Evonik Industries AG (EVK) Earnings Call Transcript & Summary

Ladies and gentlemen, dear investors, the analysts here in Essen and also out there on the screen, welcome to next-generation Evonik. About 4 years ago, I remember where we started our journey to build a best-in-class specialty chemicals company. Three years later, in 2020, we introduced our new divisional structure to you and had a deep dive into the divisions last year during our division spotlight series. And today, we are very happy to embark on the next phase of our strategic transformation together with you today. Therefore, it's my pleasure to welcome the Evonik Board here with me in Essen. This is Christian Kullmann, our CEO; Ute Wolf, our CFO; and Harald Schwager, Deputy CEO, and responsible for innovation. Our fourth Board member, Thomas Wessel, Chief HR Officer and responsible for sustainability, sends his best regards. He would have loved to be with you also today. But unfortunately, he had to attend employee meetings at our sites in Marl and Antwerp related to the intended divestments of the Performance Materials division. So he cannot be with us today, but he will join us via a prerecorded video message later today. We have an agenda today. We will start with the 4 presentations just in a minute. That should take about an hour. And that is followed then by the Q&A session. I will give you some organizational details on that later. For now, that was it for me. I hand over directly to Christian for the first part of the presentations.

Thanks a lot, Tim, and also very warm welcome from my side. I'm really glad having the chance to being with you here today. We, the Board of Management, are excited to host this year's Capital Markets Day as live event right here in Essen. So a special welcome goes to our guests here in our headquarter. We already had a quick chat before the event and we'll, for sure, continue our inspiring discussions after the official end of the event. But of course, we also welcome our virtual guests out there in front of their screens, looking forward to discussing your live questions in the Q&A session. So ladies and gentlemen, let's dive right now into today's agenda. But before taking the longer-term strategic view, we'll start with a more shorter-term picture in detail our Q1 results, as well as the current challenges in the European chemicals industry should be a little bit reflected in how we, at Evonik, are dealing with them. In other words, let me hand over to Ute because that is, in fact, her hometown. Ute, stage is yours.

Thank you, Christian, and welcome from my side as well. Despite all the challenges around us, we had a strong start into the year. In the first quarter, we again successfully compensated the significant increase in variable costs via our own price increases. But obviously, costs are arising further. So we are currently implementing the next rounds of price increases across all businesses. So far, the strong demand in our long-standing customer relationships enable us to further compensate the higher input costs. We see that the logistics situation globally remaining on strained levels, still limiting our sales potential. And we need to monitor closely the lockdowns in China and the impact on local and global supply chains. We can see first problems in some businesses to deliver products to our customers. However, so far, no broad-based impact across the portfolio. On the energy side, we have taken the decision to extend the run time of our coal-fired power plants here in Marl in Germany. Of course, this is not a permanent decision, but it currently gives us flexibility and security in energy supply. With this step, we reduced our gas needs by 15% and increased our energy hedging rate to 95% for the year 2022. While obviously, the risk of gas export stop from Russia remains imminent, we have locked in the energy costs for the current year, irrespective of further spot market developments. On the operational side, we continue to benefit from 2 Evonik specific factors. First, we expect amino acid prices to rise further. This is driven, on the one hand, by the ongoing tight supply-demand constellation and logistical challenges in the market. On the other hand, we see a push in the supplementation of methionine and lysine in animal feed formulations to compensate the high soft commodity prices. Second, Performance Materials continues to benefit from the balanced to tight markets in the C4 chain and acts as a natural hedge against higher oil prices in our portfolio. We expect these 2 factors to continue at least into the second quarter. Also on the demand side, we so far have not seen any major changes in the overall good trends of the first quarter. So we confirm our outlook for the full year, obviously, with the disclaimer that there will be no further escalation in the geopolitical situation or disruptions in gas supply from Russia, but baking in the scenario of a more cautious view and a macro slowdown already from Q3 onwards. So far on the short-term perspective, now back to Christian for the longer-term strategic view.

