AlzChem Group AG (ACT) Earnings Call Transcript & Summary

[Audio Gap] Andreas Niedermaier; as well as the CFO, [ Dr. Georg Weichselbaumer ], who will speak in a moment and guide us through the results. [Operator Instructions]. And with this, I hand over to you, Mr. Niedermaier.

Yes. Thank you for your short introduction, and thank you for joining us today, and welcome to our first call. This year, as always, we will go through the presentation first and then we'll be available for questions at the end. Therefore, let's start directly with the presentation and with the highlights here. So we have started the year 2024 quite successfully. In the first quarter this year, we achieved a group turnover of approximately EUR 150 million, roughly at the previous year's level, thanks to our consistent focus on high-margin niche products. In the Specialty Chemicals segment, we have been able to seamlessly continue the strong performance of the 2023 financial year. The areas of human nutrition with Creapure, animal nutrition with Creamino and defense with nitroguanidine continued to develop particularly well. On the other hand, the business in the custom manufacturing with our multipurpose business and multipurpose plants and NITRALZ business remained really challenging due to the ongoing strong price-driven competition from China. So overall, the growth segment, Specialty Chemicals was able to convince and successfully compensate for the declining sales development in Basics & Intermediates segment. And our group EBITDA increased significantly by around 32% to approximately EUR 25 million or EUR 24.9 million in the first quarter of 2024. The free cash flow was very positive due to the operational performance and lower inventories and analysis will be done later on by Andreas. So at the same time, as a very good performance in the operating business, the price of the Alzchem share also developed very positively in the first quarter with a significant increase in value, with our broad diversification of products and our high innovation power, we are able to grow steadily, especially with the Specialty Chemicals here. And for this reason, we also see ourselves in a position to confirm our outlook for 2024, especially for EBITDA. So as a special highlight, there is still the investment grant from the ASAP project to report. So on the next slide, I would like to start in our production tree with our product, dicyandiamide, versatile intermediate for various markets, including the pharmaceutical industry. So you can see that here, DCD itself is used as the most important raw material for the production of metformin, for example. Metformin is the largest and fastest-growing drug for type 2 diabetes, and we are the only European raw material supplier for that product. So from DCD, we produced very interesting products such as DYHARDs, the hardeners and accelerators in power, paste and liquid form for epoxy resins, products such as wind turbines, bicycle frames, plastic springs, tennis rackets and even hydrogen cylinders are also part of the application spectrum here. Our Guanidine Salts, highlighted by the magnifying glass, are often used as modern fuel for gas generators in airbags for your protection and are considered very safe to handle and durable. Highest quality comes from the only western resource and the only western manufacturer with us from our company from AlzChem. So Guanidine Salts, especially nitroguanidine are also used in agrochemicals such as insecticides in the neonicotinoid group of active ingredients here. And a third application for nitroguanidine is defense in the context of 155-millimeter ammunition with 3 bases. Currently, we supply 1 of the 3 bases, which is called our product nitroguanidine to all known western ammunition manufacturers. The advantage of the modern fuel nitroguanidine is their high stability during storage. It burns [ coal ], and it produces a high gas volume in the short term. So that are the same features and advantages as in the airbag application. So how does this relate to the ASAP project the EU funding. So last year, the Act in Support of Ammunition Production project or short ASAP project was launched by the EU Commission. This project with a total tender volume of EUR 500 million is about measures to urgently strengthen the capacities in the EU defense industry in ammunition production. A key goal of this project is the EU level is the identification of bottlenecks in supply chains. And our AlzChem Group was granted an investment grant of EUR 34.4 million in principal after applying in December 2023, on March now [ 15s ] in 2024. The final allocation with the respective call of plan will take place with the conclusion of a corresponding funding agreement, probably still in May or in June this year. So we want to use the funds to increase the bottleneck production capacity of nitroguanidine on the one hand and to renew and expand the existing plants for the production of the precursor of guanidine nitrate on the other hand. What are the financial details. The CapEx volume will be around EUR 75 million over 2.5 years. The main expenses will then be incurred in '25 and '26. The investment grant is deducted, thanks neutrally directly from the acquisition costs. And as early as 2025, the first quality increases of nitroguanidine from the debottlenecking project and will be available and will be sold to the market. So much for these topics. Now let's take another look at the segments and their contributions to the result. Therefore, I would like to hand over the floor to Dr. Georg Weichselbaumer.

