AlzChem Group AG (DE000A2YNT30.SG) Earnings Call Transcript & Summary

I'm delighted to welcome the CEO, Andreas Niedermaier; CFO, Andreas Lösler; as well as CSO, Dr. Georg Weichselbaumer, who will speak in a moment and guide us through the presentation and the results. After the presentation, we will move on to the Q&A session, in which you will be allowed to place your questions directly to the management. And having said this, let's dive straight into the numbers, Mr. Niedermaier. The stage is yours.

Yes. Thank you for your warm welcome and your introduction, and good morning together. Thank you for joining us today, and welcome to our second analyst call that year. As always, we will go through the presentation first and then be available for questions at the end. Let's skip some slides in the presentation and start with Page 5 directly. And here, we can certainly describe the first half of 2025 in such a way that the very good development of AlzChem continues and the business with the key figures is going into the right direction here. For the second quarter, we recorded significant growth, which means that group sales in the first half of the year are slightly above the previous year's level. Once again, Our specialties were the main driver for growth with a 9% increase in sales, which more than overcompensated for the decline in sales in the other businesses. We will then hear details about the analysis from my colleagues, Dr. Weichselbaumer and Andreas Lösler. EBITDA also grew by approximately 9% to EUR 56.5 million mainly due to positive volume development of Specialty Chemicals. The EBITDA margin across the group increased from 18.1% to 19.6% here. Our CapEx activity is in full swing. So the construction of the 2 new plants, including infrastructure is on schedule and on budget. Anyone who drives past our locations can already see the significant construction process here. So we are also making progress in the U.S.A. There is now a long list of parcel plots, the valuation is underway so that we will see more clearly by the end of that year and may already be able to make a location decision. So let's switch back to additional figures despite the very high level of CapEx activity, free cash flow remains clearly positive. Here, we have received further customer subsidies for the large investment projects that support this situation, thus, the net cash position of approximately EUR 20 million is positive. So next topic, market environment. The uncertainties in the market continue to be high, especially when you think of the U.S. customs policy, the development of the U.S. dollar exchange rate or even the electricity prices in the first half of the year compared to the previous year, which were significantly higher and weighted on our business. So with regard to the customer situation, our segment still applies as follows. We are following the topic in great detail and are close to it. So for many of our products are exempt from the additional tariffs and we do not see any positive or negative impact actually on the product. Only a few products are already affected by higher tariffs so -- which will certainly lead to shifts in sales. Overall, we expect a few, if any, shifts in but not really too much from today's point of view, who knows how will be the development and the decisions and the negotiations between Trump and the EU in the future, but that's the picture from the today's point of view. Nevertheless, and all in all we can confirm the growth forecast for the year as a whole as according to our current state our knowledge, revenue and EBITDA will develop in line with our expectations. So for further details and analysis, I may now hand over to Georg Weichselbaumer, our CSO in the room here.

