Lanxess AG

Oliver Stratmann – Head, IR Axel Heitmann – CEO Bernhard Duettmann – CFO

Paul Walsh – Morgan Stanley Dominik Frauendienst – Citigroup Andrew Stott – Bank of America Merrill Lynch Peter Spengler – DZ Bank Martin Dunwoodie – Deutsche Bank Martin Roediger – Kepler Cheuvreux Lutz Grueten – Commerzbank Christian Faitz – Macquarie Andreas Heine – Barclays Jesko Mayer-Wegelin – HSBC Ronald Koehler – Mainfirst Patrick Lambert – Nomura Joe Dewhurst – UBS Evgenia Molotova – Berenberg

Thank you very much Leo. This is Oliver Stratmann, I’m Head of Investor Relations at Lanxess and I’m happy to have you all on our Q3 results conference call.

With me are Axel Heitmann, our CEO and Bernhard Duettmann, our CFO and we will start in due course now with a brief presentation and have plenty of time for your questions afterwards. So, let me hand over with that to Axel Heitmann our CEO.

Good afternoon ladies and gentlemen. Lanxess Q3 volume improvement is underway particular in Performance Polymers but it is driven partly by restocking.

Raw materials started to pick up but this is small supply and demand driven but it is these are good we regard it as good news. Advanced Intermediates, Performance Chemicals strong good performance.

Tire markets and European OEM and automotive not yet recovered market prices are under pressure and remain at low level. For the stability of Performance Polymers are affected by the consumption of inventory with high raw material prices.

Our advanced program we have initiated is in full swing and we expect significant savings as planned already next year and CapEx is under control. I like to move on to look at the sequential performance of Q3 versus Q2 in 2013 and you clearly can see that price decreases on a sequential basis.

Performance Polymers is significant and this is driven by raw material price decline and you’re looking to our major raw materials for example butadiene we have experienced a significant volatility. And just to give you an example April prices U.S.

Gulf contract prices for butadiene were around $1400 and in August we are facing $700. So, half in only within five months of this – is an enormous challenge for us.

Volume is recovering and this good news it clearly indicates business in Performance Polymers is as stabilized and we are in a good pole position with this development for next year. I like to move on page – to page 6, looking for a year and year comparison.

Volume Performance Polymers up 14% and this is important for us. It clearly indicates our technologies, our products are attractive for the markets, they are needed their required and as I said this few some of optimism for us for next year.

What it is significant is a price reduction and this is partly driven by the immense volatility in raw materials but as we have discussed in the past pricing is mix of raw materials is market prices are important and the market prices are under pressure because of weak demand and increased supply and it is equation of our premium pricing and we have shown some flexibility to regain market share. The other two segments strong intermediates good performance solid performance 5% volume increase, price just a little bit lower and this very much because of benzene.

And Bernhard has more information about the attractive margin of this business a strong stabilizer of our diversified performance and also Performance Chemicals with a slight volume increase. In total, group level 9% volume increase about a 11% price reduction.

The EBITDA was also burdened by sell-off of products made from higher raw materials. So, this was a burden in Q3 as we also had some plants shutdowns, so we reduced our inventories and working capital a nicely reduced but as I said EBITDA burdened also through inventory with higher raw material input cost.

Moving on our region performance. We have positive figures in Asia-Pacific mainly driven by China, China we have almost 21% sales increase, so this is good news.

Europe, not doing too bad and this is what very much driven by our strong intermediates business both business units AII and Saltigo, very strong on a high level with a good – with very good margin excellent margins. Asia-Pacific, 25% of global sales, Latin America 12% so in total 37%.

So, this is a good hedge with the poor performance in Germany and in Mainland Europe and BRICS in total 24%. I like to hand over to Bernhard, now.

Thank you, Axel and good afternoon ladies and gentlemen. Let me come to the business and financial overview.

I would like to start with chart number 9, the overview. The EBITDA was reduced on top of selling off high price inventories also with some kind of inventory devaluation in the magnitude of 10 million we have to book at the end of the quarter.