Thank you, Andreas. The Basics & Intermediates segment concluded the reporting period with sales amounting to approximately EUR 50 million. Compared to the previous year's level, this represents a decline by EUR 8 million or 14%. The situation within this segment in Q1 is generally different compared to the first 3 months of last year. While cost-related price increases led to a rise in sales in the previous year, the development of costs and sales prices has reversed again in the current fiscal year. As shown within the detailed sales analysis, we had to reduce our prices overall products within this segment by approximately 7% compared to last year. These price declines are not intended to keep us with the Chinese or Asian competition, but are the result of various price escalation clauses that are widespread for our products within this segment. Also in this current fiscal year, our continued guideline is that volume reductions are consciously accepted if the market does not allow for profitable pricing. We do not see price competition as a sustainable strategy if our competitors work with significantly lower energy and CO2 costs and operate under completely different ESG conditions that we do. However, we also had to accept volume decreases. The main impact resulted from our NITRALZ with applications in the pharmaceutical, agrochemical and basic chemical industry. The competition within this business is currently almost only price-driven and as explained already, Chinese competitors are flooding the market with dumping prices. We work strong with each customer in order to gain back market share with our key arguments, quality, delivery reliability and made in Bavaria. Sales within our metallurgical business were also slightly below previous year's level. Seasonal competition from Eastern Europe as well as the general economic condition of European steel producers were the main cause here. Positive volume developments could be reached within the pharmaceutical sector with building block dicyandiamide as well as in our fertilizer business with our brand Perlka. The customers are willing to pay a premium for our quality and product specifications. The decline in sales led also to a reduction of segment EBITDA. In the first 3 months of the fiscal year '24, EBITDA amounted to EUR 1.8 million, which is EUR 1 million short to previous year's level. At the same time, EBITDA margin dropped to 3.7%. Even though we could experience some cost reductions for energy compared to the first quarter of 2023, this could not overcompensate the decline in EBITDA based on the volume reductions, especially within the NITRALZ business. Nevertheless, it is worthwhile to mention that the development within our Basics & Intermediates segment was generally in line with our expectations, and the segment produced and delivered all raw materials required for the growth of our Specialty Chemicals segment, which I will explain to you now. The Specialty Chemicals segment remains our growth driver and was again able to significantly increase revenue, EBITDA and EBITDA margin compared to the previous year's period. Within the first 3 months of '24, Specialty Chemicals products reached a sales volume of EUR 93 million, which represents an increase of EUR 7 million or 8.4% compared to Q1 '23. This development has increased a segment share of total group sales to 62% after 57% in last year's comparative period. Looking at the segment's detailed sales analysis, we saw an increase in volumes at 7% as well as minor price increases. However, while some business areas within this segment recorded strong volume increases, some areas had to deal with the overall economic situation in the chemical industry and reported volume declines, which were obviously overcompensated by the growth businesses. Most of the product areas within the specialty chemicals have developed as expected. This applies above all and again, with the business area of human nutrition and dietary supplements. The demand for our creatine products under the brand name Creapure, LIVADUR and also now Creavitalis has developed very well again as we understand, there is still growing market potential, we decided again to increase capacity. Despite with the market potential for creatine made in Bavaria for use in the food and pharmaceutical industries is promising, and we want to be part of this development. Our sector Animal Nutrition with the brand Creamino could also grow in volume and sales, but we experienced an increased price-intensive competitive situation. However, our global sales network pays off, and we are confident to keep our global market share. As already outlined in our last financial statements, there is an increase in demand for our product nitroguanidine from the defense sector. The growing importance of applications in the field of military defense has resulted in the further shift in revenues within this product category, moving a wafer applications in agrochemicals and the automotive industry. Based on the current political circumstances, we believe that this trend will continue. The EU subsidy from ASAP program is just another proof for this development. The products in the pharmaceutical sectors, mainly Bioselect and in the automotive sector, DYHARD, also show a pleasing development. Here, the negative trend from the previous year was reversed. On the other hand, there was a decline in sales in the custom manufacturing of our multipurpose plants. Here, we were not able to completely escape the continued negative development of the chemical industry in Germany. But also here, we are also confident that this business is a chance once the chemical industry recovers. The positive sales development was accompanied by a strong increase in EBITDA and EBITDA margin. EBITDA could be materially increased by EUR 6.7 million to EUR 22.7 million, which represents an increase of almost 42% compared to Q1 '23. Our EBITDA margin reached 24.4% in Q1 after 18.7% within prior year's period. Overall, our Specialty Chemicals segment contributed 91% to our group EBITDA of the 85% in Q1 '23. Let us now move on to our third segment, Other & Holding. The revenue in this segment was slightly above the previous year and reached EUR 7.8 million. This development essentially corresponds to passing on of cost increases to the chemical part customers. The services utilized by the chemical product customers of AlzChem were predominantly of a variable nature and represented energy supply, technical services and network operations. The segment's result was slightly above the previous year's figure, which was associated with the increase in revenue. This was all for our detailed view on the segment development. Let's now hand over to Andreas Losle and take a look at the overall key figures.

