Azelis Group NV (AZE) Earnings Call Transcript & Summary

Good day, and welcome to Azelis Q1 Trading Update Call. As usual, we are joined by Anna Bertona, Group CEO, who will give us an overview of business trends and our overall performance during the quarter. Thijs Bakker, our Group CFO, will then walk us through the numbers. [Operator Instructions] As a reminder, this presentation may contain forward-looking statements that are subject to risks. Let me now hand you over to Anna.

Thank you, Pam, and good morning, everyone. I am pleased to have you here on the call today. And like last time, I will start by providing you a high-level overview of the trends we saw in the first quarter and our performance during the period. Thijs will then take you through the numbers. Afterwards, I will conclude with our view on the outlook. As Pam mentioned, we are happy to answer any questions you may have after the presentation. Here are the 3 main points that I would like to highlight about the first quarter. First, I'm very pleased to report that we have maintained and are actively maintaining a strong conversion margin. This demonstrates our commitment to balance growth and profitability, even in challenging conditions. Second, there are some important points to consider when looking at the first quarter performance. On the one hand, the growth trends we are reporting for the first quarter are measured against strong prior year comparables, especially for EMEA and APAC. And as a reminder, Q1 last year, the EMEA growth organically was 4.4%. And in APAC, it was double digits at 11%. So in these regions, comps were still tough. Adding to that, there is a longer stabilization period in the industry. We are seeing recovery in volumes, but they are offset by pricing friction in some of our end markets. The supply and demand dynamic is rebalancing and inflationary pressures from supply chain disruptions are easy, some price discovery is natural in this situation. Final point I would like to make is that we are seeing a slow but steady improvement in our order book. This gives us comfort that organic growth should return during the year. In the meantime, we continue to control our costs while also making sure we are well prepared for the growth recovery. Now let's move on to the key from the first quarter on the next slide. During the quarter, we achieved a revenue of EUR 1.1 billion, representing a 1% year-on-year decline in constant currency. We generated profit of EUR 261 million, up 0.7% from prior year. This means that we were able to expand our gross profit margin by 47 basis points compared to Q1 '23. Given the price pressure in some of our markets, this is another demonstration of the strength of our diversified portfolio. We achieved EUR 124 million adjusted EBITA and equivalent to an EBITA margin of 11.8%. And this reflects our ongoing focus on cost control to limit the impact of slower revenue development. As mentioned earlier, we have kept our group conversion margin well above 47%. We also continued our M&A strategy to expand our footprint. And during the quarter, we closed 3 acquisitions, and we have announced 2 additional acquisitions. And that brings the M&A count this year already to 5. They are all small bolt-ons, which further enhance our lateral value chain. Now let's look at some of the drivers of the results on the next slide. In Life Sciences, volumes are recovering within certain end markets some price infections, but on the whole, trends are encouraging. Our Home Care and Industrial Cleaning segment is performing well across the board. The recovery in Vigon is slow, but steady. FNF in other regions is stabilizing. But in general, global trends in FNF are starting to go in the right direction. Food volume are also broadly stable with some price pressure in certain markets. While on the other hand, Agri was weak throughout last year due to overstocking and this quarter, we were not helped by the weather in Europe. In aggregate, volumes are recovering, although offset by price pressure. The trends in industrial chemicals are mixed. In case we continue to see over recovery in U.S. volumes while in other regions and other industrial end market volume stabilization is still ongoing. A highlight is the good performance in lubricants and metal working fluids in EMEA. Overall, I would say the market is still volatile but the stabilization is taking root. Volumes are slowly coming back, while price pressure will dissipate and w are well positioned for the recovery. Now in terms of the inorganic growth, we completed 3 acquisitions so far this year, one in each region. In EMEA, we closed the acquisition of Oktrade, which is a great addition to our Personal Care business in Turkey. South America, we acquired Localpack. And in APAC, we completed the acquisition of expanding our agri footprint in Australia. We also signed 2 other acquisitions, MDK, which is a strong addition to our Personal Care business in Indonesia and DBH, which adds to our industrial business in the DACH region. I'm actually very pleased with our M&A pipeline, which remains strong. We are continuing to play our part in the industry consolidation, building a stronger platform, a broader lateral value chain and enhancing our capabilities to the benefit of our customers and principles. With that, let me turn it over to Thijs to talk about the launch.

