Clariant AG

Anja Pomrehn - Head of IR Patrick Jany - CFO

Thomas Wrigglesworth - Citigroup Peter Clark - Societe Generale Patrick Rafaisz - UBS Theodora Joseph - Goldman Sachs Patrick Lambert - Raymond James Financial Daniel Buchta - MainFirst Bank Paul Walsh - Morgan Stanley Chetan Udeshi - JP Morgan

Thank you. Ladies and gentlemen, good afternoon.

My name is Anja Pomrehn, and it's my pleasure to welcome you to Clariant's first quarter 2018 conference call and live webcast. Joining me today is Patrick Jany, CFO of Clariant.

The slide for today's presentation, they can be found on our website, along with our media release. I would like to remind the participants that the presentation includes forward-looking statements, which are subject to risks and uncertainties.

Listeners and readers are therefore strongly encouraged to refer to the disclaimer on slide two of our presentation. The replay of the call will be available on the Clariant website for 30 days.

And with that, I would like to hand over to Patrick to begin the presentations.

Thank you, Anja. Ladies and gentlemen, good afternoon.

It is my pleasure to have you join our first quarter 2018 conference call. Let us start with the highlights.

As you can see on slide four, in the first quarter of 2018, Clariant again delivered a strong performance, not only in terms of sales growth, but also in terms of EBITDA improvement. Sales rose by 7% in local currency.

Organic sales advanced by 5% in local currency. EBITDA before exceptional items also increased by 7% in CHF to CHF 268 million.

The upswing particularly in Catalysis, but also in Care Chemicals and Plastics & Coatings led to the profitability enhancement. This corresponds to an EBITDA margin before exceptional items of 15.6%, which mirrors the previous year's higher level.

Slide five shows that in the first quarter 2018. Organic sales rose by 5% in local currency with good volume growth across all regions.

Sales were driven by 4% volume growth, by 2% consolidation effect and while as reported pricing development of a good 1%. This resulted in the sales of CHF 1.7 billion for the group.

Sales growth was most pronounced in Asia and Latin America. Asia grew by 15% driven by substantial expansion in China, particularly due to Catalysis.

While in Latin America, sales rose by 11% as a result of the recovering macro-economic environment. In North America, sales advanced by 5% in the Middle East and Africa by 4% and in Europe by a solid 2 % despite a very strong comparable base.

Looking at the figures of the business areas in more detail. Starting with Care Chemicals on slide six.

Care Chemicals reported excellent sales growth of 9% in local currency against a strong comparable base boasted by good growth and consumer care and a strong aviation business mainly in North America attributable to favorable weather conditions. From a geographic perspective, most regions progressed with very solid local currency growth, particularly in North America as well as Latin America where the economic environment improved as anticipated, reported double-digit sales growth.

The EBITDA margin before exceptional items in Care Chemicals advanced to 18.4% from 18.2% a year ago. As a result, from an improved product mix and the reduction of ramp up costs, while the aviation business was not accretive to the margin.

On slide seven, we see that sales in Catalysis sort by a 36% in local currency. Organic sales growth excluding the fully consolidated Sukhumi [ph] the India Private Limited joint venture was 19% in local currency and was driven by an improved demand across the business lines.

From a regional perspective, the robust sales expansion was largely attributable to the continued volume growth still in China and the ongoing strength in the Middle East and Africa. The EBITDA margin before exception items improved to 19.8% from 19% driven by the acceleration in demand.

However, the margin was slightly dampened by the proportionally higher sales growth contribution from Syngas. Let us now move to slide eight.

Natural resources sales grew by 2% in local currency. Sales in the oil and mining services business grew in single-digit, lifted by the improving demand in oil services in the last month of the quarter, offsetting a temporarily softer mining business.

Sales in functional Minerals decreased slightly in local currency against a very strong comparable base. The positive development in the foundry business could not fully compensate the slight softness in the edible oil business, which is subject to the quality of the respective crops and hence the weather conditions.