Okay. Also good morning from my side, and thank you, Georg, for the insight on our segment development in the first quarter of 2024. I will now have a detailed look at our P&L figures first. In terms of sales, we started very well into the year 2024. And most importantly, we started as expected with no surprises. Sales in the first 3 months of 2024 amounted to EUR 150 million, and this almost exactly represents the sales figure from last year. However, and as described already by my colleagues, these segments contributed differently to the sales development. While sales in our growth segment, Specialty Chemicals, could be increased by EUR 7 million compared to the previous year, the Basics & Intermediates segment recorded a revenue decline of EUR 8 million. In the Other & Holding segment, a slight revenue increase of EUR 0.5 million was achieved. A closer look at our sales analysis [Technical Difficulty] We'll start with our sales analysis. In terms of sales, we started very well into the year '24. And most importantly, we started as expected with no surprises. Sales in the first 3 months of '24 amounted to EUR 150 million, and this almost exactly represents the sales figures from last year. However, and as described already by my colleagues, these segments contributed differently to this sales development. While sales in our growth segment, Specialty Chemicals, could be increased by EUR 7 million compared to the previous year, the Basics & Intermediates segment recorded a revenue decline of EUR 8 million. In the Other & Holding segment, a slight revenue increase of EUR 0.5 million was achieved. A closer look at our sales analysis shows that group-wide volume increases of approximately 2% were offset by price reductions at the same level. Regarding the price declines, it should be noted that the previous period was still characterized by the very high energy and raw material prices of that time, which kept prices very high. On a regional basis and compared to the previous period, the revenue shift into our Specialty Chemicals segment also led to higher revenues in Asia and South America, while European sales dropped slightly. Our EBITDA developed very well in the first quarter of 24% and was also in line with our expectations. As already experienced within the last quarter of '23, the higher revenue portion of products in Specialty Chemicals is associated with an increase in EBITDA. Overall, EBITDA improved materially by EUR 6 million. This represents 32% more EBITDA than last year in Q1. We have improved EBITDA, not only in absolute terms but could also materially improve our EBITDA margin from 12.6% in last year to 16.6% in Q1 2024. This development is mainly caused by reduced costs for energy, which was still high -- which was still on a high level in the first quarter of last year and our ongoing strategy not to compete in business areas with negative margin impact. The increase in EBITDA as well as reduced financing costs also led to an increase in net result and earnings per share. Our net results ended up at EUR 12.2 million after EUR 7.7 million last year, and earnings per share could be increased by EUR 1.20 per share, representing an increase of almost 60%. That was the big picture of our P&L. Now let's move to the balance sheet. Our total assets increased by EUR 23 million to almost EUR 448 million, which was mainly driven by the development in current assets, which I will now explain in more detail. While our fixed assets are basically at the same level of last year's reporting date, deferred tax assets decreased by EUR 1.5 million because of changes in interest rates used for the calculation of noncurrent provisions. On the other hand, our current assets have developed contrary and have increased overall by approximately EUR 25 million. This was driven by 3 major impacts within working capital: firstly, inventories could be reduced significantly compared to last year as a combination of volume and price declines; secondly, trade receivables increased based on the strong revenue we made in the first quarter of this year; and thirdly, the highest impact came from our strong cash development, leading to an increase in cash amounting to EUR 24 million. Our equity increased by EUR 15 million to EUR 179 million, which also led to an increase in the equity ratio to 40% by the end of March 2024. Again, equity was increased by our strong net result, but also by the development of interest rates for pension obligations, which contributed approximately EUR 3.5 million to our equity increase. On the other hand, the interest rate fluctuation from 3.2% to 3.5% led to a reduction of our pension obligation by EUR 5.5 million. Our noncurrent liabilities increased mainly because of our strong business activities. That's it for the balance sheet analysis and let us now have some words about our cash flow. As already mentioned, cash developed very well and healthy in the first months of 2024. And so we can report an overall increase in cash of EUR 24 million since end of December of last year. Our strong net result in combination with a very close look at our working capital management led to an operating cash flow of EUR 33.5 million, which represents an increase of EUR 23 million compared to the last year's first quarter. We invested approximately EUR 7 million within Q1 2024, and this is EUR 2 million above previous year's level. It needs to be -- remember that we had a very cautious investment policy within the last year. Our major projects within the first 3 months of 2024 were capacity expansions in creatine and nitroguanidine infrastructure renewals and the construction of the photovoltaic plant at our Trostberg site. Financing cash flow was mainly impacted by scheduled repayments of bank loans. In Q1 2024, we were neither required to use our short-term financing nor our factoring lines. It was basically the other way, we were able to invest some excess cash and earn interest on that. That's all for our figures in Q1 '24, and we will now have a closer look at our outlook for 2024. From today's perspective, we can confirm the outlook given in our last financial statement and the developments in Q1 2024 have confirmed our estimates. Sales are expected to grow to approximately EUR 570 million and EBITDA is expected to grow to approximately EUR 90 million. The planned sales growth shall continue to be achieved organically. The fundamental growth drivers are volume effects within segment Specialty Chemicals, which shall overcompensate a sales decline in segment Basics & Intermediates. Further growth in the Specialty Chemicals segment shall be achieved through volume increases in the product Creapure, Creamino as well as nitroguanidine. The sales development in segment Basics & Intermediates will mostly be influenced by price formulas with stable volume developments. Based on a stable cost structure at the current level and the growing importance of segment Specialty Chemicals for the whole group, we expect this segment to be the growth driver with main impact on a growing EBITDA, leading to an expected EBITDA margin of approximately 16%. So that's it from our side with the information for the first quarter of 2024 and the outlook for the remaining 9 months of the year. At this point, we would like to thank you for your appreciated attention and are now at your disposal for possible questions.