Thank you, Anna. Good morning, everyone. I'll start with an overview of the group financial performance for the first quarter of 2024. Let me start on Slide 9 where you will find a summary of our P&L and revenue split between Life Sciences and Industrial Chemicals. For the first 3 months, we recorded a revenue of EUR 1.1 billion, representing a 3.8% year-on-year decline. Excluding negative FX effects, revenue was broadly stable compared to the prior year. As mentioned before, Q1 last year was our highest quarter in 2023, and Anna already provided some color on the organic profile of last year Q1. Diving deeper into the composition of this EUR 1.1 billion revenue, EUR 669 million of revenue came from Life Sciences, flat from last year or plus 2.5% in constant currency supported by volume recovery in most end markets as well as M&A contribution due to the first time inclusion of M&A. Our industrial chemicals business delivered EUR 382 million of revenue representing a 10% decline versus prior year or 7% measured in constant currency. This performance reflects stabilizing volumes offset by pricing pressure and mix effect. We've seen improvement in trends and volumes compared to previous quarters, supporting stabilization and recovery later in the year. Our gross profit for the first quarter was EUR 261 million, a 2% decrease year-on-year on a reported basis and 0.7% increase in constant currency so broadly stable compared to the same period last year. Gross profit as a percentage of revenue expanded by 47 basis points to 24.8%. The expansion was largely the outcome of mix effects from existing business tilting more towards Life Sciences, progress on M&A integration from previous year's M&A, offsetting dilution effect from recent acquisitions. During the first quarter, we achieved an adjusted EBITA of EUR 124.3 million, a year-on-year decrease of 7.2% on a reported basis and 3.6% on a constant currency basis resulted in an adjusted EBITA of percentage of revenue of 11.8%. This represents a 43 basis point contraction versus the strongest quarter in 2023. The contraction in margin was driven by margin pressure in the Americas, which had lower cost savings impact compared to the prior year, given that they started the contingency actions already earlier in Q4 2022. And from dilution from our Latin America business, which comes at a lower EBITA margin profile. EBITA as a percentage of revenue in EMEA remained more or less flat even though diluted by recent acquisitions. These effects were partly offset by the strong expansion in Asia Pacific, which were supported by cost savings measures as well as positive mix effects across our businesses in the region as we are making progress in integrating the product portfolio from acquisitions made in previous years. Conversion margin during the first quarter was 47.7%, which is 270 basis points contraction from the strong performance in the prior year. We see this as phasing and note that we continue to maintain strong conversion margin above 47%, which was achieved at the peak of the growth cycle back in 2022. Now let's move from here to the next slide, where I'll provide a quick overview of the growth breakdown of our financial metrics between organic and inorganic. Organic revenue for the group was 8% lower compared to Q1 2023 as the comparable versus prior year in EMEA and APAC are still challenging and macroeconomic pressures in Latin America continued to weigh down performance in the Americas. Revenue growth contribution from M&A during the quarter was 7%, whilst FX remained a headwind with a negative effect of 3% on revenue growth. In general, more [ comment, ] we need to be careful on the interpretation of the top line as we see volume and activities improving but it will take time to translate to absolute growth because price levels need to stabilize first. In EMEA, organic revenue declined 8.6% compared to the 4.4% organic revenue growth achieved in the first quarter of 2023 and 34% in Q1 2022. M&A contributed 4.8% of revenue growth, whilst FX effect had a negative effect of 4.3% on our revenue. Life Sciences in EMEA is experiencing volume stabilization with an increase, except for agricultural and environmental solutions offset by price friction in some end markets, while in industrial chemicals, volumes and prices are still stabilizing and still include the lost negative impact from a portfolio optimization program which is roughly EUR 6 million in revenue, representing 1% of revenue in the prior year. I will drill down into the regional drivers a bit later. But these elements have weighed down on gross profit in the region, leading to an organic decline of 8.8%. In the first quarter, organic EBITA declined by 9%, driven by the full year impact of salary cost inflation across Europe, offset by cost mitigating actions, leading to a conversion margin of 54.3%, slightly below Q1 2023. So it's quite good. In the Americas, the improving organic revenue development in the U.S. was offset by continuous weakness in Canada and Latin America, Mexico, in particular. This resulted in an organic revenue decline of 8.6%, although we can report sequential improvement. This was offset by revenue growth contribution from M&A of more than 11% at stable FX allowing us to report a top line growth of 3.6% in the first quarter. Gross profit in the Americas increased by 1.5%, driven by contribution of 11.7% from recent platform acquisitions in Life Sciences, offset by a 10% organic decline. The organic decline in gross profit is driven by a couple of moving parts namely, the positive mix effect from the recovery in higher-margin flavors and fragrances, where we see increased volume activities being offset by volume recovery