However, we expect functional minerals to return to a slight growth on a full year basis. EBITDA margin before exceptional items declined to 15.2% burdened by the continued price consciousness of the oil market.

This however should improve throughout the year due to the sales pipeline of the business and a generally improving market in the oil and mining services business. Moving to slide nine.

Sales in Plastic and Coatings increased by 2% in local currency, with growth in all three businesses and against the strong previous year. The expansion in Greater China underpinned the continued improvement in Masterbatches and Pigments, while sales growth in additives surpassed the very strong first quarter 2017, mainly due to higher demand in Europe and the Middle East and Africa.

The EBITDA before exceptional items continue to advance and increase to CHF 214 million. The main foundation of this development included volume growth as well as pricing measures undertaken in all three business units.

Moving on to the overview on slide 10 and summarizing the first quarter 2018, we delivered sales growth of 7% in local currency and organic sales growth of 5%. This growth was reported by all business areas in particular Catalysis and Care Chemicals.

The EBITDA before exceptional items also rose by 7% and this ranks to CHF 268 million compared to CHF 250 million in the previous year. This was driven by the expansion particularly in Catalysis, but also in Care Chemicals as well as Plastic and Coatings, the corresponding EBITDA margin before exceptional items was alluded to is 15.6%.

I now come to the economic outlook 2018 on slide 12. The outlook 2018 remains unchanged from our communication for the full year 2017 results.

For 2018, Clariant expects the good economic environment in mature markets, which represent a high comparable base to continue. We also anticipate that the emerging markets will be supported especially in Asia and are more confident that Latin America might improve as there are signs of recovery.

To our outlook, please move to slide 13. For the full year 2018, we are confident to be able to achieve growth in local currency, to progress operating cash flow and to further improve absolute EBITDA as well as EBITDA margin before exceptional items.

We confirm our target for the mid-term to reach a position that top tier or the specialty chemicals industry. This corresponds to an EBITDA margin before exceptional items in the range of 16% to 19% and a return on invested capital above the peer group average.

With that, I hand back to Anja.

Thank you, Patrick for taking us through the numbers of the first quarter 2018. We will now open the line for questions.

Hi, Patrick, hi Hariolf. Thanks very much.

A couple of questions if I may. Firstly, you've held the EBITDA margins well in the quarter.

And I'm guessing that there was underlying raw material inflation that you've kind of - you've mitigated in that achievement. Could you detail what raw material inflation you're seeing at the moment.

A second question would be on Catalysis. I think we're expecting in previous conversations you talked about how Syngas would have a bit of a margin dilution effect, but I definitely haven't seen that either in the first quarter.

So, were you previously too conservative and you think that actually is there sounds now that the mixed effects and could you if you could detail those mixed effects through Catalysis over the next 12 months are actually possibly lead to better margin outlook than maybe previously thought. Thank you.

Thank you, Thomas. Starting with your first quarter on the whole group on the EBITDA margin, I think we indeed held it a good level compared to quite a strong first quarter and previous year.

And since then we have been faced with quite a significant price increase last year, which you know we have difficulties in the first and second quarter in some areas to offset, which we improved in the third and fourth quarter. So, indeed comparisons since the year ago was a bit of a tough base as margin in some areas have deteriorated.

But they are bouncing back to your point. We are increasing price by 1%, actually it's probably a bit more than 1% to be totally frank, we have to round down the figures without decimals.

So, it's yes, a bit higher than 1% in price increase. And we are able as a company to offset the raw material push but not in all the businesses, and we look forward to offsetting the effect on the whole year basis, where we still expect further raw material increases.

We typically would expect a 3% to 4% price increase on raw material this year, which would imply price increase in the direction of 2% over the year to compensate for the current increase in raw materials. So, we are on it.

All business units have very swiftly this year increased prices and are pushing them through. So, in that element, I think we are much faster than we were last year.

