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Edited Transcript of LXS.DE earnings conference call or presentation 12-Nov-18 7:30am GMT

Q3 2018 Lanxess AG Earnings Call

Leverkusen Jan 21, 2019 (Thomson StreetEvents) -- Edited Transcript of Lanxess AG earnings conference call or presentation Monday, November 12, 2018 at 7:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Andre Simon

* Matthias Zachert

LANXESS Aktiengesellschaft - Chairman of the Board of Management & CEO

* Michael Pontzen

LANXESS Aktiengesellschaft - CFO & Member of the Board of Management

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Conference Call Participants

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* Andreas Heine

MainFirst Bank AG, Research Division - MD

* Georgia Emily Mabel Harris

BofA Merrill Lynch, Research Division - Research Analyst

* Georgina Iwamoto

Goldman Sachs Group Inc., Research Division - Associate

* Knud Hinkel

equinet Bank AG, Research Division - Former Research Analyst

* Martin Roediger

Kepler Cheuvreux, Research Division - Equity Research Analyst

* Patrick Rafaisz

UBS Investment Bank, Research Division - Director and Chemical Research Analyst

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Presentation

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Andre Simon, [1]

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A wonderful good morning to everybody from my side and many thanks for joining our Q3 call. As always, I have our CEO, Matthias Zachert; and our CFO, Michael Pontzen with me. Please take notice of our safe harbor statements.

And with that, I'm happy to hand over to Matthias. Please go ahead.

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Matthias Zachert, LANXESS Aktiengesellschaft - Chairman of the Board of Management & CEO [2]

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Good morning to everybody. Monday morning, 8:30, let's start an exciting week. I'll go through the presentation starting on Page #4. Key highlights for LANXESS third quarter are definitely the agreed divestments of the remaining 50% that we still hold in ARLANXEO. By now we have handed in -- or notably, Aramco has handed in the key sites in order to get antitrust approval. All of that is running well. Final one is outstanding in China. All other jurisdictions have approved in the meantime and our assumption is that by the end of the year, also here greenlight will come from China so that the esteemed closing will happen December 31.

As far as third quarter is concerned, we saw some headwinds here and there, especially from the automotive industry. But in all and despite steep increases in raw materials, operational performance is on spot and I would like to allude to the results of facility editors that despite headwinds on ROCE, posted its strongest performance ever.

We came up with several innovations notably in our polyamides value chain and are now fully on track to further expand volume wise but also through new innovative grades, most likely being capable to take some market share of PA66, but also entering with further products in the lightweight and electric vehicle domain.

We take pride in stating that we further improved on our sustainability performance and also here achieved again a strong listing. As a matter of fact, in the European index, we scored number 3 out of the top companies. Only 11 companies were able to entitle to this ranking.

As far as financial headlines are concerned -- financial highlights are concerned on Page 5, you see that we could post a nice sales increase and we were in a position to basically one-on-one, rollover raw materials to the customers.

As far as EBITDA is concerned, we had a slight increase to EUR 277 million. Nice development on EPS pre as well and as far as seasonal reduction of net debt is concerned, that was visible in Q3, most likely we'd see another more significant decrease in Q4.

With this, I would like to make some statements to our joint venture agreement that we signed on the weekend, Saturday, Page 6. The Canadians cannot only play extremely good ice hockey, we've also been approached and discussed over the last several months with a engineering company that is fully focused on lithium extraction.

They have a unique technology and approached us because they knew very well that our brine Smackover Formation that we have in Arkansas, they could potentially here come to a nice extraction of lithium because lithium is also part of the brine content in the soil. And for that very reason, we have discussed, came to terms over the last few months and signed the joint venture agreement with Standard Lithium.

This is still early stage. We are currently making a feasibility study. We'll, of course, implement a pilot plan. Should, however, all of this be successful then we would agree on building respective plants in the 3 sites and extraction towers that we have in El Dorado. That can be, as a matter of fact, nice.

Page #7, we basically, like other chemical companies who have reported by now, can confirm that the underlying trading is not as strong anymore as it used to be in Q1, Q2. We see more headwinds and some -- one or the other in industry but overall, we see that things are not that bad.

Despite headwinds, I think you see that in all our segments we developed reasonably well. Excluding Performance Chemicals here, I would say we had a tough year but nevertheless, despite Performance Chemicals, despite agro industry being pretty weak still and we don't see a change at this point in time, I think all segments were able to perform nicely.