I think second thing to mention on this chart is that we have our EPS is lowered by the cost of our Advanced Program which we booked with €21 million in the third quarter. On the lower chart, lower part of the chart you see that net financial net had nicely reduced to €1.8 billion to €2 billion.

We had to clear – we had announced to you that we will work on working capital reductions that we have delivered and we would continue to do so in the fourth quarter. So, working capital had been reduced by over €200 million in the third quarter helping the net financial debt development.

Our P&L on the next page shows clearly an under-proportional decrease of cost of sales, that’s due to the fact that depreciation is increasing. On top, we have the consumption of higher price raw materials and the write-off of these – the correction of the evaluation of the inventory.

On the SG&A cost and all fixed cost you can see the overhead cost reduction were reduced initiated by all the counter measures we have taken and has very strict cost discipline. On the next chart, you see the overview on our segments.

Advanced Intermediates and Performance Chemicals are comparably resilient. And with that, I would like to go to the Performance Polymer chart where we have clearly a major effect coming from the price development which was driven mainly by raw materials.

As Axel already mentioned just in Q3, only in Q3 the private butadiene had dropped more than 40% in the last three months. We also have seen a positive volume number partly driven by selected restocking from customers.

And our utilization rates in the quarter grow impacting – while inventory reductions that means we had increased our volumes but mostly this was – by inventory reductions. The next chart on Advanced Intermediates, I would like to guide your view on the nine months development, it was a clearly nice margin 17.6% on nine months cumulated EBITDA margin slightly below last year also in the quarter it is slightly below.

Reason here, some smaller price reductions only following raw material declines so no more no other price reductions but what was limiting us a little bit mostly the ramping up of our new cresol capacity and some currency effects which reduced the little bit the EBITDA of that segment but still on a very nice margin level. With that I would like to come to Performance Chemicals.

State wise also here the decline coming from currencies 5% here is the highest impact from currency. Volume wise slightly up and a nice recovery on the EBITDA, you might remember that we started the first quarter with 9% EBITDA margin and the second quarter we were at 11%, now we’re 13.2% where we are back to prior year level of the EBITDA margin.

On the next chart, again some KPIs I think most important to mention here again net financial debt we always say June is our peak net financial debt. From there onwards we are going to reduce net debt and this year specifically with initiatives to reduce working capital actively managed and that would continue.

You see also in the ratios the durations have improved compared to the previous quarter 64 days now to 61 days. If you look compared to last year third quarter we were even at 67 days so that is a good improvement.

Working capital improvement has also improved our cash flow where we had an operational cash flow with the working capital reduction of €378 million. And against CapEx investments of €146 million clearly strong at the – from the cash flow point of view and was a good quarter.

With that, I would like to hand over back to Axel for the guidance and the outlook.

Ladies and gentlemen, we are going to give the market environment, we are going to narrow our outlook for this year at a level of €710 million to €760 million EBITDA pretty exceptionals. And to make it short, most likely we will come out at €735 in the middle of this downwards.

Ladies and gentlemen, that’s all from my side. And now I’ll hand over to Oliver.

Yeah, we like to welcome your questions now.

Yeah, thanks very much. Afternoon, Axel, afternoon, Bernhard.

I’ve got two questions if I could please. I’m just running the indexation of volumes across your business starting in 2006 and also looking specifically at Performance Polymers.

And I guess it just strikes me that volumes in absolute terms aren’t actually that depressed. If I look at it from a Group perspective, volumes are maybe down around 2%, 3% from the peak in 2011.

And in Performance Polymers they may be down a little bit more than that. I know you’re getting intra-quarter volatility, but on an annualized basis volumes don’t appear to me to be that depressed.

So can you talk about that within – am I getting the wrong end of the stick or is that sort of close to the mark? And therefore is it right to interpret most of the operational weakness is just down to the pricing dynamics?

Some comment on that would be very helpful. And the second question I had was relating to butadiene.