Yes. Thank you, Andreas. As always, let's start with Basics & Intermediates segment, which largely continued the development as outlined in the first quarter of 2025. The segment concluded the reporting period with sales amounting to approximately EUR 78 million. This represents a decrease of EUR 13 million or 14% compared to the previous year. Only looking at the Q2 figures shows nearly the same sales development. This is basically the development we expected in our guidance. . As within the first quarter of 2025, the decline in sales is due to a combination of price and volume effects. The ongoing weak economic situation within the European steel industry leads to a lower demand of our metallurgical customers and reduced quantities compared to last year. On the other hand, we had to deal with some minor price reductions as well over the segment. We have deeply analyzed the situation for all markets where we compete with Chinese competitors, especially in the pharmaceutical business. In all cases, Chinese prices have now dropped to a level that we believe is below the competitors' manufacturing costs. To protect our manufacturing base, we are again initiating an antidumping investigation at the political level. On the positive side, we can report a stable development within our business. Also we have raised prices compared to last year. This underlines that the fertilizer is not influenced by political considerations at the EU level and that our customers do know the advantages of this product very well. The sales development clearly influenced our EBITDA development as well. Even if we managed to pass on some portion of higher electricity costs, we could not compensate for the reduced quantities and had to accept the EUR 3.5 million EBITDA decline, which also led to a decline in the EBITDA margin compared to the previous year. Right now, we are working on very promising new products within our NITRALZ business, which shall support a rebound of our Basics & Intermediates segment within the second half of the year. As explained multiple times, the products of our Basics & Intermediates segments are not only sold to the market, but the very important raw materials for our following production steps and all raw materials required for the growth of our Specialty Chemicals segment could be produced reliably. This brings me to the next page, where we will analyze the situation in our Specialty Chemicals segment. The steady growth trend continued in our Specialty Chemicals segment. Today, we can report a steady growth of this segment over the last periods. Sales have increased considering the half year period compared to last year and considering a 3-month period Q 2025 compared to last year and compared to the first quarter of this year. On a quarterly and half year basis, the segment showed historical record figures. The main driver of this development was volume increase. As shown in the detail sales analysis, we had a quantity growth of 9% over the first 6 months of the year, and almost 17% for the 3-month period Q2 2025 compared to the previous year. The segment's performance is, therefore, very much in line with our expectations. While we had solid growth for stable development with most of our products within this segment, I want to outline the development in human nutrition and custom synthesis as these 2 areas contributed the most to our sales and EBITDA growth within this period. In the human nutrition area, last year's high sales level was further increased. Demand for creatine made in Germany continues to develop positively. Current development in the global creatine market offer additional growth potential in new application areas. To meet the increased customer demand, we are currently running a CapEx program in order to increase our production capacities again. As already mentioned, during our information in Q1 2025, the comeback of our custom synthesis area continues. We see an increased and steady demand and are happy that customers with a long relationship are back at AlzChem as their destocking process is over. We always thought the downsides within the last 2 years were only a temporary phase, and that there will be demand again for highly specialized production processes within the area of custom synthesis. EBITDA ended up at a record level for this segment as well. This relates both reporting periods. On a quarterly basis, EBITDA grew by 22% and 18% when we look at the development within the first 6 months of the year. The same applies to our EBITDA margin. Specialty Chemicals reached an improvement in the EBITDA margin to 27.7% compared to 25.5% in the first half of 2025. In line with our half-year analysis, the EBITDA margin for Q2 stand-alone also rose significantly, reaching 27.8% compared to 26.6% in the previous year. Again, we are mostly satisfied with the development within this growth segment and confirm our growth perspective. Let us now move on to our third segment, Other & Holding. Sales of Other & Holding segment was below the previous year's level. This decrease is primarily due to reduced electricity grid fees for the chemical park customers which AlzChem is allowed to charge to the customers under electricity regulations. All other services provided to our chemical park customers are broadly stable. The segment's EBITDA followed the sales and the decline was mainly due to the reduction of grid fees. That was all for our detailed view on the segment development. Let's now hand over to Andreas Lösler and take a look at the overall group figures.

