Clariant AG

Thank you, Sandra and ladies and gentlemen, good afternoon. My name is Andreas Schwarzwaelder.

It's my pleasure to welcome you to Clariant's Full Year Fourth Quarter 2020 Results Conference Call and Live Webcast. I joined Clariant as Head of Investor Relations on February 1st, and I look forward together with the entire IR team to supporting analysts as well as existing and potential investors in their information requirements regarding Clariant.

Joining me today is Conrad Keijzer, CEO; and Stephan Lynen, CFO of Clariant. Conrad's will start our review, followed by Stephan who will guide you through the detailed results.

Conrad will then conclude with a comment on our strategies, sustainability objectives, and the outlook. There will be a Q&A session following our presentation.

At this time, all participants are in listen only mode. The slides for today's presentation can be found on our website, along with our media release and Financial Review.

I would like to remind all participants that the presentation includes forward looking statements, which are subject to risks and uncertainties. Listeners and readers are therefore encouraged to refer to the disclaimer on slide two of today's presentation.

As a reminder, this conference calls being recorded and a replay of the call will be made available on Clarion website. As a final housekeeping comment, please note that all figures discussed refer to continuing operations unless specifically noted otherwise.

Let me now hand over to Conrad to begin the presentation.

Thank you, Andreas. Good afternoon, everyone.

I would like to welcome you to our full year 2020 results conference call. This is my first set of results as Clariant' CEO.

As I started on the 1st of January, I had the opportunity to have many video calls with my new Clariant colleagues, with our different stakeholders and with some of you already. These discussions have confirmed my view that by successfully executing our strategy with a continued focuses on innovation, sustainability, completing our portfolio transformation, growth and performance; we have the opportunity to create significant value for all of our stakeholders.

I'm looking forward to working on this task together with my dedicated and committed colleagues. And I will report on our progress to you as open and transparent as possible.

Now, let me start by providing my comments on our full year 2020 results as shown on slide 3. Clariant delivered a robust performance in the full year 2020.

We have successfully weathered the effects of the unprecedented COVID-19 pandemic while assuring safety of our employees first and running business continuity programs across the value chain to keep serving our clients. The performance shows the resilient nature of our specialty chemicals portfolio, and the successful execution of our performance improvement programs.

Our sales in local currency declined by 5% as we saw a weakening in our markets, most significantly in chemicals for oil production and for aviation. Our core specialty chemicals portfolio showed strength and resilience.

Our full year Catalysis sales increased by 1% in local currency, and our care chemicals business showed modest growth for the year when corrected for the declines in aviation. The fourth quarter was our strongest quarter in the year.

We saw a sequential improvement from the third quarter and a recovery in most of our markets with positive developments in the industrial markets for care, specialty catalysis, coatings, functional minerals and additives. Clariant reported a strong full year 2020 EBITDA margin of 15% coming close to the underlying EBITDA margin of 15.7% in 2019.

Clariant was able to preserve its profitability due to strong cost management and successful execution over the performance improvement problems. In 2020, the efficiency programs contributed with around CHF 20 million in continuing operations, and around CHF 8 million in discontinued operations.

Our teams have done an excellent job in managing working capital and cash users in 2020, which allowed us to achieve a strong operating cash flow of CHF 369 million for the year. Excluding the payment of the EU fine the operating cash flow was CHF 535 million, which is above the 2019 operating cash flow at CHF 509 million.

At the same time, Clariant have continued to fund growth investments with our 2020 CapEx spend reaching CHF 288 million, versus CHF 273 million in 2019. Important projects include our new second generation, bio ethanol plants in Romania, our new Catalysis plant in China, Jiaxing in Zhejiang province, and our Licocene plants in Germany.

Clariant remains committed to reward its shareholders and our Board of Directors recommends regular distribution of CHF 0.70 per share to the Annual General Meeting of shareholders on April 7 2021. In the financial year 2020, Clariant progress well in reshaping its portfolio towards a higher specialty value.

Our company continues to invest in growth CapEx and innovation. And we are taking a step up in our commitment to sustainability with our new sustainability targets.

Ladies and gentlemen, we will continue to execute our strategy and we remain committed to our midterm targets. With that, I would now like to hand over to our CFO, Stephan Lynen who will provide further details on our quarterly results.

Thank you, Conrad. Ladies and gentlemen, good afternoon and welcome to today's call from my side.

Let me substantiate the robust performance Conrad referred with the financial performance starting on slide 4. In an unprecedented economic environment, Clariant generated group sales of CHF 3.86 billion, a decline of 5% in local currency.

This development was attributable to erosion in two segments. The COVID-19 pandemic impact on the aviation business and the business area Clariant Chemicals, and the oversupply and low demand in the oil markets in the business area Natural Resources contributed with a decline of approximately 450 basis points on the sales development.

The positive impact from pricing and the resilient sales increase in Catalysis were not able to fully compensate the aforementioned effects. As expected, Q4 was the strongest quarter of 2020 with sales decline of only 2% in local currency.

This was driven by continued lower demand amid COVID-19 in aviation and oil, but growth in Catalysis and some recovery in industrial applications, such as an additive for the final quarter 2020. The absolute EBITDA reached CHF 578 million, compared to CHF 692 million in 2019.

Excluding the one-off CHF 231 million provisions booked in the second quarter of 2019. Weaker sales in COVID-19 exports segments such as industrials, but particularly the difficult environment in aviation oil as well as adverse currency volatility leads to this absolute EBITDA contraction.

These effects could not be fully mitigated by all performance programs. Thus, EBITDA margin recorded at 16.0% versus 15.7% in the previous year.

Q4 was also the strongest quarter with regard to profitability in 2020, both in absolute EBITDA of CHF 159 million and in the corresponding EBITDA margin of 15.6% despite comparing to a very high base in Q4 2019 of 19.2%. Q4 2020 reflected the expected sequential margin improvements compared to the nine-month period in 2020 of 14.8%.