in case, which typically comes at lower gross profit margin levels and as well as dilution from Latin America, which is having lower margins than North America. EBITA reduced by 7.4%, driven by a 17.6% organic decline due to negative mix effect, dilution from Latin America and lower impact of cost savings in Q1 and that is because we started with a cost containment, much earlier in North America. Now we're in the early in the year and in the recovery. As such, we monitor the sequential volume improvement in the Americas and don't rule out for the cost reductions if needed. Asia Pacific, we reported a revenue decline of 6%. In the first quarter, 5% revenue growth was achieved from M&A offset by a negative FX effect of 5% and 6% organic revenue decline. So some context here, these were very tough comps to beat following 11% organic growth in the comparable period last year. The region did well in the area of gross profit margin expansion driven by positive mix effect, but mainly solid progress expanding our product portfolio from past acquisitions done in '21, '22, '23, but also margin accretive impact of recent acquisitions that Anna alluded to. This, in combination with continuing cost management efforts, resulted in a 3.3% year-on-year growth in adjusted EBITA, which follows a 58% growth in the same period last year. So this is an excellent performance. Bringing it all together, total revenue of the group decreased by 4% to EUR 1.1 billion in the first quarter of the year. We can now leave the top comparables behind us as well as the portfolio optimization, which ended in March. Our cop contingency plans are at various stages of its development. As such, our conversion margin remained at 48%, demonstrating our ability to manage the elements that are under our control. Now let's take a look at the regional finance performance on the next slide. So let's start on the left here with EMEA. In the first quarter, revenue declined by 8.2% to EUR 500 million, driven by 8.6% organic contraction. Within Life Sciences, clear volume recovery was offset by some price friction while the market continues to recalibrate towards stabilization. Our Middle East and Africa business was negatively impacted by delays in shipments due to the ongoing Red Sea tension where containers are delayed in port. [ AIS Agro ] witnessed continued weakness in Europe, where the end of the destocking was more than offset by the impact weather-related demand issues in Europe as well as price pressure in Central and Eastern Europe. Within Industrial Chemicals, volumes are still stabilizing with pricing remaining under pressure. Also note that the results in the first quarter still contain the last impact from our portfolio optimization program, which ended at the beginning of March. Slower revenue development as well as the full year impact of cost inflation from a salary point of view, led to adjusted EBITA of 14.3% and a 54.3% conversion margin. This is a 157 basis point contraction versus the record conversion margin achieved in Q1 2023. Turning to the Americas. Revenue increased with 3.6%, supported by 2 platform acquisitions to strengthen our Life Science presence in the region, namely Gillco in food in U.S. and Vogler in Brazil, both with strong synergy potential. In the organic scope, the recovery in flavors and fragrances, which started in Q4 continued into Q1, and we continue to closely monitor the pace of their recovery as this provides margin recovery for us as well. For the rest of the segment, the promising volume trend is partly offset by price pressures in some end markets, but we are seeing positive trends here, and we will get there. In Industrial Chemicals, the ongoing recovery in volumes in case is offset by continued weaknesses in the rest of the segment. Adjusted EBITA as a percentage of revenue contracted by 145 basis points to 12.2% due dilution from Latin America and lower impact cost savings in Q1 of this year. This led to a 468 basis point contraction in conversion margin, which came in at 49% for the quarter. Now to the right. Lastly, in Asia Pacific, revenue decreased 6% following a very strong growth in the prior year with 11% organic growth. Despite this performance adjusted EBITA as a percentage of revenue expanded by 90 basis points to 10.1%, supported by positive mix effect as we are focused on improving our portfolio from prior M&A and continuing cost controls. Our APAC business achieved a 47% conversion margin during the quarter, down slightly from Q1 2023. Now let's look at the main driver of our cash flow generation, working capital on Slide 12. Net working capital to sales was 13.9% at the end of March 2024 compared to 13.4% at the end of December and 14.7% at the end of March 2023. So we're well in control here. The year-on-year reduction in our working capital demonstrates our focus on optimizing our processes to preserve cash and are mainly to applying credit control applications, former systems and M&A integration. A slight uptick in working capital to sales compared to Q4 is driven by seasonality as well as preparations in view of our improving order book for April, May and June. We generated free cash flow of EUR 114.5 million, representing a cash flow conversion of 91% for the period. It's driven by the EBITA that is a bit lower than prior year, and slightly higher investments in working capital during the quarter to prepare for our order book. Overall, we will continue to optimize our working capital and focus on cash generation, regardless of a business cycle mainly in the area of M&A, which is still in the area of 25% working capital of revenue. Now with this, I'm handing back the floor to Anna for some closing remarks and the outlook.