I know we obsess over this, so apologies. But we’re seeing some moderation in butadiene prices now on the spot markets in China.

Is that simply a case of capacities coming back up on stream now that disconnection between Chinese and international prices has closed again? Thank you very much.

Paul, volumes I mean tones are lower for a number of reasons. One reason was we kept our prices high for a quite long time.

And as a result of that we have lost quite a significant of volume, we are making good product and this is important to have to be rights early provisioned when demand is coming back. We also have changed over time constantly our portfolio.

So, whenever we see the opportunity to upgrade our product portfolio, following our price before volume, strategy, we go for the more valuable products and reduce our exposure to general purposed products. There are also other facts that this would be very business unit specific, I think these two answers should help you to run your models.

On butadiene we are – we see butadiene significant price increase in the Western Hemisphere both in Europe and also in U.S. and this is helpful.

So we have a conversion – what’s this – we have a more narrowing of the bandwidth around the globe and this is helping. This effect will – for Lanxess will be lower in the future when we have our new world scale facilities operational for butadiene and in Asia also for EPDM, polybutadiene and EPDM because of local sourcing.

Just follow-up on the first one. So what you’re saying is essentially your volumes would have been better but you were slower on cutting prices.

So your volumes are actually down that much in the peak but and this has delivered growth where maybe yours is just been a bit more modest?

That’s correct.

Okay. That’s very clear.

Thanks very much guys. Thank you.

Next question please.

Yes, thanks very much. I’ve got two questions.

One is coming back to butadiene prices and you touched that in your comments that increases are helpful and I assume that because of the regional differences that are disappearing. But how do we have to think about your ability to pass on these higher butadiene cost to our customers because in the current deflationary environment you elect pricing power and now prices are going up.

So do you feel confident that you can pass on these increases to your customers in the current sluggish environment which we’re in? And secondly on cash flow what should we expect for the remainder of the year and where do you see net debt at year end?

Thank you.

First question regional differences, we discussed it already. So having all facility, major facility in Asia we cannot participate in the low butadiene prices in fact so we have to export which is in line with this strong Euro not easy and in fact we saw Asian material in Europe and in particular in Latin America, but this is phasing out now and in the future as I’ve said we can benefit from these regional price differences through regional assets and we will be the only one in the world having major facilities in all regions, ability to pass on, pass through raw materials, Dominik this has always been a high priority for us and we stick to it and we are confident we can do that.

In fact over the years we have done it almost in instantaneously maybe we cannot achieve this weak demand environment but in principal we stick to it and we are very successful with that. In fact it works both ways and look what the tire makers just announced these days they enjoy low prices on synthetic rubber.

So for us it’s a burden for them, they enjoy it and they are – they have a good time right now. So but all-in-all I think this paves the way for improvement in the entire value chain so the tire makers have high demand or take opportunities and at the end of the day this is good for us.

Can I just follow up?

Yeah.

So specifically on Europe I mean the price went from 750 now to 900, but you are confident that in the current environment you can’t pass on this €150 ton increase to your customers?

Okay, Dominik. We cannot discuss this on a monthly or a quarterly days, we always have the approach to do this in due course and I cannot guarantee you sales price in 8 or 12 weeks from now and look this is a complex issue and we have a product portfolio, we have a customer portfolio.

So this is very complex but as I’ve said we have been pretty good, we have [settings] done as an industry in the past on that.

Thank you. On the debt?

Yeah on the debt side Dominik let me answer the question. We will certainly continue, we’ll continue to work on working capital reduction and with that also on net debt reduction also for the fourth quarter but we do not give the guidance for very simple reason, we do not know how the currency situation will change, we also do not know how raw material prices will develop and they have a major impact also on these kind of numbers.

For that reason in principal we take that, we will operationally improve working capital numbers but we cannot give a clear guidance about the magnitude.

Okay. Thank you.

Next question please.

Yes, good afternoon. Thanks for taking the questions.

First of all on disposals. So go back to mid-September Axel and I think you made it pretty clear sort of 18-month process possibly a bit less if interest is high.

