Lanxess AG

Yes. Thank you very much, Judith, and a warm welcome to everybody on the phone to our Q1, ‘21 conference call from my end as well.

I have with me our CEO, Matthias Zachert; and our CFO, Michael Pontzen. Please take notice of our safe harbor statement.

And with that, I’m happy to handover to Matthias for presentation and afterwards as always the Q&A. Matthias, please go ahead.

Thank you, André. And warm welcome from my side to Q1, 2021 conference call for LANXESS.

I start with a presentation on Slide #3, where we shift key attention to strategic highlights and financial highlights. As far as strategy is concerned, definitely the acquisitions that we have embarked on beginning of the year with two bolt-ons in consumer protection and the larger one yet to be closed Emerald Kalama were definitely a clear sign that we are on track as far as external growth is concerned and we will continue pursuing this direction.

However, with focus and with discipline and noteworthy also what we've communicated recently, the team up and partnership with Tinci where we are going to start producing the electrolyte for Tinci for the European customer base for their European customer base from 2022 onwards. As far as financials are concerned, we clearly see that industries are rebounding.

There's definitely restocking that is happening across the industry. But we also see production is moving upwards in some cases supply chains are extremely tight and therefore obviously our volumes are needed.

We also see quite drastic increase in the roles across the value chains. There are some that are particularly hits also due to force measures.

And therefore, we have seen price increases in many of the raw material products that basically have not been seen in the last 10 years before. As far as EBITDA is concerned, we came out better compared to what we've stated in the March.

This is basically driven by March momentum, which was very strong. And therefore we could catch up with profitability, even though I clearly have to stress that we took internal hits, so to say, due to the winter shutdowns in the United States.

All of you know that we have substantial production assets in North America, in El Dorado, Memphis, but also in Charleston, et cetera. And our El Dorado wealth, where we extract bromine, we're frozen for two weeks.

And believe it or not even in Texas, I had never thought that this would be possible. But even in Texas we had blizzards and water infrastructure leading to our sites were down and because of that we could basically not produce any more for around about 10 days sitting the entire disinfections value chain.

This besides freight and energy costs and of course also escalation on prices and loss and the devaluation on the dollar were impacting Q1. So by and large, we closed Q1 on the level of 2020, which was all in all still an okay quarter with little impacts from Corona.

Thank you. Good morning, good afternoon.

And let me just start with the pricing. And then I've got a separate question on the balance sheet if that's okay.

So pricing was minus 2 for the group and that was due to AII and consumer protection, specifically and your European peers did arrange in the wide one of that of 0% to 5% on pricing in Q1, but obviously none of them negative. So how would you respond to that point that you're really not displaying pricing power in an inflationary environment?

And what do you think you can do going forward to address those two divisions? So that's the first question.

The second question was around the balance sheet. So your definition of net debt means that you don't include non-current assets, the non-current assets have grown by about 150, 160 which sounds like a really boring point.

But it's trying to explain that net debt delta. So the simple question is, why can you not include those non-current assets in your net debt definition?

And when will you be able to? Is it just the maturity profile of what you required on the money market?

Thank you.

Andrew, good to hear your voice. Loud and clear and healthy, positive.

So on price, I will take this and Michael will address the balance sheet question. And so let me start with price.

We entered last year 2020 on a relatively strong footing as far as prices were concerned and therefore we benchmark ourselves right now in Q1 versus previous year with a relatively high pricing level that we still have to reach again, and this will most likely come in Q2. And as the inflationary environment right now accelerated in Q1, we are bound in AII basically to our quarterly contracts with pay-or-pick clauses, everything being pick-and-spend, but we can only catch up on the prices in Q2 which will happen.

I see that already now in April. Prices are on the rise again now in Q2.

So we will again, roll that over in Q3. This is currently how I look at the markets developments.

But here on pricing for advanced intermediates, you basically see this quarterly lag with the statements I've made at the beginning, we started on the 12 months basis with a relatively high price base already in Q1 last year. Those peers they would be the catch up that we will do and therefore you should see that being neutralized going forward.