Yes. Also, good morning from my side, and thank you, Georg, for the insight in our segment development in the first half of 2025. As always, I will start with a detailed look at our group P&L figures first. In terms of sales, we finished the first 6 months of the year with total sales of almost EUR 288 million, which is slightly above the prior year level in which we ended up EUR 286 million. Only looking at the Q2 figures, we can report a sales increase of 5% compared to last year, and this sales increase in the second quarter was mainly driven by volume increases, while prices and FX rates played a minor role over the whole period. My colleague, Georg, has already explained the posing contributions of our segments to this sales development. It's worthwhile to mention that regarding our guidance for '25, we are still completely on track after finishing the first half of the year as we do expect slightly higher sales compared to last year within the second half of the year, mostly coming from our Specialty Chemicals segment. Despite all the discussions about tariffs in the U.S., we were able to increase our sales in the U.S. compared to the previous year. Our sales split within the first half of the year '25 shows 68% sales coming from the Specialty Chemicals segment, while this relationship was only 62% in the first 6 months of the previous year. Only looking at the second quarter stand-alone, the Specialty Chemicals segment contributed 70% to our group sales after 63% last year. This development clearly underlines our strategy, supports our growth and explains our ongoing good EBITDA development. Over the whole group, our EBITDA grew more than our sales did with an EBITDA of EUR 56 million, we can report an increase of 9% compared to last year. As mentioned, most of our EBITDA was generated with our Specialty Chemicals products. Our material expenses ratio has improved compared to last year, even if we had to accept much higher power prices this year. We have had cost increases in personnel expenses based on increased unit tariffs and an increase in other operating costs, mainly resulting from much higher FX losses due to the weak U.S. dollar development. Our EBITDA margin also showed a positive development and a strong increase. Within the first half of '25, we could reach an EBITDA margin of almost 19.6% after 18.1% at the same time of last year. With stable depreciations and an improved financial result, we ended up on a group net result of EUR 31 million, which represents an increase of 14% compared to last year. Accordingly, earnings per share have increased by the same rate up to EUR 3 per share. That was the big picture of our P&L. Now let's move on to the balance sheet and cash flow figures. Our balance sheet and cash flow are still very healthy, but further influenced by some specialty impact that we have seen and reported in the first quarter of '25 already. As expected and guided at the beginning of the year, we see a material increase within our balance sheet total of approximately EUR 70 million resulting from the developments within noncurrent and current assets. Noncurrent assets increased by EUR 32 million primarily due to our increased investment activities and our capacity expansion for nitroguanidine and the customer grants accounted for in this context whose payment dates are not within the next 12 months. Approximately 65% of our investing cash flow within the first 6 months of the year was dedicated to this CapEx program here in Germany. In total, we received EUR 51 million of customer grants already related to our nitroguanidine expansion. These are based on milestones or monthly payment. As such, payments increase our cash balance, they also do increase our contract liabilities on the other hand, which will be released beginning in 2027 as revenue when the products are delivered out of the new plant. During our Q1 call in April, we gave a detailed explanation of this accounting treatment, and we refer to this presentation. Apart from this, we saw an increase in our inventory level in preparation for a scheduled extended maintenance of one of our carbide furnaces at the beginning of '26. Equity total could be increased by EUR 12 million. This development was supported by our positive group's net result and the recognition of increased interest rates for pension valuation and reduced by the dividend payment of EUR 80 million in May '25. However, as the balance sheet total increased materially, our equity ratio decreased from 42% to 39%. This development was already outlined within our guidance and shows the expected ratio. Based on the increased interest rates mentioned, our pension liabilities were reduced by approximately EUR 6 million, while real pension payments amounted to only EUR 1.4 million. As already outlined and seen within the first quarter of 25%, operating cash flow was significantly influenced by the customer grants we received for our CapEx program. As mentioned already, we received EUR 51 million in total. The planned increase in inventory assets in preparation for the extended maintenance of 1 carbide furnace led to an increase in inventories and, consequently, had a negative effect on the cash flow from operating activities compared to the previous year. Tax payments have significantly increased compared to the previous year due to higher tax prepayments because of the improved tax result. Despite the significantly increased CapEx amount and the buildup of inventory, we are still showing a positive free cash flow, also, it was lower than previous year. Our dividend payment in May '25 of EUR 18 million was the major impact on our financing cash flow. Apart from this, we had regular loan repayment and approximately EUR 4 million cash out for the current share buyback program. Again, we can show a positive net cash position by the end of the first half of '25 and are able to shortly invest our liquidity surplus in order to earn interest. As you can see, AlzChem is in a very healthy cash position and the customer grants will support a debt-free financing of our largest investment program in history. At the end of this call, I will now give you some updates on our guidance for the remaining period of the year. From today's perspective, we can clearly confirm the outlook given in our last financial statement and the developments within the first half of '25 have confirmed our estimates. Sales are expected to grow to approximately EUR 580 million, and EBITDA is expected to grow at least to approximately EUR 113 million. Our outlook is still based on the same assumptions as at the beginning of the year. The fundamental growth drivers will be volume effects within segment, Specialty Chemicals, which will overcompensate a sales decline in segment Basics & Intermediates. Sales are expected to be slightly higher within the second half of the year, supported by further increased demand in the area of human nutrition, customer manufacturing and a positive development within the NITRALZ product area. As mentioned already, we still do not expect a material negative impact from the volatile tariff politics of the U.S. administration right now. But the further weakening of the U.S. dollar could have a negative sales and cost impact on our results. So that is from our side with the information for the first half year and the outlook for '25. At this point, we would like to thank you for your appreciated attention and are now at your disposal for possible questions.