I just wonder if you can make any early comments on reception to the announcement on disposals from the marketplace. So that’s the first question.

The second question was for Bernhard. Can you just remind me of your CapEx commitments now for 2014 and 2015?

And also the tax rate guidance you’ve reiterated today just your confidence around that? Thank you.

Andrew, this probably take sometime, we are not in a hurry, we take the time which is required and I cannot say anything else right now. I would come back to you as soon as we have made some progress.

Bernard, on…

Yeah on CapEx, first on CapEx you know our CapEx number consists of various elements and the first element is our maintenance CapEx to retain the EBITDA we have and that is always something a number, a ballpark number of 280 – roughly 280 million to 300 million, on top of them we have the existing growth projects being the Nd-PBR production in Singapore, with the [Dragon] EPDM production plant in China and the third product is the polyamide facility in Belgium and for that reason we have to assume that the CapEx amount in 2014 will be in the same ballpark number of 2013. And we need to finish these projects because it doesn’t make sense.

Sure.

If we have them not been finalized because they are up there to produce and to create value.

And you are thinking for 15 down to what the sort of more…

15 will definitely be lower, 15 will be lower so we will definitely then we have finalized the big projects and then we can reduce the CapEx number and I think let’s wait for the – how the business develops going forward, but then we can – we have a lot of freedom, it’s a lot higher to work on the CapEx numbers. Second question was on the tax rates of the 22% and it’s absolutely clear in the current quarter tax percentage rates are a little bit misleading because of a small number of profit before tax.

Long term the guide, we reiterate our guidance to be a 22% tax rate which is the window which we always have addressed.

Thank you.

Yes, good afternoon. Thank you for taking my questions.

Actually I have two. First, could you give us a trading outlook for the fourth quarter at the current situation in the markets?

And secondly can we expect a positive effect on the cost side deriving from the Singapore plant in Q4 and also from the Advance project?

Peter, trading in Q4 was just –cost base in Q3, some customers took advantage of the very favorable prices for synthetic rubber and so we need to take this into current talking about Q4. So we will see some seasonality on Q4 so on and demand side or operation side Q4 will be lower than Q3 and all this has factored in our guidance.

Positive cost, Singapore bureau look we always said we will step-by-step increase volume on our Singaporean plant, we expect some 30,000 to 40,000 tons this year and this even – given the fact that this is a world class facility. This small figure cannot have a significant impact on our cost position, but we will see this in the years to come.

Okay. Thank you.

On Advance the program is in plan. We are making good progress but as we discussed on the Analyst Round Table in September we expect only a small effect and I think nobody can expect anything else.

This year we gave you guidance some 5 million this year of the major effect we are going to see next year and currently we plan for some 60 million next year cost relief on the program on EBITDA…

Okay. Thank you very much.

Welcome.

Thanks. Afternoon, Bernhard and Axel.

Could I just ask on the inventory situation, obviously you’ve talked about de-stocking earlier in the year. You’re talking about selective restocking now in certain areas.

And by the looks of the China growth number then you would assume there is no real de-stocking happening in China now especially given your volume growth for the Group overall. So is that the right way of looking at that is the de-stocking has broadly finished within the synthetic rubber chain aside from the seasonal de-stocking you’ve talked about for Q4?

And then secondly, you talked about more of a negative mix effect from customers through the year obviously some if you like, trading down. With some improvements in tire markets what are you hearing from customers on that now?

Are they sounding a bit more optimistic? Are you seeing any first signs of improvement in mix going forward?

Thanks.

Martin you are spot on the selective de-stocking so we do not see any major de-stocking with our customers. In fact we do see some, we hear some, we keep hearing some slightly positive sentiment with our major tire accounts.

But I think it’s by far too early to translate this into more business for us. Number one, we’ve heard this before from our customers, number one.

Number two the winter season in Europe is very slow and I keep hearing that tire makers have some issues on selling tires, winter tires and tire production is slow. So I think have to be very careful not getting carried away because volumes are slightly higher.