As far as Advanced Intermediates is concerned, here, AII was basically overcompensating the shortfall in Saltigo. So here, one of the worst quarters we have reported so far over the last 2 to 3 years, we think that Q4 should be the first time where all the measures that we've taken in Saltigo will lead to better performance compared to previous year. But the market at agro is still terrible and we assume that '19 will not be that good either. But from Saltigo perspective, our assumption is that we have seen the worst in this business.

Advanced Industrial Intermediates performed extremely strong. Volume-wise, price-wise, more to come next year due to the debottlenecking we are doing.

Specialty Additives punched hard and we now see that synergies are still to come but already today we are performing very strongly. And I think we have the ability a fantastic diversion that will excel as we go ahead.

Engineering Materials, Urethane is weak as we indicated in Q2 but the HPM business is rock solid. The integrated value chain is really performing nicely and of course, we are putting more emphasis on the engineering compounds.

So all in all, the group with an exposure to auto of roundabout 20% after ARLANXEO is out, we are doing, I think, well. We can compensate for many shortfalls that we see either in industries agro or auto, but also digest a pretty weak Performance Chemicals year 2018. And of course, we put measures in place to improve the situation 2019 onwards.

So all in all, I think you can see that LANXESS is fully on track.

And with this, I hand over to our CFO, Michael, go for it.

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Michael Pontzen, LANXESS Aktiengesellschaft - CFO & Member of the Board of Management [3]

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Thank you, Matthias. Good morning, as well from my side. Looking into the financials on Page #8. You see that in that challenging environment which is still earmarked off a rising raw material prices, we were able to pass on the rising raw material prices to our customer leading to give-and-take, a 4% increase in our top line.

We managed to have as well a slight uptick in our EBITDA. But given the fact that we passed on raw material prices with a relatively stable EBITDA, we saw a slight decline in margin which is simple mathematics.

The other numbers on earnings went up, EPS pre for the group and for the LANXESS numbers EPS, net financial debt was knocked down in the third quarter by give-and-take, EUR 120 million. And net working capital was managed to keep stable and the expectation for the fourth quarter is like we saw in the past years that in the fourth quarter, net working capital should come down.

When we look into the segments, we see a different development throughout the different segments. Starting on Page #9 with Advanced Intermediates. In Advanced Intermediates, AII remained strong. We saw strong price and volume increases and an uptick in our EBITDA.

On the other hand, we saw Saltigo with, like Matthias said, a terrible ag market, which remains terrible and therefore, a further weakening of EBITDA. Nevertheless, we were able to maintain the overall EBITDA level of that segment in that more challenging market environment.

Specialty Additive, we saw a very strong quarter. In fact, we saw the strongest quarter ever for that segment and it is now the strongest quarter in our portfolio. We saw price increases where we were able to pass on the higher raw material prices and we saw further improvement in our integration of pro forma Chemtura businesses, which generated synergies while we were able to push EBITDA further up to above EUR 90 million for the quarter.

The opposite direction in terms of performance were shown in Performance Chemicals. Performance Chemicals remains weak. Still, we are comparing to a very strong Q3 '17 and we are now back on Q3 '16 levels but nevertheless, the development was not good.

So we especially saw strong volume declines in our Leather business unit, driven by one hand side, the site closure of our Argentinian assets end of last year and some strikes in our South African asset.

Turning to Engineering Materials. In Engineering Materials, we again saw very strong quarter and like in Specialty Additives, the strongest quarter for the third quarter ever.

In HPM, strong price increases, strong volume development and nice EBITDA development. And in Urethanes we saw a better momentum on pricing. So the EBITDA in Engineering Materials was driven by the strong operational performance. That's in a nutshell through the segments, and now Matthias is running you through our guidance.

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Matthias Zachert, LANXESS Aktiengesellschaft - Chairman of the Board of Management & CEO [4]

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So I come with this to Page #11. Industry trends, we generally see intact. Of course, reference is made by everybody on geopolitical risks and all this craziness out there. But all in all, we don't see, like some of you have feared, a hard landing in China. We see that fear momentum is softening. But in the last 2 weeks, basically who was watching statements being made. I think China will do everything, the government there will do everything in order to make sure that the underlying demand remains positive. At least we are seeing it like this. Even though we definitely would like to confirm that we factor in a tougher environment in automotive, let's see where 2019 first quarter goes.

If in Europe we'll see a acceleration again after WLTP weighing on the momentum right now on Europe. This is something that needs to be on the monitor but we, at this point in time, have no reason to be negative in our perspectives on Q4 and '19, but we consider that momentum will be softer.

