Brenntag SE (BNR) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. On behalf of Brenntag, I would like to welcome you to the earnings call for our full year 2022. On the call with me today are our CEO, Dr. Christian Kohlpaintner, and our CFO, Dr. Kristin Neumann. They will walk you through today's presentation and afterwards, answer your questions in the Q&A session. All relevant documents have been published this morning on our website and can be found at brenntag.com in the Investor Relations section. In the same area, you will also find the recording of this call later today. Before we begin, allow me to point you to our safe harbor statement, which you will find at the end of the slide deck. With that, let me now hand over to our CEO, Dr. Christian Kohlpaintner. Christian, over to you.

Yes. Thank you, Thomas, and good afternoon also from my side, and thanks for joining us today. I will walk you through the highlights of the year 2022 and provide an update on our strategic achievements and our future plans. Also, I will present our outlook for 2023. Kristin will walk you through the details of our financial performance last year. And as usual, we are both happy to answer your questions following the presentation. Let us start with a recap of 2022, which was a truly remarkable year for us. We achieved exceptionally strong results in the year, which was dominated by a highly challenging macroeconomic and geopolitical environment. Based on our unique strength, our global reach and our broad product portfolio as well as services, we impressively proved the resilience of our business model again. We managed to maintain stable operations and largely uninterrupted supply, reliably providing our products and services to our customers globally. And we leverage these strengths through our long-standing and trustful relationships with our supply partners and through the exceptional commitment and expertise of our Brenntag colleagues. This is truly reflected in our strong results for the year. Our sales increased by 28%, reaching now EUR 19.4 billion. We increased our operating gross profit by 20%, resulting in EUR 4.3 billion at the end of 2022. In an environment of supply disruptions, product shortages and deliberate business choices, we continue to benefit from good margin management and therefore, we are able to generate high gross profit per unit. Our operating EBITDA expanded to EUR 1.8 billion, which is an increase of 27%. The strong results both on top and bottom line led to an earnings per share of EUR 5.74, which is almost double of what we achieved in 2021. Also, our free cash flow increased to around EUR 1 billion, which underlines the strong cash flow generation capacity of our business. Not only did we manage the challenging macroeconomic environment very well and achieved very strong financial results, we also overdelivered on Project Brenntag. We reached our targets of Project Brenntag already 1 year ahead of plan, and we started the next phase of our strategic transformation journey, Horizon 2, our strategy to win. Ultimately, these achievements are all testament to one thing. Brenntag is a high-quality business with exceptional resilience and cash generation capability. These are critical qualities for a company in such volatile times we are experiencing right now. As we always strive to create shareholder value and to let our shareholders participate in the successful performance, we have decided to propose a dividend of EUR 2 to the General Shareholders Meeting in June. This is a significant increase of 38% compared to 2021 and in line with our dividend policy, which we have confirmed at our Capital Market Day in November. In addition, we announced Brenntag's first-ever share buyback program with a volume of up to EUR 750 million, yesterday. We laid the foundation for this buyback program already at our General Shareholders Meeting last year, when our shareholders renewed the authorization for Brenntag to purchase owned shares. Consequently, we added share buybacks to our capital allocation framework which we also presented at our Capital Market Day last November to you. Together with our proposed dividend payment, we will return more than EUR 1 billion cash to our shareholders. And finally, on the outlook. Despite the ongoing volatile macroeconomic and geopolitical conditions, we are confident to manage future challenges prudently and therefore, expect our operating EBITA for the full year 2023 to be in a range of EUR 1.3 billion to EUR 1.5 billion, which is equivalent to an operating EBITDA of EUR 1.6 billion to EUR 1.8 billion. Ladies and gentlemen, now I would like to take a closer look at the environment Brenntag was facing last year. 2022 was dominated by a highly challenging market environment. This includes the ongoing war in Ukraine and geopolitical uncertainties that had effects on global supply chains, increasing energy costs and rising inflation. Additionally, the COVID-19 pandemic, mainly due to lockdowns in China, continued to have an impact on global business activities last year. In Europe, we saw severe disruptions in supply chains, driven by rising energy costs. Logistic challenges such as harbor congestions, container shortages and lack of labor resources led to further shortages. As a result, the market conditions were characterized by high price volatility and fluctuating costs for raw materials and transport. Our unique global presence in 72 countries worldwide, our efficient logistics network, a strong position in our industry segments and the intimate product knowledge helped us to mitigate the macroeconomic challenges we had to face last year. Also, our excellent and reliable supplier base as well as our long-standing customer relationships were essential to navigate 2022 well. In this environment, our business model with its global reach and our ability to draw on multiple supply chains gave us the ability to capture business opportunities even in particularly difficult times. This is a key competitive advantage of Brenntag. Let me once again say thank you to all our Brenntag colleagues across the globe who worked relentlessly to serve our customers and business partners and who helped to achieve these great financial results in such a challenging market environment. Let us now dive a bit deeper into our strategic achievements. We successfully concluded Project Brenntag well ahead of schedule, achieving all our strategic objectives 1 year earlier than planned. It even exceeded the goal of generating additional operating EBITDA uplift of EUR 220 million annually. We delivered on all 4 pillars of Project Brenntag. First and foremost, we changed our operating model and set up our 2 global divisions, Brenntag Specialties and Brenntag Essentials. This is a fundamental change to the steering of our company. With our go-to-market approach, we changed the way how we approach our supply partners and our customers, clearly addressing the differentiated needs in a much more focused way. Additionally, we optimized our global site network. With the closure of 100 of our global sites, we successfully reduced complexity within this network. And last but not least, we resized our head count and structurally reduced more than 1,300 jobs in a socially responsible manner. Since its inception, the extensive transformation program has contributed a total of EUR 249 million of additional annualized operating EBITDA in 2022 relative to its baseline of 2019. EUR 80 million were contributed by top line levers and EUR 169 million are related to bottom line levers. We thus delivered on our promise and even exceeded our initial target of EUR 220 million. Since the beginning of Project Brenntag, the related cash out has amounted to around EUR 89 million in OpEx and around EUR 93 million of CapEx, together well below our initially planned cash out of around EUR 370 million. But even though we are very proud of what we have achieved, we continue to keep working diligently on our transformation. Hence, during our Capital Market Day in November '22, we have presented the next phase of our ambitious journey, which is Horizon 2, our strategy to win, to be recapped in more detail later. Let us first have a look at our M&A achievements. 2022 was also a successful year for Brenntag in terms of M&A. In addition to our strong organic growth and the successful Project Brenntag execution, we pushed ahead with our acquisitions. We spent EUR 184 million on 4 targets and have others already signed but not yet closed. All M&A projects were carefully scrutinized, fully aligned with our strict and highly systematic M&A criteria, and we delivered on our promises to strengthen key focus areas and geographies. Around 70% of our acquisitions announced in 2022 are related to our Specialties business. Looking at the last 3 years, we successfully executed 15 M&A deals with a spend of around EUR 670 million, in line with our guidance to spend on average EUR 200 million to EUR 250 million on M&A per year. Now going forward, we will continue to use M&A in a targeted manner to achieve sustainable growth in strategically meaningful areas. Thereby, we will focus on the following pillars in particular. First, accelerating growth in Life Science globally; second, enhancing strategic capabilities and market positions; thirdly, expanding our position in emerging markets, both in Specialties and Essentials; fourth, selectively filling white spots to complement our portfolio; and fifth, strengthening the tech capabilities to develop into a stronger data-driven company. To successfully implement this strategy, we have guided you on our planned budget for M&A of EUR 400 million to EUR 500 million per year on average going forward. This does not rule out that we will spend more in some years and less in other years, and we will also continue to explore bolder moves when the opportunity arises. Currently, we are looking at over 300 potential targets in our pipeline. While we execute this strategy, we will select potential targets in a very disciplined manner and according to strict guidelines, we will only make acquisitions if they meet our high standards and hurdle rates. I would like to close the highlights of 2022 by taking a look at our sustainability achievements another very important topic where Brenntag also wants to shape the future of our industry. In 2022, we made very good progress on our ESG efforts. Before I briefly go through the single ESG pillars, I would like to emphasize one particular highlight. Last year, we received the EcoVadis Platinum status, which puts Brenntag into the top 1% of companies rated across all industries. This makes us really proud and is a great achievement by our team. Now let me give you some selected examples of the sustainability targets we achieved in 2022 and mention a few highlights. We reduced our carbon footprint by 9.3% compared to our base year 2020, and we set up a truly unique internal carbon management program. On the social side, the so-called living wages policy was prepared and approved. It will make sure that all of our employees earn a living wage and not just a minimum wage globally. In addition, our global employee Net Promoter Score improved significantly, which shows an increased satisfaction of Brenntag employees. Our total recordable injury rate was in line with our target and are substantially ahead of 2021. Internally, we conducted an initial risk assessment of relevant suppliers to support the implementation of the supplier risk management program. And furthermore, we carried out an initial assessment of our product portfolio in terms of sustainability criteria. And we established a Sustainability Council at Brenntag as part of our ESG steering development. Our constant improvements in the field of corporate governance are also recognized externally. In 2022, Brenntag ranked among the top 3 German-listed companies in the governance scorecard ranking of the Association of Investment professionals in Germany. I think we can be proud of what we achieved in 2022 in the ESG arena and we will continue on that path with equally ambitious targets for 2023. Ladies and gentlemen, let me also add that we continued our successful ESG journey this year with the closure of a new syndicated loan facility. The credit facility in the amount of EUR 1.5 billion has a tenure of 5 years. And for the first time at Brenntag, the interest conditions are linked to the achievement of quantitative ESG criteria. This is another tangible example of how we drive our sustainability agenda across the company. Now I would like to hand over to Kristin, who will talk about the financial performance in more detail, please.