Let us take a closer look at the sales bridge by moving on slide 5. Compared to full year 2019, Clariant reported 7% lower volume attributable to the before mentioned effect, which was only partly offset by slightly positive pricing impact at plus 2%.

In contrast, the currency depreciation against the strong Swiss franc impacted sales by a negative 7%. This was primarily attributable to devaluation of Latin American currencies, the Euro and the US dollar versus the Swiss franc.

The fourth quarter showed a similar development with less pronounced volume decline based on the growth in Catalysis and the recovery in industrial applications. Slide 6 depicts the regional sales development for 2020.

The sales development in Asia improved with an expansion of 4% in local currency. Our strategic focus area China grew by 6%, while also India reported notable growth.

Sales in Latin America also increased by 7% in local currency; sales in North America decreased by 14% in local currency, this was primarily due to the decline in aviation business and Care Chemicals, as well as the decline in oil, especially land business in natural resources. Europe weakened by 8% in local currency, primarily due to the negative impact from the COVID-19 pandemic lockdown measures in the second quarter.

However, the region saw an upward trend in the fourth quarter with one of the most significant countries in Europe, Germany, also contributing positively. In the Middle East and Africa sales declined by 13% in the full year 2020.

Let's review the business area figures now in more details starting with Care Chemicals on slide 7. In the full year 2020, Care Chemicals sales weakened by 5% in local currency and by 12% in Swiss francs, due to the low aviation demand amid COVID-19 and due to reduction of air traffic.

Excluding the aviation effect Care Chemicals would have recorded a low single digit growth in local currency in 2020. The sales development in consumer care reflected high single digit range expansion attributable to double digit expansion and crop solutions, and good growth in personal care as well as home care.

As anticipated, except for strong development in paints and coatings, industrial application sales were lower, primarily due to the aforementioned sharp drop in the aviation business. The challenging economic environment also resulted in lower construction chemicals, industrial lubricants and based products demand.

Sales in the fourth quarter of 2020 decreased by 4% in local currency resulting from the sharp decline in navigation within industrial applications, while sales in construction chemicals and industrial lubricants returned to grow. Consumer care, sales rose in the mid-single digit range supported by growth in home care as well as crop solutions.

The Care Chemicals EBITDA margin showed significant progress in the full year 2020 with an increase to 18.9% from 17.6%. The weaker top line development was countered by stringent margin management and cost management as well as over proportion and more accretive growth in consumer care.

The EBITDA margin improvement at Care chemicals was even more significant in the fourth quarter as the margin rose to 21.6% from 18% in the previous year. This development was driven by a more favorable product mix, stringent margin and cost management to offset the declining sales mainly caused by low aviation demand.

In terms of the short-term outlook at Care Chemicals, we anticipate a continued difficult situation in aviation amid the COVID-19 in Q1 2021, which we expect to result in a sales decline in local currency versus the first quarter of 2020 with low aviation impact. Mitigation measures remain in place to defend EBITDA margin levels year-on-year by offsetting the aviation out load and the impact of rising material costs.

Let's move on to Catalysis on slide 8; in the full year 2020 sales in the business are Catalysis progressed by 1% in local currency, whereas depreciating currencies led to 5% decline in Swiss francs. Petrochemicals demonstrated resilience with low single digit growth, but the generally weak demand environment in the chemical industry negatively influenced Syngas and specialty catalysts.

In the second half of 2020, the sales contribution from emission coal-controlled Catalysis in India for the use with motorized scooters increased significantly due to the COVID-19 pandemic. Sales in the fourth quarter of 2020 exceeded previous year level by 12% in local currency, primarily driven by the very strong momentum in India, driven by the booming mobility sector.

Growth in specialty Catalysis and petrochemicals also contributed to this development. Clariant comprehensive Catalysis portfolio, which makes it unique in the marketplace successfully, mitigated the negative influences as attributable to the COVID-19 pandemic.

The full year 2020 EBITDA margin weakened to 19.1% from 22.9% in the previous year, as a result of product mix effects in the first and the fourth quarter of 2020, with a higher contribution from lower margin business and the Efficiency Program provision, which could not be fully offset by the sequential improvement in the margin run rates in the fourth quarter. As anticipated, the EBITDA margin decreased in the fourth quarter to 20.7% versus a particularly high base of 31.6% in the previous year.

This is due to a proportionately higher sales contribution from the emission control Catalysis in India and decrease of order shift from Q1 2020 into Q4 2019. In the first quarter of 2021, we expect growth in local currency and Catalysis versus the first quarter 2020.

We expect this to translate into EBITDA margins above previous year Q1, but below the full year 2020 average due to continued mix effects. Given the complexities of forecasting quarterly Catalysis development, especially in the current economic environment, it is important to note that the business fundamentals here remain positive based on the present order pipeline or portfolio strength and our innovation capability.

On slide 9, we see that the full year 2020 sales in natural resources declined by 8% in local currency, and by 60% in Swiss franc. More than half of the erosion in local currency in this business area can be attributed to the softer economic environment in the oil industry.

Oil and mining services sales were hampered by lower oil production due to weakened demand in the third and fourth quarter in particular. As a result, oil services sales decreased in low double digits while refinery weakened in high single digits.

The positive expansion in mining solutions was not able to fully compensate. Functional minerals sales declined at low single digit rate in local currency primarily as a result of the weaker foundry business.

Demand at the European automotive industry as well as in the construction sector, clearly softened due to COVID-19 pandemic, which could not be offset by growth in purifications edible oil business. Additive sales decreased at a mid-single digit rate in local currency in the full year 2020.

This decline was largely due to the continuingly weak fiber market, while the industrial coatings and automotive sector demand also remained under pressure amid COVID-19 pandemic. However, all business lines in additive saw demand picking up in the fourth quarter.

In the fourth quarter sales in natural resources declined by 8% in local currency as strong double-digit growth in additive supported by slight growth in function minerals could not offset the decline in oil and mining services. In the full year 2020, the EBITDA margin decreased to 13.9% from 16.3% year-on-year as a result of lower volumes attributable to the weaker demand environment, and also the Efficiency Program provision, which was booked in the second quarter of 2020.