We also see more moderate development in construction demand but also this is something we address. We often got questions on Rhine water level.

Here in Leverkusen, Cologne, we have seen 2 weeks ago a situation where it was turning tight. We've done already for the last 4 to 8 weeks everything to go on the roads with various supplies and deliveries. So all in all, we could mitigate the situation.

Fortunately, over the last 2 weeks and also on this weekend, it has rained cats and dogs. I was out and got completely soaked up with the rain. So we now see that the water level in the Rhine is going in the right direction. So compared to basically 2 weeks ago, we are now at 30%, 40%, 50% increase as far as the level is concerned, so that looks more positive.

And based on all this information when we look down into our order book, we confirm EBITDA 2018 exactly where we've guided in summer. All good on our side. And with this, we open the floor for your questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from the line of Martin Roediger of Kepler Cheuvreux.

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Martin Roediger, Kepler Cheuvreux, Research Division - Equity Research Analyst [2]

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I have 3 questions. Firstly, can you explain why the volumes in Engineering Materials were up by 7% despite the high exposure to the automotive industry in this segment? I remember you have 45% exposure here. Is the reason lightweight materials, electric vehicles, innovation, higher compounds exposure or what is the driver behind that? And is this strong performance in Q3 in this segment a sign that also business should perform well in Q4 despite all the headwinds we have. The second question is on operating cash flow. That was slightly down in Q3 year-over-year despite the increase in EBITDA, despite low working capital impact and despite lower cash taxes, can you please elaborate on that? And the third question, can you explain to me why the minorities are less than 50% of the discontinued earnings from ARLANXEO?

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Matthias Zachert, LANXESS Aktiengesellschaft - Chairman of the Board of Management & CEO [3]

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Well, let me take the first question and Michael will take second and third one. As far as Engineering Materials is concerned, I think the growth trend that we've indicated on the end compound, we guided between 3 and 5 percentage points. Third quarter came in nicely but this also has to do sometimes with simply bigger lots being distributed and requested by the customer side. We had in Q1, Q2 a situation where momentum was strong so we saw good order intake. We also assume that fourth quarter is going to be a decent one, most likely not at the same kind of growth rates but Engineering Materials, especially HPM would do solid in Q4. And my assumption is that also the urethane which disappointed in Q3 as we guided due to the force majeures we saw in the agro cyanides and the monomers in the United States. We think that this is going to improve in Q4 and also fortunately, we see that the MDIs and TDI pricing is visibly improving for us. So the tightness that we've seen in Q3 is not there as before. On cash flow, Michael will make the clarification. I simply would like to clearly indicate '18 is still a year and '19 we'll see this as well where we clean up. So we do want to get to the savings and synergies. And of course, this still absorbs onetime cost and cash in order to improve EBITDA and cash conversion in the years to come. Michael?

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Michael Pontzen, LANXESS Aktiengesellschaft - CFO & Member of the Board of Management [4]

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Martin, yes, looking to the cash flow statement, you saw a big swing in the change in other asset and liabilities and here, there are basically 2 main drivers in that quarter: one, obviously, is the exceptional bookings which we had in 2017. So in 2017, we had a much higher number than we had in 2018. And then we had booking of variable compensation, which was higher in 2017 than in 2018 and that was the major driver which put back, let's say, the profit before taxes because they were booked as exceptionals or as the variable compensation as part of our operating results obviously. With regards to the minority question, we are in the process of separating ARLANXEO further and there are some costs allocated to that separation. The agreement with Aramco is that these costs are -- which are carried with us at LANXESS are being rewarded and that leads to the fact that some millions are being back granted from ARLANXEO to us. So it's not a 50-50 contribution, which is being received by Saudi Aramco. We have a higher share given the fact that we have some costs with regards to the separation.

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Operator [5]

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The next question is from the line of Patrick Rafaisz of UBS.

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Patrick Rafaisz, UBS Investment Bank, Research Division - Director and Chemical Research Analyst [6]

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Also 3 questions for me. The first is on Advanced Intermediates. You talked about Saltigo still being weak, but you nevertheless recorded quite good volume growth over the entire division. And nevertheless, EBITDA was flat, which would also suggest some lack of operating leverage for the industrial EBIT of the portfolio. Can you comment on that, please? And secondly, on the joint venture you announced, can you talk a bit about the business model you envisage here for this joint venture and related CapEx timelines? I know it's very early and on the feasibility study stage, but will be great to hear a bit more on how you think of this. And then lastly, the Rhine water levels, you talked about -- can you talk a bit about which segments or product chains could be affected here even though the water levels are improving in the fourth quarter? Should we model any impact here?