And on the mix going forward?

On the mix…

Just between premium products and they have the right products.

Same on the mix, let’s not get carried away, let’s be very realistic. One makes this improving, we are there to deliver, we would go for it and our midterm of course it will happen but for the year 2014 it’s pretty mature.

Do not underestimate the weakness in Europe and certainties are high unemployment figures are on the rise particularly with the younger people. So all these negative news and I’m very careful on that.

Okay, very clear. Thank you.

Yes I have two questions on Asia. I understood that in the quarterly report you appeared more optimistic on Asia, in particular China compared to the other regions like Europe and Americas.

What makes you confident for this region and a follow up question on Asia you said the 11% organic growth rate in Asia in Q3 was primarily driven by performance polymers to which extent is this is the double digit growth for the Asian performance polymer business you have recorded because of it’s a switch from for example previous export of business to the, let’s say in the region export for example butyl, rubber exports from Singapore to China?

Martin, China is picking up. We are well positioned out there, in fact across the board we had an increased improvement versus year-on-year if 21% in China so this is good.

And I’m always positive on China and I think we will see more of it so this is good news. And on your second question how much business we generate from local production is to come, it’s not there yet so that’s the reason why we stick to our major projects.

As Bernhard said we stick to our completing our two major projects in Singapore and in China and with this local production we have a very good strategic positioning. But for the time being it is more.

But Martin to add something just from the reporting viewpoint we report our sales according to destination and not according to origins. So, basically you see the sales with product ends in the market.

Okay, thank you.

Yeah thanks for taking my two questions on performance polymers on prices and on volumes. The minus 19% in prices, Q3 could you give us some feeling what that was mix related and what price related and regarding the volume of plus 14%, and idea what really was underlying demand growth and what was restocking I understood that the major part was restocking but if you could be a bit more precise that would be helpful?

Thank you.

Lutz on the minus 19 it is significant and this is very much a reflection of three components it is predominantly raw materials. As I indicated raw materials for example butadiene 1400 down in April, August 700 so this has to be reflected in pricing and this is what we did.

But beyond that we also, the market price of synthetic rubber came down and also we showed more flexibility on our premium pricing to get back some market share we have lost because we stick to high prices for long time. Volume demand and restocking it’s very difficult to make adjustment on that from some customers we have some figures form others we only have some indication so it is very difficult for me to specify.

I think it’s very good news the volume increase and I take it from there, it demonstrates we have strong products, customers want and need our product and this is – and this provides as I said a good proposition for next year.

I agree that the volume growth of 40% is certainly a positive one, would be even more positive if this is really driven by underlying demand rather than speculation and restocking?

Yeah this is I cannot tell you Lutz it would be good if it would be only demand but definitely not. Our customers took advantage of the low prices and that’s the reason why we are more cautious in Q4 and this – so it is – a large component is taking advantage of the favorable pricing.

Thank you.

Yeah, thanks for taking my questions. Sorry I have to come back to China again.

Can you share with us what end markets really drove the 21% sales increase in China? Then second of all, you also had a sales decrease regionally and that was LatAm.

Can you kind of split up the 17% sales decrease between ForEx, volume and pricing? And then lastly, going forward do you see any competitive pressure arising with the recent moves to further consolidate the leather industry, thank you – or leather chemicals industry?

What was your third question, any horizons regarding the consolidation of…

The rising competitive pressure potentially from the recent consolidation moves in leather.

Christian I think it’s a positive signal markets are consolidating. So I regard this as a positive need there is not much more I can say about that.

So on China with end markets it’s a wide mix so obviously most of it is polymers its rubbers but also our plastics. Our plastic business unit anyway is performing well, it’s mainly not so much visible because of the caprolactam situation but all in our polyamide-based business and compounding business is doing very well, very strong.

Our facility in China is fully loaded we have an excellent position over there with our plastics and more to come so it is predominantly driven by the performance of polymer segment. Christian on LatAm you wanted to know why LatAm is down by 17% if we deduct currencies its 11%.