When excluding extraordinary items like the Efficiency Program provision, the underlying margins were in the range of the previous year levels due to the strong cost reduction in all three business units in 2020. In the fourth quarter, the EBITDA margin stabilized at 14.7% yet much below a high previous year base of 18.2%.

The decline is largely attributable to the continued difficult environment in oil services and refineries, particularly in North America and in the land business. Looking forward in the first quarter of 2021, we expect natural resources to see continued top line weakness due to soft oil business, compared to a high previous year base.

Recovery in additives and foundry will not compensate for the decline in oil versus the strong first quarter 2020. This will also affect EBITDA margins, which are expected in the range of 2020 averages but below Q1 2020 level despite the strong cost takeout.

Let us continue the discussion of the EBITDA development for the full year 2020 on slide 10. On an absolute basis, the EBITDA reached CHF 578 million due to the weaker currencies and low sales in COVID-19 exposed segments, but particularly the difficult environment in aviation and oil.

On group level, the provision for the efficiency program was offset by the reversal of the EU fine. The positive impact from spend avoidance to mitigate the COVID-19 impact and from the Efficiency Program, which contributed approximately CHF 20 million of total CHF 50 million in 2020 could not fully compensate for the impact of this environment.

This led to a decline in underlying EBITDA margin through 15.0% from 15.7% in the previous year, when excluding the one-off CHF 231 million provisions which was booked in 2019. Yet as anticipated, the run rate improved with the full year 2020 margin being slightly above the nine months of 14.8%.

Slide 11 reflects that in the fourth quarter of 2020 the EBITDA decreased CHF 159 million, including the currency effect, with a corresponding margin of 15.6% versus a high comparison base of 18.5% in the previous year. EBITDA margin advanced in Care Chemicals, while it declines in Catalysis and in natural resources versus high comparison base.

Nevertheless, the margin run rate improves with the fourth quarter being the strongest quarter in 2020. Let us move to slide 12; the full year 2020 net result increased to CHF 799 million positively impacted by the after-tax gain of CHF 723 million on the disposal of the Masterbatches business, as well as the partial reversal of the EU fine of CHF 55 million.

Negative impact came from the volume driven weaker absolute profits, negative currency translation effects, as well as expenses for the efficiency and right sizing program. The expenses of these performance programs amount to approximately CHF 141 million in 2020, which breaks down as CHF 49 million for efficiency in the continuing and CHF 92 million in the discontinued operations.

The latter including CHF 68 million for right sizing and CHF 24 million for efficiency. The operating cash flow for the total group declined to CHF 369 million from CHF 509 million in 2019 due to the payment of the CHF 166 million, EU fine issued.

The absolute contraction from adverse currency and demand decline and the restructuring cash out of CHF 25 million. Excluding the payment of this fine, the operating cash flow for the group rose to CHF 535 million based on a high cash conversion of 74% driven by the execution of our performance measures and our active Working Capital Management.

I will now conclude with some comments regarding recommended distribution to be paid in 2021 on slide 13. Although we were confronted with an unprecedented economic environment in 2020, we nevertheless achieved a very robust performance.

In addition, we stand to our commitment to sustainably sharing success with our shareholders based on improved financial performance. As disclosed on February 1, the Board of Directors decided based on the proposals of the executive committee to propose a regular distribution of CHF 0.70 per share.

This proposal should not be interpreted as a recurring distribution, as the proposed amount takes into consideration the group's performance of the combined past two fiscal years of 2019 and 2020, after withholding of the distribution in 2020, as a caution in the outbreak of the pandemic. The distribution is proposed to be made from share capital decreased by way of par value reduction.

Ladies and gentlemen, let me conclude; our 2020 results clearly reflect the superiority of our core specialty portfolio, as well as stringent execution of our performance programs. We see Clariant as being very well positioned heading into 2021.

And we remain committed to taking the next step in improving our performance. With this, I would like to close my remarks and hand back to Conrad.

Thank you, Stephan. I would like to take this opportunity to share my view on our strategy and the next steps on Journey.

Clariant has developed five pillars that will drive the company to become a leading specialty chemicals company. Research and Innovation will remain important as it enables us to develop offered differentiated products that deliver true value to our customers.

Sustainability becomes even more important, and Clariant rightfully has positioned sustainability as a key driver for innovation. It is our objective to develop differentiated products that make our customers more sustainable.

Clariant has been successfully repositioning itself towards two specialties Chemicals Company. The divestment of our pigments business is important, as this allows us to focus even stronger on our three remaining core business areas.

Strengthening our existing market positions, helped by bolt-on acquisitions will drive leadership economics and will enable our business to outgrow their markets. We will further continue to focus on growth in Asia.

Local capability building, especially in China will remain a high priority. Our leading market positions should indeed deliver leading financial performance in terms of growth and profitability.

Our midterm targets for our business reflect our ambition to achieve this leading performance when compared with our best-in-class competitors in the relevant market segments. Clariant has been one of the early adopters of sustainability with its commitments to contribute to the UN Sustainable Development Goals.

It is important and nice to see that sustainability is becoming a true global priority with the European Green deal, the China Green initiative and the return of the US to the Paris Climate treaty. As shown on the next slide, Clariant has adopted a clear ESG framework.

We have defined environmental, social and governance targets and will continue to drive progress in all three areas. Today, I'm pleased to announce that we increase and expanded our ambitions with regard to climate change.

We have increased our existing scope one and two targets to reduction of 40% for absolute emissions by 2017 compared to the base year 2019. For scope 3, we have introduced a new targets aiming at a reduction of emissions of 14% by 2030 compared to the base year 2019.

To achieve this, we will change our raw material base to low carbon alternatives, and we will seek to switch our feedstocks to bio renewable materials. Now I would like to conclude with our outlook on slide 19.

Overall, 2021 is expected to continue to be volatile with continued headwinds in markets like oil production and aviation. We are currently seeing more restrictive lockdowns in some countries.