[Operator Instructions] We will start with the first questions from Oliver Schwarz.

First of all, congrats on the spectacular start into Q1 2024, well done. However, I have got some questions, especially regarding the expansion or the planned expansion of the nitroguanidine salt business that you have. First of all, Mr. Niedermaier has stressed that those products are still used in agriculture for -- especially for the production of neonicotinoids, those products, the neonicotinoids have been banned in Europe and all the exceptions that were in place last year have been scrapped after the EU put the reins on that as well. So I was wondering how much of your production still goes into neonicotinoids. Secondly, if you could highlight perhaps percentage-wise in regard to Specialty Chemicals, how much of Specialty Chemicals sales in 2023 or Q1 2024 was actually related to those nitroguanidine and guanidine salts? That will be my second question. And the third one. Judging from the overall CapEx of EUR 75 million that you highlighted for the next 2.5 years in that regard. Obviously, this capacity expansion will provide you means to notch up your sales with those products quite substantially. As those doesn't seem to be, let's say, greenfield expansion, but are rather brownfield expansions or expansions of existing facilities. Could you give us a ballpark of how much additional sales are to be expected from that expansion? I would assume given the size, perhaps 75%, 100% of the CapEx of the EUR 75 million a year in sales. Would that be a fair assumption that ballpark region? Or is that too high or too low? That would be my first round of questions.

Yes, Oliver. Thank you for the congratulations. We always take that very nice and are likely to have that level for sure. So to answer your last question. So usually, you're right. In the chemical industry, if you invest approximately EUR 100 million, then you can receive EUR 100 million turnover. That's a good sum figure. But in that case, it's a little different because that's the main portion of that EUR 75 million is a renewal of the existing plants for the precursor of the nitroguanidine or guanidine nitrate, so that's more to secure the delivery and the supply chains. So from that point of view, the additional turnover is much lower. So there is an incremental increase planned for the nitroguanidine plant for sure that could be available with the beginning or in the second or latest third quarter in 2025. But therefore, we are talking about minor figures, so roughly, I guess, EUR 5 million to EUR 10 million additional turnover approximately, so -- but we think bigger. So as already reported, we think about hopping over to U.S., we think about investing additional capacities for nitroguanidine. So there is nothing to disclose at this stage, but we think that the next step could be an additional capacity increase for the downstream products. And from that point of view, I hope that we can disclose that information during that year. We work hard on that decisions. We work hard on that investment projects. And from that point of view, we can't disclose more at this stage. So you asked in Q for neonicotinoids, yes, they are banned in Europe for sure. They are banned, I think, since 2013 or since 2014, something like that. But we always had a good business with neonics because what you have to take into consideration, Europe is not the world. So the world takes neonics very seriously, and they need the neonics and the growth of the neonicotinoids is not as bad. So there is -- there was always and there is always a good growth trend behind that, and we had a good business. But with the new situation, we changed ourselves from the neonicotinoids away. And yes, are doing more defense business now. We reduced the neonics business a lot only to step to stay in that business and to have all the market information in the future available. But for sure, we sell the main nitroguanidine now into the defense business. So the nitroguanidine, to be honest, in the last years was very low for defense business. But now it's remarkable because all the neonicotinoid business switched to the defense business more or less. And from that point of view, you will see that already in P&L, I guess, with a share of 5% or more in sales, but not more. So from that point of view, the creatine growth is at least as important that the nitroguanidine because we added a big quantity into the creatine plant. So we added CapEx all the last years, as you remember. And we have completely sold out. From that point of view, we added -- or we tried to add additional capacities for creatine as well. So the growth is ongoing here because of the high quality and the well-known product out of Germany. So we are the same producer here out of Germany, out of the Western world. Nobody can produce creatine on itself on the raw materials instead of Alzchem. So from that point of view, that's the main growth driver as well for our group.