Thank you, Christian. I will now talk about our key financial figures for the full year, and I will start with the development of our operating EBITDA. The financial performance in 2022 was strong despite very challenging macroeconomic and operational conditions. Please have a look at the bridge on the left-hand side of Slide 9. As a reminder, when talking about growth rates, we generally talk about FX adjusted rates. In the full year 2021, we reported an operating EBITDA of EUR 1.345 billion. The translational foreign exchange effect in 2022 had an impact of EUR 83 million. Our acquisitions contributed EUR 56 million to the operating EBITDA growth. Here, the majority of the contribution from our M&A activities relates to JM Swank and Zhongbai, our large acquisitions in the field of nutrition. Our EBITDA growth rate for the whole group came in at 27%, and we reported an operating EBITDA of EUR 1.809 billion for the full year 2022. On the right-hand side, you'll find a more detailed view by division and all other segments. Brenntag's 2 global divisions, Brenntag Specialties and Brenntag Essentials, reported strong results throughout 2022. Both divisions contributed to the positive performance with operating EBITDA growth of 32% for Brenntag Specialties and a growth rate of 28% for Brenntag Essentials, which is according to our expectations. Brenntag Specialties reported an operating EBITDA growth of EUR 213 million and Brenntag Essentials grew by EUR 311 million compared to 2021. The positive translational FX effect within Brenntag Specialties was EUR 23 million, and within Brenntag Essentials, the tailwind was EUR 61 million. Acquisitions contributed EUR 48 million in Brenntag Specialties and EUR 8 million in Brenntag Essentials. Brenntag accomplished to translate the positive gross profit growth into an over proportional growth of operating EBITDA. This has a positive effect in our group conversion ratio. It increased by 210 basis points to 42%. For the full set of figures in this regard, please refer to Pages 25 and 26 in the appendix of this presentation. Let me briefly talk about our Q4 development. Operating EBITDA in Q4 amounted to EUR 352 million with a growth rate of minus 3%. When looking at our gross profit development, the trends we saw throughout 2022 also continued into the fourth quarter with stable gross profit per unit contribution on an ongoing high level. This resulted in a 7% gross profit growth year-over-year. However, as the fourth quarter is always a seasonally weaker quarter, we already expected Q4 to be slower compared to Q3. This seasonal pattern was even more prominent this year, driven mainly by inventory control measures on our customer side towards the end of the quarter. From a cost perspective, the ongoing inflationary environment in combination with some year-end booking effects put additional pressure on our operating EBITDA. For example, we made a significant onetime payment to our employees worldwide to compensate for general inflation. This lower double-digit million amount was fully booked and paid in Q4. Nevertheless, we achieved great bottom-line results and managed to increase both profit after tax and EPS substantially in Q4 this year. And we also generated a very strong free cash flow of EUR 451 million in the fourth quarter. As a reference, this is more than our total free cash flow of 2021. For further details on the Q4 financials, please refer to Pages 29 through 35 of this presentation. Coming to Page 10. Brenntag Specialties reported an operating gross profit increase of 25% to around EUR 1.7 billion. Operating EBITDA increased by 32% to EUR 780 million, where of around 75% is from organic growth. For the full year 2022, the conversion ratio for Brenntag Specialties was around 47%, an increase of 230 basis points. This growth was broad-based across all segments with a particularly strong growth contribution in Americas. Almost all focus industries showed double-digit gross profit growth rate. Life Science industries, such as nutrition, pharma and personal care, HI&I performed particularly well. Also water treatment and lubricants showed very high year-over-year growth rates. As expected at the beginning of 2022, the second half of the year became more challenging. From a top-line perspective, we experienced weak demand in the construction sector, impacting our Material Science business. Since this focus industry makes up for more than 20% of our specialty business, the weaker development is visible in our group numbers. Also, COVID-19 lockdowns in China and a related drop in Chinese domestic demand had a negative impact on the overall performance of our APAC region. The inventory control measures from our customers mentioned earlier were also visible within Brenntag Specialties, particularly towards the end of the year. On the cost side, we experienced increasing inflationary pressure as was expected in the general inflationary environment. However, we were able to pass on higher costs through sales prices of our products and services. Let me add one more word to the cost development in our Specialties division in Q4. Apart from the general inflationary environment, we had to book certain one-off effects in Q4 2022. One effect is related to the group-wide onetime inflation compensation payment we made to our employees, as mentioned before. Another effect is a more technical one within BSP. As you know, our Essentials division charges a service fee to our Specialties division for infrastructure services, in line with market prices. Some of these service fees have been recalculated to better reflect the true cost development during 2022, and this led to an increase in overall charges from BES to BSP. These costs occurred already during the entire year 2022, but were only charged to BSP in Q4. Thus, this quarterly cost development should not be extrapolated to the next quarters. Let us take a closer look at Brenntag Essentials. Brenntag Essentials showed a strong performance and achieved excellent results in 2022. Operating gross profit grew by 18% year-over-year to around EUR 2.6 billion with operating EBITDA reaching EUR 1.2 billion. This is 28% above the previous year. The positive development of operating EBITDA in the EMEA, North America and Latin America segments was almost entirely driven by organic growth. EMEA and North America showed a particularly strong development. The EMEA market was characterized by the war in the Ukraine and related effects on energy costs coupled with general market uncertainties. This resulted in decreased production volumes in certain value chains, which created a highly volatile price environment and limited supply. In these adverse market conditions, Brenntag Essentials was able to play out its strength in utilizing the global Brenntag network. The North American market proved to be very robust despite macroeconomic uncertainties in 2022. This translated into strong earnings, driven by both positive volume development and high gross profit per unit contribution. The performance in APAC was noticeably lower year-on-year due to a drop in demand in all APAC regions, particularly in China. Overall, our Essentials division had to