Yes. Thanks, Thijs. Indeed, I would like to conclude the presentation with our view on the outlook. Yes, the market continues to be choppy, but the volume recovery in some of our key markets and the evolution in our order book gives me reason to be cautiously optimistic for the remainder of the year. And as I said in March, supply chains have mostly normalized. Now volumes are normalizing and even starting to recover. And with that, we anticipate that the pricing friction we are currently seeing will eventually dissipate. At the very least, the tough comps are behind us, but visibility remains low and the market remains volatile. We continue to expect to return to organic growth during the course of the year unless, of course, a large unexpected event of course. Exactly when we will see the organic growth is still too difficult to tell. The distribution market intrinsically remains attractive, and I see many opportunity we can build on for the future. In the meantime, we remain focused on managing our costs, but on the other hand, also continuing our growth investments and I'm, therefore, confident that we are strongly positioned for the recovery. With that, I would like to end the presentation, and we are happy to take your questions now. So operator, if you could please open the line for Q&A.

[Operator Instructions] And your first question comes from the line of Chetan Udeshi from JPMorgan.

Just following up on Anna's point about progressive recovery in volumes. Can we assume that at least the earnings for this reason in second quarter will be sequentially better than what you have done in Q1? Or you think it's a bit too early to comment on that particular point? And second, you mentioned price pressure across a number of businesses. I'm just curious how much of that is just the gross pricing coming down because you are getting maybe lower prices from your suppliers that you are sort of passing on versus how much actually is your price compression in the business? And within Life Sciences, which will be the pockets that you can identify where you might be seeing compression on your pricing levels? Of course, we all know these prices are coming from a very high level over the last few years. But just curious within Life Sciences, where do you see from Azelis' perspective, price compression?

Thank you for your questions. So maybe first, the question you had on the outlook for the Q2 results. We are actually optimistic about our Q2. We can see in our order book that things are improving. And so we expect to have a better quarter than the current quarter. On the price pressure, the price pressure is in the end markets. And you probably have seen also, we hear that not only from our side, we hear that also from our principles on our direct customers. And you probably know how it works in our pricing mechanism and we get our pricing from our principles, and we pass that on. Of course, there's a dialogue going on between us. So when we see in the market pressure, we discuss these kind of things with our principles. It takes some time to adjust, of course. We have purchased already some goods and so it takes some time before we can adjust. But yes, we pass on the prices that we receive from our principles. So I would say that, yes, the pressure is coming from the end market and we adjust it together with our principles.

Your next question comes from the line of Laurent Favre from BNP.