So I did not get 100% of your question it is, we also asked you take into account that the butadiene development is also reflected in this figure. So what is your question?

I just wanted the same…

Beyond these issues.

I just wanted the split of the 17% into volumes, pricing and ForEx?

I now understand. No we don’t give this on country information Christian.

I only can repeat what I just said, it is currency and butadiene driven and Latin America is predominantly our performance polymers business speak the performance poly-butadiene but we have three sites over there and we have exported from these markets. So it currency as I said butadiene business.

Okay. Thank you.

Yeah, thanks for taking my question. At first on Bernhard, could you clarify how much this inventory impact on the P&L was in performance polymers in the third quarter?

And then going to the guidance, that means the full-year guidance, if I take the mid-range – the mid of the range, then Q-on-Q earnings would go down on Group level a little bit. If I take the normal seasonality for performance chemicals advanced intermediates, I would derive that performance polymers will be a little bit up in earnings in the last quarter.

Is it possible so that the impact in the inventories out-weight the positive impact from the volumes in that quarter so that we might see a sequential improvement? And then I read that the butyl plant startup costs in the first nine months were €20 million.

Are these the total burden of the plant in the full year? I had a significantly higher number in my mind than just the €20 million.

And last but not least, there were comments in the press conference what the impact on the EEG might be on Lanxess. Could you repeat what you say there and put it into context so I’m not misled what I’ve read in the press?

Thanks.

Andreas, number of questions, let me start with your last question on the so called EEG. I cannot really explain to the international community this German regulation.

Andreas, I like to keep it very short, this is nothing else than a burden on energy prices to finance solar and wind power and this burden has to be digested by the end consumers and also by the most of the industry. But those companies like Lanxess who have their own setup or have a special exemption like Lanxess do not see this burden.

We knew after the election the incoming government want to fiddle around on that and we are working like hell to stop them doing this because this could end up in a significant burden for Lanxess and unless it’s premature the new grand coalition will come up with final results I think end of November, December our latest information is that we in the VCO in the chemical sector have been pretty successful making very clear that this additional burden would kill jobs and I think the battle is almost won we do not see this additional burden on our business.

Okay.

So sorry being so elaborative on that but this EEG legislation is very funny, no not very funny a very strange German thing. So let’s look now I like to move-on on our guidance.

Andreas please accept that we do not specify this guidance on our very segment. We will have more information on that on the quarterly or final year end reporting in spring next year.

Well, if you were asking in again about the inventory evaluation, yes, we have turned butadiene through our P&L in the third quarter. So we had a negative impact there on top we had a €10 million devaluation at the end of the quarter.

And the second question was how about Singapore ramping up costs. Yeah we have and also we have given the information that we are ramping up costs of €20 million after the ramping up this operation went into normal operation but as you know with the capacity loading of 30 to 40 kilo tons only in this year.

We still have idle cost from then onwards because once it is an operation instead of ramping up costs it basically measured as idle cost and for that reason the cost is being higher than just the €20 million ramping up cost.

Okay.

Andreas we do this for good reason. We want the business units to digest all this costs.

So this will be as regarded as a normal from now on as part of the business right. So we do not allow the business units to have exceptional items right on this matter.

Fair enough thanks.

Andreas did we answer your questions?

Yeah I had a number of after €90 million what the butyl plant’s startup costs and all related costs are. I just wanted to know whether this is still an accurate number, what the burden is, what you might not have any more next year or whether the incremental improvement from 2013 to 2014 from this plant is something different.

Yes Andreas please accept a no comment policy on that.

Okay, fine. Thanks.

Thank you.

Jesko Mayer-Wegelin from HSBC. Thanks for taking my question.

I have two questions as well, first on the butyl production increase in Singapore. It seems as it would be going as planned.

Do you, on the other hand then reduce production for butyl in Europe, for example, maybe could you give us some details how you are you steering this globally, or is it really that other additional production can be taken up by the market as demand is increasing? And then second question on the foreign currency impact.