Thanks a lot Ute. Ladies and gentlemen, starting with a look in the rear mirror, the last years have been, let's say, pretty challenging for the overall economy, for the chemicals industry and for us right here at Evonik. And it feels, let's say, pace of always new challenges is even accelerating. 3 years ago, nobody would have dared to foresee that we are faced with the global pandemic, that we are faced with a war in Europe, that we are faced with the end of [ marginal terrorism ] as we know it, that we have faced with massively stressed global supply chains; and last but not least, with a severe energy crisis. Also we at Evonik have not foreseen any of these events. But with a consistent, with a consistent execution of our long-term strategy and maybe also with a little bit of luck, we have been as well prepared as we could have been and have managed the challenges pretty well so far. We've entered into the field of mRNA vaccines very early, we have strengthened our local exposure behind trade barriers via investments and acquisitions too. We have reduced our cost base, both in administration and our operating businesses. Nevertheless, or even more so, it is important to constantly review and adapt our strategy. If it needed one more proof, then the current energy crisis demonstrates the importance of sustainability. We at Evonik have a portfolio, which is strongly geared towards the major sustainability trends. And these sustainability trends, these products will be the futures -- will be the winner of the future, future winners in other words. In a world where sustainability and independence from fossil energies will play a decisive role. So now, ladies and gentlemen, it is the right time to take the next step on our strategic agenda and to depart into the next phase of our transformation. We are even more systematically integrating sustainability into all elements of our strategy into portfolio management, into innovation steering; into capital allocation; and into our culture; and worthwhile to mention, into our financial and nonfinancial targets too. With this, we create what we call the Next Generation Evonik. And you will hear today from us here on stage how this Next Generation Evonik will look like. Let me start with the portfolio element of our strategy. Over the last years, we have consistently shifted our portfolio towards a higher share of specialty businesses. In the next phase of our transformation, we are now taking the step to fully focus on 3, our 3 highly attractive growth divisions: Specialty Additives, Nutrition & Care and Smart Materials. We'll exit Performance Materials, and the preparations for all 3 business lines are already ongoing. You will see good progress and some news flow already in the course of this year. And we are aiming, we are aiming to find new owners in the course of the next year, which then results and the dissolution of the division Performance Materials. This decision, ladies and gentlemen, this decision to divest close to EUR 3 billion of sales, which is about 20% of our total portfolio, is based on our existing strategy and financial criteria. Our future portfolio, our future portfolio will be more resilient, less capital intensive and more, definitely more customer-innovation driven. It will have around 1 percentage point higher top line growth and around 150 basis points higher margins over the cycle. But the decision I've informed you about is also a result of the very consistent integration of sustainability elements and KPIs into our portfolio management. The exit of Performance Materials will increase the sales share of our Next Generation Solutions by around 5 percentage points, and it will reduce our CO2 emissions by around 20% for Scope 1 and Scope 2. And -- ladies and gentlemen, and also our future capital allocation is strongly geared towards our sustainable transformation. We will use both, the divestment proceeds from Performance Materials as well as our operating cash flow over the next years, to invest heavily into the 2 core elements of our handprint and footprint. In other words, our Next Generation Solutions and our Next Generation Technologies. You will hear more about these 2 elements today, and you will also learn why they are not only very beneficial for our handprint and for our footprint too, but also for our growth and for our returns. And also M&A will remain an active part to accelerate our sustainable portfolio transformation. We will target businesses with a strong overlap with our 3 existing growth divisions, which are characterized by above-average growth, sustainability profile and returns. Chart 12 gives you an overview of the most attractive growth areas in our portfolio. These are our largest and most attractive investment projects over the next years: expansion of our specialty Additives Platforms; investments into drug delivery and specifically, mRNA technologies; biosurfactants; gas filtering membranes or specialty peroxide solutions. All of them are characterized by returns, by returns that are clearly above our ROCE of 11%. This was, ladies and gentlemen, short and crispy, the portfolio part of the next phase of our transformation. Let me now cordially hand over to Harald for our next-generation innovations. And after that, Thomas will give you, via a recorded message, some insights into our sustainability strategy before Ute will summarize the impact on our financial targets. And I will be back for the final wrap-up. With this, I cordially hand over to Harald.