And we're also experiencing the elevation of raw material costs, particularly for ethylene and propylene-based materials. While these issues create some uncertainties in the first quarter, we continue to be optimistic about the further recovery of our markets.

In 2021, we will be realizing the bulk of our Efficiency Program savings and we will continue to invest in growth, sustainability and innovation. We therefore remain committed to our midterm targets.

While timing depends on the economic environment and further developments of the COVID-19.

Thank you, Conrad. And thank you, Stephan.

Ladies and gentlemen, before we begin the Q&A session, we would kindly ask that you please limit the number of questions Two, two, that providing more participants with the opportunity to ask questions. Thank you for your understanding.

And we will now open the line for question. Operator, please go ahead.

Hi, good morning. Can you hear me?

Yes, we hear you.

Sorry, I've had a little bit problems with phones today. Can I explore a little bit the Care Chemicals results in the fourth quarter?

Your revenue was down CHF 40 million year-on-year, and your EBITDA was up CHF 10 million, adjusted EBITDA. Even with Consumer Care growing at a mid-single-digit or high single-digit rate in the fourth quarter and the higher margin that you get in that division, I find it extremely difficult to reconcile that result.

Could you possibly help bridge the gap, be useful?

Thank you, Alex. Yes, I'll sort of give a high-level view, and then I'll hand it over to, actually, Stephan to you to provide some more detail.

If you look at Consumer Care in the fourth quarter, what we saw is a bit of a change in mix, where, in the beginning of the year, the Consumer Care Chemicals, so let's say, the products into Crop Protection, Personal Care, Home Care, actually stayed positive. We actually did see declines in our industrial segments, most significantly, obviously, de-icing, but also our lubricants business.

Paints and Coatings actually were quite positive. In the fourth quarter, we saw a general recovery of the industrial markets.

For Consumer Care, that meant - that means that the mix became more towards the historic mix, which is more like sort of 50-50 between the 2. Yes, maybe, Stephan, you can add some more detail here?

Sure. So as Conrad said.

One effect is clearly the accretion of higher-margin growth, consumer care versus aviation or certain industrial areas. And two is definitely also the reduced cost line because there's a strong traction also from the implementation of the efficiency program in Care Chemicals.

Three, but that is a minor effect, we also had a small credit on an energy discount for the full year. So there is a little bit over proportion in Q4, but it's definitely a recurring item for the full year.

Okay. So there's nothing else in there, which may have distorted the profitability?

You're saying it's just because of the product mix and small amounts of cost savings?

Only the 3 factors, which I mentioned.

Okay. Is there any way you can quantify the energy credit that you talked about?

Yes, mid single-digit millions.

Yes. Thanks.

I would like to understand a little bit more on the catalyst business. You mentioned the Indian emission catalyst - sorry, from my ignorance, but I didn't even know that you have them.

Maybe you can outline what the background of this growth is and whether there was something special that are continuing? And how is the underlying trend in the more profitable business is?

And what we can expect here for 2022, as you said that your order book still looks quite good? And the other question is on the oil business, in Oil and Mining Services.

Yes, of course, you had a high base in Q1 '20, and that's we are not able to achieve that level. But can you explain a little bit more the underlying trend and what except these high bases in Q1, we can expect from the underlying trend for the year 2021 for this business, please?

Thanks for the question. Maybe first on the India business.

This is actually through a joint venture that we run a catalyst operation in India. The big increase here is actually for the emission control catalyst, primarily for 2-wheelers.

There are 2 effects here. First, people spend less time in public transport with the whole situation around COVID.

And secondly, India has actually adopted last year, much more stringent emission control legislation. You do see this in the mix, a strong effect actually for the mix in catalyst in the fourth quarter because this is indeed a lower-margin business.

More generally speaking, we actually do see a pickup in catalysts in the fourth quarter in some of the underlying markets. You see, obviously, better run rates in chemicals, better run rates in petrochemicals.

And for syngas, we didn't see this yet, but we are expecting that, and that is more or less the timing of orders. I'll make 1 or 2 comments about OMS as well.

But then, Stephan, I would appreciate if you could maybe also talk a bit more about segmentation and catalysts and particularly underlying trends. If you look at the OMS business, clearly, this has been hit severely by the very significant drop in oil production last year.

Unfortunately, here, we do not see a pickup yet. We see continued low run rates, particularly with our land drilling business in the U.S.

If you - well, you've probably seen the announcements by companies like Halliburton, Schlumberger, some of the companies who are very active in the same segment that report revenue drops of 20% to 30% on their business. We see not an improvement yet.

It is good to see that for this business, at least that the oil price is a bit recovering towards the $60, which means the rig counts are increasing. But for the time being, we do not see an improvement in OMS.

This continues to be a headwind. Maybe you could comment a bit further on both of these segments, Stephan?

Sure, Conrad. Let's start with Catalyst, you're right, emission control in India is not a strategic focus field historically, but there was an opportunity which came up, as Conrad alluded to, from the COVID-19 move public transportation to scooter 2-wheelers and also from the upgrade to EU norms in India in that regard.

Now important also looking forward is this is still also continuing a little bit into the Q1. And this is the mix effect, which we will see.

The mix effect comes because this is from a percentage margin below the average of the catalyst portfolio. And that's why from a margin percentage point dilutive, but it's a very good cash business.

And secondly, when we started or entered this business, which has us, by the way, also with utilization of plants, which were a little bit more emptied maybe for other markets which were weaker. We also had the opportunity - or we have the opportunity going forward to replace this catalyst, which has a high content of a precious metal with a second generation, which will have a much lower cost base.

And therefore, we will also be able, just for this business to, in future, shape that also more accretive from a margin standpoint. Now from a - and from a total outlook, it's as Conrad said, refinering is definitely not for strong rebound seeing in 2021.

Syngas is definitely seeing growth momentum because remember, we said that was really peaking in '19, weak in 2020, but we've seen some robust order pipeline now for '21. And petro is definitely a hard for growth in 2021.