Yes, thank you very much for the numbers in the presentation. We will now move on to the Q&A session. [Operator Instructions] So I will -- we will wait a few seconds. And we have participants raising their hand, Mr. Wiechert, you should be able to speak now.

Perfect. Thank you, gentlemen, for the presentation and congratulations on another good solid quarter in a time where most chemical peers have revised their guidance for the full year. I think that brings me maybe to the first question already. Maybe a bit more on the customs and fee service. I would be interested if you could give some details on the magnitude of improvement that you've seen there in the second quarter? Are you back to breakeven or even in positive territory? And then obviously, the outlook for that business into the second half that most chemical peers have reduced their guidance. It doesn't really look like the demand from the chemical industry is improving here. And in the past, you've said that this business is generally linked to the overall chemical industry and especially also to the construction industry, which doesn't seem to look so great. So some color on your outlook for that business. And then maybe a second, and then I'll get back in the line for later maybe. Second one, I would be interested if you could break down by month, from April to July, how the business, especially with creatine, but in general, with sales in the U.S. has developed? Has there been a stronger start into the quarter and the subsequent softening? Or was that roughly equal for every month over the last 4 months. I'll leave it by that for now.

Let's start with the last question, Konstantin. So what we see in the U.S. that we have a very stable business, stable growing business, so we have received some changes between different months for sure, but there is no big impact coming from the tariffs from our point of view. So we haven't already built up some additional storage in the U.S., and we haven't decided some let's say, crazy or stupid things. So from that point of view, we have a stable growing business. And what I can say is that demand of Creapure and especially Creapure, it is quite high in the U.S., and we could not fulfill all the demand we want to see out there. So that's the reason for some mentioned question here in the written form. Here was a question you mentioned an ongoing capacity expansion for creatine. So we are doing always more or less capacity expansions for creatine and the next step is 10% to 15% additional capacity, we increase and we have in mind that we want to increase the capacity for the next year as well on a regular way, let's say. So that's the part of the U.S. business. So there is no stocking, no destocking, that's ordinary normal business, normal running from our point of view and no interactions, let's say. So for the second question, I want to hand over to Georg.

Yes. This was the question about the development of the custom manufacturing business. I mean we have communicated it throughout the time that our customers have been in a destocking mode, which has stopped now. The businesses in which we sell to our stable businesses, and those customers have come back and take the volumes, again, which we had in the past. On top of that, we have at least 1 or 2 additional projects, which come to fruition now, which go into innovative areas, which are not so much influenced by the general industry trends and both of them realize and grow in the second half of this year. .

Is that okay for you?

Yes.

We now move on to the next participant, Mr. Fitz. You should be able to speak now. .

Yes, good morning, gentlemen. I hope you can hear me. Also congrats on the quite solid results in these times from my side. Two questions, please. First, how long will the maintenance shutdown of your carbide furnace last? And the second question is, when will CapEx normalize, i.e., when will the nitroguanidine expansion be completed?

So let's keep those questions very easy. Maintenance shutdown, we have planned approximately half a year. So from 5 to 6 months from the beginning of late December, that year up to, let's say, June next year. And normalized CapEx is a very interesting question because we see so much growth potential out there. So we had a normalized baseline in CapEx between EUR 20 million and EUR 30 million. And so usually, we had EUR 10 million to EUR 50 million maintenance CapEx. And yes, let's say, EUR 5 million to EUR 15 million growth CapEx every year. So when we -- behind the big growth project, we have some additional ideas for additional growing, growing in Creapure as well, growing in some specialty chemicals. And we have some ideas where we can receive a better production cost position, and receive much better cost positions. And therefore, we have to invest money. So from that point of view, to be honest, I see higher gross CapEx for the next years to come, and we will not see the low CapEx program down to EUR 20 million. So that's in a nutshell.