We will now continue with the questions from Peter-Thilo Hasler.

First, I would like to ask also just to confirm what I just heard. So you expect from the investments of EUR 75 million, an additional turnover or nitroguanidine from about EUR 5 million to EUR 10 million. Is that what I got -- what I heard?

Yes, right. For that stage, yes. But it's as already disclosed, we think bigger and we think that we can add in the future, some nitroguanidine quantities as well, but we are not prepared, yes, to disclose more about that project in that stage.

And since the defense ministries are desperate to get hold of nitroguanidine, I expect this to be a high-margin business for you.

Yes, Yes, as you have seen the margin within the Specialty Chemicals is not as bad, so it's 20-plus. But that's the part for all of the products in that product group. So only 2 parts of that product group are missing, actually, that EBITDA margin as disclosed from Georg. So the multipurpose plant and NITRALZ plant is more on breakeven or sometimes loss-making actually. And from that point of view, we think that could be a chance for the future as well and adding additional growth and additional EBITDA. Probably next year when chemical industry regains back and are in better shape.

So given the -- if I look at the Specialty Chemicals segment, and we have a price increase in the first quarter of 1.5%. And then if we look at sales and EBITDA in absolute figures, so this was a EUR 7 million increase in sales and also a EUR 7 million increase in EBITDA. So I suppose that these additional sales were not 100% margin, there must have been a change in the product mix here too. So is this the segment that you just mentioned that lost of importance quarter?

Yes, yes, yes, that's the case question.

Okay. Then I have a question on the cost of materials ratio. The materials ratio fell significantly in the first quarter also against the backdrop of the reduction in inventories. Can we assume that the effect of the inventory reduction will be at least diminished in the coming quarters?

Now as already outlined in our forecast, we expect inventory increase during the year. We will probably see the peak in inventories in autumn. This is because we are running right now with 2 furnaces to produce carbide. And as we already mentioned, we tried to use the cheaper energy months to increase our inventory stock. And then after autumn, when we probably in Q4, when we probably shut down the second furnace again, then we will see an inventory decline by the end of the year, and we expect inventory probably at the same level as last year's reporting date.

We now take the questions from Duarte Murta.

Congratulations on a very strong quarter. I have a few questions. Maybe we could start on Specialty Chemicals. As a percentage of EBITDA, this increased from about 85% to 91% of group EBITDA in Q1. Taking into account your visibility for full year, what do you expect this split to be for the entirety of 2024? And what is your long-term target in regards to Specialty Chemicals as a share of EBITDA?

Yes. As we already signed out, as we already mentioned, we see the development in the first quarter and also the development in the last quarter of 2023, it's a good prediction of EBITDA share for Specialty Chemicals for the whole group for the -- for 2024 for the whole year consideration as well. So keep it stable, would be a good assumption.

And in regards to long-term target, do you have any idea on that where you would like to get?

Usually, we -- I mean, that's a good situation right now, and we would be happy to keep this situation stable as we see that this EBITDA portions pays off. But nevertheless, we are also happy to increase the EBITDA in Specialty Chemicals in Basics & Intermediates segment as well. So right now, we feel very good with this share of Specialty Chemicals, but if Basics & Intermediates increases and EBITDA overall increases as well, we are also happy.

And since you touched on Basics & Intermediates, what's your expected EBITDA margin for 2024? I think you mentioned we should expect a decline versus last year. Do you have any idea where this might land for the year?

So probably, it made or it will be a good assumption to keep that stable like in the first quarter. But to be honest, we were quite hard to increase the EBITDA margin in that segment as well. So as already mentioned, the NITRALZ business is facing a very bad market situation and loss-making actually or close to breakeven, hopefully, by the end of the year. If we are in the position to reverse that back, then I see the possibility at least to have 8% to 10% EBITDA margin in the Basics & Intermediate segment as well. And I think we need that for capital costs and for CapEx reasons to have that debt level.

So you mean 8% to 10% in 2024 if you managed to reverse the NITRALZ situation?

In 2024, that target could not be managed from my point of view, I think we can manage that for the next year. In that year, you should more calculate between 1% and 3% or 3.5% EBITDA margin.

Okay. No, that's understood. So there was a seasonal effect in this quarter as perhaps operating capacity was still low in Q1 2023. If yes, does this mean that growth in the second half will be more contained from a year-over-year perspective?