And look forward to therefore major hit in the margin. But to be able to compensate this raw material.

Looking at the Catalysis, indeed, we actually sold quite a lot of Syngas in China. You can see that with the geographical mix.

The plus 36% in China are really driven by an excellent figure in Catalysis. So, it's the phenomenon we talked about quite a long time ago which is now taking place.

So, that's according to plan. Therefore, I would say with such volume increase and margin could have been higher but given that the mix is a bit disfavor for the margin.

We still could manage to have a positive effect but see if it would have all been petrochemicals and margin would have been obviously higher than the 19.8. But I think it's in accordance with our guidance, so from that point of view another real surprise, the order book looks good.

We always know the mix for the year and now looking into 2019 as far as demand is concerned. So, we can confirm a good demand environment for 2018 and 2019.

And from the margin I think we will stick to our guidance to the 24% to 26% with a bit of volatility in there depending on the full year basis clearly, with a bit of volatility depending on the actual mix, which we will be able to involve in those years.

Okay. Thank you very much.

Yes, good afternoon everyone. Just two please, first of all on the Care Chemicals; again it's coming back on the margin question.

Actually, I was a bit surprised it was only up 20 basis points and in the common trade about aviation actually not contributing, because I thought that was a pretty high margin business. So, I don't know there is a regional impact in that business.

And I'm just wondering if there was a little bit of raw material pressure there because you made it quite clear not all the divisions cross-setting, so maybe that built again with the cost going up. And then the second question is around I guess the natural resources division and your pointing to getting some price traction with the oil customers as you go through the year, just wondering how long do we potentially have to wait for that, you sense it's happening into the second quarter or is this really going to be a second half thing where you see the margin start to call back?

Thank you.

Thanks Peter. Referring to Care Chemicals indeed I think we had a significant growth a nice 9% growth in local currency.

But obviously their aviation business helped which didn't do well last year, but this year was actually quite a good year particularly in the U.S. in comparison, which we normally have lower margin in that business compared to Europe.

But generally speaking, I would say that the aviation business overall did not contributed the margin probably slightly lowered the margin in the first quarter, because on a one hand it's a geographical mix, U.S. stronger, but is also the fact that this business typically works on a mechanism where you do the contracts and you fix the prices in summer for the next season, which was done and in the meantime obviously after name and zone have increased a little bit right since last summer and therefore the margin was more compressed when we actually delivered those products and which was the original plan when the contracts were made back in last summer.

So that's the seasonal risks, some years you win, some years you lose a bit, this year was probably a year where the margins were not at the highest to put this in aviation. But I would say from the growth pattern it certainly helped.

Overall, I would say that our consumer care business so talking about our personnel care, about crop has an excellent growth, pretty close actually to the 9% as well. So, from that point of view I think we are progressing in the right mix and you will see this progression of the mix apparent as we go forward in the year which means when the aviation effect received.

Looking at natural resources, indeed that was probably the one sector which is still on the way to come up, but not really showing it in the numbers but from the contract point of view, new contracts signed, price increases passed, I think it looks good for the next quarters. But we are still in a phase we're participating in the U.S., the so-called land business in the U.S.

was a bit depressed in the first quarter. I think you can see that in all the competitor's numbers as well, which actually sequentially down in the U.S.

all the three major ones. Sequentially, we are slightly up, so we didn't fair too bad, but the Q1 was not the best for chemicals business, service business in the shale.

That will pop up in during the year and we expect both volume to increase and margins to increase as new contracts come into play as the year progresses quarter-on-quarter, so you'll see probably already an improvement in the second quarter to your specific timing question but overall the effect will improve quarter-on-quarter so it will be a better picture in the second half than in the first half. But definitely I would say the order pattern, the contract signed and the pricing that we're talking about now not always invoice but at least talking about, are definitely better than the previous quarters.