Consumer protection, this has to do with one contract. In the takeover, we change the pricing formula and that led to a distortion and then also to one other products where we had a underlying contract with the 12 months a clause that was therefore reducing the prices on an agreed basis.

However, this will vanish in course of the forthcoming quarters because pricing eventually and raw materials and consumer protection do not really matter. This business is relatively resilient towards loss because raw materials are simply not the name of the game and this value chain and this business profile.

Michael will address balance sheet.

Hi, Andrew. Hi, everybody also from my side.

Yes, we had the discussion about how to display the investment of $150 million, which we did now in the first quarter already in Q3 last year, because we did the same kind of investment at that point in time. And the clear message and the feedback was it's not part of the way we should determine liquidity and therefore net financial debt.

So, your observation is principally absolutely right Andrew, we have the increase in reported net financial debt and the decrease in liquidity and the vast majority is driven by the $150 million investment which will come back next month. So in Q2 reporting, you will again find the inflow and the cash flow statement and therefore the improvement in the liquidity coming from that investment.

Okay, thank you very much.

Welcome.

Thanks for the opportunity to ask question. Just with regards to the electrolytes, is the Tinci contract exclusive.

How much capacity have you got available above and beyond that, which you've already agreed? And can you give us some sense of the margin of this business relative to AII I think that it will be hard than the group?

The second question is, do you have ambition for specialty additives to get to 20% margin obviously the aviation situation is exogenous to LANNXESS that may be picking up, taking account of that noting that bromine markets and prices are back on track. When should we think about being able to hit this 20% margin ex-aviation specialty additives?

Thank you.

Well, Tom good to hear you. And let me address the questions one by one.

As far as electrolyte is concerned, I mean first of all, we are happy to team up here with the worldwide leader in the electrolyte chemistry Tinci and I cannot be specific on our customer and his plans. I would just like to indicate they are following the requests on the OEM industry that I think you are well aware of that a lot of the big players in Asia are coming to Europe as far as battery cells are concerned.

Again, these are the worldwide leaders. And they bring along -- they are current suppliers.

But these suppliers eventually need the raw materials. We stressed, we have the raw materials.

And at this point in time, however, we use our high technology base in Latigo to already produce the electrolytes. So this is the first that comes in a way to see what else we are going to do with Tinci.

This is definitely an exclusive contract with us it's a bilateral long-term contract starting from 2022 onwards for the next few years. I cannot indicate capacities et cetera this is all under confidentiality agreements.

But definitely this would not suffice to satisfy the marked developments which is going up like a rocket. We are talking here about 20%, 30% volume growth rates on a yearly basis.

And now, I think this is the first step we have to see what other steps we are going to do. And this is yet to be sorted out.

Now, as far as your second question is concerned, 20% on specialty additives, I would like to make the following adjustments to this. The first one you mentioned yourself the high margin aviation business is not yet back on track point #1.

Point #2, we transferred at the beginning of the year out of advanced intermediate into specialty additives the business, the accelerators antioxidants that reported round about $300 million in sales and no EBITDA. So we transferred that adjusted our segment reported reporting, and if you move $300 million sales with no profitability, i.e.

zero EBITDA, of course, margins are not going up. But they are diluted.

And you need to take this into consideration for the SA segments. Having said this, we move the business over in order to derive synergies from the combination of Rhein Chemie, and the antioxidants and accelerators because eventually they have the same markets, the same customer base and of course, we would like to achieve synergies going forward.

But this business will dilute the specialty additives which is of course negative. At the same time the positive is, when I look at the new configuration of Rhein Chemie, we now have its in 2020 at a low.

My personal belief is if we approach this business in a correct way, this business will at least double in profitability. My expectations are however that it's going to triple.

If everything goes well. It's going to quadruple.

What will happen then this is a different story. I think then we have to see how further we can scale it up going forward.

But this decision will be taken I would say in something like two to three years down the road. First of all, we are trying to extract as much profitability out of it going forward.

Okay. Thank you very much.

You're welcome, Tom. Next question, please.

Thank you. Just wanted to ask you on polyamide 6, so 66 is basically out right now.