So yes, that's a very good question. And I wanted to inform you about that as well because that was not in the presentation. So we had -- or we have seen a quite good quarter 1. But please be not surprised if the second quarter is not at EUR 150 million turnover. So it could be a little less and from EBITDA wise it could be a little less as well. So the third quarter, we see them more or less on the same level than the second quarter. And what we see is a very strong fourth quarter back. So -- and with that development, we think that we can easily reach the EUR 90 million EBITDA, hopefully, a little more and not less. But the second and the third quarter could be a little lower than the very strong first quarter. And please be not surprised about that development.

And just to clarify, you expect a very strong Q4 based on possible reversions in the situation for the markets -- end markets that are more affected, right?

Yes. So because of the product range we sell in the fourth quarter because usually, we always have a very strong September or October business, and it depends on when the business comes back out of the holiday season. And from that point of view, for that year, we plan a very strong fourth quarter, more or less on the same level as the first quarter. And from that point of view, if you summarize that, you can take the math and see that the second and the third quarter will come a little lower than the first and the fourth quarter.

Perfect. And last question from my side. Do you have an update on the U.S. investment, and I want to understand the balance with the new nitroguanidine investments?

Yes, I'm very sorry to say that we are not allowed to say anything about that project in that stage. But hopefully, in the next few weeks or months, not years, not years.

And so just to clarify, this nitroguanidine investment was not in last year's business plan, so it carries extra CapEx. So EUR 35 million from the EU, the remaining from your side. And you mentioned possibly -- I know you can disclose, but you manage possibly a second round of investments for actual nitroguanidine increased production. Could this required CapEx impact any U.S. investment? Or also could it affect the dividend outlook?

It only goes with CapEx for sure, but we work quite hard on the financing issues as well, and we will see how we can finance that business. We try to do that with our customers together and to keep the CapEx -- or the cash quite low, the cash demand for that CapEx volume, but we can't disclose more at this stage. I'm very sorry.

We continue with the questions from Konstantin Wiechert.

Congratulations from my side. Maybe a couple of questions left. First, a clarification regarding the inventory again. Is it right that in the first quarter, the inventory reduction was mostly through semi-finished and finished goods or more from the raw material side? That would be the first. And then what would be interesting also if you could give some more color on what has to change with regards to the NITRALZ business to really also improve your situation in competition with the Asian competitors. And maybe also whether the turmoils in the Red Sea have not led to any positive effect yet, yes. And then maybe the last question, if I may, I would have 2 more questions. One is regarding the creatine business here. Again, strong demand and growth from Creapure, you also mentioned Creavitalis shortly, but maybe you could give some more color also on the development of Creavitalis and LIVADUR, maybe both sequentially and also year-over-year and also what you expect for the rest of the year? And then the last question would be around what you've said, increased competition for -- in the Creamino business. If you could give some more details here as well, also, especially with regards to whether these intensified competition is in your view of temporary nature or whether competitors have become more aggressive maybe also over the midterm?

Thank you, Konstantin, for your decent questions. I will start with the first question regarding the inventory. As we were coming from end of December last year, we saw an inventory decline in about EUR 10 million. And as we already mentioned, half of the decline comes from quantity and the other half comes from pricing impact. If it comes to quantity, you can say that maybe half of it was raw material and finished goods and semi-finished goods and the other half was finished goods. As we mentioned, we had the second furnace shut down during Q1 -- during almost Q1, and we reentered production in the second furnace by the end of March. So we needed to increase our carbide level by the end of the year -- last year, and we used our carbide during Q1 in this year. So this was the main impact on the raw materials and semi-finished side. And on the finished goods side, we could also manage to decrease our stock level, especially in the segment, Specialty Chemicals. Okay. Georg, do you want to add something to NITRALZ?

Yes. When we look at NITRALZ, I mean, we mentioned already in the presentation, the reason for the shortcoming day is a very healthy competition from China, which is not only the case on our product level, but there's a huge impact on the overall pigments business, whether Chinese manufacturers take market share away from established companies in Europe. I mean when you look into the press, you see that one of them, way back was the previous [indiscernible] business actually had to report insolvency. What do we do about that, I mean 2 things a --I think there is like in all the other areas, room for European producers and we hook up with our customers to see that we can maximize both ours and their share in the business with taking us in as a raw material supplier. We work hard on that. The second thing is that -- and we have, I think, spoken about that already, we have a new -- 2 or 3 new products where the current producer actually exited or is exiting the business will take over that business, and that will happen not so much this year as we had hoped, but mainly starting in next year and this will bring up also NITRALZ business. Again, to which level remains to be seen. But despite the fact that there won't be very good this year, we see prospects that we can get it back to profitable business again. The next question was about Creavitalis, LIVADUR. I mean, also there, we have mentioned that Creavitalis will not make a huge impact in terms of sales and volume this year, but we have quite a few promising developments for end products where it could be in the market already next year. Do not ask for which customers because it's too early to tell, but it is for well-known brands where it will go into the full applications. And we actually are ahead of the schedule, which we have set ourselves for Creavitalis. Last question was about Creamino and competition. I mean next topic, an explanation. Everybody, when we look at Creamino, the competition comes from China directly -- from China on one side, but also where we have one European competitor who sources material from China. So there is price competition also. But in the meantime, we have established a very, very good global network. And we gain sales in various regions of the world, so we are balanced. And we are well on the way to achieve the volumes for which we have invested into our production plan.