Okay, very clear, thank you.

Thanks, and good afternoon. Three questions please from my side, the natural resources business and the functional minerals can you talk a bit more about the impact of the harvest and the crops and which crops were really driving the lower business here year-on-year and that's not the topic that's come up often in recent first quarters?

And then on Care Chemicals you mentioned that and consumer care group to be close to 9% and is that, can you break that down often into the individual components personnel care, crop care et cetera. And lastly on one off - clearly, you're not showing them for the first quarter, but can you confirm that you're on track for your guidance with the one-off so far incurred in the first quarter after we over shopped a bit last year?

Sure. So, coming with the national resources, indeed, Functional Minerals had a customer to have a very good number, so we typically don't talk about it when the numbers are very good.

I think they're performing it at an excellent level. They've now achieved 17% plus EBITDA consequently.

Nevertheless, there in terms of growth the first quarter was a bit of a reduction compared to the high base of the previous year particularly because of edible oil business. The edible oil business when you use is bend to clay to actually do the filtration of vegetable oils before they are bottled and delivered to the customers, and that then the amount of Bentinib [ph] use depends on the quality of the original crops.

So it can be soy and canola for instance in the U.S. And the crop has improved in 2017, not the quantity but the quality.

And therefore, for the filtration process we just need less Bentinib that we used a year ago. That's a sequential issue.

I think the new crop will have a new level of quality coming to the second half of the year, so the game is open for the second half. And we are confident that Functional Minerals will not be dragging growth down to return to growth on the full year picture.

So, will you say soya and canola are the main crops here relevant for Functional Minerals.

Yeah, it's all the different crops for edible oils. The quality in Latin America was particularly improved in the end of 2017.

It's North America with particularly Latin America in that effect. And therefore, there was a less consumption by all the oil processors in Latin America of Bentinib.

I think it's a small deviation I think if you looked at national resources you have look at the fundamental driver which is oil which has talked about it before. That will significantly progress in the course of the year.

I think we have passed the lowest probably somewhere in Q4 and early Q1. March is the single month look good already.

And I think we'll see those numbers ramp up as we have forecasted for the year. Right we saw it for 2018-2019 the main drive of improvement of the EBITDA margin will be which has depressed everything, and they will actually then pull everything in the coming quarters right.

So from that point of view that's the major delta, in Q1 specifically also mining was not particularly good we have a buy plan which is not running from a major customer that reduced consumption. So, you have a few single effects which in addition the Functional Minerals which is talked about didn't really look at this out.

Counter effected the actual improvement of oil, that's a temporary measure. Sorry, long answer.

Going to your Care Chemicals question, I think consumer care in general is pretty close to nine sites, high, even fives and nines, and it is driven by personal care, but in particular in Q1 by Crop where we had another very good progression there.

Okay.

And then on the third question on the one-offs, where clearly, we overshot last year out of different reasons environmental and all the project costs. Our guidance this year is that we will stick and reach plus 1% of sales.

And that is certainly what we are in the rhythm to achieve in terms of cash and guidance which simply comes as along which is important to see that we have also, or we will have in the second half impact of tax penalty we have to pay in Germany. And that will be a quite significant one double-digit tax impact in Q2.

But overall, I would say them is all the P&L impact it's a cash impact. So, we have provisions for that, but that will be our guess the only biggest one-off we talked about.

Right, can I ask just - sorry, one forth small question, just reading here on the Bloomberg the headline, Clariant's sub temper strategy could have at or boost from at home boost from SABIC [ph], What do you mean by that?

I think it's sort in line with what we have said in full year and in the months since then. We two processes this year, one is clearly the new strategy we are doing in 2018 is the last year of our strategic plan, and therefore independently of any additional ideas all that be user are working on the new strategy designing their go-to-market and results for the next few years in the horizon 2021, 2022.

