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Edited Transcript of LXS.DE earnings conference call or presentation 13-Nov-19 12:00pm GMT

Q3 2019 Lanxess AG Earnings Call

Leverkusen Dec 5, 2019 (Thomson StreetEvents) -- Edited Transcript of Lanxess AG earnings conference call or presentation Wednesday, November 13, 2019 at 12:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* André Simon

LANXESS Aktiengesellschaft - Head of IR

* 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

* Chetan Udeshi

JP Morgan Chase & Co, Research Division - Research Analyst

* Knud Hinkel

Pareto Securities, Research Division - Analyst

* Martin Roediger

Kepler Cheuvreux, Research Division - Equity Research Analyst

* Oliver Schwarz

Warburg Research GmbH - Chemical Analyst

* Peter Spengler

DZ Bank AG, Research Division - Analyst

* Thomas P Wrigglesworth

Citigroup Inc, Research Division - Director and Chemicals and Basic Materials Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining the LANXESS conference call.

I would now like to turn the conference over to André Simon, Head of Investor Relations. Please go ahead.

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André Simon, LANXESS Aktiengesellschaft - Head of IR [2]

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Yes. Thank you very much. A warm welcome to everybody, 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 statement. And after collecting some feedback from some of you, we have decided not -- to only briefly set tone today with Matthias just presenting 3 charts. We assume most of you will have had a look at the presentation already, and therefore we dedicate more time to your questions.

So Matthias, please go ahead.

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

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Welcome to all of you to our third quarter conference call. I move to Page #3 and would like to address highlights and challenges of the running quarter. First, we have advanced nicely on our portfolio management, which we highlighted to you 1, 2 years ago that this would be an ongoing process and we continue executing on this. This relates to the chrome chemicals divestiture, quite a CO2-intensive business. We indicated to you that we will depart from South Africa and we will address the chrome value chain. And as far as the first step is concerned, I would like to say that here, mission completed. As far as CURRENTA is concerned, the signing was also announced in August during third quarter. And here, all preparations for going to the closure is in full preparation, full swing, which we expect for next year. Today, we announced the realignment of our Organometallics business. It's one business that we highlighted we would find ways to fix the profitability. And this is definitely a step in this direction, so I will make some further comments just in a moment.

As far as earnings are concerned, we delivered on our communication that I gave to you in August with the second quarter that we would be slightly below previous year quarterly performance, but if you look into the details of the numbers, we did well in 3 segments and nearly compensated the weakness that, of course, was pronounced in the automotive industry and thus burdened our Engineering Materials segments. As far as the leading positions in our non-auto chemical industries are concerned, we performed very, very nicely. And this becomes visible if you look at the respective segment reporting.

The ongoing investments in debottlenecking projects that we started 2 years ago are more and more coming through and are contributing to earnings. And last but not least, we have been ranked as #1 in the European Dow Jones Sustainability Index, something that I will also further elaborate when we will see us on Friday.

Challenges, of course, a slight pressure but only slight pressure overall on prices and volumes, and of course the reasons are known to you. We have passed on declining raw materials and, of course, especially in one segment, AII. This is over the last 10 years and always happening where you see from 1 quarter to the other that sometimes there's a swing in margins. It happened in Q2, and therefore it happened in Q3 in the other direction. Nothing to worry about, this is standard. Of course, challenge is clearly also the seen auto and agro market weakness which is holding on. And of course, we continue terminating the low-margin contracts which were visible already at the beginning of the year in specialty additives.

Now I turn over to the Organometallics repositioning, and here we've given highlights on Page 4. We have basically 3 catalysts which we analyzed and detailed. We have now had enough time to sort out our industrial cost curve position. We had enough time to get good understanding what our customer wants, where we are competitive, where we are less competitive. And therefore, we are very, very enthused about our aluminum catalysts. We see growth opportunities here in the future. We see our industrial cost curve as a very competitive one. And the technology that we have, we consider as a very good one.

The thing looks entirely different if we look at our tin and gallium catalysts. And therefore here we have decided and worked out in the last basically 12 months to find a partner, which we found with PMC. It's, I think, for us, the best home. And therefore we will sell this business to PMC and expect that closing will occur in just a few months, end of the year. With this, we will then lose around about EUR 60 million of sales, which has very, very little single digits EBITDA contribution. We will step from that point onwards, for 2 years period, into a pure tolling agreement and then see what PMC takes as decision afterwards. With this, however, we believe that the base business aluminum catalysts will be the business of around about EUR 100 million in size with a profitability of industry standards.