Thank you, Christian. Welcome to everyone in the room, and welcome to everyone on the screen. Innovation is a key pillar for future success of Evonik as a pure-play specialty chemicals company, it is how we maintain our competitive edge. It's the basis for our sustainable growth. Sustainability has a double meaning here: continued sustained growth of our innovation pipeline and innovation sales; second, growth mainly through green and sustainable products and processes. The mission of our RD&I organization can be derived from Evonik's purpose with main contribution to beyond and tomorrow. It leads to innovative products and process solutions that enable sustainable growth. The chemical industry is a key driver for a more sustainable economy. We need completely new products and processes. We need digital and connected solutions. And all of this in ever-shorter innovation cycles and last but not least, under increasing regulation. To meet these challenges, we have decided to realign our innovation activities in 2020. The global RD&I function is now even more closely integrated into the company's operational business than before. And we have fully integrated sustainability into all RD&I processes as guiding principle. Let's start with how we steer our innovation portfolio. So basically, how we allocate our resources. In this context, resource primarily mean an R&D budget of above EUR 450 million per year, more than 2,500 employees. This scale is a clear differentiator for us. Steering happens through the RD&I Council, which is composed of the CIO, our Chief Innovation Officer; and all divisions heads and is chaired by myself. Sustainability is fully integrated into decision-making processes here. We follow a stage-gate process. And only if the overall evaluation is a positive one, we start an innovation project. We apply our well-established park assessment logic to identify handprint improvement potential. We consider a variety of environmental factors to identify footprint-reduction potential, such as anticipated greenhouse gas emissions or energy and water use. This leads us to focus on dedicating our R&D budget mainly to the Next Generation Solutions and, of course, technologies. You should all be familiar with this slide you see on the screen, our 6 innovation growth fields by now. So I will keep it very short here, just 3 impressive numbers: growth rate, 40% in '21, resulting in more than 500 million new sales achieved, well on track to achieve the 1 billion by 2025. The innovation process does not stop once the growth field has first commercial sales and success. Let me demonstrate that on the next slide using the example of membranes. The development of our gas-separation membrane is a good example of how teams with -- in Evonik work together, how innovation is a continuous process. 2008, ladies and gentlemen, first idea for this product developed in Creavis, our strategic innovation unit and business incubator. But Creavis did not work in a vacuum. It involved the business, high-performance polymers from the start. The business then took over the project in 2010 and started commercialization. The initial focus was on upgrading biogas, example given, biomethane. But the cooperation between the various R&D functions with Evonik did not end there. Creavis is still involved today. Further innovation took place mainly through the development of additional applications such as helium or nitrogen filtration. Membranes are very successful, with sales in the mid-double-digit millions in '21 and continuing to grow at a CAGR of around about 30%. New products are constantly being developed. The potential is enormous. For example, for the new upcoming hydrogen economy. More on this topic later. In most people's mind, innovation is about new products, but process innovation is as important for us in driving the company's profitability and sustainability forward. Let me highlight just one of the 3 examples from this side. SAM 3D stands for Evonik Competence Center for simulation and additive manufacturing. It focuses on the efficient design of customized chemical reactors for our production plants. We help of computer simulation supported by artificial intelligence and manufactured with high-quality 3D printers. Advantages, almost no restrictions in complexity, less material consumption, compact reactors and smaller separation units with lower energy consumption, less capital intensity, and therefore, of course, at the end, fewer emissions. This enables us to test process improvements before them -- before upscaling. The first part of my presentation was very much about operational, more shorter-term innovation. Let's now move on to the longer-term perspective. Creavis has been our strategic innovation unit for more than 20 years. Now it has been positioned even more clearly as business incubator to develop transformative new businesses, beyond