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Matthias Zachert, LANXESS Aktiengesellschaft - Chairman of the Board of Management & CEO [7]

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All valid questions, let me take them one by one, Patrick. So Advanced Intermediates, you're fully on the spot. The segments did well. As a matter of fact, Advanced Industrial Intermediates was basically here taking a lot of praise and what's making sure that everything that was positive in this segment was coming from Advanced Industrial Intermediates. Very strong volume, very strong pricing, very strong EBITDA contribution. It has been, however, completely eaten up by Saltigo contribution or lack of contribution, better. Saltigo was falling versus previous year visibly, but this will change in Q4. Advanced Industrial Intermediates was going to rock the boat in Q4 as always, but we would see from everything that we know as of today that Saltigo would improve Q4 versus Q4 last year as indicated already a few months ago. So that's -- as far as your first question is concerned. Joint venture characteristics, well, Standard Lithium has the technology, extraction technology, they have pretty sophisticated technology developed, patented. And I think if you go to their Internet site, they are pretty outspoken about this project. They see this as a fantastic opportunity and my recommendation is if you want to get further insight, go to their publication, they went public this morning at 7:00 a.m. as well. So the business model is the following. We have in El Do our 3 plants, west, south and middle plants. And in all 3 plants, we are extracting bromine or brine. So we basically will -- if the pilot plant comes out with the results that Standard Lithium has tested, we would then basically contribute the lithium rights that we have or the lithium extraction that we have in El Dorado into the joint venture. So we would make sure that Standard Lithium can use our existing infrastructure that we have. They could access our raw materials. We would get, of course, the bromine and they would extract the lithium out of it. And we would then share the profitability in a same manner. But of course, as we are the owner of land and infrastructure, we would get the majority of the profitability. Standard Lithium would contribute the technology and should everything turn out, we will, of course, then build respective extraction units. That's basically the business model. So we have only -- we had only opportunities to win. There's nothing that is a downside for us. This can be only a very nice upside, but we keep feet on the ground because first of all, we need to see if the current assumptions turn indeed into positive views based on the pilot plant that is being built. Now on River Rhine, of course, here the notably the Leverkusen plants would be impacted like Covestro, we would both have with visible production in Leverkusen. So all of us are working tightly together. But normally fourth quarter is a quarter where here you have winter season, autumn season. So 2 weeks ago, we have a lot of focus on 1, 2 raw materials where the situation was tighter. Everything is now turning yellow, even green and therefore, this is a topic that is no longer on my agenda. It has left the agenda of the board because we see that the situation has calmed down and again, is substantially better than it has been a few weeks ago. I hope that clarifies all your questions and therefore, I would like to open the floor for the next question, please.

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Operator [8]

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The next question is from the line of Georgia Harris from Bank of America.

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Georgia Emily Mabel Harris, BofA Merrill Lynch, Research Division - Research Analyst [9]

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Firstly, just on the Chemtura synergies, could you give us an update please on where these are compared to your initial expectations? And also, could you comment maybe on any potential for further synergies that you're bringing next year? And then my second question is on the construction market. You mentioned the softness there, could you give a bit more color on perhaps where that is regionally and the outlook for that market?

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Matthias Zachert, LANXESS Aktiengesellschaft - Chairman of the Board of Management & CEO [10]

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Let me say the following and Michael will pick up the ball on synergies. If you look at the exceptional guidance that we do on Q4. You can assume that we will make sure that we get all cost savings that we are planning and in a focused decent manner and if possible, with a certain acceleration. But this is something we will only make clear once we've closed our books for full year. Michael, on synergies?

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Michael Pontzen, LANXESS Aktiengesellschaft - CFO & Member of the Board of Management [11]

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Yes, Georgia, as Matthias said, we will report the details when we disclose full year results next year March. We are very good on track to achieve the envisaged EUR 30 million for this year and for next year, we expect another EUR 30 million to come and the year after, the remaining EUR 10 million to get to our target of EUR 100 million.

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Matthias Zachert, LANXESS Aktiengesellschaft - Chairman of the Board of Management & CEO [12]

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So then on the construction, notably in the emerging markets, we see that construction has softened, that has impacted our Pigments business as well. So that's the feedback, but again, no collapse, no dramatic change, simply softening and we have guided here softer environments, but all of that is embedded in our guidance.