Ladies and gentlemen, let me now turn over to the guidance of the company next to the quarterly numbers. So I think numbers are known to you everywhere, the headline sales pretty stable. You see more cash flow generation now in 2019 coming through; as indicated, EBITDA margin relatively stable as well. And ladies and gentlemen, please let me inform you macroeconomic times are not improving. We don't see that. We see that the auto market is still in no recovery. And therefore, we expect that Q4 trading is following the trend of the last few quarters, but as far as current trading is concerned, when we look into Q4, it's exactly on track with what we had expected initially. So as far as guidance is concerned, we stick to our guidance. And Q4 is anticipated to be slightly, and I pronounce slightly, better than Q4 of last year.

And with this very speedy, we would like to open up the floor for your questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And we receive the first question from Tom Wrigglesworth from Citi.

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Thomas P Wrigglesworth, Citigroup Inc, Research Division - Director and Chemicals and Basic Materials Analyst [2]

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I -- just obviously you've stated very clearly there that things are tracking in line with your expectations. When was the earliest point do you think we could start to see some improvement in your automotive end markets? How are you thinking about that as that progresses into 2019? Is this a business that you have to maybe look at further adjusting if volume conditions remain weak? And secondly, on the restructuring charges, I'd like a bit of help, please. You previously guided to EUR 30 million to EUR 60 million of restructuring charges for this year. And then you've highlighted, I think, EUR 20 million for the Organometallics business, but that still kind of leaves me short of around EUR 20 million to EUR 30 million of restructuring charges. Could you just run us through where the restructuring charges have taken place this year and which businesses?

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

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Tom, welcome. Thanks to have you on the call. So let me address the first two. Michael will take number three. The automotive industry, basically you get different signs. All from -- nearly all customers, we get the feedback that the market is pretty, pretty tough and, of course, under major transformational change, which will last not only 1 years but several years to come due to technology changes, regulatory pressure, et cetera, et cetera. We see clearly positive signs from the e-mobility side, which we get more volume attention also from next year but notably 2021 onwards due to regulatory changes, but we are prepared for a stagnation in the automotive industry and even erosion. So therefore, I don't see right now that the automotive industry is changing overall. However, what we've seen in Q4 now is that, of course, indeed the comparable base in last year is pretty low. So we've seen, for instance, that underlying performance versus previous year turned into slight improvement. And therefore, overall the industry, I would address as still in clear trough-y situation, but as far as our expectation is concerned, we are fully on track. Now as far as measures are concerned, Tom, I think we've seen and shown this over the last several years. If we see under capacities for too long of a period, we will always address that. So that would be -- that should be no surprise to you if we take measures whenever needed. And Michael, come on, address exceptionals.

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

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Tom, welcome, everybody. Yes, with regard to exceptionals, there are basically 3, 4 major buckets. One is obviously still some exceptionals which we are booking in the specialty area related to the Chemtura integration. The second is obviously in the chemicals area now with regards to different measures we're undertaking. And the third bucket, that's the rather larger one you find on M&A. And the M&A-related exceptionals come in, like we discussed, Organometallic. We discussed chrome. We discussed CURRENTA. That obviously comes along some M&A costs. And last but not least, we have our digitalization initiative, which does as well consume some of our exceptionals.

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Matthias Zachert, LANXESS Aktiengesellschaft - Chairman of the Board of Management & CEO [5]

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Yes. I would just like to add on, on this. You have seen in third quarter CURRENTA coming through. That was a project where we have invested a lot, but we get a lot. So M&A-related. Chrome chemicals was running for quite some time with its intensity in third quarter. And now you see today delivery on Organometallics. So if you do M&A, you should not be surprised to incur certain costs for all the advisers and the work that we are doing, but I think all of what you have seen goes in the right direction.

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Operator [6]

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The next question is from Martin Roediger, Kepler Cheuvreux.

