see the full group. I think to speculate what would it be without hedges is somewhat I think, going very far because you never know when would you buy. So I think we should leave it with the numbers. We know and not with the numbers that might come depending on whatever scenarios. Of course higher energy costs are part of our pricing initiative and in some of the products we have also energy prices as part of pricing formulas. So a big part of that will be passed on to our customers. The question regarding networking capital is a very valid one. You are right; we had quite a build-up of in last year. And of course now as raw materials are still rising, that goes into the valuation of our inventories. But of course, we are also rising prices on the sales side. And this year, that should overcompensate the rise in raw mat and energy. So from that point of view, from Q2, and Q3 onwards, we will have also more cash in from our receivables. And this is how we look at it. So first quarter, I think will still be influenced by this rising raw material prices. But then I think in the consecutive quarters, step by step that should in the end level out.
Martin Rödiger: Thank you. Can I have a follow-up question on the free cash flow in general, the free cash flow guidance? On Page 35, I see that you're also factoring M&A in the free cash flow. So are there any disposed proceeds baked in your free cash flow guidance for 2022?
Ute Wolf: I don't know which Page 35 you mean?
Martin Rödiger: On the presentation.
Ute Wolf: M&A is not -- M&A is not part of our free cash flow. Its CapEx is in that --
Christian Kullmann: I think that's the -- that's the net debt which we refer to cash flow.
Ute Wolf: Net debt, yes. And net debt of course that's non-divestiture [ph] but not in the free cash flow.
Operator: The next question is from Geoff Haire, UBS. Your line is now open. Please go ahead.
Geoff Haire: Good afternoon. Thank you for taking the questions. Two questions for me. You're clearly guiding to 10% EBITDA growth in Q1. But I look at the midpoint of your 2022 guidance for the year at 7%. So it's a slowdown as we go through the rest of the year. Just talk a little bit about what that's relating to, or is it just cautiousness? And then secondly, I was just wondering if you could give us some thoughts on how we should think about the LNP sales for 2022 given we are seeing COVID, obviously easing in the Northern Hemisphere, at least, as we go through this year.
Ute Wolf: So I'll start with Q1, Geoff, good afternoon. LNP is Christian's favorite topic. Yes, so I think what we see is really customer demand is strong across all divisions. Now, we really see continued strong and resilient demand. And we see that our price increases are accepted quite well and go through quite well. Yet also, strong order book in our industry-related businesses. So the consumer side, of course, there is still some pent-up demand, but also in industry-related business. As we said, of course, we are now having another increase in raw material energy logistics as I said. But as I said, the price increases accelerate further. And as described, they will outpace the cost increase on the energy and materials side. From that point of view, we have a strong start to the year. That's why we give that very positive guidance. Of course, you might argue it is more positive than a full-year but on the other side, we have more visibility on Q1 than on the full-year. So maybe I think that explains why your math is not working between Q1 and the full-year.
Christian Kullmann: Okay. I will take the second question about the lipids. And yes, I'm really excited about the business because it is one of our growth drivers in future. So last year, we've crossed €100 million revenues for mRNA and the lipid-based therapies. It was split it up, one half was about pure lipid production and the other half that is worthwhile to mention was about development and manufacturing of a very complex parenteral lipid nanoparticle system. Taking this in consideration, this translates for me and for the company and hopefully for you into higher sales in 2022. And why am I excited about the future of this business? Yes, as of today, it is focused on fighting the Corona pandemic. But in future, there is much more growth we do expect from different opportunities and options like for example, fighting cancer and a lot of other ideas we do have. And here in this respect, we have already started deep discussions and negotiations with a lot of potential customers. And they're really keen on making use of our capabilities to foster their own ideas about this brilliant new technology. So sum it up, good startup, good amount of revenues we have reached last year. And this year, we will definitely see higher sales in this area of mRNA and lipid-based therapies, if I compare it to the last year. So you talk to a CEO which is filled up with hope and confidence about the future of this business. Please forgive me that I'm talked about a little bit more excited about it, than you might have expected it. But I'm really here convinced about and therefore, forgive me on my bold statement about the future of our business in this respect.
Geoff Haire: And can I just follow-up on that is the growth in 2022 expected to come from more from lipids or the delivery systems that you're developing or both?
