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Edited Transcript of TESB.BR earnings conference call or presentation 25-Aug-22 1:00pm GMT

Half Year 2022 Tessenderlo Group Earnings Call Brussels Aug 25, 2022 (Thomson StreetEvents) -- Edited Transcript of Tessenderlo Group earnings conference call or presentation Thursday, August 25, 2022 at 1:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Kurt Dejonckheere Tessenderlo Group NV - Group Controlling & Consolidation Director * Stefaan Haspeslagh Tessenderlo Group NV - Executive Chairman, CFO & COO ================================================================================ Conference Call Participants ================================================================================ * Christophe Beghin Kempen & Co. N.V., Research Division - Research Analyst * Frank Claassen Banque Degroof Petercam S.A., Research Division - Analyst * Stijn Demeester ING Groep N.V., Research Division - Research Analyst * Wim Hoste KBC Securities NV, Research Division - Executive Director Research ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Thank you. Hello, and welcome to the Tessenderlo Group Half Year 2022 Results Call. My name is Judy, and I'll be the coordinator for today's event. Please note that the call is being recorded. (Operator Instructions) I will now hand you over to your host, Stefaan Haspeslagh, COO and CFO, to begin today's conference. Thank you. -------------------------------------------------------------------------------- Stefaan Haspeslagh, Tessenderlo Group NV - Executive Chairman, CFO & COO [2] -------------------------------------------------------------------------------- Thank you very much, and welcome, everyone, to our call on this very sunny day in Belgium. I believe we have over 30 degrees so it's -- it's a very hot and setting day, but we can comfort you with a very good first half year for the Tessenderlo Group. First, we would like to start this formal events, which we believe are interesting for you to know. One is the acquisition of a PE production plant in France. As you know, in February, we have been announcing the takeover of the production unit of Pipelife France, which is a plant situated not far from Eure. So ideally located to supply Paris and the north of France. They are specialized in the production of pipes for gas, water and cable protection. So we think that as of end of September, this deal will be closed and that this production unit and sales will be part of our Data group. This reduction will, however, not materially impact our overall results. The second one, we have been working on the acquisition of Fleuren Tankopslag. Fleuren Tankopslag is a storage of chemical liquids, which is situated on the Walmart channel. And it will be integrated with the factory that we are building in Helene. And from there, we will be able to distribute our products by barge and by truck in all and parts of Northern Germany. It will be integrated into the Tessenderlo International business unit. The takeover will have no material impact on our group results, but it's strategically important for our own distribution of products. Next slide is the construction of a new plant in the Netherlands. I can tell you by first quarter 2024, this picture will be looking very different. We are just starting the groundwork. We have some delays mainly due to permitting issues, but always looking well, and we will go ahead to make the most modern CO2 production plans in Europe. The next one is construction of a new plant in the U.S. We will start with the construction of a new plant in Defiance, which is in Ohio more specifically into the Great Lakes area, where we have a gigantic market for the sales and distribution of our products. We will be producing a full role of products from ourselves being Thio-Sul, KTS and K-Row as well as from chemicals for industrial markets mainly for the production of corn syrup. The schedule is that it will be operational first half of 2024. We also have the pleasure to announce a new production line for Violleau. We are doing this in Venerolles not so far away from Aisne where we will be converting animal proteins being 2 material into fertilizer for the B market. It will be situated right into the market, and we will have a top product to support this type of agriculture in the future. The next one is a bit more difficult one. It's our new power plan. We have a long history to try and realize this project. As you know, we had some additional questions from the minister. We have been working on this. We have been filing all our answers. So with the minister, we are expecting an answer in respect of the permit by September 24, 2022. Later on, there is a CRM option, which will be moving on end of September. But we can tell you that we will only go ahead with this plan if we believe that we have a financial sound plan supporting this investment of over EUR 500 million. On the financial side, we have been repurchasing part of our bond in February, which we have been, in the meantime, partially refinancing, together with the refinancing of the rest of our bonds, which was due in July 2022. So in total, we have refinanced through (inaudible) loans, EUR 60 million, with interest rates, which are different and with different repayment schedules. Then we come to the conflict in Eastern Europe. The potential to be very short. It is an impact on our business in terms of energy, in terms of supply chain, but we have been describing this quite a bit in our press release so we don't think we have to go much deeper into this. We have 2 key events after balance sheet date. One is the transaction Tessenderlo Group, Picanol Group. So we're trying to create an industrial group combining the 2 companies, which will create more transparency to all our shareholders with the target having a single