Thank you so much. Just to add on this. So you say you will grow volumes, but you also expect to maintain attractive margins on this. So that has not changed, right? And just the second at, I think I missed it or could you also say something on the development of LIVADUR.

Yes, LIVADUR, sorry, that I have not mentioned it. I mean LIVADUR is a product which very much supports our whole story because it allows us to get the news out into the market about the things which creatine can do. We are working very hard to go directly to LIVADUR how it develops. We're working very hard with practitioners in the physical therapies because they had really can help because if you want to get sales in that area, you need to hit pain points. And I think the pain points, which we have hit these people who have problems with the muscles, have to recover from injury and that could be a very promising area in order to expand LIVADUR. That application is not very well organized. So we have to go into the business one by one step by step approaching very different touch points. We are on that. We've actually intensified the staffing for LIVADUR because it will take some resources to do it, but we are still certain that it will pay off, not just for LIVADUR, but also for overall creatine.

So but to be honest, the main business is scrapped here and that's developing quite well. LIVADUR is more developing case, more a market case, more a learning case, more a feedback case to get the direct feedback from the creatine users. And that's good to learn. And we are doing some advertising via Instagram and something like that. You can find us there. So from that point of view, it's a learning case for us. But the main case where we earn our money back is Creapure in the sports nutrition market.

And again, clarification on Creamino. So margin-wise, nothing has changed as well. Is that right?

No, nothing has changed.

For now, we have one final follow-up question left in the queue from Mr. Schwarz.

I'm sorry to say it's more than one question. I hope you can bear with me. Okay. It's not more than 2 pages. I promise. Firstly, just a clarification point. You stated that nitroguanidine salts, nitroguanidine is approximately perhaps 5% of sales. Just to specify, is that specialty chemical sales? Or is that group sales?

For sure, Specialty Chemicals. Group sales basis, sorry, it was on the basis of the group sales, but it's incorporated on Specialty Chemicals.

Yes, right. Okay. Okay. So we are on the same page here. In addition, are there any caveats with connected to the investment grant that you receive are there? And let's say, milestones that you need to achieve that could become a bit tricky if things don't work out the way you expect them to do. Is there anything that could, let's say, come in the way between you and receiving the full amount of this investment? That would be my second question. And perhaps to finalize that theme here. When you said that you shifted most of your sales from neonicotinoids and also from airbags to the defense sector for obvious reasons. I just wonder who stepped in and because as far as I know and as you said, neonicotinoids are still sold outside Europe and also new cars all still come with airbags, so who's basically providing that product now, who has taken over your market share when you decided to proactively step out of those markets? And is there any, let's say, reasoning why you should be able to get back that market share if you decide to, let's say, took a closer look on that market, again, probably with the expansion of production capacity in June with your investments or planned investments in North America.

So first step to precise -- to be precise, we didn't and we haven't stepped out of the market for airbags for sure. So the airbag market is very interesting, and we delivered to the airbag market. We only shifted capacities away from the neonics. And therefore, I think Georg is prepared to inform more about the market development of neonics.

I mean it was mentioned before that the neonics are banned in Europe. But when you look at the volumes, which are sold into the neonicotinoid market and have been sold, Europe was not really or made -- didn't really make an impact. I mean the main market for neonicotinoids is North America, but even more in South America and spreading also to Southeast Asia. The end product actually more and more and increasingly come from China. And with the end products, also the nitroguanidine which is required for the production comes from China. And to give you some ideas about capacities for nitroguanidine, with our current capacity, we have 10%, 15% of the production capacity for nitroguanidine in the world. I mean the most of it comes from China. And also here in the neonics market, we have -- we play the same game as we do it in NITRALZ, as we do it with Creamino, we are the reliable Western supplier, which our customers need and that has kept us in nitroguanidine and now we are reducing that share into the nitroguanidine, but as Andreas mentioned, we will never exit nitroguanidine for neonicotinoids because if you exit, you're out. You are not in touch with the market anymore. We do not make that mistake. We will stay in that market. And it is certain that as the nitroguanidine demand for defense purposes goes up, sooner or later will go down again. And then we want to make certain that we are present and take our market share again in neonicotinoids again.