So what is really happening in nylon 6 in terms of your ability to sort of pass this crazy benzene move up. And then if you look a little bit more longer term, once polyamide 66 sort of improved in precursor supply next year and the year after next year.

How do you see that as an impact on nylon 6, just in terms of you know, as EVs ramped up and given both these polymers are so important for the auto industry. That's my first question.

The second question is just any update on Emerald Kalama given the fact that the flavors and fragrance market is coming back, if pharma industry is doing well. So any update that would be appreciated?

And the third question really is about bromine and I apologies for this. But Chinese bromine is hit new records and both your key close peers have talked up this business.

So if you can just remind us how should we think about your flame retardants business in terms of pricing versus whatever sport bromine we can track? Thanks a lot.

Well on polyamides, I agree, PA is tight on the 66 side but also on the 6 side. I do assume PA 6 is in Europe the better position going forwards due to the value chain being more robust than the 66 value chain.

And as long as the market is tight and it is very tight these days, we cannot produce as much as we want to. And if we see that the demand is on the rise and continues to go up.

We have various customers like competitors that currently don't get volume. In some areas we have to cancel, see customers because we simply don't have the volumes anymore.

And this is something happening in the entire market. So, we have seen benzene going through the roof going up by 200, 300 percentage points unbelievable.

This hit cyclohexane, of course, is the next step. And we are not passing all of that on.

Peers and ourselves out with price increases and this will be a theme going forward. And as long as demand is robust, and not yet all industries are back in the order book.

So, the situation from my point of view is not going to soften at least in the next few quarters, it might get even get tighter. And this is therefore a good time for the polyamide value chain all in all for 2021.

And with all the e-mobility accelerating in 2022, 2023. I think that the polyamide value chain is going to be a after two tough years 2019, 2020 should benefit going forward.

So this is what I would like to say on PA 6. On Emerald’s, I agree I think we bought Emerald at the right point in time.

And of course the business is not in our hands yet. We are doing all the filings answering to all jurisdictions antitrust authorities.

But of course, whatever we can do and what can be done from an integration standpoint, which is in line with legal prerequisites, legal loss, we are doing we are preparing for day one. We want to be ready with operational analysis, synergies, verification et cetera by end of June.

So that we are prepared for taking the business on board should approvals come. We like the team.

We like the people, great people energized fitting very well to us. And yes, I think it was the right purchase at the right point in time where industries are quite robust moving forward as you indicated.

So I'm looking quite positively on the second biggest acquisition that we did, and it will catapult the consumer protection business in different league. Emerald is a business where we've detected substantial savings on business, which is already around 20 percentage points.

We see growth here sales growth. We see of course, productivity gains.

So I think this business going forward in the next two to three years. Together with our consumer protection businesses will move this entire segment into the new league, which from the KPI standpoint is of course impressive.

Now your third question, I know that with good comments on bromine, I agree on prices, in the prices you see our Chinese prices spot prices. We have not only Chinese prices, but also European and U.S.

basis based pricing often with contracts in place. The Chinese prices are spot market prices.

But if they're on the rise, it's good. And we are happy about it.

Markets are tightening again in bromine business definitely the case. Also in flame retardants, we hit simply one big issue Jaideep we could not produce, we could not extract bromine, our oil wells were frozen El Dorado was basically for two weeks out of production.

So we had demand from orders all over the place, we couldn't ship. And I think other money mates looked at their comments in Q1.

Their Magnolia plant was impacted because it's 50 miles away from ours, they will also down and alluded to the fact that they will have volume impacts from the winter season not only in Q1, but due to the lack of production, they will also be short on volumes in Q2. And therefore there's a lot of demand out there from flame retardants construction industry, but two of the three big players had set issues to get the volume for the customers.

And that's the situation in the market. So I'm not negative on bromine, the opposites as long as we can keep our production running, and we have to catch up with the volume demand coming from the end market and the end market is strong.

Very clear. Thanks a lot.

You're most welcome. Stay tuned.

Next question, please.

Yes, thank you for the opportunity to ask question. Two I have, one is on Rhein Chemie.