Now on the natural resource side, that's what the whole guidance about Q1 is about. It's about oil and aviation.

And it's about an endurance of the impact of those 2 items in Q1, as we would have been probably talking about growth now in Q1 '21. And in oil, as Conrad said, we have, I think, in the last year, around 40% of rig - oil rig closures internationally, globally, mainly in U.S., mainly in land, and that is just taking its juice.

And our oil crisis landed in our P&L and in our business, really by mid of last year. And that's why on a year-on-year comparison, automatically, plus certain recovery, which we also see, I mean, in the midterm, you could see still an erosive comparison in the first quarter and also in the second quarter when you look at oil.

Now as we said, you see a recovery in Additives in Q4 and also in the foundry part of Functional Minerals. So that is a positive signal, but that will not be able to overcompensate, particularly the oil comparison, where in Q1 2020, we still had double-digit growth, and that's basically the net effect of it.

But the fundamentals would be that oil should - could recover by mid of the year and that Additive and Functional Mineral could continue the positive trend of Q4 2020.

Yes. Thanks and good afternoon.

Congrats Stephan and Andreas. Yes, I've a couple of things I wanted to tackle.

One was the scope 3 reduction target. And really, really good to see these numbers, they're pretty aggressive.

But the scope 3 one is interesting because it's such an exact number. So can you just walk me through how you got to 14%?

And when you look at the balance of recycling versus plant-based raw material, how do you think that balance will come through roughly, I guess, it's difficult to be exact. So that's the first question.

And second one was much more straightforward. I might have missed it, but I haven't seen CapEx guidance for '21.

And also, if you do have a sort of general viewpoint on CapEx for '22, while we're at it?

Sure. Thank you, Andrew.

Yes. So maybe a few comments about scope 1, scope 2, scope 3, and I'll obviously focus on scope 3 as you - as that was what your question was about.

So scope 1, scope 2 actually Clariant increased its target. But we already, as a reminder, had a target for scope 1, scope 2.

We made it a bit more aggressive to be really leading if you compare ourselves versus peers in the chemical industry in terms of target setting. As a reminder, scope 1 is the energy efficiency.

So it is really the - let's say, the energy efficiency in our own operations. For example, you install a more energy-efficient pump that counts as a scope 1 saving.

Scope 2 is very much about the energy transition. So this is about, let's say, green electricity, for example, that would come to your scope 2.

Scope 3 is an interesting one because here, what we - what you really do is you take a look at the raw materials, you basically lower the carbon footprint on those. You mentioned recycled materials.

For us, it's definitely also an area of interest, but what we really want to focus on is, let's say, biorenewables. And just to give you an example, if we were to use the bioethanol in our new Romania plant, and we basically derive bioethylene from that.

And then we basically feed our ethylene oxide plant in Gendorf with that bio-based ethylene then you actually have a renewable feedstock for your Surfactants portfolio, or a large part of the surfactants in Clariant, as you know, are EO-based and [Indiscernible] products. That's an example where you really, yes, redesign your products, and that would really count towards scope 3.

So for us, the scope 3 is actually a very important one. Yes, I think - yes, Stephan, yes.

Let me take the second part on the CapEx guidance, I think. So you saw that we came out this year with around CHF 288 million.

So that was already a bit higher because we had a certain part of the investment for the biofuel plant just mentioned in Romania. And the new catalyst plant in China.

Now - but we have also proved a little bit in the crisis. For 2021, we forecast CapEx up to the amount of CHF 400 million, which is what I also said, was the third quarter because it's a heavy investment here also, again.

For completion of the sunliquid plant in biofuel - for biofuel in Romania as well as for completion of the Catofin plant in China, and that makes it to that the amount. But it's directly correlated also to the midterm targets.

Remember that the biofuel plant in Romania has a very strong contribution on the Catalysis midterm target delivery when it comes to growth and also to the high EBITDA margins. And commissioning that then by end '21 requires us to complete the investment and to commercialize and start commercializing in 2022.

Now for the long-term guidance, I remain with the guidance I said that on a, let's say, on a continuing basis, you can plan Clariant with CHF 250 million to CHF 280 million CapEx, roughly, which includes certain investment projects that's basically the guidance in a normal year after this heavier investment year 2021 and 2020.

Can I just follow-up quickly? Just go back to that point on Romania.

Conrad, you mentioned that was a big part of the displacement of the [Indiscernible] that's using EO. But what does that do in numbers terms?

So let's assume you fully load that, what percentage then of your raw materials are natural?

Could you repeat the last sentence, Andrew? We didn't hear you here.

Yes, sure. What percentage of the raw material base would be fully natural, if you fully loaded Romania?

Sure. Well, let me just, first of all, clear that this is not a number because you asked earlier on why you get to exactly 14%.

So this is not a sort of bottom-up calculated number with the impact of Romania. Romania, I just gave as an example.

So this could be actually one of the components. But as you can understand, there are many components.

Anytime those in surfactants, you basically introduce a bio-based or plant-based material that would actually count. You've probably heard about, for instance, the products where we do root milking, which is then an active ingredient in aging cream because it does something to sort of reenergize the cells in your skin.

That would also be an example, which accounts to these scope 3 targets. So I certainly don't want to leave you with the impression that this is tomorrow the case that we convert our entire sort of oxalated product line to buy renewable.

It would be nice, but this is a plant that first needs to start-up, which is planned somewhere towards the end of this year. And then there's still quite a lot of work that needs to be done in terms of product development and sort of process development as well for - if we were to go in the direction of this biorenewable-based ethylene.

That's certainly not a decision or sort of a complete green light at this stage. It was just meant as an example.

Hi, everyone and thanks for taking my questions. And the first was on the dividend.

I wanted to ask a little bit about what was the rationale of you and the Board around the decision to propose the point - the CHF 0.15 for 2020? I know you've sort of combined it with the '19 and '20.

But with the changes at a management level and at the Executive Board level, I was wondering if that signaled any change in the dividend policy away from your stable to rising dividend? Or is the sort of 2019-'20 thinking really one-off?