stock exchange listing and a single Board of Directors over time. We have already the commitment of the 2 reference shareholders, Luc Tack and Patrick Stevenlynck that will be contributing their shares into the new group so that we have a good basis to move ahead with this transaction. We will communicate in respect of this transaction, in the coming future, when the prospectus is completed and when it has been approved by the authorities in Belgium. So in the meantime, we will not be able to give much more comment about this transaction awaiting their confirmation. We have been also working on the bilateral bank lines, which we have been increasing to EUR 250 million with a longer confirmation date so that we have quite a bit of financial power to move ahead if we would face difficult times or we would encounter opportunities. And the last one is the acquisition of Lannate. It's a pesticide that is used in specific crops to make sure that it protects the yields of crops like onions, sweet corn and things like this. So it's really for very specific crops that this is used . Kurt, maybe you can comment on the results of the half year. -------------------------------------------------------------------------------- Kurt Dejonckheere, Tessenderlo Group NV - Group Controlling & Consolidation Director [3] -------------------------------------------------------------------------------- Yes. Thank you, Stefaan. The revenue of the group in the first half of 2022 increased to EUR 1.3 billion, compared to EUR 1 billion loss, it's an increase by 31% or when excluding the foreign exchange effect, it still an increase by 27%. The adjusted EBITDA in the same period increased from EUR 185 million to EUR 248 million. It's an increase by 34%, which includes 12% foreign exchange effect -- a EUR 12 million foreign exchange effect mainly the strengthening of the U.S. dollar, which has caused this increase of the adjusted EBITDA. It's in the Agro segment, EUR 51 million of organic growth, internal growth was also realized in this period. Profit and loss for the period EUR 164 million compared to EUR 97 million last year when excluding the exchange gains on non-hedged intercompany loans and also cash and cash equivalents, mainly in U.S. dollar. When we would exclude these gains, the net result would have amounted to EUR 150 million this year compared to EUR 90 million last year. Total comprehensive income, EUR 220 million does not only include the profit for the period, but also some items which are directly recognized within equity. It includes translation distances, thanks to the strengthening of the U.S. dollar and also the decrease of pension liabilities, thanks to the increasing discount rates. Capital expenditure, about EUR 60 million. It's higher compared to prior year, but it also includes the acquisition of the assets of Fleuren Tankopslag in the Netherlands and also it includes prepayments for the construction of a new Tessenderlo plant in Helene, the Netherlands. Operational free cash flow, EUR 88 million compared to EUR 129 million last year, so this higher operational results. We have a lower operational free cash flow because we have higher capital expenditure, but also we have a higher cash outflow because of the investments in trade working capital. In the first 6 months of last year, we had a cash outflow for trade working capital of EUR 14 million. This year, the cash outflow in the first 6 months amounts to about EUR 100 million. In total, the net financial debt of the group is further decreasing. At the end of June last year, net financial debt stood at EUR 118 million. At the end of last year, it was EUR 75 million and we were able to reduce further the net financial debt to about EUR 48 million at June 2022. If we would exclude the lease liabilities, in fact, we would have been slightly cash positive at the end of June 2022. The net cash position would have amounted to about EUR 5 million to EUR 6 million. If we look at the group revenue per segment, we see that in fact, the contribution of each of the segments is quite stable. Agro contributes about 41% to the group revenue, valorization 28%. Industrial Solutions also 28% and T-Power contributes 3% to the group revenue of EUR 1.3 billion. If we look at the group adjusted EBITDA per segment, we see that in 2022, progress was made in all activities. Agro contributes now about 49% to the group. EBITDA Bio-valorization, 20% Industrial Solutions, 19%, and T-Power contributes about 11% to the group adjusted EBITDA. If we have a brief look at the different segments 1 by one. The Agro segment, we see that revenue has increased to more than EUR 500 million. When excluding the foreign exchange effect, it's an increase by 39% mainly thanks to an increase of sales prices, which were implemented not only in 2021 but also in the first half of 2022 to offset higher raw material, energy and transportation costs. We also see a significant increase in the adjusted EBITDA. It increases to about EUR 122 million. It's an increase by almost 50% when excluding the foreign exchange effect. And we see that for the different activities, (inaudible) to (inaudible) International and also NovaSource, the adjusted EBITDA has increased thanks to favorable market circumstances. And from 2022, also Violleau, the organic Agricultural Solutions activity we have is also now included in the Agro segment. In the past, it was included within Bio-valorization. However, the contribution of this activity to the results of the segment is not considered to be significant at this stage. If we look at the second segment, Bio-valorization. For Bio-valorization, we also see a significant increase of the revenue to almost EUR 400 million. It's an increase by almost 23% when excluding the foreign exchange effect, mainly thanks to an improved product mix, and also market