You sent about you were talking about your ambitions to double, triple or quadruple earnings. It's easy if you start very, very low.

Going to what margin might be after having done the homework, can it be 10% or let's say in the range of as the group margin or is that so tiny right now that this even not getting Rhein Chemie to that point. And the second question is the sequential improvement from Q1 to Q2.

If I just think what you mentioned about advanced intermediate rolling over prices, which were not able to do it in one -- and taking U.S. weather related impacts and I'm going to basically get to the midpoint of what you have given us guidance.

So this is the second quarter in general, more or less the same? And these two negatives are not existing anymore?

If that's the right way on this sequential trend?

Well, let me address the margin question first. I mean, margins are -- if you take zero EBITDA on 300 million in sales, the margin is not there.

Of course, this was the case for the accelerators and antioxidants, they were badly hit. At the Rhein Chemie business, I would say the former Rhein Chemie business the Rheinau GmbH was a business and last year in the high single-digits low teens margin.

So simply unacceptable. And therefore this business with change the management team.

It's a good one, I'm looking at this now carefully, they take the right steps. And I'm impressed by the analysis that we not put in action.

And therefore this business has to definitely this is a double-digit margin business in the new configuration periods. If it will not achieve the group margin standards.

And the margin standards for me are not where they used to be five or six years ago. We are bringing this business our group to different margin levels.

Either this business moved there or moved out. But the first thing that I want to see is that in absolute terms this business goes up strongly.

And as long as it goes up strongly they have the right to be under the length this roof if the long-term can then keep a low asset base with high double-digit margins I will revisit. But this is something the business yet needs to be proven and this is the strategic plan we discussed and now we put it into place.

Now as far as Q2 is concerned, the one thing that is clearly visible is strong volume momentum and that we catch up on prices. The one thing that of course is negatively impacting us as the force majeure.

It is the energy prices and it is the USD which nasty was something like $0.10, $0.11 better in our direction. Now it's the opposite.

Oliver is mitigating this to some extent. But of course the delta is still something like $0.06, $0.07 points so it does hurts.

But all in all Q2 should be a sequential further improvement versus the Q1 numbers that you've seen. And that's what I've indicated earlier on also in terms of narrowing the guidance range somewhat on an operational basis, but still, the guided number for the street to be absolutely certain is 240, 280.

You're most welcome, Andreas Heine. Next question, please.

Hi, good afternoon, gentlemen. Two questions remaining.

First one is on the engineering materials business. You said there were companies more anecdotal evidence, but I think you have better views maybe that there was double sourcing in particular the automotive customers.

Do you see this as a risk for the second half? Or do you think this business was only as at anecdotal evidence?

And secondly, on the specialty additives business, this 10 million one-off effect impact and do I understand its right -- this is basically mainly in the specialty additives line? And in particular on the bromine line?

Can you repeat the second question, please.

Yes, you lined out that had 10 million negative one-off effect from the harsh U.S. winter?

And my question was, if this effect was mainly then in specialty additives or even solely and if so, if this term was basically then attributed to your bromine business, as you said you are well, was of over two weeks.

Okay. Very clear.

Thank you. So on your first question, you're totally right.

Automotive industry is normally going for double source, sometimes even triple source, but the big guys are double sourcing. But hey, in this case, both suppliers of the PBT business, the both the two big players in the European camp, both were on force majeure because it was not us who had the issue, it was the biggest raw material supplier who was supplying our competitor and ourselves.

And therefore the next step of the value chain was reporting as well the force majeure leading to tightness in the capital goods industry, E&E industry and automotive industry. By now we've sourced from Asia.

So we are liquid, and we will go back on stream already earlier than anybody else. Most likely, Friday this week, we run extra shifts and we are the first to supply customers again.

And we will go out to customers telling that we are now internationally sourcing so that this situation will not occur again, so we are doing everything in order to be speedier and some help our customers to regain lost production as quickly as possible. So I'm not concerned that in the second half, we will face an issue rather the opposite.

I think customers will give us credit for our speed and agility we are showing in this particular case. Now with the second question.