deal with various challenges such as high energy prices, inflationary cost development, particularly for transport, labor shortages and pressure on supply chains. The provisioning of Brenntag Essentials with its unique global presence, broad supplier base and efficient network made it possible to maintain deliveries to our customers largely uninterrupted. The conversion ratio for this division came in at around 44%. This is an increase of 340 basis points compared to the full year 2021. I also want to address the development in all other segments. In all other segments, which mainly include the holding companies, we recorded a negative operating EBITDA contribution of EUR 124 million. This is driven by the general inflationary environment, but also related to our ongoing transformation efforts and our future strategic plans. The major drivers here included higher advisory expenses, primarily in IT, Brenntag excellence and other strategic projects as well as noticeably higher lease expenses, particularly in relation to software and licenses. In summary, we are very satisfied with the performance of the group in this highly challenging market environment. Coming to our income statement on Slide 12. We generated sales of around EUR 19.4 billion, which is an increase of 28% compared to 2021. Our operating gross profit increased by 20% and amounted to EUR 4.3 billion. More than 80% of the growth was organic. Since we are not immune to the current inflationary environment, increases across all cost items are reflected in the development of our operating expenses. As mentioned before, we also incurred some year-end effects such as a group-wide inflation compensation payment. Operating expenses, excluding special items, increased, therefore, by 16% in 2022. Now let me explain our special items in more detail. For the full year 2022, we report special items of around minus EUR 20 million. On the one hand, this effect is mainly related to expenses in connection with Project Brenntag and other strategic projects in the amount of EUR 37 million. On the other hand, tax assessment of energy tax were issued in 2022, resulting in a lower-than-expected tax liability compared to the provisions recognized in 2021. The reversal of the corresponding provisions resulted in another operating income of EUR 19 million. Depreciation increased by 7% to EUR 297 million. Amortization remained roughly stable at EUR 110 million. However, we recognized an impairment loss of EUR 38 million for the goodwill of the Brenntag Essentials Latin America segment, which is mainly due to the lower expected income from the cash generating unit in combination with increased country risk premiums. Net finance costs increased to EUR 148 million in 2022 compared to EUR 92 million in 2021. I would like to mention a couple of effects here. Firstly, net interest expenses increased mainly due to the change in general interest rate levels as a result of the measures taken by Central Banks to tackle inflation. Secondly, higher currency fluctuations in general had a negative effect on the translation of foreign currency receivables and liabilities. And in addition, the classification of Turkey as a hyperinflationary economy increased our net finance cost. Both profit after tax and earnings per share were particularly strong in 2022. This is mainly due to our strong business performance and less special items compared to the prior year. Profit after tax amounted to EUR 903 million, and EPS came in at EUR 5.74. Coming to Page 13 and the free cash flow. In 2022, we reported a very strong free cash flow of more than EUR 1 billion, which is more than double of what we achieved in 2021. The significant increase in free cash flow generation is due to our strong operational performance in 2022 and lower outflow for investments in our working capital. Let me elaborate on further cash flow items outside the free cash flow. We paid EUR 456 million for interest and taxes in 2022. Payments for our M&A transactions amounted to around EUR 157 million. Finally, we paid our dividend in the amount of EUR 224 million. On Page 14, you can see more details on our working capital development. Working capital amounted to around EUR 2.6 billion at the end of last year. This is an increase of around EUR 480 million compared to 2021, and it is driven by higher chemical prices but also related to investments in additional inventories that we had to make due to disruptive supply chains in order to service our customers. Our working capital turnover was therefore lower compared to last year and stood at 7.5x. Let me briefly touch upon our value-creation metric ROCE. Brenntag consistently creates substantial value with our ROCE being significantly above our cost of capital. For 2022, our ROCE came in at 22%, 650 basis points higher than previous year. Our net financial liabilities remained basically unchanged at around EUR 2 billion at the end of 2022. Our leverage ratio, that is net debt to operating EBITDA, stood at 1.1x. On the right-hand side of the slide, you can see our current maturity profile. Here, I would once again like to mention the closure of our ESG-linked syndicated loan facility in the amount of EUR 1.5 billion in February of 2023. Our new syndicated loan has a tenure of 5 years and replaces the credit facility of a similar amount, which was up to expire in January 2024. For the first time, the interest conditions of this credit facility are linked to the achievement of quantitative ESG criteria derived from our ESG strategic targets. They include reduction of greenhouse gas emissions, Scope 1 and Scope 2; further increase in occupational safety and increasing the proportion of female employees at various management levels. With this facility set up, we demonstrate our ambition in the ESG field and set financial incentives for a sustainable business development. Let me come to our cash return to shareholders. The Management Board and Supervisory Board will propose a dividend of EUR 2 for the financial year 2022 to the General Shareholders Meeting mid of June, an increase of 38% compared to the previous year. This is the 12th consecutive dividend increase since our IPO. And considering the current number of shares outstanding, this represents a total dividend payment of EUR 309 million. In addition to that, and given the strong financial profile of Brenntag, we would like our shareholders to participate in the excellent performance of the past years and to keep our promise made at the Capital Markets Day. Therefore, we have decided to return additional cash to our shareholders and conduct a share buyback program in the amount of up to EUR 750 million. This is the first ever share buyback program for Brenntag. It will be initiated in March and executed over a period of up to 12 months. Together with our dividend payment, this means that we will return more than EUR 1 billion cash to our shareholders. At the same time, this will not hinder us from further investing in organic growth and pursuing value-accretive M&A activities. Taking all of this into account, we remain committed to keeping our investment-grade credit rating. And with this, I would like to hand back to Christian.