prices for fats and proteins that have increased substantially compared to prior year. Also, the sales prices for gelatin products were increased in the first half of 2022 to offset the higher costs. The adjusted EBITDA for the first 6 months of 2022 amounts to about EUR 50 million it's plus 15% when excluding the foreign exchange effect, thanks to favorable market circumstances in the market for fats and proteins and also thanks to recovered margins of gelatin products. In our third segment, Industrial Solutions, we also see there a significant increase of the revenue, plus 19% when excluding the foreign exchange effect. Revenue amounts to almost EUR 400 million, and this increase was realized mainly thanks to DYKA Group, where revenue was positively impacted by an improved product mix, but also increased sales prices, which were implemented to offset a higher raw material, mainly PVC, energy and also transportation costs. We also see an increase of the adjusted EBITDA plus 13% to EUR 48 million. And the adjusted EBITDA of DYKA Group was positively impacted by, as I already mentioned, the improved product mix, but also a further increase of production efficiency based on investments made and certainly also by the timely pricing management to offset significant cost increases. However, in fact, these costs are not yet fully reflected in the cost of goods sold. What we also see for the other activities in the Industrial Solutions segment, the adjusted EBITDA of Moleko has decreased, mainly linked also to a lower result on the Barrick contracts, which will also end at the end of 2022, but the decrease of Moleko adjusted EBITDA was more than offset by an increase of the adjusted EBITDA of Kuhlman Europe. The fourth segment, T-Power, in fact, it delivered results in line with expectations as the segment was also able to fulfill all tolling agreement requirements. We see an increase in the adjusted EBITDA from EUR 26 million to EUR 27.5 million, mainly thanks to the fact that last year, there were more development expenses included in the results for the intended construction of the second gas-fired power plant in Tessenderlo. So these costs only occur to a lower extent in the first half of 2022. When we look at the reconciliation between the adjusted EBIT and the net result of the group, there are still some items in between. And the first one is EBIT adjusting items. So the nonrecurring items, which are positive for almost EUR 10 million, and they mainly relates to 2 items. One is the changes in provisions, mainly environmental provisions, which were impacted by the increase of the discount rate used to calculate, in fact, the environmental provisions. The second impact was, in fact, the impact and the revaluation of the electricity purchase agreement the group has. So in total, positive nonrecurring items were almost EUR 10 million. Finance income plus EUR 8 million. It includes the exchange gains, as already mentioned, on cash and cash equivalents and also on intragroup loans, which have not been hedged, for a total of about EUR 13 million, and it also includes interest expenses for EUR 4.5 million. The income tax expenses, they amount to EUR 39 million and mainly related to the operations in France and in the United States. The share of results of investments, EUR 2.5 million. And in total, we arrived at a net result of EUR 164 million. When we look at the outlook, the group anticipates in fact, a continued high level of uncertainty in the second half of 2022, but also in 2023. Due to the current conflict in Eastern Europe, difficult supply chain circumstances and also other challenges we are currently facing. The development of customer demand and sales margin could therefore come under pressure. However, based on the currently available information, the group expects that the adjusted EBITDA of 2022 will be 15% to 20% higher than the adjusted EBITDA in 2021, and in 2021, as a reminder, the adjusted EBITDA amounted to EUR 354 million. This revised outlook for the year 2022 reflects the first half of the year, which was very strong. while the results for the second half year are expected to be in line with the same period of 2021. But certainly also the group wishes to emphasize that it currently operates in a volatile geopolitical, economic, financial and health environment. To end the financial calendar, the result for the full year 2022 the publication of these results is foreseen next year on March 23. -------------------------------------------------------------------------------- Stefaan Haspeslagh, Tessenderlo Group NV - Executive Chairman, CFO & COO [4] -------------------------------------------------------------------------------- Thank you very much, Kurt, for this clear summary. I want to share with yourselves that we had an exceptional first half year 2022. We had, in the first half year, the fact that all our businesses were performing very well. The second thing is that we have been able to not only to pass on to the market all the price increases we have incurred. But on top, we have been able to preserve and protect our percentage EBITDA margin on all our businesses. I think these 2 elements together make that we have an exceptional first half year that we hope we will have an exceptional 2022. Please, if you have any questions, I would say go ahead. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) The first question is coming from the line of Frank Claassen from Degroof Petercam. -------------------------------------------------------------------------------- Frank Claassen, Banque Degroof Petercam S.A., Research Division - Analyst [2] -------------------------------------------------------------------------------- Three questions, please. First of all, given the high end market prices for all of our products, have you seen any positive inventory adjustments of valuation gains in your inventory? And if so, how sizable have they been? That's my first question. Secondly, on the sourcing of the MOP, you see -- you say that it had limited impact and did you expect limited impact also in the second half. Could you further elaborate why that is? And how do you see that situation going forward into next year on the sourcing of MLP? And then finally, a question on the energy prices. Yes, let's say, how much of the impact of the high energy prices have you now seen given your hedging situation? Do you still expect more negative impact in the second half? Or yes, could you elaborate on that situation. -------------------------------------------------------------------------------- Stefaan Haspeslagh, Tessenderlo Group NV - Executive Chairman, CFO & COO [3] -------------------------------------------------------------------------------- On the first question in respect of inventory gains, we are not recording any gains because the increase of raw materials. So I can be very explicit on this. On the second question in respect of the sourcing of the MOP, Indeed, we are spreading our sourcing to various suppliers all over the world. However, there are already a limited number of such suppliers of [Cardium] salts, the quality that we need. However, there is one thing positive, and it is that European Union has opened a quota for import of Russian Cardium salts into Europe. So there, we are reviewing the conditions which are mainly legal and customs technical conditions to get this all organized so that at that moment, we can start again importing MOP from Russia. Then the last question, energy. Energy is having an impact on various sides of our business. This goes from the fuel cost for our people to come to work with their cars to transport of our goods inbound and outbound. It goes to production processes where energy is needed. So there is a broad color of impact into our business. However, there are 2 things which are helping us. One is the fact that part of our production processes, they are exothermic for energy. For example, in the production of our software base liquid fertilizers, we also produce steam, which is uncolorized. Secondly, in home, in the production of sulfuric acid, we produce also electricity. And thirdly, indeed, we are hedging our electricity we are also hedging in the coming years. However, at higher prices than we enjoyed today. I hope this clarifies for you your questions. -------------------------------------------------------------------------------- Frank Claassen, Banque Degroof Petercam S.A., Research Division - Analyst [4] -------------------------------------------------------------------------------- And how long normally do you hedge forward these electricity prices? Is it when -- yes, in other words, when can we expect more of the higher electricity prices to kick in, in your numbers? Will that be as of next year or even longer out? -------------------------------------------------------------------------------- Stefaan Haspeslagh, Tessenderlo Group NV - Executive Chairman, CFO & COO [5] -------------------------------------------------------------------------------- Indeed, as of next year, higher prices, we will incur higher cost prices, although we are hedged. -------------------------------------------------------------------------------- Frank Claassen, Banque Degroof Petercam S.A., Research Division - Analyst [6] -------------------------------------------------------------------------------- What do you see with that -- no, I don't give -- what do you mean with that higher cost prices but you are hedged. So you are hedging but... -------------------------------------------------------------------------------- Stefaan Haspeslagh, Tessenderlo Group NV - Executive Chairman, CFO & COO [7] -------------------------------------------------------------------------------- When you hedge, you hedge out a certain price, right? So the price that was hedged for 2022 is lower than the price that was hedged for 2023 because all this all depends on the market when you were closing the hedge. -------------------------------------------------------------------------------- Operator [8] -------------------------------------------------------------------------------- And the next question is coming from the line of Wim Hoste from KBC Securities. -------------------------------------------------------------------------------- Wim Hoste, KBC Securities NV, Research Division - Executive Director Research [9] -------------------------------------------------------------------------------- Yes. Also a couple of questions from my side. The first one is on Moleko. You hinted that the contract with Barrick Gold will come ends at the end of this year. Can you maybe provide an outlook for the Moleko business into next year? Will you absorb ATS volumes in the Agro segment. Do you have a kind of backlog plan for Moleko. Can you maybe elaborate on that? That's my first question. -------------------------------------------------------------------------------- Stefaan Haspeslagh, Tessenderlo Group NV - Executive Chairman, CFO & COO [10] -------------------------------------------------------------------------------- So on the ending of the contract is because the ore that could be used for our process is coming to an end. The second thing is that, in the end, the overall impact of the Moleko business on our total is in the end immaterial. So this will not have a material impact on overall performance. -------------------------------------------------------------------------------- Wim Hoste, KBC Securities NV, Research Division - Executive Director Research [11] -------------------------------------------------------------------------------- Okay. Then a question on Bio-valorization. Can you elaborate a little bit more