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Operator [13]

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The next question is from the line of Andreas Heine of MainFirst.

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Andreas Heine, MainFirst Bank AG, Research Division - MD [14]

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I would like to start with Performance Chemicals. It was indeed very weak. But looking on the split of the business as you have, I would expect that most of that is dedicated to Leather with several reasons you have provided. And Inorganic Pigments only that's a single digits and the rest doing fine. Is that describing the picture rightly? And then, could you give some flavor of what we can expect in Q4 from the net working capital run down. It has increased quite a bit also in relative terms and sales outstanding. Is that something where you can improve that in Q4 or is that impossible? And maybe also one question on Saltigo, so you report for quite some time that it's getting weak and it's good to know that Q4 is doing somewhat better. I would still expect that Saltigo is profitable on EBITDA line. Could you confirm this, please?

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Matthias Zachert, LANXESS Aktiengesellschaft - Chairman of the Board of Management & CEO [15]

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So Michael will take net working capital. I will address first and third questions. So let's start with Performance Chemicals. What you're indicating is pretty on the spot. So a major shortfall is definitely on Leather and that will continue in Q4. So Performance Chemicals, our view on Q4, it's another very bad quarter. It will show clear decrease in profitability percentage wise, absolute terms as well. So here, not very nice. But let's look at it, Leather is just a disaster, we are working on it and we will make sure here for the measures are being taken, point one. Point two, Inorganic Pigments didn't have a great year year-to-date. Q4 will also be weak, but we are working here also on actions to mitigate the situation. And I'm looking to 2019 for Inorganic Pigments with measures that should then improve the situation going forward. The other 2 business units do well. No discussion for the reason we are making sure that MPP biocides will be further developed. And I think reference was given to you in the last analyst roundtable. The same holds true for our water purification business, where we will, as a matter of fact, bring new capacities onstream, second half '19 because here we turned pretty tight and then some products are in allocation models. So that's being set on Performance Chemicals. As far as Saltigo is concerned, yes, the agro industry, all in all, are all reporting; its U.S. companies or European companies are all reporting bad numbers. And we've not seen any positive tone coming from the big 3, big 4 companies. I can confirm that we are still positive, but I used the word, I need to take my microscope out to see it. I'm getting older every day. So my eyes are getting weaker, I need a thick microscope to see the profitability of Saltigo. But that should change Q4. It will still be Mickey Mouse contribution but it will be more than last year. And therefore, I think we've put all measures in place in Saltigo to see a turn in momentum '19 versus '18 but the last few quarters were not nice. And my expectation is that Advanced Intermediates will become the strongest segments again. Of course, we are competing between facility editors and Advanced Intermediates. And I think Advanced Intermediates has all the potential with AII being rock solid, improving next year even and Saltigo coming back to show a fundamentally strong segment in Advanced Intermediates and also Specialty Additives. Michael, net working capital?

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Michael Pontzen, LANXESS Aktiengesellschaft - CFO & Member of the Board of Management [16]

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Yes, Andreas. With regards to net working capital in percentage of sales, that number should come down as well through Q4 because we not only have the seasonality in our inventory levels, but we do have as well our seasonality when it comes to payables and receivables. Because as you know, we are spending give-and-take 40% of our overall CapEx, annual CapEx in the fourth quarter, that will lead to a higher number of payables which will help on the net working capital plus usually the month of December is a rather weak month, given the overall number of business and the number of holidays, which will have an impact on receivables. While we expect net working capital in total to come down and get back to levels in percentage of sales which are comparable to previous years.

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Operator [17]

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The next question is from the line of Knud Hinkel of equinet Bank.

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Knud Hinkel, equinet Bank AG, Research Division - Former Research Analyst [18]

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Two questions. First one is on Leather. Mr. Zachert you mention that it's not close to your heart anymore, leather business. So I would -- maybe you can share what options you are considering for that business. And secondly, on Saltigo, as far I know, a German chemical not heck far or not too far away from you sold a precursor business in the U.S. And you said during the Capital Markets Day, that you would also consider to reinforce Saltigo by acquisition. So my question would be why it didn't fit your portfolio because it went to a private equity as far as I know.

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Matthias Zachert, LANXESS Aktiengesellschaft - Chairman of the Board of Management & CEO [19]

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Can you please repeat your first question? It's not quite clear, did you say Lisa or leather.