Yes. Thanks a lot, Kristin. Let me now elaborate more on Horizon 2, our transformation journey, our strategy to win. As we shared with you during our Capital Market Day presentation last November, it comprises 4 basic key pillars: a differentiated divisional strategies and steering for Brenntag Essentials and Brenntag Specialties. Our digital data and excellence program called DiDEX, our sustainability agenda and our merger and acquisition activities. We outlined in our strategic framework, Horizon 2 that we are consequently sharpening our operating model to reflect the nature and the requirements of our suppliers and customers and the respective markets they operate in. We described decisive steps to move Brenntag further into incrementally independent operating divisions which differentiate themselves wherever differentiation is meaningful and with one purpose, to address the needs of our suppliers and customers most effectively while at the same time, building the specific capabilities required in both the divisions to do so. We will continue on our path of capability building and structural adjustments with the adequate speed and consequent decision-making required to secure a successful strategy execution in both divisions and for Brenntag as a whole, while implementing the required changes in our operating model. However, despite excellent results in Brenntag Specialties, we also recognize the current performance gap relative to our pure-play specialty peers, which we consequently will close with our announced Horizon 2 strategy and in line with our medium-term financial targets we gave to you last November. Our digital data and excellence program DiDEX capitalizes on our data and will drive excellence across our business on a continuous basis, and we'll make Brenntag a more data and tech-driven enterprise. From the DiDEX pillar, we expect a EUR 200 million net annual EBITDA uplift by 2026 on a structural basis. In addition, we continue to drive the sustainability agenda in our industry. Our market-leading position enables us to lead the creation of a sustainable distribution ecosystem. As presented earlier, we continue to focus on this part of our business with ambitious targets and already first achievements going into 2023. And lastly, M&A is a key driver of Brenntag's growth trajectory. Also here, I already mentioned our strategic focus areas and our increased annual M&A guidance of EUR 400 million to EUR 500 million. In order to keep you updated on the overall progress of our Horizon 2 strategy execution and the evolvement of our operating model, we intend to host our next Capital Market Day later this year in addition to our regular results communication. Let me also give you some early examples of the execution on those strategies. For BSP, we recently announced an exclusive supplier agreement with MycoTechnology for innovative food ingredients in Europe, and we announced the expansion of Brenntag's water treatment business with a new facility in Pomona, South Africa. For Brenntag Essentials, we announced the unveiling of 2 expanded facilities in Latin America, strengthening regional distribution networks and optimizing the last-mile delivery capabilities in that region. And for DiDEX, we recently announced partnerships with leading technology companies like Salesforce, Amazon Web Services, Workday and project44 to foster our digital transformation. We are fully convinced that Horizon 2 is the right strategy to continue our successful transformation journey which we initiated with Project Brenntag in 2020. With our strategy to win, we will be creating 2 undisputed global leaders within the chemical distribution industry with above-average market growth. Before coming to the outlook for 2023, I would like to provide you with some more information on a different topic outside of our strategic initiatives which is the personal change in our Management Board team. As announced in January, we look forward to welcoming Michael Friede to the Management Board of Brenntag from April 2023 on. Mike will succeed Henri Nejade as COO of Brenntag Specialties, who has chosen not to extend his contract by the end of June. On behalf of the entire management Board, I would like to express my sincere gratitude to Henri who has been a great leader at Brenntag for many years, and who was driving -- was a driving force for our Asian business and the transformation of our Specialties division. Michael Friede currently is Chief Commercial Officer for Performance Coatings at Akzo Nobel. He is responsible for all global coatings and resins activities and in addition, Michael leads the company's central commercial and marketing excellence functions and is a member of the M&A and Investment Committee. Previous jobs included various leadership positions at COVESTRO among others, as business units head for coatings, adhesives and specialties. Furthermore, as a member of the Digital Governance Board, he was driving the company's digitization efforts, and he also led the acquisition and prepared the integration of DSM's Resins and Functional Materials business. I have come to know Michael as a highly qualified, insightful executive with a profound understanding of the specialty chemicals sector. Michael brings international experience, a strong expertise in M&A and post-merger integration as well as leadership skills, which will perfectly complement our management team. As outlined previously, we will consequently execute Horizon 2 and close the performance gap of Brenntag Specialties. Michael will, in particular, focus on the further development of the operating model within specialties and the differentiated steering required to deliver successfully against our strategic targets. We are convinced that Michael is a great fit for Brenntag and a driving force for our Specialties division. As mentioned earlier, we will provide a detailed update on our progress in our next Capital Market Day later this year. Ladies and gentlemen, let me now talk about the outlook for 2023. The external environment continues to remain quite volatile for the time being. Thus, we expect the year 2023 to continue to present a tough operating environment for Brenntag. The overall geopolitical, macroeconomic and operational conditions will remain challenging. High energy costs, especially in Europe, may lead to further disruptions and changes in energy-intensive value chains. We also expect to see further inventory control measures on the customer side in the first quarter. As supply chains continue to normalize, customers now take higher risks, toward lower inventory levels, relying strongly on a secure resupply. All this results in continued uncertainty about growth expectations of the global economy in 2023 and thus, our guidance at this time is slightly broader than usual. In light of current economic conditions, we expect the Brenntag Group's operating EBITA for the financial year 2023 to be between EUR 1.3 billion and EUR 1.5 billion, which is equivalent to an operating EBITDA of EUR 1.6 billion and EUR 1.8 billion. We usually do not comment on the outlook on a quarterly basis. But given what we observed so far, we expect our performance for Q1 2023 exceeding the level of Q4 2022. Our forecast for the full year 2023 already includes the potential efficiency improvement anticipated in implementing the measures of strategy to win. Our forecast also takes into account the contributions to earnings from acquisitions already closed and assumes that exchange rates will remain stable on the level at the end of February. Ladies and gentlemen, let me summarize what we have just presented to you. 2022 was a very successful year for us with exceptionally strong earnings. We fully delivered on Project Brenntag and accomplished our strategic ambitions well ahead of time, and we started the next phase of our comprehensive transformation journey with our strategy to win. Also, we delivered on our M&A targets and on our ESG priorities. And these great achievements do result in high shareholder returns. Our dividend proposal in combination with our share buyback program together will return more than EUR 1 billion cash to our shareholders. Looking at 2023, we present a strong outlook despite macroeconomic and geopolitical challenges, which continue to create substantial uncertainty. We look ahead with confidence and are sure that Brenntag is well equipped for the challenges to come by building on our resilience and our strong financial profile. With this, I would like to close the presentation and we are now looking forward to your questions. Thank you.