the current product and market focus of the operating units, but always with a clear business and use case in mind. And it will position itself even more strongly as a pioneer of sustainable innovation by focusing exclusively on Next Generation Solution and zero or low-carbon dioxide emissions. Creavis takes a cross sector interdisciplinary approach. We partner with universities, with start-ups, with industry partners, ideally within an entire value chain or even better, a value cycle. The target for all Creavis project is commercialization within a 5 to 10 years' time frame. So we are working on our innovation pipeline beyond today's innovation growth fields. These projects are clustered in the Creavis new growth areas. This is the long game. This is about identifying the key themes of the future, such as hydrogen, circularity, prevention and well-being, all of which are linked to the 4 sustainability focus areas. With the proven success with the innovation growth fields, we are confident that we will focus on the right topics also beyond 2025. Let's look at a specific example, which supports the hydrogen economy. There are high hopes, there are high hopes for green hydrogen being a renewable resource in the energy transition, both as a fuel for industry and transportation and as a key raw material for the chemical industry. But green hydrogen is still much more expensive than conventional hydrogen. To overcome this, we need sufficient low-cost electricity from renewable sources and efficient electrolysis. Evonik has developed a novel Anion Exchange Membrane, AEM, that is a breakthrough for the electrolytic production of hydrogen. The membrane was developed jointly by researchers from Creavis and experts from high-performance polymer business line. Electrolysis with AEM has clear advantages compared to other electrolytic processes, resulting in an around 20% to 30% lower CapEx and 10% lower OpEx. The market potential is enormous. In our base case, the market potential is EUR 1 billion. We have the leading AEM technology. So sales potential for this membrane alone is about EUR 100 million by 2030. Together, we selected partners, we are currently working on the commercialization of our membrane to help AEM technology achieve a breakthrough. The production is currently being ramped up at Creavis to a continuous process. First, sales are planned for the end already of this year. Our innovation activities are complemented by our venture capital activities launched in 2012. We've designated funds of EUR 250 million. We made 46 investments in start-ups and specialized venture capital funds over the last 10 years. On average, our venture capital team reviews more than 1,000 start-ups per year and finally, invest in less than 1%. For example, in '21, we added 10 new investments to our portfolio. There are mainly 3 benefits. In the first step, startups provide fast access to innovative technology that support us. In a second step, we might even integrate the start-ups into our operating businesses, 2 companies, Structured Polymers and JeNaCell, have been fully acquired by Evonik. We are today generating sustainable earnings. In the third step, we might then finally exit our investments. To date, we realized 7 exits from our portfolio. A very recent example is the exit of FRX Polymer at the Toronto Stock Exchange, which most probably will happen in May. Besides the strong strategic benefit for Evonik, we target an overall financial return of twice the invested capital. Already today, we achieved significant financial returns and expect an evergreen situation by '23, meaning that our exit proceeds will entirely finance the new investments. Venture capital is also a key element of our sustainability strategy. To this end, we have launched a new Evonik venture capital fund, dedicated exclusively to investments into technologies towards carbon neutrality. Investments are made with the primary aim of achieving CO2 mitigation by reducing and eliminating emissions and promoting carbon sequestration. We intend to make 15 to 20 investments worldwide over the next 5 years. The Evonik Sustainability Tech Fund has an investment volume of EUR 150 million, in addition to the existing EUR 250 million. And we expect to close the first investments within the next weeks. To summarize, the chemical industry is a key driver for a more sustainable economy. Innovation is a key to success. At Evonik, our RD&I organization is well positioned internally and well connected externally to achieve our goal of sustainable growth. Sustainability is fully integrated into innovation portfolio management, as can be seen in our innovation growth fields and the Creavis new growth areas. In addition, Venture Capital is invested in a sustainability tech fund to capture additional business opportunities. Thank you for listening, and Ute.

No, Thomas first.

We will now play. There we go.