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Martin Roediger, Kepler Cheuvreux, Research Division - Equity Research Analyst [7]

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Yes. Only 2 questions from my side. Firstly, I see that the number of employees has increased by 100 people in Q3 compared to Q2, driven especially by Engineering Materials and at the corporate level. Why do you expand your workforce, especially in these 2 segments? And the second question is a minor one. As you certainly have, I mean, locked in the deal with PMC Group, can you disclose the enterprise value you receive for the tin-based Organometallics business?

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Matthias Zachert, LANXESS Aktiengesellschaft - Chairman of the Board of Management & CEO [8]

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Well, Martin, you should not assume that we are here on the peak hiring modus, but you sometimes take in certain jurisdiction changes as far as contractors that are not on your P&L and current or employed employees are concerned. And we've made certain changes in some jurisdictions where we changed from contractors or had to change from contractors to in-source people. And in one specific case, these people were in the production area, however, associated to our, as we call it, technology production PTSE function, which is a -- defined as a global function thus in the corporate area even though the people are completely production related. It's a technicality, and therefore I would not stress too much time on this matter. Michael?

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Michael Pontzen, LANXESS Aktiengesellschaft - CFO & Member of the Board of Management [9]

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Martin, with regards to the EV of the part we sell to the PMC, we agreed with PMC Group not to disclose the EV. So therefore, I appreciate that you appreciate that we agreed on it. But just as a reminder, that business was not a very high-margin business, just the opposite, very low single-digit EBITDA, so you should not assume monster income from that sale.

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Operator [10]

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The next question is from Knud Hinkel, Pareto Securities.

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Knud Hinkel, Pareto Securities, Research Division - Analyst [11]

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Two, I have. Firstly, on Organometallics, can you elaborate a little bit on the different economics of economic -- Organometallics with view to the different materials? So why is the position of the cost curve so different for these different divisions? And that will be my first question. Second question, on numbers. And here, you guided for depreciation as high as EUR 450 million for the full year. If I'm not mistaken, you are at the EUR 356 million after 9 months, so that leaves for the last quarter a little bit more than EUR 90 million of depreciation, which is much lower than what we've seen in the first 3 quarters. Maybe you can explain the difference [of these].

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

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Yes, well, let me address the first one. Michael will take the second one. So if you look at the different catalysts: a, you have different deepness or a different strength in the value chain. In the aluminum catalysts value chain that we have, we do have a variety of production steps. They are far lower or limited, reduced to basically one, in the tin and gallium catalyst production. So here, we are simply more competitive in the aluminum one from the production cost curve. Second, as far as scale is concerned, in aluminum we are bigger than in tin. Third is, as far as the end product is concerned, aluminum goes basically to the polyolefins, and the tin goes to PVC. And therefore, it's also a different market with different volumes, different margins. And this gives you just a little bit heads-up. As far as gallium is concerned, it's basically negligible. We have a Mickey Mouse position here. Therefore, we don't make a difference. And that's the reason why we plan to exit this as well because both businesses, tin and gallium, are -- you need a microscope to identify the EBITDA. And I get older, so I have glasses. And when I start reading, and microscopes, I don't have it all. And it's for that very reason it simply doesn't make any sense. We want to have big numbers, double-digit margin numbers. Then you don't need microscopes and glasses to identify them. So it's basically, in a nutshell, the reason for the differentiation, and Mike will address depreciation.

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Michael Pontzen, LANXESS Aktiengesellschaft - CFO & Member of the Board of Management [13]

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Thanks, Knud, yes. With regards to D&A, the, let's say, underlying run rate per quarter is, give and take, EUR 110 million to EUR 120 million. It also depends to some extent on the exchange rate because, as we have nowadays lots of assets as well in the U.S., they are denominated in the U.S. dollar. With a stronger dollar, we have a higher run rate of D&A. So the EUR 350 million, give and take, is of course to some extent an effect on D&A of the FX. So if FX remains as strong as it is, the number for the year-end could indeed be maybe around EUR 460 million, but that's no, let's say, major deviation on the overall number which we're having. And the second is obviously we're spending still more CapEx than we have as D&A. This year, we are a little bit faster with regards to spending the D&A than last year. That does as well have a little impact. And these 2 impacts are the major driver for the D&A number.

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Operator [14]

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The next question is from Oliver Schwarz, Warburg Research.