Wonderful. So we move on to the next participant. Mr. Schwarz, you should be able to speak now.

Congrats on the numbers. Obviously, good results. A couple of questions from my side. You were upbeat in regards to new trials, especially for the second half of this year. Could you elaborate on that one? What is driving the positive stance here? That would be my first question. Second question on your Chinese competition, has that elevated due to the crowding out of Chinese producers from the U.S. market so that they are dumping their stuff in larger volumes on European customers? Or is that a structural issue that is bound to continue regardless what the final solution of the Chinese, of the U.S. will be? That would be my second question. And the third one, if I may, regarding to your planned expansion in the U.S. Obviously, you've put in a lot of work you built a shortlist. I guess you had many trips to the U.S. negotiating checking the respective objects. What level of CapEx are you bound to incur once the project has been identified and you are commenting with the acquisition of that project and then the refurbishment or the buildup of required production facilities in the U.S. Just to go how much of that will be covered by the subsidy granted by the DoD? And how much will you have to infuse using your own capital? Or is there another solution that customers are willing to help you out on that -- in that regard as well. That will be my third and final question.

So for the first question, I want to hand over to Georg. That was the trials issue and what's the idea behind the growth opportunity.

Yes, I mean, on nitrates, we have seen that we have a big turmoil in the market. Our businesses, which we had in the past have to a big extent disappeared. Disappeared, means they moved to China. And we have started already last year a program to see if we can revamp that business and have started with projects, which are not in the pigment intermediates area, but which go into different applications. And we have a couple of them, which will come into production this and next year. And the biggest one will actually start this year and will lead to a significant change in the performance of the NITRALZ business.

Yes. So I think that's in a nutshell for the NITRALZ business. So for Chinese competition, we can tell you that Chinese -- don't blame me for that when I tell you, they undercut all our prices a lot. So sometimes, they do their pricing on approximately 1/3 of our production costs. So you can purchase material, let's say, if you have production costs of EUR 10 then you can -- here in Germany, then you can purchase sometimes the material out of China for 3 to 4 years. . So from that point of view, that's a real structural problem. That's a structural problem because of our input costs, so energy is much higher here in Germany and Europe than in China. So China is supporting their companies much more than the European does. And from that point of view, that's a deep structural problem. Nevertheless, so our customers like the high quality, they like the logistics, they light the reliability of our products. And from that point of view, that's our position, how to survive against that very bad, let's say, competition. So there was an additional question to the plant in the U.S. and what is the level of CapEx? So Georg, probably you can elaborate a little bit on that, and could clarify some questions here.

I mean we have communicated a couple of times that we have a contract with the Department of Defense and the Department of Defense will finance -- will fully finance the plant in the U.S. Our search, and that refers to one of the questions in the chat is not limited to nitroguanidine, but we are looking for a site in which we can grow in the U.S. The first product will be nitroguanidine, but we look for other opportunities, which does not mean we will shut production in Germany down, but that we will grow in the U.S. with products for U.S. customers.

Okay. Thank you, Georg, for that. So from that point of view, I try to pick up some questions. Some written questions as well here. So that this one question about nitroguanidine, the quantities, and what is the -- what are the sales expectations for nitroguanidine in 2025. So as you have already heard the presentation from my colleagues and you never heard nitroguanidine for growth topics that year. So the main growth will come next year when additional capacities come on stream. So our utilization is not bad within nitroguanidine, but from my point of view, we are ahead of the wave with our capacities and our customers have to install capacities as well. And after that process and nitroguanidine growth will be going up. So -- and we don't disclose the quantity in details of the product level, so from that point of view, we can't do that because we only report on segment level. Then there is an additional question. Can you give more color on the drop in EBITDA margin of roundly 200 points in Specialty Chemicals for quarter 2. So Andreas, could you elaborate a little bit on that?