You're right, the biggest hits on the 10 million was in bromine because El Do is definitely our biggest site in the North America. We will also hit in lap because with the Chemtura acquisition quite a few sites of lubricants on North America to.

It's a little bit went on Memphis. It wasn't the million low millions.

But we were basically hit an all big production sites but the biggest chunk definitely out of the 10 million was in El Dorado. And with net of course the significant chunk was specialty additives where we were incurring the idle costs.

And the idle costs are seen in the 10 million. But we lost volume as well.

So this was really bad.

Okay, thank you so much.

You’re most welcome stay healthy.

Yes, good afternoon. Thanks for taking my question.

On Saltigo I was wondering given the ag market, I know your business is project based, but are you seeing an increase in potential projects discussing with your customers or is there more in the pipeline I guess? And then I have some comments, maybe on your view on raw material inflation for the full year?

I'm just wondering if your guidance implies kind of an easing in the second half? Or what are your thoughts around that?

Two good questions on Saltigo. Momentum is clearly better.

We were despite trophy arc industry doing reasonably well in the last two to three years because of innovative products and projects. So we did well in the last two to three years.

Last year, we achieved the best result in Saltigo, ever since. But now the agro market comes back.

And this of course, gives you a different negotiation power going forward. And my personal belief is Saltigo will be on the rise also for the years to come.

I mean, now we start with electrolytes that’s different industry, which will somewhat diversify the setting of Saltigo. But all in all, I'm looking optimistically towards the Saltigo business, this will not move up every year in the double-digits, but it will move up in the millions and the high millions and therefore I'm optimistic on this year's performance of Saltigo, but also for the years to come.

Now on Ross, I mean, this is potentially one of the most difficult questions to be answered right now. Macro indicators at this point in time are alluding towards a softening of by and large raw materials in the second half.

I'm saying to my guys, don't plan for that. I mean, let's do the bottom up work and analysis and forecasting based on raw materials that potentially might be a bit softer.

But operationally, that's what I'm saying to my teams, you should all be prepared that even in the second half, we would see a further rise in raw materials. And if this is happening, we have to go out with further price increases.

So the situation right now is a one that I think you have to simply be flexible, agile, speed is everything. And you cannot make predictions, like you've done potentially 5 or 10 years ago.

Great, thanks very much.

You're welcome.

Hi, thanks for taking my questions. Just firstly, on consumer protection in Q1, of the 10% volume growth you printed how much was underlying volumes versus the IFRS 15 impacts you mentioned?

And then secondly, on Q2 guidance, could you possibly strip out the raw material headwinds that you're receiving in that range? Thanks.

Let me take both questions though. So with regards to consumer protection in the first quarter, we're not detailing out the exact effect.

They are some part of it but not the majority. The underlying business is like Matthias said earlier growing nicely in Saltigo, especially with regards to the overall environment in the ag industry.

And second, we were as well displaying that the acquisitions which we did a couple of years ago. With regards to MPP are contributing nicely as well to the overall growth of the volume.

So therefore it's a part of it, but it's clearly not the majority. With regards to Q2 raw material headwind, I think if you read the newspapers if you look into the market, there are a few of our raw materials, which are benzene, which are keep on skyrocketing, we saw further increases now, in course of the second quarter.

And therefore, it is of utmost importance that we keep on rising prices test now. Matthias was mentioning the price forward escalation clauses, but clearly, then on a sequential basis, we will further see pressure from the raw material and the pressure must be forwarded to our customer through price increases.

On the spot, Michael, very good. Next question, please.

Yes, thanks and good afternoon. Actually, it's two questions on the same topic on antioxidants and accelerators.

According to the restatement, we can calculate that the sales of that activity last year was $237 million and EBITDA was actually negative by minus $6 million. So a wonder about your $300 million sales figure.

Is there any other retroactive change in this specialty additives inbound, is there anything we should be aware of. And staying on antioxidants and accelerators.

You shift that business from Advanced Intermediates to Specialty Additives actually back to your Rhein Chemie where it was some years ago. My question here is what went wrong in the past under the advanced industrial umbrella?