That will be ready by early autumn, which is really the new step for the group for the next few years, might revised guidance. On top of that as you know already we are currently looking at few projects with SABIC going into we have a detail on where can we actually create a value for both groups with the new business ideas given that we can have a bit of maybe that our cooperation between the groups in the different areas, where we can have common businesses.

That is still at a preliminary level as you know we are in antitrust phase where SABIC first - first all to acquire them the shares after having the antitrust approvals that will take us in June, July, never really know when the whole process is finished that will than allow us to actually share more information for now the amount of information shared is very, very limited because out of legal reasons we are - we cannot share too many detailed information. So, by I would say the same early autumn, we will then have two aspects the fundamental new BU strategy for every single business units and as we have guided for few concrete ideas of where the corporation with SABIC can deliver added value to our shareholders by concrete business opportunities.

We should then add up to the normal strategy. That's what's I meant by that.

Understood. Thank you very much.

You're welcome, Patrick.

Hello, hi. Thanks for taking my questions.

My first question is actually in the Care Chems division, because that I am looking at margins it roughly flattish year-on-year and I am just thinking in terms of contribution of one-off costs that seems that it has much less this quarter and looking into earlier question that the aviation impact was slightly probably slightly dilutive in margins. Can you give some color on what the underlying margins for the division actually as excluding the aviation impact?

And then maybe I can take out my question on natural resources later on in the second after you've answered it. Thanks.

Well I think as we have just talked about Care Chemicals, we do have a good fundamental evolution in consumer care, which is typically driving the margin up, right. And I think in terms of volumes we have gain quite a lot of commodity business during the last year to fill the capacities that we have put into place to fulfill the amount ill 2020 - 2021, so I think we have created quite a few capacity as you may recall back in 2016, which drugged a bit our profitability in 2017 and we fill progressively during the year, but we feel than with the products with lower margin and now we are replacing those products with lower margin through higher value products, actually the products the plans were made for in the first stage.

So, that is a switch which is improvement of the portfolio which happened, and therefore we'll increase the margin of Care Chemicals, I think last year we had a 18.2% margin that gives you a point of reference, because last year the icing not particularly big it was accretive but not particularly big, this year you would have a deterioration effect because aviation is much bigger, but lower in margin, so that pull us a bit down and therefore the progression that you see there is a bit diluted I would say by this dilution effect of valuation.

Okay.

Sequential improvement year-on-year.

Very clear. So, as 4Q I mean 4Q 2017 can a 19.4% margin, is a good base to think about for the underline business?

So, Q1 edge before always the biggest quarter for Care Chemicals and therefore I think you always have to have this view that are you going to compare funds like Q2 whether Q4 item in access always different business. But on a quarterly basis I think, yes you have a good progression and we're margins to our higher level of margins.

Okay. Very good, thanks.

And my second question actually is for the Natural Resources division. You mentioned that there was a temporary effect in the mining business, so I was just wondering if you can give us a good sense of what the underline growth rate of oil business actually is.

And if we look at U.S. onshore oil versus the rest of your portfolio and oil, is there a huge deference in the growth rate?

If you look at the oil, actual oil business without mining and so, we actually have a mix of our higher single-digit growth, so we are above the 5% which is already good compare to previous evolution. So, we are rebounding on that, the U.S.

personally have not contributed at all which is rather flattish slightly positive. It just really came back slightly in March so as an increasing dynamic in that figure.

That's compare to what we're saying before the issue, and if you look at the press release is our major competitors in the whole industry in the U.S. we actually fund that they are sequentially Q1 versus Q4 decreasing in the actual oil shale business.

We are slightly increasing flattish, still increasing so we're certainly not doing worst, but the actual driver of oil growth for now has been mainly Latin America and Europe. And this is the time delay we talked about, about - first of all you have the drilling picking up, then you have the oil production picking up.

But the new well that typically was you don't really need too many chemicals or too much chemical treatment. And then it's a deterioration of the yields which increases a use of chemicals on the specific oil well.