[Operator Instructions] Our first question comes from Rory McKenzie from UBS.

It's Rory here. 3 from me, please. Firstly, group gross profit growth slowed to 7% year-over-year in Q4, of which I guess about 1% is acquisitions, 6% was organic. How much within that would you estimate is down to volume growth year-over-year? Secondly, focusing on operating costs, which were a lot higher than expected in Q4. Kristin, can you just go through again, how much of that we should think of as nonrecurring at the group level? You've already mentioned a one-off double-digit million employee payment, but you also referred to higher advisory fees and some other year-end kind of true-ups which hit Q4. Can you go through again what were they and how big they were, please? And then finally, you haven't spoken publicly since you announced that you had started and then ended discussions with Univar about the potential acquisition. Can you give us any more background as to what the potential deal rationale was that you wanted to explore? And how should we think about that very high profile potential combination in context of the M&A strategy that you laid out at your CMD?

Okay. Rory, thanks for your questions. I will start with answering the Univar question, then Kristin will come back to you on gross profit growth and the operating cost development in detail. Now let me -- let me maybe start talking about our self-understanding as a management team running this company. It is our duty to explore all optionalities to increase the shareholder value for our shareholders going forward. And in that respect, it is our self-understanding that we will also explore the optionalities, which -- when they arise, that we have a look at that. And so we will continue looking at optionalities going forward, but always with a clear understanding of, at the end, there needs to be value creation for our shareholders. The second thing I want to say is that when you look on the fragmentation of our industry, and again, we talk about a EUR 290 billion market size for chemical distribution globally, we are the, by far, the #1 with 5% market of share roughly and then the #2 is only 2.8% and then you have a lot of smaller players coming afterwards. So that is an extremely fragmented industry, which creates a lot of efficiencies for the chemical industry in general. And in that respect, our anticipation or our expectation is that there will be further consolidation going forward in that industry, maybe faster than it was usually in the past, but this is what we expect from -- and again, not short term, but for the next 5 or 10 years. We also need to -- when we look at this strategically -- to be in a position to put Brenntag into a sustainable competitive advantage going forward. So we always look on all optionalities. Does it do this besides the value-creation part? Is there a sustainable competitive advantage being created? Now when we come back to the Horizon 2 strategic discussions, which we had and the M&A guidance we gave you, we clearly said, "okay, we believe in M&A as a growth lever going forward. We have an excellent track record of doing so. We will double up our M&A spend into EUR 400 million, EUR 500 million per year. So this is the guidance." And we are able to do this. In 2021, for instance, we did EUR 440 million. So we will continue on that trajectory. But we also say clearly that we also look at bolder moves if the opportunity arises again under the light of exploring optionalities. Also, we said clearly that we want to significantly scale our specialties platform and scaling our specialties platform, which is already quite substantial would have been also in light of that strategic rationale because in the portfolio of the company we're talking of, there's a 30%, 35% specialties business, which could be acquired at, I would say, a decent multiple and thus creating a lot of value. We also wanted to strengthen our specialties in North America to be clearly -- become the #1 on specialties also in North America. And we also are clear about our story around essentials, which is the strong, strong story and the untold story of combining the ownership for the last-mile delivery with the global reach story only Brenntag can tell. And that was also just one other strategic logic, why we looked into this. Again, I told you and I reemphasize this, you can always count on us to be disciplined and also clearly having value creation for our shareholders in mind. And if we discover that the risk/reward profile of such a transaction is moving into a territory where we feel uncomfortable with, we also are very disciplined to not continue those discussions. And that is, I think, what I need to say on the Univar topic. And then I would hand over to Kristin, who will answer those questions you had before on gross profit growth and operating costs.

Thank you, Christian, and hi Rory, also from my side. So first of all, if you look at Q4, there was a kind of destocking in Q4, which means that there was no growth out of volume, it was more -- a slight decline in volume. But what we could see is still a high GP per ton, especially also in the Essentials area, driven clearly also by the EMEA region. Coming to your second question on the cost development. If you look at our cost increases in Q4, we could see that around 85% of that was driven by organic growth. And let me also say that all those cost items include everything we invest in our DiDEX program, in our excellence program and into our further development of the group. That also means the development of our strategy and so on. So we do not report that as special items that it's different from we did with Project Brenntag also to be very clear here that this is included. And as I said, there was a one-off of lower 2-digit compensation payments for our employees that was split across all 3 divisions. That means Brenntag Specialties, Brenntag Essentials and all others. And if it comes to further one-off that was primarily referred to our Specialties division where we saw all of those true-ups. Those true-ups of course, on group level, do not plays a role. I hope that this answered your questions.

Yes, that's all really helpful. Can I just follow up. I think you also mentioned -- and maybe this relates to those kind of DiDEX and strategic investment that saw higher advisory fees. Within your other operating expenses, that audit and advisory fee cost is now about EUR 132 million, which is -- sounds very large for what it describes. Can you say more about what's contained in that and what drove the big increase this year?

So first of all, yes, you are right, there is an increase in our advisory cost in the audit -- in the audit fees. The drivers for that -- there are multiple reasons for that. First of all, I mentioned that already, it was all about developing our strategy, but also looking into strategic options, I'm referring to what Christian just described with Univar. It was also Project Brenntag driven [ sales ], but on the other hand side, also for our DiDEX implementations. Also going forward, we will have additional implementation costs, which are also reported under advisory costs so that -- those will also stay for a while now, and we refer to the EUR 350 million of implementation costs, OpEx and CapEx in our Capital Markets Day. On top of that, of course, there is also an element of inflation also on the advisory fees because certain expenses increased, but that is -- that other major drivers for that increase.