And if so, what should we see as the base for your policy from 2021? And then the second question was around your sort of outlook comment saying you plan to actively defend profitability.

I was wondering if you could talk a little bit about what initiatives you're actually taking. So are you announcing price hikes in specific areas?

Or are you more focused on ways to manage costs?

Yes. So let me start with the dividend.

And so the rationale is that we - usually, our season starts in Q4 when we start to model what kind of dividend scenarios, we can run to share the success with our shareholders, which we are committed to. And as you remember, when we entered into the AGM of last year, we already had a proposal for 2019 of an ordinary dividend of CHF 0.55 per share, which was based on a distribution of the 2019 recurring net result.

We have suspended that or withheld it because we were just at the brink of enter into COVID-19 and the uncertainty. We stood tall at the time to our extraordinary dividend of CHF 3, which we paid out mid of last year when we very successfully completed the Masterbatches divestment.

But we said that we're going to review this ordinary dividend from 2019 into 2020, once again, when we complete 2020 and have a better outlook on, yes, and the world. And this is what we did now.

If you look, we - there is no reason that the financial results of 2019 changed. So we said, from a financial standpoint, that's the other dimension then are we able to stand tall and commit to our investment rating, to our liquidity, to also do the things which we need to do in our strategy to transform the company, which is a massive transformation right now, as you know.

And with that confirmation, we could confirm the CHF 0.55 from '19. And then we looked at 2020 for 2021.

And you saw that we also had a good improvement in earnings per share on a continuing basis, which gives you the base that the recurrent net result was there to be able also to distribute the dividend based on 2020 net results. And that was then leading to the CHF 0.15 or CHF 0.15.

In totality for '19 and '20, it's a bit higher than our usual payout, which was basically around 40 percentage of the recurrent net result. Now it's more in the dimension of 50 percentages.

So we looked at what we could do. We made the proposal to the Board, and they discussed it.

They unanimously approved it. And then we responded to the SABIC letter.

And well, I think the arguments are very clear. Also, you remember that the surplus from the Masterbatches cash in which we had, which was a bit more than CHF 200 million, we always said we need that to finance the EU fine in the last year to finance on liquid investment, and the restructuring program, which is the biggest restructuring, which we have since 12 years.

So very consistent in that regard and then SABIC also supported our proposal has withdrawn from their initial proposal, and that's where we came up now with the CHF 0.70. They are, of course, nonrecurring, and it's very difficult to make - fill your models for the future, I understand that.

But it's referring to 2 years, and it's an increased payout ratio. So therefore, there is no base to use this for future ongoing calculation.

And on the outlook, let me just quickly mention the efficiency program, which we mentioned, but there is much more than that, which Conrad is happy to - yes...

Yes, yes, sure. I mean we have actually, obviously, quite some discussions before coming up with our outlook.

So the outlook is very much targeting to preserve our EBITDA margins, which basically refers to the Q1 EBITDA margins that we had in 2020. So indeed, it is our target to end at levels very close to or around - at or around those levels in Q1 this year.

2 comments, how we're going to do that. So first of all, as Stefan mentioned in his prepared remarks, if you look at volumes, some of our core segments are clearly trading well below the levels from a year ago, particularly in oil, that is - there a very big gap that we're facing.

Our production down substantially from what actually was a high level at this point in time a year ago, de-icing is another example. So our volumes have not recovered.

And here, it is very much about cost. It's not that we're going to initiate new programs.

It is very much about the execution of the existing programs. And what was announced last year already is a program which actually affected 600 positions in the businesses, yes, this is something that is part of the sort of the efficiency improvements, the lowering of our cost.

There is a separate program actually affecting 200 positions in our Pigments business. And finally, there is the big program, Clariant 2021 affecting 1,000 positions.

This is very much about bringing the cost in alignment with the new scope of the business without actually Masterbatches and Pigments moving forward. So that's as far as cost is concerned.

Those are the key initiatives there. Then secondly, pricing, as mentioned already, we do see raw material inflation right now, it is in the low single-digit area.

But clearly, we are working on pricing programs in all of the businesses right now. And are actually reviewing that biweekly.

So we do need to more than offset what is coming through right now in terms of raw material increases.

Thank you. I want to start with Pigments, if I can?

Can you just - I arrive at roughly CHF 560 million book value for this now. So just want to understand if this is correct or not?

And secondly, could you just give us some sense of what is the current sort of annualized profitability of this business? Because I just want to understand really because what is the sales scope and what is the profitability scope of this business?

And then sort of tying that in, in terms of timing of the divestment, are you very confident that you will be able to execute this year? Or is this really contingent on getting the right value for the asset?

The second question is more on catalyst. Appreciate the comments made.

I just wanted to double check a couple of things. Propane has gone up a lot in recent months and so has coal.

So are you seeing any sort of short-term negative headwinds because your customers are reducing utilization, cost profitability is sort of under pressure in those 2 areas? And sorry, apologies if I may just squeeze one more?

Conrad, like I did not have the opportunity in the previous call to say, but welcome and good luck. Just from your Akzo experience, when you think about specialty chemicals and then look at the Clariant portfolio, are you happy with the size of the portfolio as is today?

Or is actually getting to the sort of top tier, especially chemicals requires an increase in size in the Clariant portfolio?

Yes. So perhaps, if Stephan could comment on your first 2 questions around Pigments and Catalyst, then I'll come back on the - my observations on the portfolio.

Yes, Jaideep, pleasure to do so. Let me start with Catalyst.

So you're right, we've seen certain changes there. But on the other side, we also see increase of oil price and following naphtha olefins export over the last weeks.

So you have trends in all directions and the increases of prices here are, of course, call maybe care chemicals a higher feedstock price, which we have to mitigate. But for Catalyst, it's again another, yes, levers to see even higher orders in the petrochemical side.

And on the coal side, we are not so strongly exposed. So that means for us, it's still, in total, positive when we look at petro and syngas as opposed to - again, we definitely don't see that - which is smaller in weight for us that refinery catalyst will have any kind of upswing in 2021.