Welcome also from my side. First of all, my apologies for not being able to attend in person today. Related to today's announcements around the exit of our Performance Materials division, it is my role as CHRO and Labor Relations Director to attend information meetings with our employees in Marl and in Antwerp, which we unfortunately had to move on short notice. Nevertheless, it is my pleasure to guide you through the sustainability pillars of our strategic transformation road map with this prerecorded video message. As Christian already pointed out, along our transformation into the Next Generation Evonik, we are now fully integrating sustainability, and that is why we are committed to further grow the portfolio share of our most sustainable products, our Next Generation Solutions, and to strive for constant improvements of our environmental footprint. And it also means that we set the right governance and adhere to the highest reporting standards, a continuous improvements year-by-year. Our sustainability approach is based on taking action in 4 sustainability focus areas that are based on the United Nations' SDGs. It is about making our impacts and contributions in the fields of fighting climate change, driving secularity, safeguarding ecosystems and ensuring health and wellbeing. So how we do? We actually integrate sustainability into our strategic management processes. We do it with 2 sophisticated tools that we have developed and optimized over the last years. Our portfolio sustainability analysis on the handprint part and our emissions data cube was the footprint part. We have developed our portfolio sustainability assessments together with other major players in our industry on the platform of the World Business Council for Sustainable Development. In our emissions data cube, we assembled all available data into a single point of truth for baselining, calculating and forecasting carbon emissions above all scopes and for all of our production sites worldwide. With these 2 tools, sustainability is ingrained in all aspects of strategic decision-making; portfolio choices; innovation priorities; and most importantly, capital allocation. Let me now give you some more details on our portfolio sustainability assessments and how we have derived our handprint target, the new Next Generation Solutions goal out of it. We are using the PSA methodology to analyze all of our portfolio, and only best-in-class products that come with a sustainability benefit clearly above market reference qualify as Next Generation Solutions. If there's just any red flag in just any of those 7 signal categories, the product will be ranked as challenged or a transformer. The main findings of our sustainability analysis are: Evonik generates 91% of sales with products and solutions whose sustainability performance is at least in line with the market reference. More than 37% of our sales come from products rated as leaders or drivers, which together makes a class of our Next Generation Solutions. Since they showcase above-average performance and growth rates, it may not come as a surprise that we aim to substantially grow the portfolio share of such products to at least 50% of sales by 2030. Our 3 main levers to achieve this are: firstly, and this is the most officious one, existing Next Generation Solutions with superior sales growth rates will take a higher sales share over time. Secondly, growth is generated by innovation and our new growth areas, which Harald just presented to you, meaning new products qualifying as Next Generation solutions with squeeze out older products with a lower sustainability profile. Lastly, challenged products or transitioners will be exited or reformulated. Since Evonik operates in a dynamic environment where technologies and regulatory requirements are subject to change, the targeted portfolio upgrade will be a matter of constant evolution and permanent improvements. So far on the handprint, let me now jump to the footprint part of our strategy. Since 2008, we are reporting an extensive overview of greenhouse gas emissions from the extraction of raw materials to production, to disposal of the products, so covering all scopes. As you all know, working on the reduction of Scope 3 emissions remains a tough nut for everyone in our industry. A lot of it goes beyond our direct control and is influenced by a wide variety of external factors. The availability of low-carbon feedstocks remain a limiting factor here, but we are acting on several levers. With raw materials being the biggest contributor, we are executing several projects with our key suppliers and customers. But the story is also about green opportunities in our portfolio. For example, we have kicked off a business-by-business analysis to assess where the market pull for greener products is strong enough to overcompensate the higher abatement cost for these products. And there's also the way of giving certain business into other hands along for backwards integration, better-captured carbon opportunities or asset transformation. But first priority in the next years is to achieve the highest possible CO2 savings for the lowest possible costs. This means concentrating on Scope 1 and Scope 2 emissions reductions primarily. We are fully committed to the Paris Climate Agreement, becoming climate-neutral by 2050. This is, of course, not new. But we have news today. First, we have set new targets. Second, we have joined the science-based target initiative. What does this mean more precisely? We are committed to significantly reduce