Our next question comes from Simona Sarli from Bank of America.

I have 3, please. So the first one, if you could a little bit -- provide a little bit more color on your expectations for Q1? You were mentioning that you expected to exceed Q4. What are your underlying forecast in terms of gross profit per ton and volumes? Also, secondly, on your outlook for 2023. And I appreciate that you might be overly cautious to extrapolate the trends for 2023 from Q4 during -- due to the destocking trend. But can you talk about what are your expectations on your profitability guidance for 2023? And especially if we compare it to the guidance of one of your competitors, it seems to imply quite a significantly lower year-over-year decline. And the third question is just on what are your expectations on financial expenses for 2023?

Okay. Simona, thank you very much. I will take the first 2 ones, expectation for Q1, Q4 and the outlook and Kristin will answer the financial expenses. On the expectations for Q1, Q4, as we said, we just want to let you know that you should not now assume that the Q4 run rate is the run rate we see at this moment. Q4, as Kristin has outlined diligently, has been impacted by quite some special effects or due to year-end effects. So currently, we see the business development in the regions quite differently. Again, I've said it frequently, we are still optimistic on the U.S. or not so pessimistic like many people are, we see first signs of recovery in China and that might have ripple effects into Asia as well -- positive ripple effects as we go forward. Maybe not so quickly, but latest in the second half of this year. And then Europe remains to be a challenge. Still, as I said, we are in a phase where inventory control measures are clearly visible. Typically, it is about 4 to 6 months. So it kicked in, in Q4. And so we will expect that maybe Q1 marks at some point of time, the inflection point, then the inventory depletion is coming to a stop. But please also understand that inventory control measures at our customers are also driven by price expectations of raw materials going forward, plus also taking larger bets and larger risks against stable supply chain scenarios. And this stability and this normalization, we clearly are foreseeing compared to what we have seen the last couple of years. So this brings us, when we look at the regional split, to a view that Q1 actually will show a better performance than what you have seen in Q4 out of those reasons. Outlook 2023, we believe that overall, we see in the second half of 2023, also recovery, which will be translated into higher volumes, which at least -- this is what we can somehow deduct from some of the activities we already can recognize. We still see a stable business, in particular, in the areas of pharma. The whole Life Science sector is actually performing still good and still well. But we do have, of course, impact on the material side, also water treatment to some extent, which we need to digest. But overall, the outlook, we believe coming from -- and you have many times referred to that topic, what's the element of over earnings in 2022. I think the guidance we give to you is something we are -- we clearly are reflecting that we are less pessimistic than a lot of people are for the year 2023. And thus, even that we are giving you a broader range now, this is something which we see as a realistic guidance going forward despite the, I would say, uncertainties we clearly see in the market nevertheless. So Kristin, then will take over the financing topic.

Thank you, Christian. And hello, Simona, also from my side. Thank you for your question. In terms of financial expenses, we expect a slightly higher finance expenses compared to where we came out in 2022. Also here are several drivers. We do not plan for any currency evaluation in receivables and liabilities. On the other hand side, of course, we also have higher interest rates everywhere and that is, of course, affecting Brenntag, but all in all, it's a slightly increased cost we see going forward.

Can I please just follow up on the question regarding the 2023 outlook? Can you try to break it down between your expectations in terms of prices, so gross profit per ton and volumes? So you have already talked about volumes picking up in the second half, but can you talk a little bit more about prices as well?

So generally, Simona, if you look at the entire year, we foresee slightly declined GP per ton values. However, I think we see a mixture during the course of the year. So currently, the GP per ton amount are still quite high. Volume's a bit slower. That reflects the destocking effect we described further for Q4 already, and that will also last on a little bit in Q1. So there's always a mixture between price and volume overall, slightly lower GP per ton values and increased volumes. So that is what we foresee with the seasonality -- is included.

Our next question comes from Suhasini Varanasi from Goldman Sachs.

My question is first on Slide 32 of your presentation, please, where helpfully give the details on Q4 trends by region. Specifically, the question relates to Specialties division in EMEA, where despite the 6% constant currency growth, you've seen like a 23% decline in operating EBITDA. I'm just curious whether this is reflecting the one-off impacts or something else? And what is the normalized number adjusted for it? I take the questions 1 by one, if that's okay.

Yes. I think Kristin.

Yes, I will take that. Thank you for the question. That is exactly driven by the one-off just described and especially the EMEA region was affected by the true-ups I described. So therefore, there would be a decline in EBITDA as well as we take that out, but it would not be that steep, I hope.

Got it. Got it. And the 2 items were basically the payment for cost-of-living adjustment and the service fees.

The true-ups and the onetime payment, yes, to the employees. Exactly.

Got it. And is it possible to give some color on how you see wage inflation in Europe and America for -- America -- North America for 2023, please?

All in all, for our group, we expect wages and salaries to increase with the mid single-digit number. And that is, of course, now -- exactly right now up to negotiations, but that is our expectation if we look into the year 2023.

And the last question for me is on the all other segments. Within the EBITDA, it's almost doubled in size in '22 versus '21, and I appreciate you gave a lot of color during the call on what drove the increase. But the question is, what's your expectation for '23, please? Should we expect a further doubling or some normalization over there? Just some color there, please.

Also here, we will see some normalization. However, we will see higher costs compared to a normal strategy and DiDEX freeze time, so to say because we will see that we need to invest in our DiDEX program and our excellence program and also in our IT infrastructure going forward, and that will lead to higher costs. And as I said before, this will be all included in our operating EBITDA and EBITA we will not present that as special items as we have done that in Project Brenntag.

If you don't mind if I squeeze one last question and it's for Christian. You mentioned that you would like to close the performance gap on Specialties a couple of times during the call. Please can give some color on what exactly is holding you back at the moment? Is it a mix effect on -- in terms of exposure to Life Sciences, for example, or something more fundamental on investments in IT that you're planning to in '23, '24?