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Oliver Schwarz, Warburg Research GmbH - Chemical Analyst [15]

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Two questions from my side, please. Firstly, Rhein Chemie. It seems like Rhein Chemie is -- continues to struggle to achieve margins that are in tune with what you are achieving for your divisions or business units. I know that Rhein Chemie has a history with LANXESS once being up for divestiture, and then due to change in management, there was a different strategy implemented of Rhein Chemie. In the light of the current development, would you still consider Rhein Chemie to be a core asset of LANXESS? That would be my first question. Second question would be more philosophical perhaps in regard to your midterm targets and the margin projects you -- projections you made. In the light of change in the reporting, especially IFRS 16 impact, and the resilience of your performance in 2019, which is more, let's say, a trough year than a peak year, I guess, do you plan on going back to that guidance and maybe tweak it a little? That would be the second question.

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Matthias Zachert, LANXESS Aktiengesellschaft - Chairman of the Board of Management & CEO [16]

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Very valid questions. And I think, I mean, both one, I would rather like to address on Friday, in our Capital Markets Day event. So if you don't mind, I would be very, very aggregated on the first one and basically refer to Friday on our second one. And Rhein Chemie has been always under -- since the spin that we did in 2005, they have always been a pillar in our portfolio. It's an international leader, and you need to differentiate right now. I mean they hold position #1 in where they compete. You need to distinguish between 2 business lines here, the colorants additives business, which is suit up in a unique -- in little niche positions. And therefore, things are running perfectly well, even better than last year. The problem right now is definitely the rubber additives business. And that is the separate business line, which of course is next to our polyamide value chain, the biggest exposure to automotive sector. And as such, they are going through tough times right now as the automotive industry and the supplying industry are going through tough times. At some point in time, the automotive industry will definitely stabilize, and volumes will come back also to Rhein Chemie. And we will now make sure that this is not lingering on our divisional profitability, which compared to last year in the additive segment could reach 19.5%, as you have spotted in the third quarter results. So overall, there must be some other very good businesses in specialty additives that overcompensated the weakness in Rhein Chemie and even to some extent the weakness that we had in our lubricant additives. And again, on the margin, let's come back to this on Friday with delight.

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Oliver Schwarz, Warburg Research GmbH - Chemical Analyst [17]

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See you on Friday then.

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Operator [18]

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The next question is from Peter Spengler, DZ Bank.

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Peter Spengler, DZ Bank AG, Research Division - Analyst [19]

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I have 2 questions. First, on the CURRENTA sale. If I remember correctly, can I assume that your net financial debt will decrease by around EUR 620 million after receipt of the proceeds from the sale in Q2 in 2020? And the second question is on your COGS, which have risen in Q3. So can you elaborate about the utilization of your facilities, especially in Engineering Materials? I would imagine that the utilization rate there has decreased recently.

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Matthias Zachert, LANXESS Aktiengesellschaft - Chairman of the Board of Management & CEO [20]

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Michael will take both questions, Herr Spengler.

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Michael Pontzen, LANXESS Aktiengesellschaft - CFO & Member of the Board of Management [21]

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Peter, first question. With regards to CURRENTA, yes, that is pretty much the direction which you should assume. We gave the EV for the equity which was EUR 780 million. We gave you an indication of the tax rate to be expected, and that number sounds pretty reasonable to me. The second, with regards to COGS, indeed if you take a look into our P&L or, give and take, the EUR 10 million decline in EBITDA you find in the gross margin. And that is driven for the overall group. Basically, on the one hand side, we have a negative volume effect. We have a positive currency effect, and we have a negative effect from a lower utilization for the group. The lower utilization is driven, let's put it like this, to some extent, and that you will find in the cash flow statement, because our businesses or we as a group started to work on our inventory levels in the second half of the third quarter, while the increase in inventory, and you find that as I said in the cash flow statement, is much lower than it was in the third quarter last year. So that effect, you find on the gross margin for the group, and that effect you find then in the EBITDA. So it's one of many effects, but yes, the utilization rate was a couple of percentage points lower than it was last year.

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Operator [22]

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The next question is from Chetan Udeshi from JPMorgan.