And from your experience, how often did it happen that a low margin business or negative margin business has caught up to a level where it did not a more dilute the group margin. And finally, you say the profitability will rise to synergies?

Because it has the same customer industries as Rhein Chemie. But what is really different today compared to the past when it was part of it Rhein Chemie?

Did the customer industries change in the meantime? Thanks.

Hi, Martin, good questions. By the way, my son who was 13 years old.

He hears the Martin song currently all the time. I thought about you when I heard that first at home.

So let me come to your questions. The $300 million with zero EBITDA.

It's basically not the guidance on where true numbers 2020 are, but basically, what's the configuration of this business? How has this business behaved in the past in a trophy economic environment.

And in 2020 and in past cyclical downturns, this was somewhat the sales and the bottom line contribution. The precise numbers you've mentioned are the ones that we have given in the adjustments overview that we I think, issued in March.

So here you have the precise numbers, I think for ‘20, but also for 2019. And with this, I would like to answer then the second question this business when we integrated it in advanced industry intermediates, way back in 2014 or ‘15 that was, I think, it’s continuously on the rise we went from basically zero after the last crisis 2013.

We went from zero to around about $30 million in profitability, and then ‘19 the automotive crisis came and then 2020 Corona, this business will go back in normal times to 30 and with the synergies we can achieve in the Rhein Chemie business on the sales muscle on logistics, warehousing, you name it's my personal expectations are that this business will even go further than 30. If you then add the bottom line contribution from Rhein Chemie with respective synergies on top of this, you will understand that my expectation on this business versus 2020 is that this should not go up by double times.

Definitely with other triple times and if everything goes back and they are really doing well quadrupled times. And that's how I look at this business.

I hope that you understand the rationale, but also that we successfully repositioned the business under the advanced industrial intermediate umbrella. Any further question Martin?

Thank you.

You're most welcome. Do you know, the Martin song?

No.

I’ll send it to you.

Okay.

Hi, everyone. Two questions, maybe.

The first one just around the cash flow and the sizable swing and tax payments. Not that I want to run and dwell on a given quarter there.

Can you talk a little bit about what happened there? Whether that was anything structural, whether that's purely a bit of randomness around cost and timing.

The second question, how small the mid-term one, but it's around R&D for the growth. It looks to me like you're only spending perhaps half of what some of your diversified peers in Europe do on a percentage of sales basis.

Appreciate it could be an issue with definition or asset mix. But I just wondered what the approach was towards R&D as you continue this journey to becoming a more specialty company, whether you're investing enough right now or whether you need to use some of your stronger financial flexibility to ramp that up over the coming years?

Yes, two valid questions. Texas, that's difficult, better.

That's only Michael will be able to really shed light on so I pass it on. Before that I address R&D.

Well, in R&D, you have to look specifically where we report what kind of R&D. I’ve looked into this with other companies who made the assessment.

In our company we are doing R&D in three areas that other companies combined, we don't. The process R&D we do on technology, like when we now do R&D in order to reduce CO2 emissions.

We are one of the leader in all its -- that is in German laughing gas. We are one of the innovator here in Europe as far as this CO2 technology is concerned we developed it in a catalytic but also thermal reduction way we have patents et cetera.

And with this, we have improved our own CO2 emissions drastically in Leverkusen but process of reducing this in 100, 1,000 tons in Belgium in two steps. But this is not reported under R&D.

It’s even though we've patents and stuff like this, we report that in cost of goods sold, because it's process technology thus production related. Second, I know that some peers are reporting technical application that is not on a yearly, but two to three years basis in R&D.

We post that in the marketing and sales. We basically did that right from the beginning.

And we stuck with this ever since. And the CFO that followed the first CFO in this company was not bold enough to change it.

And therefore we are still having sales and marketing. Now the rest staying in R&D is the is the normal R&D stuff.

This will automatically go up over the years because consumer protection, of course here automatically will post more R&D in this area. But therefore, if you solely look at our own reporting, you could give it up we don't do it.

But we know what kind of R&D we are doing. I hope that gives a little bit of more clarity to your R&D question.

Now we come to the real sophisticated stuff. And with this, I pass on the words to Michael.