So there was one question about the ASAP ground. But can you elaborate a little bit on the question again, sorry?

Yes. I was basically just wondering whether -- as you said, that the Chinese competitors took the market share. And I was wondering if you really decide to perform a major increase in production capacity of nitroguanidine salts and nitroguanidine in the wake of your U.S. project, whether you'd be able to tap into, let's say, neonicotinoids markets once again and go and also in airbag markets, obviously, markets that you didn't decide to leave completely, which I'm pleased to hear. But nevertheless, I guess a lot of that comes down to the price points that your Chinese competitors are able and willing to give to the respective customers. So is your thinking when it comes to nitroguanidine, basically ride the wave of defense spending because even, let's say, if the Ukrainian crisis or situation resolves tomorrow, I don't think so, but nevertheless, I think we are still in a phase of rearmament from a nature perspective because there are more problems out there than [ infancy ] just Russia invading Ukraine, so there might be, even in the long term, more demand, more structural demand for nitroguanidine and guanidine salts from the defense sector overall that could last well over 10 years from now because the lead times there are nothing to try over.

Oliver, when I read the newspaper, so everybody is asking about 155-millimeter ammunition. AlzChem is the single producer in the western world of nitroguanidine and nitroguanidine is used in the triple-based 155-millimeter ammunition. And from our point of view, that ammunition will be produced for the next 5 to 10 years. And from that point of view, there must be demand out there. And yes, so I can't disclose more about the project details, but I think the main growth will come from the 155 use and not from the neonics. But the neonics, we will stay in that market. We are in good mood with our customers. We are in good relationship with them. And we are -- at the end of the day, we would be prepared to deliver them more qualities if they ask for more, for sure.

Very well. As I seem to be the last one in the queue, I press my luck and go for an additional question. However, I guess, to your relief, it's more related to Creapure and Creamino. As your plants or your production capacity at the moment seems to be sold out at least until the end of this year and you're speaking about increased competition from China nevertheless. Might it be fair to assume that due to those products are increasingly taken up by existing and also by new markets that it's also a bit of, let's say, a push-pull situation that because you weren't able to satisfy the full customer need here in Europe with your products due to capacity restraints that those customers might have been forced to turn and go for product from your Chinese competition as well, despite this competition not being as reliable and maybe not as high quality as your product is.

Hopefully not. So we try to fulfill all customer demands. We invested a lot in the past, and we are in the middle of the CapEx additional process for creatine. So from that point of view, we can grow with the customer demand from our point of view. So there should be no real demand out there from our customer, which couldn't be fulfilled from Alzchem. So if there is any demand, we try to fulfill that actually. And we are adding capacity and from that point of view next year, we will see a good growth in creatine as well as we will see next year.

Yes. Yes. I guess I catch you rift. Just a quick one that just sprung to my mind. I think you already answered that, but I'm not sure because I can't recall the Red Sea situation, has that had any impact on the, let's say, the competitive pressure from your Chinese competition? Or is there, let's say, or has there been some relief in Q1? Or is there some coming in Q2 or Q3 from your point of view? Or is that just a situation that happened, but it didn't really have an impact on your specific markets?

It takes a little bit longer until it arrives. It's a little bit more expensive when it arrives, but goods are there, so we had a little impact. There is more support for our business because we are the reliable resource of Europe. And from that point of view, that helps the business more than it hurts the business.

Yes. So there is one question in the chat available. Here, I read that again. You said that the EUR 75 million investment is mainly for increasing guanidine nitrate production by which factor does it increase capacity versus the status quo. So what I said is that EUR 75 million is more for the precursor of the guanidine nitrate production. So we will see only an incremental increase for guanidine nitrate production. We will see a big increase in the precursor guanidine salts. And the EUR 75 million is more for the precursor of nitroguanidine, same nitroguanidine it in itself.

And we just received a follow-up question regarding that topic. And for the precursor, what factor is it?

So actually, we are thinking to replace more or less the precursors capacity because that was and that is a very old plant. And we are thinking about doubling the capacities, but we are not decided actually.

All right. Thank you very much. As we did not receive any further questions. In the meantime, we are coming to the end of this earnings call. Again, thank you very much for taking the time and also all your questions, and I hand over to Niedermaier for some final remarks before closing.

Yes. Thank you for the questions. Thank you for the 1 hour and a quarter. We can now offer you the opportunity to visit us again for sure, virtually or in person at the conferences. I think the next conference will be in 14 days in Frankfurt. And otherwise, we will back with quarter 2 information on August 1 or at the Annual General Meeting next week on Tuesday, I think, yes, on Tuesday. So should we not see each other by then, stay safe and stay sound and stay in our good graces and goodbye. Thank you.