On the Pigments side, you definitely can understand that I will not comment on the detailed book value of Pigments, neither the underlying margin nor the sales. But what I can tell you is that we've been guiding that Pigments is looking at a top line in the high 3-digit million bases.

And they were actually - it's reported in our reports. In Q4, they were down by minus 3% in local currency in totality on top line; they were quite resilient in 2020.

And then on an absolute EBITDA margin, they even improved to the prior year because we have here also a high contribution from the efficiency program, which runs in Pigments, which contributed CHF 8 million last year. And yes, has another upside then doing the full CHF 20 million run rate in '21 and '22.

So on the process as such, we are now - we have completed the funneling of the interested parties. So there is still strategic and financial interest to parties, which are now going through the due diligence, virtual or physical if possible, site visits and the negotiation rounds.

And as I said also in the third quarter, we are very confident that we can conclude these negotiations to the third - within the second quarter, so that we will be able to give an update then or an announcement, whatever is the outcome then in the second quarter or by mid of the year. And to your other question, I also said there was the third quarter.

We do not have any time pressure to close it tomorrow or so. We go here for value over speed, for sure.

And we have a significant increase of the run rate of the EBITDA of Pigments and we want to have that considered in the valuation. And therefore, we definitely look at a very good value offer if we then go into the signing in the second quarter.

Okay. Jaideep, so some observations on the portfolio of Clariant, and I'll try to keep it short.

If you look at what Clariant has done very successfully in the last decade is reposition itself from a company that actually had positions also in sort of more commodity chemicals towards a company with clear positions in Specialty Chemicals. So if you look at the 3 business areas: Care Chemicals, Catalysis, Natural Resources, these all can be seen as specialty chemicals.

Perhaps the exception, if you look at Natural Resources, our Functional Minerals business, this is more a specialty material. But I can tell you from my Imerys experience, actually, this is - is a very attractive business, and it is really a specialty material in and by itself.

So if you look at the portfolio, these are - yes, portfolio - this is a portfolio of specialty chemicals. If you then look at your question around size, what really matters is market share in the individual segments.

So your strengths vis-à-vis your competitor at a segment level. Then if you look at the portfolio, typically, Clariant has 1, 2 positions, which means the portfolio as it is actually very sustainable and is not lacking skill, so to speak.

If I reflect back on my Akzo experience and how we looked at our chemicals portfolio, in Akzo, we always refer to it as big fishes in small ponds. And I can tell you that is a very profitable and attractive situation to be in as a company.

Good afternoon, gentlemen. Two questions from my side as well.

Again, on this sustainability target, how fast do you think to switch your raw material [field, for example, in] Care Chemicals or also in the Oil and Mining field. Is this something we should expect over the medium term, say, 3 to 5 years?

Or is this more kind of a vision for the next 5 to 7 or 10 years? That's my first question.

And the second question is then on innovations. Could you update us, are there any important innovation product launches coming up soon?

Yes, this will be my 2 question, please.

Sure. So as to your first question on how quickly can you actually convert your raw materials towards more, yes, recycling use as well as bio-based raw materials?

Yes, this is not something that is done overnight. As a reminder, these targets are for 2030.

So that's actually when we expect these to be delivered. Now I will say, if you compare Clariant to some of its competitors in terms of the product line, it is already very much future-oriented, particularly if you look at - for instance, in Care Chemicals, a number of products that are already bio-based.

And if you look at our IP, if you look at our technical know-how, and when it comes to biorenewables, it is actually leading. Just as a reminder, if you look at the bioethanol plant, this is actually second-generation technology.

So most of the people are practicing first-generation technology or 1.5-generation technology, which basically means you're competing with the food chain. What Clariant has this unique technology that actually allows us to use waste streams in agro to then actually convert that to bioethanol.

So just - I hope that, that gives you some comfort that we are actually quite ahead here of a lot of competitors already. In terms of new innovation, it is a constant pipeline, I would say.

So this is certainly in Catalysis, a constant introduction of new and more efficient catalysts together with our clients. But as well in Care Chemicals, you do see a constant turn out of new products.

Natural resources in some areas, perhaps a bit lower hard beats. But I think across the portfolio, innovation remains a core priority.

We mentioned it earlier today, the R&D spent 4% of sales, it is actually at or above our competitors, and we do want to maintain that as a core differentiator for the company.

Yes, hi. Thanks.

I had - first question I had was is it possible for you to give us any color on how much was the contribution from discontinued operations in your full year 2020 cash flow? Because I think my understanding is that, that number is, including both continued and discontinued operations.

So if you can give us some sense of how much of the cash flow from operations and CapEx was allocated to discontinued operation? That would be useful.

And the second question was, given all these efficiency programs running, should we expect a much bigger restructuring cash-outs in 2021 compared to what you had in 2020?

Yes, Chetan, of course, let me take the question. So I'll start from the last, and I remember it faster.

So when it comes to restructuring cash out, you're right, we expect higher restructuring cash out in 2021 and we had CHF 25 million or CHF 26 million in 2020. And we're going to see more in 2021.

As we said, we have booked provisions and direct costs for cash out of CHF 141 million for all these 3 programs. And from a P&L side, we are totally covered now for 2020 recordings.

And from a cash point of view, there is probably the most significant part then in 2021 and then some parts still in '22. And for the rightsizing, might still have some effect, even'23 cash out.

But as I said, the majority will be in '21 - for 2020, '21 and '22. In that regard, and if you look on the, again, on the operating cash flow, there is not so much - yes, I can't obviously fully differentiate into a discontinued and continuing cash flow.

Of course, the big effect from the Masterbatches sales, they are not affecting the operating cash flow too much. That's more on the then divestments part, on the lower part of the operating cash flow.

And if you look on the EBITDA contribution from discontinued operations, which we did disclose you're looking at around a by normalized CHF 140 million, where you have, of course, then still a lot of cash-out costs again, which still take a significant impact, and therefore, the effect of discontinued business on operating cash flow is there, but it's not a major effect.