Anna, you mentioned normalization of supply chains, I mean elsewhere, we've heard that in Europe, in particular, there's been impact in Q1 from the Red Sea situation with customers switching to domestic suppliers rather than importing from China. I was wondering if net-net, do you think that, that has been a positive or a negative for your business? And is there any sense of, I guess, prebuy in Q1? That's question number one. Question number two, cheeky one, the elephant in the room. Am I right to assume that you have no comments to make on the recent press speculation on EQT and the future of Azelis?

Thank you for your question. I'll start with the second question, which is an easy one. It's not up to us. So I think if you need more information, it's better that you contact EQT directly. And coming back on your question on the -- coming back on the question on the Red Sea, you have also to take into account that even if we work with Western European principles, they have also production that is not in Europe. And so yes, the goods can come even from Asia. So there has been some impact. I think that the impact is not enormous for us. We don't think there's a lot of prebuying. We think that the normalization of the supply chain comes from , as we know, from '22 and then '23, where people overstocked and they used in '23 their stock. But we think that these stocks have been normalized in most of our segments.

The resi is not structural for us. Obviously, we have quite a larger part of our business in EMEA is quite large in Middle East Africa where, as I mentioned as well, there are quite a lot of containers delayed in the port. So it's mainly Middle East Africa, where we see basically some impact in Q1 and the delays, yes, you can estimate them for the first quarter, they're roughly in the EUR 8 million range of revenue. And this is all delays. Obviously, the timing of Ramadan wasn't really helpful.

Question comes from the line of Stijn Demeester from ING.

Three, if I may. The first one is on the dilutive impact from the M&A. In the past, you have sometimes provided a margin number without this dilutive impact. Can you provide that number for this quarter or for Americas specifically?

I have to come back to you on that one, Stijn. But in general, the M&A -- I understand you're coming from. The M&A done in 2024 was mainly in Life Science and is coming from higher profile, except the one in LatAm in Colombia. If you then take a look at 2023, the M&A came in for a lower percentage. So look at the number here, M&A in Q1 2024, aiming with a GP of about 200 basis points higher. Yes.

Okay. Understood. Understood. Then as to M&A, we've seen limited deals in recent months from your end relative to the pace of the last 3 years. Is there a specific reason, for example, discussion on multiples that you're having or is it just a timing-related issue?

We have a very healthy pipeline. And for this quarter, I think, is not really low number compared to the past. We don't see any different dynamics than last year. I'm actually, as I said before, quite pleased with our pipeline. It's very well distributed over the globe and especially in the areas where we want to strengthen ourselves.

Okay. And then the final one from my end to address the question of the previous analyst in a different way. Do you still believe large-scale M&A in the specialty chemical distribution industry creates more dis-synergies than synergies? Is that still a fair assumption.

Yes, I can confirm. That's why we normally focus on smaller bolt-on acquisitions and that, that are filling gap and that are much more complementary than creating conflicts. I think if you have large mergers then you will have a lot of conflict.

Your next question comes from the line of Eric Wilmer of Kempen.

It appears that A brands are currently doing a lot of volume promotions to support sales as pricing is indeed also difficult for them. And this appears to be particularly helping volumes of the FNF ingredient manufacturers. I think you highlighted stable FNF and stable food. Do you see any signs of this spilling over to your customer base, which should support your volumes as well, so basically from the A brands to your customer base?

Yes. Well, I think that it's something that's, I will say, broader than only the A brands. By the way, we also sometimes supply the A brands depending on what kind of products. So yes, we see this recovery that is already, I would say, more visible in the U.S. than in the rest of the globe. But yes, we are actually quite positive in the development of the FNF and we see also for next months, a good order book and a good development.

Yes. So please also note we see volume recovery in FNF. There's price stabilization taking place, but the margin profile in Life Sciences of FNF is, of course, higher. So we will also have an uptick in our margin. I think the discount mechanism where you're referring to, that's not normal. We just get the prices from the principle. And obviously, we're not walking away from volume at customers, and that can be a time lag in between.

Your next question comes from the line of Matthew Yates of Bank of America.