So, the actual use of chemical is slightly delay compared to both the drilling and the ramp up in production. But that is now coming and in terms of I would say contracts, so new fields which are been one a lost we actually quite a nice situate and there is a quite a lot of new fields which means the people are earning money in that industry and investing too more production capacities, so it actually looks pretty good if you look at few quarters ahead.

I see. Okay.

So, correct me if I'm wrong the impression I'm getting is that within the U.S. oil itself, it seems that it's pricing that's partially offsetting any early increments in volumes.

So, as we move on to the next few quarters, as pricing recovers, you should see more volume improvement as well as the lag impact kind of dissipates. Am I right?

It's not really the pricing, we're looked in with contract which have typically done - have been done in the last two to three years, right. Because the contract says - has a duration of life of one, two, three years normally and therefore the sales we're having today are the consequence of contracts we sign two, three years ago, in the midst of the crisis.

So, I'm not saying the prices are going down, but we're locked in into rather low level and that is now improving when you gain new contracts at new pricing levels.

I see very clear. Thank you, Patrick.

You're welcome.

Hi, good afternoon, everybody. Few questions for me, first regarding Catalysis just to [indiscernible] catalyst if any contribution there?

Second stay on Catalysis, the margins could you tell us about the dilution of your bio-ethanol if any in Q1 and how you see therefore the full year since you integrated that into the division? And finally, effects on margin per se, was there - as with the acquisition in the U.S.

that may have changed a bit, but if you could help us update sensitivity in terms of cash cost in our longest year in euros versus CHF in over currencies that matters U.S. dollar, euro and Swiss francs.

Thank you, Patrick.

Yeah. So, starting with Catalyst.

I think indeed the TP plant is now running. I would it has no significant impact in terms of sales.

It is still probably costing us more than if that need to earn because of the ramp up of capacity. So, we'll see I would say the effect diminished over the year, but it still remains our business which is in the start of that.

Okay.

Looking at the margin of Catalysis per se. Indeed, there is a slight dilution, you're absolutely right from the new activity of the business line, also liquid of bio-ethanol.

I think at the time we have guided for quite a good portion of the central R&D cost being allocated to that. So, we talk about between CHF 15 million to CHF 20 million more or less order of magnitude, which over the year are now under Catalysis and a normal under corporate costs.

And that is consequently the cost burden without too much sales right now. Because we are obviously working still and for instance onetime effect.

So, I think there will be a ramp up effect here, but for the first quarter, there was no sales associated with that activity. And then on the more of the currency positions right and the potential erosion gains.

I think you have two effects there. First of all, we are still lagging dollars $400 million to $500 million long position is still valid.

And therefore, we are certainly leaving better with the strong dollar which is not exactly the case right now. And we are short in Euro, having more costs in euro than sales, so the recent appreciation of the euro would certainly not create an advantage.

But at the end of the day it is an evolution which you have to offset by pricing. And is currently in the proportions not the major.

In fact, it doesn't help compared to previous year it's probably one element of margin dilution. But I think it's something which over the year you have be able to compensate if it stays in those order of magnitude today shouldn't have a major impact on the any results.

Perfect. Thank you.

Yes, thank you very much for taking two remaining questions. The first one would be on Catalysis.

I mean obviously you have very good quarter especially in terms of organic growth with 19%. You mentioned before that you have a quite good order book visibility.

I mean if this 19% in 2018 kind of a new normal as I would say or is there like in Q3 and Q4 last year bit of order pattern that is to we have in minds. So, how can we see that?

And then in Plastics and Coatings, I mean we have seen a sequential slowdown and you mentioned a higher comparison base, and if we see what the 6% in Q1 last year. Obviously, it is higher.

Do you see any underlying negative trends here, and how was pricing versus volume in Plastics and Coatings because it's basically I think the pigments part is having significantly higher from titanium dioxide and other raw materials? I'm just trying to understand here.