Understood. And sorry, I sort of didn't fully get the response to one of the previous questions on - I think there was a mention of some one-offs in Care Chemicals.

And I think there was some quantification given mid single-digit million was that for full year or was that for Q4 alone?

That was for Q4, but that refers for the full year. So it's not a one-off, it's a recurring item that you get certain energy discounts and sometimes they fall in Q4 and in another year, they fall in Q3 or Q1, but they are analyzed always the same.

So that means this is not a nonrecurring item, but it had a little bit of a peaking effect in Q4 because we got only the credit note in Q4. But it is normalized for the full year result.

It doesn't matter for Q4; it was a bit single digit. I said mid-single-digit higher.

Good afternoon and thanks for taking my question. Now that you've signed several sunliquid licenses, has anything changed in your expectations for this business?

And I think the previous target was CHF 100 million sales with 40% EBITDA margins. Is that still valid?

Yes. So maybe I'll make it for the sort of general statement on how pleased we are with the progress from a commercial point of view, and then Stephan can add to that, including the financials.

So if you look at the commercialization of this, we actually are very pleased with what we're seeing. We've signed 5 licensees already.

Now the plant still needs to start-up later in this year. So we're actually well on track there.

What is particularly of interest for us is that we actually finished the second Chinese contract here. And I mentioned briefly the Chinese Green Dream initiative.

This is actually a very significant thing in China right now. Just as the Paris Climate Treaty targets Europe to be carbon and now actually the U.S.

joined back in as well, target's actually to be carbon neutral in the year 2050. China has actually signed a similar arrangement and committed themselves to be carbon neutral in 2060.

As you can imagine, this means a lot of innovation that is needed, biorenewables do play a significant role there. So we're pleased overall with the progress in terms of the number of licensees signed.

We're particularly pleased to have 2 out of the 5 being signed with Chinese customers. That is actually more than we expected.

Maybe, Stephan, you could allude further on it, including the financials?

Yes. Just remind yourself that there are 3 revenue streams from sunliquid.

One is the licensing of our technology to parties who sign such a license agreement and built-in their own plants. And second is then by providing the enzymes, which we produce.

And the third one is then, let's say, by our step 2, which is an unusual step, not specifically way which we would do, but that we - to accelerate the penetration of our technology, we invested in the plant in Romania and build a biofuel plant by ourselves. So these are the 3 revenue streams.

And for a license income, this is only starting to be more significant when the customer commissions his plant and not at the signing days. That is not the huge part.

And the enzyme production sales, they also - or the enzyme sales, they also, of course, float once the commissioning of customers have been completed. But Romania is the one - is, of course, big in the top line, also increases in the margin.

And that is, of course, more in our own hands when we invest and commission that by end of this year to start commercialization in 2020. So these - sorry, 2022.

So these are the 3 revenue streams, and I can confirm that those add up to a total dimension of CHF 100 million from coming today from a very low base, yes.

Yes, thank you. Good afternoon, everyone.

I think it's for you, Stephan. There were some comments on the wires this morning about turning the page with the SABIC relationship, and I think they were yours and normalizing.

Obviously, when the share was taken over, I'm not talking about the SABIC deal itself, we've told a lot of initiatives are underway. There was a lot of potential growth synergies potential for raw material savings.

And then, of course, everything went radio silent. Just wondering on your thoughts and also Conrad's thoughts on the potential for that?

Because, obviously, we've heard nothing and we were promised that there would be something.

Sure, Peter. Let me really start a little bit coming from the history and then Conrad can truly give a bit more also of the future.

I mean, you're right. I mean, let's not forget yet how they came in when we were under activist attacks once the Huntsman deal did not process the way we proposed it to do.

And at that time, we were also thinking, of course, about a couple of very big projects. The biggest one was on the HPM.

We announced that even on MOU basis and then that fell apart in mid-2019 because of, yes, we didn't - couldn't confirm the exact valuation thoughts, which both parties have in mind. And then we had to depart.

And that was, as I said, the stress test of the relation may be the lowest at the time because, of course, a good project, which - but for good reasons, didn't mature. There were then also a lot of media discussions about the relationship more in the media actually than in real life.

There is a couple of very good progress. And there are big customers for us on the catalyst side.

They're also a good customer on the additive side for us. In that regard, we have a lot of collaborations going on.

So commercially, on that side, then being the customer is progressing well. Commercially on us being a customer for ethylene and propylene from their cracker in Germany, it's also progressing well.

But you're right, I mean, there is not today the big-ticket item. Nevertheless, we have, again, a couple of good progress, and they are interested, of course, that with us, we also develop in a very positive sense from a financial standpoint and a performance review.

And that's why it's so important that we - not just to SABIC, but to all shareholders proof what we have announced back in 2018 about our midterm targets and the achievement as such. So this is, I would say, the recap.

And again, if you go to the more recent times and their request in December, obviously, this - we had to publish it immediately and it's a professional thing. And you heard how much the oil business did affect us in 2020, and that definitely also affects the kingdom, and therefore, I don't find the dividend call so unusual, to be honest.

But in the magnitude of discussions, the most important thing is that we have had an anonymous decision in the Board to support our dividend proposal and aligned ourselves, and we have those issues which were up on the table by end of December off the table and resolved now. And maybe this good translation to Conrad who gives - can give some prospect into the future development of the relationship.

Sure. Well, yes.

So I like to keep it short. So clearly, there have been some issues in the past.

I'm extremely pleased, first of all, that these issues have been resolved. I'm also very pleased that our Board is actually fully aligned, including the 4 Board members representing SABIC.

So I - from here, I very much like to look at the future and move forward from here.

So thank you, ladies and gentlemen. That was the final question.

This concludes today's conference call. The Investor Relations team, obviously, remains available for any questions you might have.

We look forward to continuing the dialogue during the upcoming roadshows and conferences or latest with our Q1 disclosure on April 29. Once again, thank you for joining, and have a good day.

Bye-bye.