Question really around M&A. Azelis is spending close to EUR 2 billion on acquisitions since 2020, you haven't necessarily provided much disclosure about how these assets are subsequently done since being acquired. I appreciate there's a whole bunch of external macro factors that you can't necessarily control. But is there anything holistically you can say to reassure investors that the company is deploying capital wisely given this is such an integral part of your strategy, whether that be the lateral value chain strategy driving the top line synergies. I'm just wondering whether in hindsight you found that any of the businesses you bought actually had a more commoditized portfolio, and that's been contributing to the pricing pressure that you've been seeing. I am, obviously, thinking here specifically about Latin America.

Matthew, it's a good question. I think on the disclosure, refer also to the section in our year-end report. And I think we have been very open with splitting out compared to peers already for -- from the beginning, organic and M&A growth. I think your question regarding deploying capital wisely. We do strategic M&A. So we indeed apply the lateral value chain concept. We look where we are missing basically letters of the alphabet. And we try to win them, obviously, organic based upon our portfolio strength, but also fill them with M&A. So we're not going to, for instance, buy companies where we are already very active and where we have already a full lateral value chain. And the margin of the group reflects also our M&A since it become part of organic after 12 months, just to mention that. Now obviously, M&A is an art on its own. And sometimes, you make decisions to get a foothold in, for instance, certain geography. I don't think we never made a secret out of it that, for instance, in Colombia. We have been in LatAm. We have been looking for many years for a starting point there. But for compliance reasons, we turned down quite a lot of vessels. And we found an asset and that had indeed a bit more commodity to our liking as our previous CEO also mentioned on the record. And what we are doing then, yes, we are converting this company and it takes a couple of years. We're converting these companies towards more specialty side of the portfolio. So in general, our M&A, we basically bring in suppliers, take, for instance, the food is a good one. We are #1 food platform here in Europe. And what we are doing, we're bringing basically food principles also to the other regions where we don't have a food blueprint. Now that gives commercial synergies, and that's basically measured. Difficult to capture that immediately because -- yes, these are ongoing commercial discussions. So we track that basically on a 24 months to 24 to 36 months, you begin to see really the benefit of that. Example to give you a little bit of comfort there, you can see actually that our margins on our GP levels, et cetera, are improving in Asia, so this is not something that is just quarter-on-quarter, but this is all the work that the team is doing in the background to basically optimize and improve the product portfolio. I hope that, that gives you a bit of an answer, Matthew.

Yes. And if I can also build on that, we are onboarding our principles to that platform. I recently visited our acquisitions in Latin America. And I'm actually very pleased with what I have seen there. We have a team there that is very technically oriented with strong connection to customers. And so with these 2, if we onboard the right products, we will get the margin up as well.

Can I ask a second question, just to be clear. Anna, you said you are seeing an improving order book for April and May, are you just referring to normal seasonality that you would expect kind of month-on-month improvement? Or is it more of an underlying comment about demand that you're seeing pick up?

No, it's real year-on-year improvement, so not just seasonality. And that gives us, yes, the positive signs that things are moving in the right direction, not only on a seasonality point of view, but really on a more healthy business portfolio.

So Matthew, as I said before, we have about, let's say, 4 to 8 weeks, we have quite good visibility on our open orders. That's what we track. That's a KPI where we look at. Open orders are, of course, a very dynamic picture. If you do that across a global company with all these segments and all these countries. But in general, we see an improvement in the order book, especially in April and May.

[Operator Instructions] Your next question comes from the line of Nicole Manion from UBS.

Just a question, please, on your SG&A and the cost controls that you're emphasizing. Could you maybe give us a bit more detail on what those cost measures are? What you think you're out for some of those levers and how you feel about the cost base now into a potential volume recovery? And secondly, maybe within that, if you could comment specifically on head count trends, if there is anything new there to update on since the full year.