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Knud Hinkel, equinet Bank AG, Research Division - Former Research Analyst [20]

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Leather, leather business.

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Matthias Zachert, LANXESS Aktiengesellschaft - Chairman of the Board of Management & CEO [21]

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Can you repeat your question then, please?

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Knud Hinkel, equinet Bank AG, Research Division - Former Research Analyst [22]

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Yes. Just what option do you consider for the weak leather business? So the -- do you consider sale, I guess, it's hard to find a buyer in that environment. Or do you consider a complete shutdown of the business? So that would be the question.

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Matthias Zachert, LANXESS Aktiengesellschaft - Chairman of the Board of Management & CEO [23]

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So I think we're very clear on we are not selling problems, we are fixing problems and afterwards, we see what we will do. So here on the leather business notably, I mean we see leather, of course, the weakening automotive chain, and this has to do with organic leather. So that's the one area where we simply saw weakness in the industry. And we have confirmed that, we have stated that and therefore, leather has been impacted in this regard as far as the organic side is concerned. Organic leather is still okay, cash contributed but overall profitability has gone down also on the organic leather side. Now chrome, we have taken steps to improve it and we'll take further steps this has to do simply with costs. We are taking capacities out, we have to get costs out and we will work here on making sure that the situation is being addressed and improved. Now on your second question as far as Saltigo is concerned, I think we've clearly stressed that the market was weak. We have made now, we put self measures in place to improve it. We are looking outside what possibilities are existing in North America and in Asia. Of course, we are looking into all opportunities. I am aware of what is being sold in the market. You can assume that we look into things that are interesting to us. And if they are not interesting, we are not pursuing them. I'm not therefore addressing specifically the asset that you have mentioned, but we clearly can say if we would have considered this as interesting, we would have been potentially also mentioned as a potential acquirer. We did not consider this asset as attractive for us, so we are not pursuing it.

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Operator [24]

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(Operator Instructions) The next question comes from the line of Georgina Iwamoto of Goldman Sachs.

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Georgina Iwamoto, Goldman Sachs Group Inc., Research Division - Associate [25]

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I've got a couple of questions and they're all around Specialty Additives. I was hoping we could look a little bit closer into the top line. And so can you give an idea of what the underlying volume growth is outside of the plant closures? And also how much longer we should expect to see negative volume growth on the back of your restructuring activities? And then on the good pricing that we saw in this segment, can you give an idea if that was across both lubricant additives and flame retardants or if it was one more than the other? And then finally in bromine, in the market some of your peers have mentioned that there's a shortage of bromine in China. I was wondering if you can give an idea what you're seeing on the supplies -- from the supplies perspective and whether this is the usual winter season impact or if there is some other effect going on.

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Matthias Zachert, LANXESS Aktiengesellschaft - Chairman of the Board of Management & CEO [26]

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Thanks, Georgina. Well on Monday morning, you have to be upbeat with the music and therefore, I appreciate that you have realized the upbeat tone in music. We are upbeat on the company as well. Let me address all 3 questions. Volume, basically, we saw flat volumes in Specialty Additives and this is driven by the fact that we have now 3 plants being offstreamed, which were partly still onstream last year. So all 3 plants if you here blend that out, you will see a positive volume growth in the area of 2 to 3 percentage points. As far as the pricing is concerned, I can basically confirm that we have increased -- we had to increase pricing in all business lines. So we push prices up in the lub adds. We had to due to the raw materials spike. The same, we had to address in the phospho value chain. As far as the bromine is concerned, of course, we absorb our own raw materials but due to the tightness in flame retardants in China and due to the tightness of bromine, you can assume that we like pricing also here and just make sure that the pricing is appropriately to market prices. And therefore, in all respect I think Specialty Additives despite the headwinds in ROCE was all able to perform very nicely as far as absolute EBITDA is concerned but of course, we are happy that margin improved as well. I think with this, all questions have been addressed also on the music.

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Operator [27]

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There are no further questions at this time. I hand back to the presenters for closing comments.

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Matthias Zachert, LANXESS Aktiengesellschaft - Chairman of the Board of Management & CEO [28]

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So if there are no further questions in the room or in the cities, I -- looking forward to see all of you on the road. I would be heading to New York. Michael will also be on the West Coast, we would then be in London. And thank you for your time, and we are looking forward to finishing the year on track and to then open 2019, another year of transformation and acceleration. Thank you so much from all of us. Thank you so much from LANXESS. Bye-bye.