Yes. I quite don't understand the question because we had an increase in the EBITDA margin in Q2 in the Specialty Chemical business and this increase compared to the second quarter of last year was mainly driven by the development in all products. As we mentioned, all products were mainly stable and where our team business grew a lot and the comeback of the custom synthesis, which did not contribute so much to the EBITDA and EBITDA margin last year. So the increase this year is driven by those 2 factors. And Hopefully, we understand the question correctly.

So otherwise, please ask an additional question. And here, from my point of view, the more or less last questions written down is how much is your revenue EBITDA exposure to Creapure roughly. So to save the business, to save your share investment, we don't disclose that because we are the single production and supply resource out of the European world for Creapure and from that point of view, we decided only to disclose segment information, but as you have heard from my colleagues in the very deep analysis that Creapure is one of our biggest growth driver here within Specialty Chemicals. So from that point of view, I hand back to the moderator. Are there any questions around? I think, yes.

Thank you very much, and thanks for answering the questions in our chats to all the participants who have written questions, please be so kind and lead your questions as soon as they have been answered. And we move on to a participant dialed in via phone, you should be able to speak now. Hopefully, this will work.

Yes, here's Peter-Thilo Hasler from Sphene Capital. I have Dr. Georg Weichselbaumer mentioned in his speech that about new create applications, if I heard this correctly, and I read that the therapeutic use of crates increasingly being researched and clinical studies increased, for example, in Parkinson ALS. Is this something that you also consider to go into that area? . And the second question would be on the reach discussion about possible back end of as a fertilizer. What is your current scenario that you modeled in, in this regulatory uncertainty right now? And the third question would be on the European steel industry, do you expect or do you see any signs of a structural recovery here, which would be a surprise, but I wanted to ask that question anyway.

Yes, so Georg, I think you can answer some or give some information about creatine applications, I think.

Yes. I mean, health applications are the primary focus of growth, and we expect them also to kick in earlier than food applications. And we are evaluating quite a scaffold of health applications because the energy level in body is very much influenced by creating and those go into various effects where we see quite some progress, for example, on female health on various stages of the life. So the answer to the question is, yes, there are various applications and ALS is also one of them. .

The second question was about the reach band. That's a very interesting calculation question. So for sure, we do the calculation, and we view that update of the model on a very regular basis, what will happen if we will lose calcium cyanamide. But I tell you, from my point of view, I think that we won't receive a complete ban. So that won't be, from my point of view, the result after, let's say, 5, 6 or 7 years discussion. So we are in the middle of that discussion. We already received additional questions from the EU Commission. We prepared that, and we are in the deep process. And from that point of view, if they would have banned that, they could have done that already. And as you have seen that, that process took already 5, 6 years. And normally, that process takes 1, 2 years. So from that point of view, I think that we won't receive a full ban of calcium cyanamide.

So then EU steel industry recovery, that's a very difficult question. But I think the answer is fairly clear. We do not see and expect a recovery in the steel industry. I'd say quite the opposite. Those businesses under quite some pressure. And there was a question already posted earlier, if we see any additional imports into Europe because of the tariff situation and the economic development. I think that is happening in the steel area. We still imports into Europe and the steel manufacturers, in particularly in Central Europe are faced with very high energy prices. So that business is very, very difficult.

Okay. Then I will grab the next chat questions. Can you disclose some details on creatine contracts with customers? How long are the contracts, for example, and are there cost pass-through clauses? Can you also disclose the mix of Creapure growth for 2025 split by volume and price? So let's turn that answer in that way around. In principle, our growth idea is to grow by quantities. And the quantity growth was the most driver for the growth story of the Specialty Chemicals. So sometimes we could hand through some price increases. Sometimes we have to reduce some prices, depends on the customer, the quantity on the customer. And so -- and from the principle of the business is that within creatine business, we don't have 10-year supply contracts. That's -- the supply contracts are, let's say, on a 1, 2, maximum 3 years horizon. But usually, it's shorter than that. So that's the question or the answer for that question from my point of view. Then I will grab the next question from the chat. Could you comment on why you have chosen not to divest the NITRALZ business so far despite it not being part of the Verbund model and potential opportunity to speed up the shift towards Specialty Chemicals? To be honest, we thought about that, and that could be at the end of the day, solution. But our DNA is to develop business, to work on business and to make business great. And the next topic is that we run the Verbund and the business tree, and we always are looking for some businesses besides that Verbund and are interested to develop business beside the Verbund as well. So from that point of view, it fits perfect to our strategy. And we think that we could be successful at the end of the day. If not, and if as a company could do that better than we do, then we think about that as well. So then I hand back to the moderator.