Yes, I think -- well, thanks for the questions because I think it's a highly relevant one. And I mean it's clear that we fully recognize the performance gap. And I would say it's three-folded. One has to do with how our portfolio currently looks in Specialties relative to the pure-play peers we have in the market. So our exposure towards Life Sciences is less. And we have also businesses which are like Material Sciences or water treatment, but also lubricants basically showing a different growth profile, but also showing a different profitability profile. So we need to work on that portfolio. That's pretty clear. And we will take this up. The second one is performance and performance management, in particular, when it comes to pricing and how you price in the market and how you are able to translate the raw material costs you have into value-creating pricing strategies. So this is something which we clearly see that, but also in general, also cost control and being very clear about what do we expect from that division going forward, so they become better in line with peers. The regional exposure, we should not forget we have quite an exposure in Asia and one needs to be no excuse, but one needs to be fair that the second half in Asia was really difficult business-wise. And that has also led to that topic. Again, this is a passing topic, and I guess everybody is exposed to that, but it's something to be factored in. And then we talk about skills and capabilities. We need to continue to build in Specialties, which we don't have everywhere fully fledged yet. So this is -- as I have said, when we started the new operating model, a multiyear journey, but Horizon 2, the next strategy side is exactly where to close that performance gap, also when it comes to M&A and how we want to strengthen our exposure towards Life Sciences and also in particular towards pharma. So I think this gives you a little bit of flavor of what is ahead of Michael when he joins to really execute on. But that's something which we clearly have in few and we will as I've said, address it very consequently.

Next question comes from Thomas Swoboda from Societe Generale.

I will limit myself to one question and -- well, my question is on the synergies on running Specialties and Essentials [ proof ]. So could you please remind us what synergies divisions do share [ which ] benefits you have from having under one roof. This is my question.

Yes. Thanks, Thomas, for the question. I mean one needs to remind ourselves where we are coming from. We're coming from a full-line distribution model, we're actually -- any business was taken on in Brenntag and executed. And we are now on the trajectory of -- we have created and give you that transparency on the performance of both specialties. And this is a journey which actually is quite -- is taking quite some time because once you separate those 2 divisions more and more as we do, and we have announced in November, you need to build in both divisions the necessary capabilities in order to really, really drive them independently going forward. I just mentioned 2 examples. One is the supply chain capability in Specialties, which we don't have today. We need to build this up in order to keep this -- to make this more and more independent from each other. And the other one is would be a global sourcing capability we have and need to execute our Essentials' strategy, which I believe is the -- also quite unappreciated story or tool we have in our company. So we -- as I said, we consequently will work that part and walk that path and create the optionalities to make them more and more independent from each other, but this is also not happening overnight because you also need to have structures and processes and legal entity structures in place, which allow you to do that. But this is clearly what is the agenda of Horizon 2 to continue on the journey and building those capabilities that we have. While we are on that journey, we want to benefit from cost synergies, which are provided at this moment from global business services, where both divisions are actually plug and play into. And so you don't have to duplicate for both divisions, let's say, HR functions or finance functions or even IT. And that gives us, of course, advantages. We also talk, for instance, in the area of indirect procurement, just to give you an idea. Indirect procurement, we spent about EUR 1.2 billion in indirect procurement. So we are a big buyer of packaging, a big buyer of drums, a big buyer of logistics services where we have scale effects by just having the sheer volume of indirect procurements and doing those services for both divisions, just to name another example. So I think there's a lot of synergies, which we are clearly seeing and which we want to benefit on based on where we are on our journey. And as we go forward and strengthening capabilities in both divisions, step by step, we also want to understand are those synergies still big enough to justify keeping them together or not. But this is what I said in the beginning when we talked about our large transaction, which we did not continue. You expect us as management to explore the optionalities and understand all the relevant impacts. And this is what you can expect from us going forward that we explore those optionalities and then take the relevant decisions to really create value for our shareholders. This is why we are here. This is why we also listened to all the arguments which we have with investors or hear from our investors, and we are intensively engaged with all investors to reflect that we build their opinions and their views into our decision-making. And this is where we are in our trajectory. And I think that's, I think, hopefully, is explaining a little bit of how we see the situation at this moment.

Our next question comes from Isha Sharma from Stifel Europe.

I just have 2 left, please. If just for the one-off in Q4 and even assuming a sequential improvement in Q1, it seems that the lower end of your guidance is more realistic from today's perspective than what needs to happen to achieve the upper end. That would be the first one. And on -- the second question is on free cash flow. What are your expectations on the net working capital requirements in '23 after the release that we have seen in Q4?

Yes, I will take the guidance question, Kristin will take the free cash flow question. On the guidance, I think our underlying assumption is that currently we see, in particular in Q1, still quite substantially [ in ] on inventory control measures. And so the volumes are still subdued. And we clearly see that. And that will continue, as I said, most likely towards the end of Q1 and I don't how far it reaches in Q2, but at some point of time, we should see the inflection point. But our underlying option is that we do see a gradual improvement already in the second quarter out of China, but definitely in the second half for 2023. And this is why we believe the guidance we have given to you is a realistic picture based on those scenarios, again, in the absence of any exogenic shock, which could happen due to, I don't know, the China situation or any other geopolitical tension, which will add to that again. So we need to see that, but greater normalization as we go forward and a different volume scenario in the second half and in the first half. So those would be the key elements. And then the free cash flow comes from Kristin.

Isha. So on the cash flow and the working capital, especially, we see or we foresee that we will have a slight inflow out of working capital out of 2 reasons. First of all, a little bit lower business movements. And on the other hand side, of an improvement in our turns, I mentioned before that we still saw that higher inventory due to investments in additional stock, which we assume to be lower for the year 2023. So slight improvement in the working capital.

Next question comes from Chetan Udeshi from JPMorgan.

A few questions. I'll start with the first one on just the OpEx. I know there have been a lot of discussions. But I think one of the key pillars of Project Brenntag, as I had understood, was to manage the cost base better. And I'm just struggling to see that in the numbers because your OpEx organically based on my numbers was up 12% even when volumes didn't grow in 2022. I think this is on top of a similar number in terms of increase last year. So I'm just wondering that EUR 190 million of cost savings or efficiency improvement that you talked about, despite those, why is the cost inflation so high in the business in general? I understand some of the IT spending, et cetera, et cetera, et cetera, but still seems the cost inflation that we see at Brenntag is like very, very high in general, despite the general inflationary environment given the efficiency programs that you have been running behind the scenes. The second related question, again, it is probably part of the answer as well. But if I look at the employee cost per head, it's almost 25% higher than in 2019, if my calculation is correct. How much of that can come back in 2023? Are you assuming that you will have lower employee compensation costs in 2023? Is that sort of built into the bridge for 2023? The third question, just to clarify on Q1 outlook. Are you expecting Q1 to be about EUR 400 million, again, just to get a sense of how much second half recovery we need to see to hit the midpoint of the guidance? Or you still expect Q1 to be below EUR 400 million? And last simple question, the share buyback, is the intention to cancel those shares? Or are you going to put them into treasury and decide thereafter what to do with them?