on the on the results of both gelatin and the Akiolis business in the first half. I think in the introduction restatements and also in the press release, it was already mentioned that gelatin prices have increased. But can you maybe elaborate also on the mix? Have you -- and to what extent have you maybe increased the collagen peptides volumes after you had some nickel issues earlier, I think, last year. So elaborate a little bit on that? And then also on Akiolis, what's the business momentum of Akiolis and results that are set at the moment? -------------------------------------------------------------------------------- Stefaan Haspeslagh, Tessenderlo Group NV - Executive Chairman, CFO & COO [12] -------------------------------------------------------------------------------- So in Bio-valorization, we are, on the one hand, for Akiolis faced with very interesting prices for fats and for proteins, which we can right now valorize at very interesting conditions. We also valorized quite well the fat and the protein is produced in our gelatin business and in respect of collagen, we hope to have our production back at 100% as of the month of October, November this year, which also will have an impact on the profitability of the Bio-valorization business. The overall market sentiment is a little bit changing with the palm oil prices that are changing in the world, but which are also not stable right now is not a stable outlook. So we are expecting some lower fat prices. But right now, they do not have an important impact on our results. -------------------------------------------------------------------------------- Wim Hoste, KBC Securities NV, Research Division - Executive Director Research [13] -------------------------------------------------------------------------------- Okay. And then last question for me would be on, yes, the balance sheet. You have a very strong balance sheet. There was -- there are a number of projects that are ongoing. You already elaborated on that in the beginning in the Ohio plant and Chilean plant. But can you maybe elaborate a little bit more strategically how you look at the strong balance sheet and what you might do with that after the combination with Picanol would become effective. -------------------------------------------------------------------------------- Stefaan Haspeslagh, Tessenderlo Group NV - Executive Chairman, CFO & COO [14] -------------------------------------------------------------------------------- I hope by now that you all are aware that we like a strong balance sheet. I can give you, for example, our strong balance sheet has helped to finance the incredible increase of our working capital over the last 3 years. And we did not have to go to a bank to finance the substantial increase of our working capital. And we allowed the business to have a higher working capital right now because this allows us to serve our customers in the best possible way. So some competitors are not able to supply because of working capital restrictions, we could. So we were able to create more value in our business and support our customer relations in a positive way. The second thing is that as you have seen in the last years, we are more into organic growth by debottlenecking plants, by building new plants in businesses that we know that we know how they develop, but we know the product that we know the customers. And the last one, I think you have seen that we are trying to buy on an opportunistic basis businesses which fit in our current businesses, like we bought DYKA in [Bourges], we are now buying DYKA in Helene. We are now buying Fleuren. So by each transaction, we try to have a good deal, but at the same time, we try to strengthen the current business we have. -------------------------------------------------------------------------------- Operator [15] -------------------------------------------------------------------------------- And the next question is coming from the line of Christophe Beghin from Kempen & Co. -------------------------------------------------------------------------------- Christophe Beghin, Kempen & Co. N.V., Research Division - Research Analyst [16] -------------------------------------------------------------------------------- Stefaan, I have 2 questions. Can you already give us -- speak of the dividend policy? Or is that still depending on the prospects? -------------------------------------------------------------------------------- Stefaan Haspeslagh, Tessenderlo Group NV - Executive Chairman, CFO & COO [17] -------------------------------------------------------------------------------- Well, I can tell you, I hope you are all of you so positive on this transaction that we can go through with our proposed transaction and that I can give you a very good answer in that respect. But first, we need to realize this merger and create a very nice industrial group for the future. -------------------------------------------------------------------------------- Christophe Beghin, Kempen & Co. N.V., Research Division - Research Analyst [18] -------------------------------------------------------------------------------- Yes. Okay. That's clear. And then I have a question with regard to your application for getting a permit for participating in potential second cost part power plant, (inaudible) power plant. You've always said that it needed to be an economic and viable project that makes sense, of course. But the feeling that you're some different has that to do with the current energy market environment. Is it viable with such a high gross price the fixed subsidy fee that is already in place by the Belgian government. Is that sufficient to operate profitably gas-fired power plant in this environment? Can you comment on around that. -------------------------------------------------------------------------------- Stefaan