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Chetan Udeshi, JP Morgan Chase & Co, Research Division - Research Analyst [23]

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Yes. First question was on guidance. Can you maybe confirm that the midpoint is still relevant when you talk about slightly higher for Q4, just to be in the right ballpark? Second question was the pension provisions have gone up and just the reflection of the lower interest rates, but does that have any bearing on the costs next year for service pension costs that go to your EBITDA line? And then just on this debottlenecking brownfield project CapEx, can you remind us how much of that is already being spent by end of this year and how much is left to be spent next year? So in other words, will the CapEx next year start to go down, or will it remain at current levels?

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Matthias Zachert, LANXESS Aktiengesellschaft - Chairman of the Board of Management & CEO [24]

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Yes. Chetan, I will take number one and number three. Michael will take pensions. So on guidance, I reiterate what I said in Q2. Our guidance is EUR 1 billion to EUR 1.050 billion. It's literally impossible to make a point lending. And so where I sit today, the guidance is basically in our range. And midpoints, I would rather like to state it in the following way. We want to deliver last year's EBITDA, which was EUR 1.016 billion. And I indicated to you in August we work hard to make sure, through cost measures, cost containment that we land there. I would be surprised if we would be a lot above this. I would rather be very clear that the EUR 1.016 billion is what we want to achieve. I don't think we would be millions above this. So that is the guidance. It has been the guidance beginning of the year. We are working on that and do our professional work that we will deliver on this. On brownfield investments, it's something that we will comment on, on Friday. It's, I think, a very interesting development. You've seen that we have started to bring onstream additional capacities in Advanced Industrial Intermediates. I referenced to this already 2017 and '18. And reason for our stability in Advanced Intermediates is that these great projects are now coming onstream. They will continue coming onstream next year, and we would like to explain more on this matter so that some excitement is left to you for Friday. We will explain some further topics on this on Friday when, hopefully, we will also see you here in Cologne, Chetan. Michael, pensions?

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Michael Pontzen, LANXESS Aktiengesellschaft - CFO & Member of the Board of Management [25]

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Yes. As exciting, I guess, as the topics on Friday is pension...

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

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(inaudible)

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Michael Pontzen, LANXESS Aktiengesellschaft - CFO & Member of the Board of Management [27]

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That was a joke -- yes. Okay. With regard to the change in pension, you are absolutely right. The interest rate in Germany, which is the major driver for our pension accruals, declined further, another 25 basis points. That is still a book value, yes, so we have to adopt it, but there are no changes in the cash flow nor in the service cost which go hand-in-hand with that development. What goes -- because the changes are recorded in the OCI, but what goes hand-in-hand is that we have, at least to some extent, counter-position on the asset part of our balance sheet, which are the deferred tax assets. So please don't forget or don't only assume or adopt your pension accrual, but please keep in mind that there is a pension asset sitting on the left-hand side of the balance sheet which does, the theoretical outflow of cash related to the pension accrual, reduce that cash outflow.

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Operator [28]

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The next question is from Oliver Schwarz from Warburg Research.

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Oliver Schwarz, Warburg Research GmbH - Chemical Analyst [29]

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Can you give us an update on your lithium project, please? And the second question would be with total exceptional items at EUR 73 million of the 9 months and EUR 55 million of that for digitalization, M&A expenses. Is it -- would it be fair to assume that we'll only see EUR 7 million run rate for the existing business and around about EUR 20 million earmarked for the disposal of the Organometallics? Because that would be like those EUR 7 million for Q4 would be a bit lower than the run rate for the first 3 quarters. So I'm just wondering whether you're toning a bit down or have finalized some of the exceptional projects. Or is there more to come also in or shifted into 2020?

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Matthias Zachert, LANXESS Aktiengesellschaft - Chairman of the Board of Management & CEO [30]

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I will take lithium, and Michael will take your questions on exceptionals. So on the lithium project, there is nothing new. So the current timetable is unchanged, and therefore there is nothing that needs to be added at this stage. And Michael, please take exceptionals.

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Michael Pontzen, LANXESS Aktiengesellschaft - CFO & Member of the Board of Management [31]

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Yes. Oliver, with regard to the exceptionals, as you said, many of the exceptionals are booked in the reconciliation line like -- and there is a certain trend like you see as well in our reported EBITDA and exceptionals. You don't have a linear development quarter-over-quarter. You have a certain seasonality in these number because the majority or a large part of these exceptionals are project related. And I was referring to the project with regards to the chrome chemicals part, with regards to the OMS part, especially with regards to the CURRENTA part. And these are, of course, not running costs but project costs, so therefore you should not expect, let's say, a given run rate but project related. But with regards to the, give and take, EUR 20 million exceptional bookings for OMS, these you should most likely expect then in the fourth quarter.