We had 4% impact on the sales, could you give us some figure what the impact on EBITDA and then also on the margin was?

Jesko on Europe this €30 to €40,000 we are aiming for which is still a challenge is not additional volume we have to in this current environment and particularly also over the summer month we had to cut back and we wanted also to cut back existing facilities.

Jesko on the foreign exchange we had a negative impact un-hedged on the currency situation following also the sales lines but with the hedging activities it resulted in a small negative value only.

Okay. May be a follow-up on the butyl production.

So also for 2014 you probably plan then to reduce production at other facilities even more to increase in production in Singapore?

No, Jesko, I understand you want to know what this would undermine our present policy so I cannot make any comments on this right now.

Okay.

It’s impossible.

Okay, thank you.

Thank you.

Yes, thank you. First question on LatAm again, we had obviously in the beginning of the year some, let’s say, exports from China which were burdening LatAm on the pricing side.

I just wanted to get a bit of feeling from your side, do you still see these exports or did they, let’s say, go significantly down given the import tariffs increased, one and the increased butadiene prices in China, or do you still see Chinese competitors aggressively in LatAm? Second question is on your guidance that Q4’s operationally lower than Q3, I would think this is let’s say volumes, utilization rate, but if you would adjust that for the normal seasonality, would you still believe this is the kind of case, or is it taking into account the normal seasonality or is it just a quarter-on-quarter guidance without looking at any seasonal effects?

These are the questions. Thank you.

Ronald, on LatAm we did see import material in LatAm coming from China but also from Europe because the Chinese pushed volumes into Europe and European players pushed then material into LatAm so it was just had an add-on effect, but this came – this is significantly reduced because of the butadiene – the recent butadiene development. On guidance I think it’s fair to say we are entering into a normal seasonality.

Okay, thank you.

Thank you. Thanks for taking my question.

Good afternoon. Yes, two questions also.

Corporate costs I think your guidance has slightly gone down by €20 million, at least the range, the bottom of the range at €180 million. Could you comment a little bit on what’s driving that?

Is the early sign of restructuring program, the €5 million in that, or anything that could help us understand the change there? And the second question is more general in terms of high-grade performance rubbers again.

If I look at the comments from Solvay and Evonik on silica, precipitated silica, they saw very strong demand again on Q3, mostly Asia driven, and pricing doing well also. And I understand the competitive landscape is very different, but can you comment on the essentiality of those products versus what you’re seeing in Asia?

Is China ready for high grades? Is it moving to the right direction?

Is anything that would help us understand the development of Singapore towards Asia going forward would be very helpful? Thanks.

Yeah Patrick, first is of corporate costs, as I said before in the P&L line you foresee that this shows great cost discipline in regard to fixed for spendings and working on cost reductions and that is also critical in our guidance that’s the main reason for the like the guidance into the band of €180 to €200 compared to the former information of €200.

Is that sustainable next year?

Yeah as we said, we are basically working on cost reductions on the advanced program and that should bring up next year’s cost reduction of €60 million.

But that would be in the divisions right?

That yeah, that would be in, no that would be in these segments as well as in corporate cost. It is in both.

Okay.

Both quarters for all functions. Yeah, Patrick on silica these are good news.

So less carbon black and more silica is good news but this is only beginning of the story. So silica using silica opens the door to enter into next generation or new generation of tars and this then paves the way to use our materials so but China is only at the beginning and more to come.

Okay.

So silica using silica is only the first step right.

And it’s still facing it.

Yes, I understand that. So the weakness we’re seeing that in your volumes are mostly European driven at the end of the day?

That’s a right analysis.

Yeah. Next one please.

Next question please ma’am.

Hi. Good afternoon.

I just wanted to ask so three questions, but first on prices. I mean there’s been some news flow around the NBR but also SBR prices, so we’ve seen some price increases there.

I mean, are you also seeing and managing to put through some price increases on some of the other grades? Then also on the commercial function, essentially from what I understood there is that – the group there, the sales group were quite heavily incentivized for EBITDA and EBITDA growth in the past.