Thank you very much, and thanks for answering the questions in the chat, and we move on to the next participant. Mr. Speck, you should be able to speak now and place your question.

From my side, congrats on another very solid quarter. I have 2 questions left. The first one is on the Basics & Intermediates segment. you're guiding for a slight sales decline for the whole of the year. The first half now was a decline of double-digit area. So does it mean that Q2 now was the low point from your perspective? And do you expect higher sales in the second half of the year in this segment? And also according to this, what will be the impact of the new products you mentioned in the trust business, what will be the impact of this in the second half of the year already. And secondly, you received customer grants of EUR 51 million already for the nitroguanidine expansion. What's the total amount of customer grants you expect to get in 2025?

So let's start with the last question. From my point of view, at the end of the day, as my colleagues already announced this, the idea that we invest approximately EUR 140 million. And at the end of the day, we have received grants from customer new about that level. So that's the idea that we don't receive any debt in the balance sheet when we start production. Then Basics & Intermediates slight sale decline for the overall year. Yes, that's the case. We see that there could come in some additional sales from the already mentioned projects within NITRALZ. NITRALZ is Basics & Intermediates and will lift up sales for the second half of the year and we will see a good season as well for the second half of the year within Basics & Intermediates, and that's the reason for the summarizing that we will see, hopefully, a better second half than we have received in the first half. So I think, therefore, I included already your second question as well. That was the impact of the new products within NITRALZ. So from that point of view, we hope that, that will lift the profitability a little, but actually, electricity prices are quite high and writing quite heavy on that segment. And so from that point of view, if we haven't had or, let's say, that positive if we would have received the saving electricity prices than last year, profitability would have been much healthier. So from that point of view, I hope that the electricity price will come down a little bit, and that will help that segment as well.

Thank you very much, and we move on to Mr. Wiechert again. Mr. Wiechert, you should be able to speak.

Yes. Just maybe to follow up. One is, you mentioned already that a few of your products are excluded from tariffs in the latest agreement that we've seen from the U.S. There was also again mentioned that products are excluded, I guess, nitroguanidine is one of them. Do you already know whether creatine, Creamino, maybe the dicenomide are excluded as way from the tariffs or no details on that yet? And then second question regarding your inventory buildup in Intermediates that we've seen so far, given that the Basics & Intermediates segments, particularly from the steel industry is probably weaker than what we initially expected. Do you still plan to increase the inventory significantly in the second half as well? Or are you almost at the point where you are happy with the inventory you have stocked up for this shutdown already?

So the inventory stock-up has nothing to do with the market. So that's our own decision to build up carbide and calcium cyanide inventory because as of the already mentioned shutdown of carbide with the beginning of next year or with the end of that year. So that's the bridge, let's say, the inventory bridge for the first half year of 2026. So some more details on tariffs. If you are interested in the very details, we have that available, and you can elaborate and you can find that. So we haven't seen late test inflation and haven't received latest information from the market and nothing out of the deal of underline and Trump here. But in principle, ahead of that, Creapure received some smaller tariffs. DCD received some higher tariffs, but the main production portfolio receives lower tariffs than higher tariffs from our point of view. So if you want to receive a real detailed information, then we can do that in a later session, I think.

And just to clarify because maybe I've missed that point. So will you further increase inventory in Intermediates in the second half? Or are you already happy with the inventory?

That should have been the case already. So it's lactorating around that point. We have received -- there could be some, yes, some higher or lower inventory, some millions, but not that increase that we have already seen.