Yes. I think maybe our approach on cost contingency, first of all, we have a very variable cost base, yes. That's one. So basically, we can scale quite well with the uptick in demand from a GP point of view. Obviously, we monitor, and we're very good at that. We have a good track record there. We obviously initiate these contingency plans. We call them, we initiate them on various timing. In the U.S., we started, obviously, much earlier because we already saw an organic decline in Q4 2022. So then you get that takes about 3, 4 months before you start to see the run rate so we noticed that in Q1 2023, and that's why you also see from a conversion margin our comps basically in the Americas. Now obviously, I also made a comment, yes, you're not going to cut in your front line, for instance, if you see that your volumes are coming back. So we're holding off a little bit our foot off the paddle there, and we're monitoring the situation clearly. EMEA had, of course, a very good Q1 last year and also actually, April and May were still good. So we started back then with our contingency plans. So we will still see a run rate effect of those effects. Because if you look at our conversion margin, please note that the salary increments in 2023 were quite significant, but we kept actually our conversion margins relatively stable. Asia, same thing. We started only in October, towards the last part of the year. So therefore, you see, for instance, right now an uptick. But also there, we started with those plans. So you will see -- you will see basically a full run rate of those savings somewhere in -- yes, in the coming months. If we look at where do we have cost savings, you asked about headcount? This is very simple. We are always having the ambition to have one platform worldwide. And we take, of course, smart synergies as we can. We can take that out of the back office. We want to have as many feet on the street to serve our customers and principles. But on the back office, yes, we are basically trying to be efficiently as possible there. So I hope that gives you some color on the SG&A. So we're not done yet with our contingency plans.

Your next question comes from the line of Alex Stewart of Barclays.

I just want to go back to Chetan's question actually about pricing. I hear what you're saying that your suppliers' prices are coming down. But could you comment about your price? In other words, the margin you charge to get product to made to be. I know it's not as simple as that in specialty chemicals, but are you seeing the margin or distribution such as the prices distribution coming down at the same time.

I think it's very difficult to hear on the line, but maybe I can repeat it a little bit and maybe Anna. So you're saying basically, pricing are coming down, and you're asking for us what the impact is on our margin profile.

Yes. I mean you said that the product prices are coming down and you were discussing that with the suppliers, which I understand. But I'm interested in sort of the price that you charge for the service. In other words, the distribution margin whether you're seeing that come down as well as the product price?

Well, we have only one price. So it's one price we have to customers that includes products and services. So we don't make any difference in that -- in pricing to our customers. So I'm not really sure I understand the question.

Okay. That's fine. I'll take it on with your Investor Relations team.

Your next question comes from the line of Suhasini Varanasi from Goldman Sachs.

Just a couple of small follow-ups, please. Did you see any impact from trading base in 1Q, a couple of other companies in our coverage have mentioned that? And should we expect that to reverse in 2Q as a result? Second question, just on the pricing pressure again. Has it eased or is it still ongoing in 2Q at this point in time?

Let me take first and maybe the pricing question, and then you can look at the -- Thijs, you can look at the impact on the trading days. So yes, we see still pricing pressure. It's still there and it's not gone yet. We anticipate that at a certain moment, you get at the equilibrium. And also as volume goes up, it's a normal market mechanism that prices stabilize. So we expect it will improve. But at the moment, we see in several of our markets, still pricing pressure. Thijs, maybe you can take the trading.

I think Suhasini, you're absolutely right. March was a short month with 2 to 3 trading days less for us. So that impacts, of course, the comparables to previous periods as well. Although if we look on in April, we have -- obviously, in April, we have 2 working days more again, yes. So yes, it does have an impact for us especially when you do your math, we take orders on the last working day, it's about EUR 15 million to EUR 16 million. So it does have a bit of an impact from quarter-to-quarter. I think the best way to look at this business on 6 months LTM.

I understand. So is it possible to quantify the impact, mostly maybe like a 1%, 1.5% impact at the group level for 1Q and then maybe that reverses into...

No, not that much, but it's -- I gave you a number what our daily run rate is, you have a bit of -- you can do a bit of a calculation.

There are no further questions on the conference line. I will hand back to management for closing remarks.

Thank you, everyone. We trust we provided you with sufficient insight in how Q1 developed and how we see the future. And as usual, we are at your disposal for any follow-up questions. We wish you a good day and speak to you all soon.