Is that still the case? Is that still quite a strong incentive there and is it in their best interests to try and see EBITDA build as raw materials for the tailwind then helps them.

And then I just guess, finally again as far as the prices, if your customers are building inventory because of lower prices, isn’t it fair to assume that they’re expecting prices to then increase in the coming months? Thank you.

Sorry, I didn’t get your third question?

Yes, just on pricing, if your customers are building inventories now based around a speculation that prices are lower, isn’t it fair to say that they’re expecting prices to actually be increasing then in the coming months because of effect of what they’ve seen in butadiene?

Okay, Joe we are very active when it comes to price increases so we have made some releases and we are pushing on not only key put through our inventory or higher input cost we also as you know we want to recover some of the margin we have lost so we’re very active on that. People are incentivizing on that that’s clear much in orders and we take it from there.

On your first comment or question, it is still very competitive out there and customers they shop around and they hard work to increases prices. But you’re may be to write an analysis when customers take advantage of a building from stocks because of inventory costs of raw material costs and the acceptance that practice may be up as higher.

But I would like to add.

Higher prices.

I would like to add the release of information where we indicate price increases is not exclusive that means we have a lot more activities in regard to price management and just once we were we’ve give n releases.

Yeah that’s right.

Thank you.

Next one please.

Hi. Thanks a lot for taking my questions.

I just had two. The first one is on inventory reduction and utilization levels.

So can we expect that now you already worked through the inventory that you had, the utilization levels will improve going forward? And also if you could comment on the level of the – utilization level that you’ve seen in Q3.

And the second one is about pricing and market share. You said that you tried to keep prices high as long as possible and lost market share as a result.

What is the magnitude of the market share loss? And also now does it mean that in order to gain market share, you would be reluctant to increase prices when your competitors are increasing because you want to get market share back, or does it mean that the product mix will be changing into more staple, less technological products?

Just trying to understand how can you increase prices and gain market share at the same time, thank you

Utilization levels are slightly below 80% across the Board. Utilization levels were lower because of some plants shutdowns and also because working capital managements but it’s premature we didn’t give an indication its position end.

Prices in market share this is price volumes very complex and as we kept prices high for quite a long time, we have lost some volumes we got it back and now we have to do both in tandem we have to – we want to go for more volume as demand picks up and also we want to fight for higher prices but this will be quite difficult as that will take some time. This does not exclude price increases so we have a – whenever raw material required traffic rules but this is a project, this is what we go for.

But I mean on beyond is a challenge and but we will go for that.

At the moment you’re still – you still haven’t recovered the market shares that you lost before?

No, this is not correct to say, but it is too complex to make a comment across the Board on that. It’s different in each business units, but there is still some room for maneuver but as we indicated in the past it’s – we are not market share driven we are EBITDA driven.

So in case we go for EBITDA and not for market share.

Yes. Thanks a lot.

Do we have any more questions?

Yep follow up.

Yes. A question on your weak chrome ore business in South Africa.

So how about the situation there? You had in the past some problems with – I think it was oxygen supply, is that fixed already?

You had also strikes middle of the year, or is it basically the weak demand and the currency situation in South Africa?

You’re correct in those assumptions, so our technical challenges are down, there is nobody on strike right now, it is more than marketing environment.

Okay, thank you.

Ladies and gentlemen, thank you very much for joining the call. We keep working hard to improve our EBITDA based on technology-driven products and good processes giving us a global competitiveness.

We keep going on utilizing our good positioning in the growth regions like Asia and Latin America. We keep going on our good positioning on the global megatrends, volumes are picking up getting better indicating that we – our product there is a demand for our products, pricing will improve we give more attention our two others segments intermediates and performance chemicals look at these intermediates segment very good performance and both absolute figures and also margin and above that’s we keep our discipline on CapEx and working capital.

That’s all from our side ladies and gentlemen, thank you very much.

Thank you and bye-bye.