Christian Kullmann: From both. Take it as a mixed, a pretty nice mixed picture. So from both sides, we do expect a similar growth. And if I look to our order books, they are already filled up so yes, from both sides.
Operator: The next question is from Georgina Fraser, Goldman Sachs. Your line is now open. Please go ahead.
Georgina Fraser: Hi, thank you. Good afternoon, Christian and Ute. And firstly, I just want to thank you for your sincere words related to the difficult context in which you're running your business and we're all working in. And I know there are various scenarios that are impossible to predict. But I was wondering if you could describe the key end market assumptions that you made in the guidance range that you gave today. And maybe if you could break out, how much of your growth is driven by capacity expansion versus margin recovery? And my second question is that we have seen limited wage inflation in recent years. But we are undeniably in a strong inflation environment. And so I was just wondering if you factored in higher labor costs in your outlook and if so, at what rate? And then I have one final question. And on the lipid business, would Evonik prefer to grow in capabilities organically or are acquisitions in this field also possible? Thank you.
Christian Kullmann: Good to hear you. Thinking about our strategy in respect of enhancing, of expanding and extending our lipid capacities, we do not have in mind here to tackle M&A opportunities. Here it is to grow organically because we do have the capacities. We do have the staff to do it on our own. And by the way, it is not so costly, if we would do each year in this respect with M&A. So we will focus on our own investments in organic growth so far. The second about higher labor costs and the inflation. I do not worry about it because I'm convinced that the Head of the Trade Union, Michael Vassiliades, will have good and fruitful and open-minded negotiations and the outcome of this will be that we stay reasonable. So I do not hesitate about the results of those kinds of discussions. There have been some more questions maybe, Ute you could assist.
Ute Wolf: Yes, I'll take the first one the key end market assumptions and key growth drivers. I think we should go through this division by division. If we look at Specialty Additives, here of course we have cross linkers with high volume demand in their applications. We have comfort installation where there is also some pent-up demand. We have oil additives that were constrained last year as raw material shortages and logistic constraints were limiting their growth. So I think there it is really a mix of yes, demand growth, better usage of capacities. If we go to Smart Materials, of course, here is a big driver, our new PA12 capacity. So here is clearly one driver, the new capacity. But also, if we look at the other businesses like Active Oxygen they have seen good growth in 2021, both in the traditional and also in the specialty applications. And we have enough capacity to grow the business also this year. If we look at coating additives, I think also here, good growth, I think that is what really drives the growth in the more material-oriented division. If we look at Nutrition & Care, we discussed it here and there already. We have good demand in our overall Animal Nutrition, good price levels, for all the amino acids and we've seen many, many years and very, very solid and healthy demand and volume growth. If we look at Care Solutions, again, they increase the sales with our active ingredients dramatically. They are working on that. They have two smaller M&A acquisitions that they integrate, of course, that will fuel growth. And so I think that is for that Care Solutions. Healthcare we discussed with our lipid nanoparticle business, but also with other applications where we have a good pipeline with Pharma Polymers growing at very, very good margins over the last year. I think that more or less describes the picture that we have in our outlook.
Operator: The next question is from Chetan Udeshi, J.P. Morgan. Your line is now open. Please go ahead.
Chetan Udeshi: Yes, hi. Thank you for taking my question. Yes, I had one question. Maybe this is for Christian, given that you also Head of the German Chemical Industry Association. I mean, it's a broader question, how do you see this huge spike in energy prices impacting the German chemical industry and the competitiveness of the industry? I'm not asking this from a Q1 or Q2 perspective, it is more a philosophical question from a -- same the structural perspective. And second, I mean, the Q1 guidance, can you -- is it driven, is that growth driven primarily by Methionine prices? Or do you see other segments also contributing to that more than 10% growth for the Group earnings?