Okay, Chetan. Kristin will take the tax and the share buyback questions. I will take the Project Brenntag question and Kristin can also add to OpEx if she wants and I will also talk about the Q1 outlook. Actually, I will not talk about the Q1 outlook quantitatively, Chetan, I think I hope you understand that I will give you not a number here. On the Project Brenntag, yes, I mean, we -- when we look on all the measures which we have implemented over those last 2 years, creating the operating model, but also clearly shutting down 100 sites globally and moving those volumes, for instance, which have been third-party warehouses into our own network require that so that was part of the plan. So that's not an issue, but is explainable on the FTE side. You also need to incorporate this into your infrastructure, into your warehouse network and that has added some people back. We have also structurally reduced the 1,300 accounts and this was name-by-name cases. So these people have left the company. So it's not just a lump sum number, it is very clearly individuals who left the company and also those positions have been eliminated. This is what we understand as structural changes. On the other hand, we have to take -- and this is where we took deliberate choices also invest into our capabilities going forward. This is, in particular, in the digital arena where we need to strengthen our capabilities according to the DiDEX program. So you see already some investments also in people and in FTEs there. You should not forget that we added almost 800 people -- even more than 800 people due to M&A. So this is also something which since the baseline of 2019 has added to our headcount, which essentially stayed flat over those 2.5 years. And also, we took steps which are necessary like creating shared service centers going forward where you have an interim period of time, double organizations or shadow organization in the shared service center which takes over the job from the people in the existing organization. And as that transfers into the shared service center process is happening, then you start to actually reduce the head count, which you have in your remaining organization going forward. So there are quite some explanations possible about why you see, what you see. And also, I mean, this is clear that Project Brenntag in many cases, has allowed us to make those deliberate investments also going forward. On the Q1 outlook, as I said, I will not give you a firm number. I can only repeat that we see Q1 sequentially improving compared to Q4. And that, I think, is something -- the only thing I can say at this moment here as we typically would not guide you for Q1 results. But I wanted to give you a flavor about what we see in the market right now. And on the tax and share buyback, Kristin will answer your questions.

Thank you, Christian, and Chetan. First of all, on the share buyback, we will hold these shares in the treasury account. So it will be return shares account and we potentially would decide later on that we cancel these shares, but initially, we will keep them. and we can use them for any permissible purposes available under the regulation, which is applicable for us and as well also according to our AGM authorization. On the employee costs, I think there are several effects on that one. First of all, of course, there is inflation since 2019, it's a several year inflation. You can see here on tax. On the other hand side, we had a remarkably high variable tax in 2022 due to the extraordinary results. And the second -- the third thing is then also that we have some specialists joining Brenntag because Christian described it already that we want to be a more digital and data-driven company. And of course, there are different costs bound to those employees. I think that is what we can see in the development of the tax cost per FTE.

Can I just quickly check on the share cancellation or share putting in the treasury. Like you said you will decide at a later stage. So can we also interpret that you can use the shares for any acquisition? I mean, is that the reason why you're giving yourself that time of keeping them into treasury and not canceling right away?

So there is no special reason behind that. So there's no special M&A deal in front of us where we would need it, if that is your question. We have just not decided it yet, but for the time being, we'll keep them, but there's no -- there is no certain targets behind that discussion.

And the next question comes from Markus Mayer from Baader-Helvea.

3 questions from my side as well. First one is just modeling question on your guidance. What cost of the strategy to win and DiDEX, et cetera, are baked in the guidance from the overall costs you have elaborated on your Capital Markets Day? That's my first question. And the second question is then you've heard from private peers, India and Essential business that they have seen basically since September, October, higher volumes floating into Europe from [ DS ] and also Middle East. And I was wondering if your strong gross margin growth in Essentials in EMEA was due to this effect? Or was there a special effect in there? That's my second question. And then the third question would be, do you expect any effect on the potential reduction of U.S. railroad safety legislation on your pricing power? That's all.

Thanks, Markus, for the question. I think Kristin will talk about impacts of DiDEX on our guidance. I'll take the other 2 ones. When you look at the situation which we currently see in Europe and that is with us now since quite some time, high energy-intensive value chains are under severe pressure in Europe. Just take our example. We are now one of a top distributors of caustic soda and currently, while 30% of our demand in Europe is actually coming from the U.S. into Europe. So it tells you this is quite unusual that has not happened in the past. We also bring other materials outside of Europe into Europe like hydrochloric acid from Egypt or from India. So these are exactly the opportunities which we are able to harvest in our Essentials setup. I think, as I said before in one of my answers, the untold really great story also in our strategies, Essentials, really owning the last-mile delivery with the combination of that global reach. And this is currently in full swing, and this is what has contributed to that performance of Essentials. On the U.S. rail enforcement act, yes, I mean, transport is always an issue for us and for everybody in the industry. We have not now quantified impact on that. But overall, we believe it has not a dramatic impact on us as we majorly transport our goods in U.S. food truck and lesser [ food ] rates.

But Christian, could ask -- still another question here, I add on. Is it overall positive for you as this would basically lift the cost for railroad transportation? And as such, then the truck transportation could be more cost competitive?

Yes and no. Because I mean you also bring in raw materials, for instance, by rail. So it's -- you basically have a double-edged sword here. Typically, it could create a little bit more disruption. I agree with this one, and that's typical for Brenntag, some volatility is always helpful. But again, I would not see now a material effect, which you would immediately recognize. We still believe, of course, that owning -- we own transport, but as we said, about 55% of our transport we do by ourselves is offering advantages for Brenntag. And we breathe with the 45%, which we source from the market. So we believe that we have a value in that fleet, which we own in the United States. And on the guidance on DiDEX, I mean, Kristin, please.

Markus, on the guidance from my side. So first of all, we have got 2 impacts here, the positive impact coming out of the strategy we implemented -- or we started to implement it last year. There are some benefits already coming in next year. They are included in the -- those are included in the guidance and also the cost element. If you go for the net number, there is a lower 2-digit million euro negative impact, which is included in the guidance.

[Operator Instructions] Ladies and gentlemen, we have no more questions waiting in the queue. I would like to hand over to Thomas Altmann to conclude this conference call.

Thank you, Stephen. This brings us to the end of the conference call today. Thank you very much for joining us today and your interest in Brenntag. If you have any further questions, please don't hesitate to contact us. We will publish our Q1 2023 results on May 10. Until then, we are looking forward to further discussions with you. That's it for today. I wish you all a good day and a good week. Goodbye.

Ladies and gentlemen, thank you for your attendance. This conference has been concluded.