our CO2 emissions by minus 25% for Scopes 1 and 2 by 2030. This is equivalent to a well below 2-degree target in the first step. Of course, being committed to net zero by 2050, this means our aspirations are really higher. Therefore, we will revalidate our targets as soon as we can for 1.5-degree scenario in close alignment with our business. To achieve our ambitious target, we see 3 main levers of emission reduction: first, exiting coal-based energy production; second, boosting our Next Generation Technologies; third, switching to renewable energy. Each element contributes by around to 1 million metric tons of CO2 a year. With respect to our tight agenda today, I will focus on the second lever here, our Next Generation Technologies. In the course of setting up our Evonik data emission cube that I presented to you earlier, we also performed an in-depth analysis of Evonik's greenhouse gas sources. We started with a pilot project at our Antwerp site. Here, we identified the levers with the highest energy efficiency as the best cost effectiveness profile, so with the highest environmental and financial returns. We identified, for example, well-known measures like heat exchangers for improved heat integration. We also picked innovative waste heat-up cycling tools like high temperature heat pumps or mechanical vapor recompression. And of course, we also got some valuable insights on complementing redesigns of some of our processes. Based on such Next Generation Technologies, we will be able to reduce emissions by 1/3 in Antwerp. And what is even more impressive and good news, all of these measures and investments come with a positive net present value, meaning they also generate significant OpEx savings. Ute will elaborate on that a little bit later. The findings at the site in Antwerp surface blueprint for rolling out analysis and measures throughout the group, this is delegated to a cross-functional project under the name EAGER. The full road map for all our sites is to be in place by end of 2022. By the way, EAGER will not just be focused on carbon mitigation but will also identify potentials in the water and waste reduction. Because combating climate change is not everything, we also keep a close eye on other urgent environmental challenges as defined in our sustainability focus areas. Take, for example, the important topic of water. Site-specific action plans were drawn up to ensure effective preventive measures. In parallel, we are currently elaborating new water-reduction targets. They will be based on the data of our main production sites, collected by the EAGER project team. I am confident we will be able to announce them with our next sustainability report in March next year. The same holds true for new waste targets. To make sure we deliver on our high sustainability ambitions and targets, we have integrated ESG aspects even more solely into our governance framework. For the governance part, we have now lifted our well-established Sustainability Council to Board level. It is supported by a sustainability circle involving all functions and operative businesses. On the remuneration part, we will now integrate sustainability targets into our management compensation scheme, and Christian will tell you more about it. Coming to a close, let me summarize the key points to take away from my presentation. With our sustainability focus areas, our portfolio analysis and our emissions data cube, we have set a strong foundation for fully integrating sustainability into our strategic management processes. We have set new ambitious target for both handprint as well as footprint. And we have lifted our ESG government to best-in-class level. Sustainability is an essential part of how we do business. And we will be ever more so in the future. This is what we summarize with our purpose leading beyond chemistry to improve life today and tomorrow. Thanks for your attention, and I'm glad to pass on to Ute, live in Essen.

Yes. Finally, let me put our portfolio sustainability and innovation strategy into a financial perspective. What does it mean for our capital allocation and how will it be reflected in our financial targets? We launched the leading-beyond chemistry strategy in 2017. Since then, we have been consistently working on portfolio, innovation and culture. This is clearly paying off. We established a very good promise and deliver track. And of course, a very strong support of that was our improved performance culture internally. When we look at the numbers, we see we delivered a strong earnings growth of 5% CAGR since 2017 and even stronger free cash flow growth with a 15% CAGR. In '22, despite all the challenges we described earlier, we have very specific positive and on specific positive drivers. First of all, our resilient businesses in Nutrition & Care, like Animal Nutrition, Health Care and Care Solutions. We have strong market positions and cost positions across the whole portfolio. And we have strong demand for climate-friendly solutions in comfort & insulation, high-performance polymers, silica silence, crosslinkers or additives, just to name a few of them. So we are confident to see further on earnings growth, not only this year but also in the years to come. Evonik has significantly improved its cash conversion rate and is today a real cash-generative businesses. Let me now talk a little bit about the sources and uses as financial people say, of our cash. First of all, our free cash flow is around EUR 1 billion with a cash conversion rate of 40%. For the normal environment, that's