Thank you very much.

So-- we have the catalyst growth rate. Here we had 19% organic growth that is the strong first quarter we talked about back in Q4.

I think obviously our guidance for the full year, you know that Q1 is typically the lowest quarter in Catalyst then you have a normally a decent Q2 and Q3 and the absolute margin and sales growth driver comes through Q4. So, from that point of view it is 19% looks big in percentage, right.

But over the year it will get to that diluted by just stronger quarter in absolute numbers. But we confirm our guidance of --for 2018 and 2019 for the two years for Catalyst in the range of our guidance which is 6% to 7% for the business.

And we'll see effectively then during Q3 Q4 function of deliveries what gets involved this year or next year, whether we are in this guidance or above that will depend on the actual delivery schedule of the orders. But the orders are strong, and I think we are in for quite a couple of good years in Catalyst and 2021 don't look bad either.

So, from that point of view I think it's a very regular evolution, if you look at it on the year if you on a quarterly or have those effects up and down, but…

That's normal.

So, from the Plastic and Coatings business, yeah indeed we have achieved quite a good level of performance in some businesses, so additives are running extremely high level probably quite full already, limiting a bit growth potential but excellent profitability while being in Masterbatches are more in mode of increasing prices as you right fully say. We are not looking too much at the volume there, or whatever, what we want to from them is an increase EBITDA and increase cash flow generation.

So, they certainly have the challenge of increasing prices I think they have started strong much better than last year, but they lost a bit in Q1 and Q2, I think that we're in the market with broad price increases across the board I think in Masterbatches we started generally I think 8% price increase, which is now coming progressively through the whole custom and landscape in the different regions and that is the business which has to offset increased components and as mentioned is a raw material for the white Masterbatch, right. In terms of pigments evolutions how much slower, they're further down the value chain so raw material increases are much smaller and are as far in between the channel, so you have actually less dynamic on the raw material and pricing in the pigment area, then you have to have in Masterbatch.

Okay, thank you very much. That's very helpful.

You're welcome.

Yeah, thanks very much, afternoon Patrick, Anja. Just a couple of questions for me.

Do you think you can get into the lower end of that EBITDA margin target range as you move through this year, it sounds to me like you start on a good footing and there are opportunities in the margin at the margin but for the margin to continue to make progress through the year given that you had some headwinds in the first quarter, that's my first question. My second question is just, I am not sure I particularly understand the dynamics of the natural resources business, i.e.

the lower margins because of the price conservatism in the oil market, is it just simply a fact of weaker mix in the first quarter in natural resources driving that lower margin? Thank you.

All right, so in terms of general EBITDA guidance, I think we maintain our guidance as we were to increase EBITDA in absolute terms in terms of margin. The question that we get to the 16% this year will depend, I leave that open I think that the guidance is the guidance.

I think certainly we have two elements which is down as you know previous couple of years which was very low Latin America in oil business which was dragging us down in terms of reduce sales and reduce profitability. Yeah now reversing, so it will depend a little bit on the pace of the reversing, so if you look at the 2018, 2019 period is to grow them up a few quarters more.

I think certainly the again speeding oil imply in improved natural resources which than will have to lift the group margin. Yeah.

So that is - this is certainly something which can confirm today, because it's what we see in the business but the translation into actual see as an improved profitability, it will take a few quarters.

It is also fair to say that Patrick that your highest margin business is growing much faster than the other segments as well which at a group level if that continues, that is constructed of the margin bridges as well as it not?

Absolutely, I think it's certainly damaging, yeah. But again, I think as we stated we do actually have Catalysis as we just talk before right we will have actually run in 2018, 2019, 2020 don't look back as we can judge it from now with interesting new contracts coming as well, so that is I would say the most profitable business on a good track.

And then we need to remove the under performance of the last two years which why we're a little bit behind of our plan, which was clearly oil in terms of business and Latin America in terms of regions. Yeah.