Christian Kullmann: Chetan, good to hear you. And by thinking about how to answer your first question I try to answer your second one. And to be very clear about this, it is not, not exclusively driven by Methionine. It is broad and therefore, bright growth in all areas of our businesses. So it is, let me say, very well underpinned in Smart Materials and Specialty Additives and in Nutrition & Care too. And sometimes to give a little bit more color about this. Sometimes Caspar Gammelin, the Head of the Nutrition & Care Division with a twinkled eye looked at me, and said Christian do you know what, I'm little bit not really satisfied, because it is so attractive growth rates. We do have in Care Solutions. And in our healthcare business, they are not really treasured for example by the Capital Markets, because everybody is talking about Methionine and Methionine. So having said this, now coming to your first question, that is, I should try to differentiate the answer a little bit splitting it up. And saying first of all, those German companies who are global players, they could definitely better in a better way balance the energy prices out, because they do business all over the world. And here, the energy prices the uplift of energy prices is really let me say present some kind of pressure on the Mid Cap companies here in Germany, because they do not have the chance of diluting the increase of those energy prices. But second it is -- there is definitely worthwhile to mention being in touch with the Minister of Economy Mr. Habeck in Berlin. We are in good speaking terms about the question how he could have to ease the energy prices here in Germany impacting German industry overall. And in this respect, I'm confident that we will create over the course of the year might be not some kind of that we will not be able to resolve it. But I'm confident in that we will find a way to relieve those energy prices here for German industry. So my first answer was very concrete. And my second answer was, as you have expected it more on the level of a philosopher, but I'm not.
Operator: The next question is from Jaideep Pandya, On Field Research. Your line is now open. Please go ahead.
Jaideep Pandya: My first question really is around your competitive landscape, especially focusing on Wanhua, who is potentially a very small competitor today, but going to enter PA12 soon I mean in the next year or so, and then, the move from them to also signal entry into Methionine. So just when you look at your competitive landscape today, given you guys are so downstream, and you've had technology, advantage, and innovation advantage over the years? I mean, what is your intel on new competition especially on products, where it's been sort of, if I may use the word in few hands, a few company hands technologies over the years? That's my first question. The second question, to you Christian, is really around the share price and I apologies for asking this question. But, you've done a fantastic job over the last four years in EBITDA growth and in cash flow as well. But share price remains between €25 and €30. From your point of view, I mean, what is it that you guys want to do to unlock value here? Is it a share buyback? Is it a special dividend? Or is it -- how is your conversations with your anchor shareholder for that matter? Because, frankly, for me, this is the biggest puzzle is to what you could do to sort of breach €30? Thanks, a lot.
Christian Kullmann: Pleasure. Maybe, let me start with the first question the competitive landscape. And here in respect talking about Wanhua, you would make a brilliant mistake to underestimate the potentials and the perspectives of Wanhua and that is a mistake we do not want to do. Second, the more specialty technologies, businesses, markets are the more it is about customer intimacy, the better the position of Evonik in the respect for example of PA12 is. And as you could see, as you could observe, there is a remarkable delay of Wanhua to ramp-up their PA12 capacities in here in comparison to us, we are frontrunner. So to sum it up, I do like competition, because that is the best chance for us to make the difference. And each and everybody is re-invited to tackle our markets and to see what will come out of it. Competition helps us to become better. Second, "Oh hey" that's a very German phrase. It's close to goodness gracious if I look and Ute the same to our share price, we are really let's keep it like this. I'm disappointed and as you know, as the members of the extended Board of Directors, our shareholders so if anything else, than sufficient if I look to the development of our share price. What could we do? It is not about thinking about super dividends or super somewhat ever something else. It is about to remain and to stay put to our strategy, which translates into good EBITDA growth, which translate into good free cash flow growth over the course of the last five years in a row. And I'm confident and I brought my sleeves up for it. And I'm going to work my knuckles bloody for it to make Evonik together with Ute and the members of the extended Board of Directors, a better company. And therefore, I'm convinced that there will be a point of time when this blossoming up of the company will be recognized by the present investors and that will have to lift the share price up. So stay put, move ahead, roll our sleeves up, work our knuckles bloody and create more and better growth and more and better growth perspectives. That is what I do have in mind about the business -- that is what we have in mind about thinking about the future.
Operator: And the next question is from Thomas Swoboda, Société Générale. Your line is now open. Please go ahead.