Okay. And if I may, one, sorry, a bit critical, but a follow-up on that one. What I would like to understand better the rationale why you increase these inventories so much especially in the first quarter and then in the first half, even though you mentioned that electricity prices were not so favorable, you have a track record of being pretty good on kind of trying to find the days where electricity prices are low and profiting from that. And I think as well or you mentioned as well that usually in the summer quarters, electricity prices are lower in Germany, so I don't quite understand why you basically already are at the inventory or desired inventory level with some electricity prices from the first quarter.

Konstantin, there is a second limitation. It's not only the price that the price for the electricity. That's the net grid limitation as well. So if you want to receive the 7,000 hours rule, let's say, and to keep the carbide quite stable in the net grid, then you receive some net subsidies back. And from that point of view, you have to do that on a regular time. You can't do that within 1 or 2 months, and we don't have the capacity available for that. So from that point of view, we have to build up the inventories very -- on a regular basis. It's not possible to do that within 1 month.

Okay. I see. I see. So next year, when you have the shutdown, will that impact your 7,000 hours rule by any degree? .

Yes, for sure. So we don't have the electricity costs. We don't have the grid cost and we don't receive the grid subsidies for that at the end of the day, for sure. And we will -- and that's the question in chat as well, how much capacity expansion are you envisaging for the -- no, that's -- that was different, sorry. Yes, I saw the question in previous in the chat. What will be the inventory level next year after the shutdown I think we are talking about EUR 10 million to EUR 15 million inventory buildup for that second point. So then I will take the next question here from the chat. How much capacity expansion are you envisaging for the pure business in percent terms? And what would the time line look like? So they had -- or to keep that in that way, -- so we try to add additional capacity that year, 10% to 15%, and we try to add additional capacities next year. And we are thinking about the bigger step, but that's not decided yet because the demand out there of creatine and Creapure is quite high, and we think that's a big mega trend and we want to grow with the market, and you should be not surprised that you will see additional products, additional topics risk Creapure and from that point of view, we try to grow quite good for the next years. So there is a next question. Can you provide a rough ballpark figure for the revenue contribution from the trials? Yes. So today, we have many questions about the profit centers as we run the business here. And but we don't want to disclose profit centers or product details because of competition issues. So from that point of view, we can't disclose that. I'm very sorry about that. Next question, can you please confirm that the cutdown of the furnace is part of the usual course of business for this kind of machinery? For sure that, that is the case. So that's a very interesting discussion for sure. You have to do shutdowns every year. You have to do shutdowns every, let's say, 5 to 10 years, you have to do shutdowns usual shutdowns every week or every 2 weeks to bring the machineries back to normal conditions. So from that point of view, that's a great and a big shutdown for sure. We don't want to do that every year, hopefully, but you have to do and to realign that in the same way as the steel industry, for example, has to do that. Yes. So then I'll hand back to you.

Yes. Thank you very much. And there are no more raised hands on the audio line for any questions and the questions in the chat has been answered by you. Thanks for that. So -- and due to the time I would say and suggest that we come to the end of today's earnings call. You will find the presentation on the website of AlzChem Group, and also at the Airtime website by clicking into today's event. Dear participants, thank you for joining and your shown interest in the AlzChem Group. And should further questions arise at a later time, please feel free to contact Investor Relations. A big thank you to Mr. Niedermaier, Dr. Weichselbaumer and Mr. Lösler for your presentation and the time you took to answer the questions. My name is Ingmar, it was a joy to be your host today, and I wish you all a lovely remaining week. With this, I hand over to Mr. Niedermaier for some final remarks.

Thank you very much and your questions. We can now offer you the opportunity to visit us again. So from that point of view, I have to switch the slide to our financial calendar. You can visit us again virtually or in person at the conferences as shown here above. Otherwise, we will be back with quarter 3 reporting on October 30. For all those who are going on holiday, we wish a few relaxing days and to those who are allowed to go to work not too hot or not to wet days, I don't -- I'm not decided yet what I wish you safe and sound staying good graces, and goodbye. Thank you.