Okay.

Now coming to natural resources, I think we have just have there few one timers which then have masked a little bit progress of the oil business and that will be, I would say removed in the next quarters. when as we say it was functional minerals which have extremely well performed in the last few years at a good level, but now in Q1 have a bit of a consequence already of a different mix and therefore slight deterioration, not substantial but still it doesn't help.

And then you have mining temporary situation that will result itself in Latin America with customers with fixed pipeline and volumes in principal and prices are good for iron ore and copper, so there is no structural issue there. And then coming to the oil itself I think it's a matter of as we just discussed really have both improving volumes from our customers and new contracts and those new contracts being at higher margins of the contracts that we made at the worst of the prices two, three years ago.

Just to be clear functional minerals and the mining business are by definition slightly higher margin than today's oil and mining services activity that's the point isn't it?

Absolutely yeah, right.

Right, okay. Thank you.

Yeah. Hi, thanks.

just maybe two questions one just follow up to Paul's question, without getting into numbers within that range of 2016 to 2018, 2019 that you've given for the mid-term, do you expect just a normal course of business in the sense Catalysis continuing to grow over the next two years delivery delivering the margin that you aspire to have because some could argue that maybe in two years' time Catalysis might be at peak again, so you might achieve net level of margin only for a year or two rather than sustainably, so what are the key drivers to get to that level on a sustainable basis was the question I had. And number two question is are you seeing any material changes in the month in demand trends from any of your end markets at this point looking into 2Q versus say Q1 or last six months?

Thank you.

Yeah, I think to reach the 16% to 19% I think is clearly as we just discussed before the improvement of the mix of the businesses about the renting ways I would say of the businesses within the total share of sales in shale of EBITDA. So clearly Catalyst has to roll.

It has much in driver and them getting above the 700 million to 800 million growing towards 900 million is certainly something which improves the mix. And fundamentally as you know natural resources growth factor where we can differentiate ourselves particularly in the oil business, the mining has a very good profitability and those things when they grow are naturally giving the group already at least the lower end of the margin on a very sustainable base all right.

What has happened in the last two years or last three years actually since 2015 was that oil instead of progressing as was in our plan was obviously confronted to the whole crisis of the industry, which instead of having increased sales at higher profitability had slightly decreasing sales and slightly decreasing profitability which is still much better than all the peers that compare to where the group wants to be when we talk about the 2016 to 2019 is a major deviation. So, from that point of view this is reversing.

It cannot reverse in one or two quarters and the business just started to improve during Q4 as we talked about the business in the U.S. actually really just in the last month of Q1 starting to recover.

So, it is progressively gathering speed and we need this to continue to really get them to do this level. But then it is absolutely sustainable, I mean there is no reason why with this portfolio we shouldn't be in that region at all.

Now looking at specific demand trends, I think we still see quite of good demand across the board, I think the plastic industry is still going strong that at least in our case crop delivers a regular growth, the personal care markets have been supported for many years and with innovation there's still lot more to come. That's where probably market, and innovation are two factors, right sometimes the market is not as volume but if you can replace competitors' products with better technology your sales can still advance.

And for that point of view I would not see significant sign that there is a slowing down, I think geographically, it is clear that Europe will go less in 2018 and 2017, now I think we have 7% growth in Europe last year, you cannot grow in U.S. 7% every year.

It doesn't really - it's possible from the market point of view. But on the other hand, there is a lot of room to growing in China, the U.S.

is actually doing pretty, okay. Latin America is responding back, so you probably see a shift in the regional mix, but overall, I would say market remains supportive.

Okay. Thank you very much.

You're welcome.

Thank you. Ladies and gentlemen, that then concludes today's conference call.

If you have any further question, please don't hesitate to contact the Clariant's Investor Relations team. We are very happy to answer any questions that you might have.

And with that, once again thanks for joining the call today and bye-bye.