Thank you, Matthias. And I'm so happy that I'm not the CFO who followed the first CFO of this company to remind everybody on that call.

Dark times. Yes, with regards to the cash flow statement, Matthew rightly said, so there is no quarterly timing and there is no like in the P&L quarterly right quote in tax payment they come I don't want to say totally randomly, but there are clearly timing issues.

Overtime, you should recognize that the P&L quote of 28% will as well become true in the cash flow statement. But there are quarterly changes, which means in some quarters, we have cash-ins because we have down payments to the tax authorities, which in Germany carry a positive interest rate of 6%.

In case, we finally received money back because our down payments were higher than the final cash payments we have to do. And in Q1 last year, that was the case we received money back from the tax authorities, including a nice interest payment as well.

But not only that, last year in the first quarter, we were as well receiving some VAT payments, which we're doing different countries. And that amount was in the neighborhood of $20 million and these two tax elements were basically the reason why our cash flow was impacted last year versus this year.

For the next quarters to come, again it's hard to predict the tax cash payments, but as we paid more in the first quarter now than our P&L reported, you should overtime expect maybe a smaller cash out then the P&L expense.

Thank you, Michael. I'm glad that you have your tight hands on it.

Next question, please.

Thank you. Hi, Matthias.

Hi, Michael. Good to speak to you.

I've got two questions. The first one, I think we'd been anticipating by the midpoint of the year an announcement on your standard Lithium partnership.

Just wondering if you could update us on that. And then the second question is kind of a follow up on -- if that ends up being a go ahead, and we've had this nice announcement of the electrolyte production with Tinci, how are you thinking about the portfolio in the medium-term with all of the kind of growth that you are seeing in electric vehicles?

And you've done a lot of work reducing the auto exposure of LANXESS from 40% to about 20%. I mean, how high are you comfortable going for auto exposure as a percent of group sales?

Thanks.

Well, thank you on your questions, let me address them one by one, step by step we make further strides on Lithium, of course, in the current environment, not as fast as we would like to and all of you know about this. Now, what we can say, at this point in time, the pilot process and technology indeed brings up or brings out that the better English most likely brings out Lithium carbonate.

So we are able, it seems to convert -- to first of all extract Lithium out of the wells. Second to then convert Lithium chloride into Lithium carbonates with a relatively high purification of 99.85%, which is battery great quality.

And this is what we now see. However, the process, the new process on this extraction is not fully there, where we would like it to be, we have still two areas where we will need to optimize from an engineering perspective.

The process in terms of content of extraction and purification or waste reduction better to say and here our engineers need to work how long this takes in order to get our entire process data in an area where we can then go full scale. I cannot tell you yet here and it's simply my engineers to do the work the groundwork.

But that's where we stand on Lithium. So all in all, another step in the right direction.

But technology and production processes, especially when they are new one, simply need groundwork and great chemical engineers to put their heads together. And to come up with solutions where today we don't have a solution.

Yet we know where the problem is, but the solution gets needs to be engineered. So this is as far as Lithium is concerned.

Now on the electro mobility growth, it's a big market. And first of all, you see that we're looking at this big market, we can because we have the knowledge to do this, we have the precursors to do this.

And if we see here, a big value pockets with a controllable risk, we will decide on going into it. If we then team up with a partner or if we do that on our own we have to see.

But first of all, let us understand and analyze how big the value pocket is. And what kind of risk profile we would take on our shoulders, and then we decide how we are going to enter into it.

But I think the positive thing I take for my personal self of for me as a CEO of this company. It's nice that we have many options in our company, if it relates to this, if it relates to Tinci if it relates to Lithium, if it relates to et cetera.

The good thing is we have a strong platform, and we have options. And now let's see what kind of options are coming through.

Thank you.

You're welcome.

I see no further questions on the call. And with this I would then like to thank you for your participation we will open up the doors or the video cameras and tablets for digital road showing.

And I hope that in the second half of this year when we are all vaccinated all over the planets or lists and most of those cities, we are going to have face to face meetings again. We are energized and look forward to seeing you then, take care all the best for 2021.