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Matthias Zachert, LANXESS Aktiengesellschaft - Chairman of the Board of Management & CEO [32]

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And again, we are not standing still. If we find good projects either on the cost side in automotive-exposed businesses or in form of good portfolio moves on buy and sell, we always incur exceptionals, and therefore we would not shy away because of a guidance on OTC costs. That would always go along, of course, with the communication of a project that is completed, so please have understanding for this. We are -- I think we are working on a lot of good projects which we have completed in the last several years. All of you know them, and you should be convinced that we will continue doing this.

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Operator [33]

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The next question is from Andreas Heine, MainFirst.

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Andreas Heine, MainFirst Bank AG, Research Division - MD [34]

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Yes. I have basically 2 questions. The first is on Specialty Additives, which performed a bit better than I have expected in Q3. Could you elaborate whether this is also, let's say, kind of quarterly on range to the positive and might be more on the down side than in the next quarter? Or is it sustainable? And how important was [bromium] pricing in this particular quarter? The second question I have is on the special items. Can you elaborate how much of this EUR 100 million for this year will relate to cash-outs? And how much will be just impairments and other accounting stuff?

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Matthias Zachert, LANXESS Aktiengesellschaft - Chairman of the Board of Management & CEO [35]

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Yes, Heine. As far as specialty additives is concerned, I think I gave some color already to Q3. So Q3 did well basically because of the entire flame retardants setup. So flame retardants did well; and key, of course, notably the brominated flame retardants. And of course, price, please take into consideration that price had been on the rise on brom over the last settle -- several years. So -- but of course, at the end of the day, we are selling not raw brom but our brominated flame retardants. So the entire flame retardant -- somebody should put his phone on mute because we are hearing that you are traveling. I wish you safe travels.

And now back to your question, Andreas. The entire brominated value chain did well and thus overcompensated the weakness, clear weakness in Rhein Chemie rubber additives, whilst lubricants did, by and large, okay. I would say that third quarter was -- there was some volume momentum, some volume accounts with customers that were especially strong that should not be considered as underlying next year. I think third quarter 2020 specialty additives will have a tough comparable base. And so we had here some extra earnings, single digits, but overall the brominated and phosphorus value chain did already the entire year 2019 pretty nicely. And therefore, we've communicated that we are repositioning here the business, working hard to get margins up. And we've done that over the last 2 year, I think, quite successfully. Michael, come on, rock the EUR 100 million.

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Michael Pontzen, LANXESS Aktiengesellschaft - CFO & Member of the Board of Management [36]

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Andreas, thanks for the question. First, you will get a complete update, like usually when we report full year numbers, about the table of expected cash-out and synergies, like we gave you in the past couple of years. And if you take and recall what we told you for the beginning of -- or at the beginning of the year for this year, we told you, you should expect some EUR 40 million cash-out for the Chemtura integration-related expenses and only a smaller expense to be taken. And that is what you exactly see in our accounts. So there is a deviation between the booking of expenses and the cash-out, obviously. With regards to the overall, let's say, give and take, EUR 100 million which we are guiding, the majority does carry some cash-outs. But with regards to the EUR 20 million we're guiding now on the OMS business, here the majority are write-downs which will not carry major cash-outs.

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Operator [37]

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Currently, we have no further questions. (Operator Instructions)

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Matthias Zachert, LANXESS Aktiengesellschaft - Chairman of the Board of Management & CEO [38]

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Well, ladies and gentlemen, if there are no further questions, we close the call. And again we would like to highlight we welcome all of you to our investor and analysts event on Friday, starting in the morning. And we've worked hard over the last few weeks and basically months to make it a worthwhile trip for you. And we are excited to present more about LANXESS, and we are looking forwards to see you on Friday or on the roads when we do our road show.

All the best. Thank you for your time and participation. Bye-bye from LANXESS. Bye-bye from Cologne.

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Operator [39]

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Ladies and gentlemen, this concludes the LANXESS conference call. Thank you for joining, and have a pleasant day. Goodbye.