Haspeslagh, Tessenderlo Group NV - Executive Chairman, CFO & COO [19] -------------------------------------------------------------------------------- To be honest with you, we are seeing every week a different environment. it's very volatile. And we see also that politicians have difficulties to envisage what will be the future. So we are open and we are willing to support the energy transition for the future. However, we want to see a good return on this project this is the baseline for us. You see the returns we have today. And we want to see also for that project a good long-term return in order to go ahead in that direction. -------------------------------------------------------------------------------- Christophe Beghin, Kempen & Co. N.V., Research Division - Research Analyst [20] -------------------------------------------------------------------------------- Okay, that's clear. But it's today much more uncertain than it was, let's say, 1.5 years ago, I can imagine. But let's say, if you do -- you could not through with the second gas power plant, I want to follow up on the question of Wim. You have indeed a very strong balance sheet even if you are consolidated fully with Picanol. Your net cash, we were supposed to spend at least EUR 50 million of maybe second gas power plant. What are you going to do? Are you looking to fifth pillar of the 6 pillar to the group. Are you considering to look at bigger transactions? -------------------------------------------------------------------------------- Stefaan Haspeslagh, Tessenderlo Group NV - Executive Chairman, CFO & COO [21] -------------------------------------------------------------------------------- If you look at our numbers, you would see that we have spent already today, half of the EUR 500 million on the increase of working capital, right? So in first instance, we want to support the current business and see what are the opportunities in the current business. And so far, again, that these are contributing in a sustainable way to the growth of the group. But we cannot say that all is we have EUR 500 million available and if the project does not go through, we would only want to have EUR 300 million available to invest in any other business because part it would be based on the CRM mechanism and part will be based on lending. So you should look at a bit of a different nuance at this project in that respect. -------------------------------------------------------------------------------- Christophe Beghin, Kempen & Co. N.V., Research Division - Research Analyst [22] -------------------------------------------------------------------------------- Okay. And then maybe a last follow-up, if I may, with regard to it. in the call after the announcement of Picanol merging and planning to merge with similar you gave some comments on retail that they are one of a kind in what they do, can you repeat that if you remember what I mean? -------------------------------------------------------------------------------- Stefaan Haspeslagh, Tessenderlo Group NV - Executive Chairman, CFO & COO [23] -------------------------------------------------------------------------------- Well, I will make some publicity for our stake we have in retail. So recent bought technology from their competitors [Werra], which they are integrating as of this year. And this will make that retail can supply the spinning market with a complete system from the entry to the final threats on ovens to be used in the weaving mills. And that will be the strong point for the future that we will have an integrated technology. And as we put in that respect in the first position in the spinning market and make them really do our belief, a very strong player in that market. -------------------------------------------------------------------------------- Operator [24] -------------------------------------------------------------------------------- And the final question in the queue is coming from the line of Stijn Demeester from ING. -------------------------------------------------------------------------------- Stijn Demeester, ING Groep N.V., Research Division - Research Analyst [25] -------------------------------------------------------------------------------- Stijn Demeester, ING. Three questions, if I may. The first one is on the fertilizer season in the U.S. Can you comment on how that evolved this year as phasing being rated first half, which could explain some stronger profitability in the first half relative to the second half. And then also related to Agro. Can you remind me the importance of MF MOP in the agro mix? And then the last question is on -- actually on the Machine and Technologies segment, which is currently still under Picanol, I think it has recorded EBITDA of EUR 18 million. Can you comment on where in the cycle of that business currently is and what we should expect as a mid-cycle EBITDA level questions. -------------------------------------------------------------------------------- Stefaan Haspeslagh, Tessenderlo Group NV - Executive Chairman, CFO & COO [26] -------------------------------------------------------------------------------- To come back on the fertilizer business, second half, there we give you the guidance that our result for the second half will be in line with the second half of last year. That's the basic guidance that we have been giving. In respect of Agro, I'm not clear if you ask SOP or MOP. -------------------------------------------------------------------------------- Stijn Demeester, ING Groep N.V., Research Division - Research Analyst [27] -------------------------------------------------------------------------------- MOP. -------------------------------------------------------------------------------- Stefaan Haspeslagh, Tessenderlo Group NV - Executive Chairman, CFO & COO [28] -------------------------------------------------------------------------------- So the use of MOP is where we try to give potassium to the agro world, but in MOP, it is combined with chlorine. So this means when you put MOP on your field. You also put chlorine there, which goes into the water, underground water into rivers and also which evaporates. So this is a type of fertilizer ready to try to give potassium make it available to the crops. But the side effect is that Decor has to be disappearing because the plants normally do not like to do not like a chlorine pollutive environment. This is why our process of SOP, we buy MOP. And from the MOP, we take the chlorine so that we have left with the potassium. And the chlorine, we use it to send it to the production of PVC. We make -- we did products for water treatment, drink water production we make it for other applications like the combination of customer for the production of beer, the production of cheese, meaning that compared to MOP, we take away the chlorine, and we try to plan for it. So it does not go into the water, surface water or in the ground water, and it does not create air pollution. That's the big difference between SOP and MOP. So SOP is used in environment today, like in greenhouses, where plants do really not like chloride, like lettuce, like flowers, they do not like this. right? So that's the difference between the 2. So overall, MOP is used more today than SOP. The application is much bigger. However, using it on the same piece of land for a long time, creates a degradation of the land for future crops. -------------------------------------------------------------------------------- Stijn Demeester, ING Groep N.V., Research Division - Research Analyst [29] -------------------------------------------------------------------------------- Sure. Then the last question. Thanks for the color here. But how important is that MOP product chain in the agro mix? -------------------------------------------------------------------------------- Stefaan Haspeslagh, Tessenderlo Group NV - Executive Chairman, CFO & COO [30] -------------------------------------------------------------------------------- It is quite important because this is producing in millions of tons and being used all over the world. So it's MOP is quite bigger. -------------------------------------------------------------------------------- Stijn Demeester, ING Groep N.V., Research Division - Research Analyst [31] -------------------------------------------------------------------------------- For the (inaudible) Within macro, can you give me a number? -------------------------------------------------------------------------------- Stefaan Haspeslagh, Tessenderlo Group NV - Executive Chairman, CFO & COO [32] -------------------------------------------------------------------------------- We buy MOP and we convert MOP into SOP. -------------------------------------------------------------------------------- Stijn Demeester, ING Groep N.V., Research Division - Research Analyst [33] -------------------------------------------------------------------------------- I understand that. But since you have some sourcing issues or potential sourcing issues, can you give me some indication on how important that product chain is within Agro? -------------------------------------------------------------------------------- Stefaan Haspeslagh, Tessenderlo Group NV - Executive Chairman, CFO & COO [34] -------------------------------------------------------------------------------- I foresee how important is indeed. Let's say, in our overall performance this year, it has been in line with our total performance for the previous years. In financial performance. -------------------------------------------------------------------------------- Stijn Demeester, ING Groep N.V., Research Division - Research Analyst [35] -------------------------------------------------------------------------------- Okay. And then maybe the last question. -------------------------------------------------------------------------------- Stefaan Haspeslagh, Tessenderlo Group NV - Executive Chairman, CFO & COO [36] -------------------------------------------------------------------------------- Then on the (inaudible) technologies, there, we cannot give you any comments, we will have to refer you to the prospectus where all this information will be disclosed and which we cannot disclose until we have green light from the stock exchange authorities to do so. -------------------------------------------------------------------------------- Operator [37] -------------------------------------------------------------------------------- (Operator Instructions) There are no further questions, so I'll hand it back over to your host to conclude today's conference. -------------------------------------------------------------------------------- Stefaan Haspeslagh, Tessenderlo Group NV - Executive Chairman, CFO & COO [38] -------------------------------------------------------------------------------- I want you to thank all of you for your interest in Tessenderlo. And I think you have seen we have an outstanding performance the first year and this year. It's exceptional conditions, which we -- where we have been able to pass on all oil price conditions to the market and where we had an underlying good performance. And in respect of the -- going together with the Picanol Group, I would say spread the good news. We believe it's a good transaction, and we will create a solid future for the combination of the 2 companies. Thank you very much. -------------------------------------------------------------------------------- Operator [39] -------------------------------------------------------------------------------- Thank you, everyone, for joining us on today's call. You may now disconnect your handsets. Host, please stay connected.