Thomas Swoboda: Yes, sir. Good afternoon, everybody. I have two questions, two related on your portfolio clean-up opportunities. Firstly, on Baby Care, I heard you saying that the contracts are set to roll-forward and that the margins are said to improve. I think there is also an anti-dumping probe in the U.S. which should have earnings. So I figure this business could become very quickly triple-digit EBITDA again. So my question here is, is it fair to assume that Baby Care is finally to go out this year? Or do you still have hopes that you could get more forward if you wait for another year? And secondly, on Performance Materials, and Performance Intermediates, I think, if I remember correctly, your cash flow issues in the past were partly keeping you from up -- from thinking in a divestment. I mean that that looks fixed now, congrats by the way. Is it time to revisit, is it time to think of Evonik excluding Performance Materials? Thank you.
Ute Wolf: Yes, Thomas. Good afternoon. Baby Care, yes, as we described last year, they still had unfavourable price cancellations. But that really turned with the new contracts that started this year. So the earnings are improving here. And as you rightly said, the anti-dumping cases will help, will support that. I think the final decision in Europe will come somewhat in April or May, in April. And I think the U.S. then, later in the year. So what we have done, we have prepared Baby Care technically, the carve-out is completed. And now we will then see the operating performance and then decide when is the right time to start the process. I think normally it makes more sense to have somewhat positive track record. So I think that might take just be one or the other quarter before we start the official process here. Yes, before I think that question also is some kind of evergreen for us. Performance Intermediate is a cash generator for the group. This is how we run it. And I think at this point in time, we do not invest into growth here from that point of view, that's how we do. If we look at the portfolio, we really take a step by step approach. We divested M&A, we carved our Baby Care. We are now preparing the sale of some smaller parts of the portfolio for Functional Solutions. And this is how we look at it. And generally speaking, of course if you want to sell something, you have to prepare the business for divestment. And then of course, you have to see that you have a good ideally the best timing in the cycle. So this is how we look at this.
Operator: And the next question is from Charlie Webb, Morgan Stanley. Your line is now open. Please go ahead.
Charlie Webb: Good afternoon, everyone. Thanks for taking the questions. Maybe just following-up on Thomas's question there, Ute, around divestitures. So just, also you mentioned, what's kind of currently underway that when you look at the portfolio, I guess other parts like I've seen have kind of come up with essentially non-core and other bits and pieces. So just wondering, where are we and in terms of the divestitures opportunities or restructuring opportunities, as you look at the portfolio today, I mean, perhaps last year, just a bit more detail on other parts that may be in scope looking ahead? And then just second question on PA12 and thinking about the ramp up there. Can you help us understand what the ramp costs were in the second half of 2021? And just how we should think about its contribution this year as it gets fully ramped [indiscernible]?
Christian Kullmann: Charlie, good to hear you. I'll take the first question and Ute will take the second one. About divestment candidates, it is an easy one. Because the businesses we do have in our non-core Performance Materials division, they are flagged as non-core review, it means that it is next step is to know [ph], taking this in consideration. It's all about timing, to sell the Baby Care business. And we've started a process to find a solution for our sites in Germany close to Cologne in Lülsdorf, that is, if I look to it, good amount of the Financial Solutions business line. And these are the next two steps. And once again, Ute has already mentioned and it is worthwhile to repeat. All the businesses we are -- which are located in the division, Performance Materials are non-core businesses. And here it is to work on them step-by-step. And then you have asked if there is anything else -- if so -- as I said, anything -- some new ideas about what could be non-core or not. Here's the answer. It's an easy one is two letters and one message. The two letters are an N and an O and the message is no. And with this to Ute.
Ute Wolf: Yes, Charlie, good afternoon. On the PA12 ramp-up, it's actually much more than two letters here. The fixed costs last year were around €20 million roughly, as soon as the facility is starting production. We expect significant positive contribution because the market of PA12 is very, very split. So we knew the market is really waiting for the materials that we'll see a big ramp-up. And the quick contribution here to EBITDA and maybe even somewhat more than we thought originally, or the ramp-up takes a couple of years, but given the market environment, and really the supply shortage in that market we think that we will have a decent contributions in this year already.
Christian Kullmann: So, ladies and gentlemen this ends our call for today. Under these very special circumstances and our thoughts and prayers are with the people of Ukraine. Thank you for your attention and take care. This closes today's call. Bye.
Operator: Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.