more or less the level for our free cash flow. On top, we will have inflow from the divestment of Performance Materials over the next 2 years. We will reemploy this capital to drive our green portfolio transformation, both into our handprint and footprint. Until 2030, so over the next 9 years, we will be investing more than EUR 3 billion in our industry-leading sustainability products. So what we call the Next Gen Solutions, and around EUR 700 million into the Next Gen Technologies. That will be complemented by targeted M&A, as you have seen that in the last years, very well-selected bolt-on acquisitions for our businesses. Of course, overall, there is an unchanged high priority for an attractive dividend, both in the level and the development over time. You have seen that we increased the dividend last year. So I think that is also an important path for the future to develop the dividend from today's level on. And as a foundation of that, a solid financial investment-grade rating. Yes, when you hear about billions of CapEx, some of you might raise your eyebrows. But of course, our disciplined CapEx approach does not change. Up to now, we spend around EUR 900 million of CapEx with a rough 50-50 split between growth and maintenance CapEx. To drive our transformation into next-gen Evonik, we will invest around EUR 350 million per year into our next-gen solutions. That is around 80% of the growth CapEx. On top of the EUR 900 million, we will see between EUR 50 million and EUR 100 million per year for footprint reduction via our Next Generation Technologies. That will ramp up now over the next decade. The budgeted numbers for '22, of course, will not change. Please note, these numbers still include around EUR 65 million for Performance Materials. And I want to outline again, green investments will have to be high-return investments. If we look at the Next Gen Solutions, beyond the superior sustainability profile, they also come with a superior financial profile. Harald gave you some examples in his presentation. We also have above-average growth in these products, margins and returns. We are already including the greenhouse gas pricing as part of the investment calculation. The same is true for our Next Gen Technologies. All planned investments into lowering our carbon emissions are NPV-positive projects. They are leading to significant OpEx savings as they are leading to a reduction in energy and a more energy-efficient process. The earmarked EUR 700 million of CapEx are expected to contribute notably more than EUR 100 million in OpEx savings per annum. This implies a return of around 15%, so exactly the usual level for investments. This concludes the first part of the presentation. Now let's move on to our financial targets. Where do we stand today? You see there is a lot of green ticks in the boxes here on this chart. We have made good progress in many of those EBITDA margin. We have a little bit of a structural issue as Performance Materials, has a structurally lower margin than the rest of the group. With ROCE, we made good progress. But of course, there is still a lot to do. If we look at those targets, they are still valid and are still ambitious target for the next years. For the future, we will now exclude Performance Materials when we talk about our financial targets. The most notable change is the volume growth target, that is being replaced by an organic sales growth target. And that, of course, reflects the higher specialty character of our portfolio after the exit of Performance Materials. Let's now move into the specific targets. Let's start with organic sales growth target of higher than 4%. If we look back the last years, our growth divisions already delivered 4% of sales growth per year. So the target is now to outgrow that level, especially with higher growth aspiration from the Next Gen Solutions and next-level innovations. Pricing power will be more into focus. We are in the middle of the stress test already in a high inflation environment, but also structural improvements will have to be implemented in the future. The sustainability focus and the innovation power will play an important role, both for volume and for price. Upgrading the sustainability profile of our existing products will drive and volume growth as well. One example is the spray-foam additives in Specialty Additives. And of course, we will have completely new products that step-by-step will drive the volume growth may also in the membranes business. And our sales targets from R&D point a little bit into the direction. If we look at EBITDA margin, you'll see with the exclusion of Performance Materials, we make a material step into the right direction. But of course, there is still more to do. If we look at the improvement levers that we have, it's very much about product mix. So the new solutions that bring better margins, higher value to our customer. One example is our LNP. Christian talked about it in his introductory notes. Another one is, of course, innovation growth fields in 3D printing and other applications that we have talked about. Another important part when it comes to profitability is the portfolio mix -- the product mix. And if we look at one example, Care Solutions, they have very consistently and very effectively changed their product mix over the years, phasing out the low-margin products and focusing on the specialties, on one hand, improving the profitability, but also on the other hand, really getting on a very impressive growth trajectory. And if we look at innovation also here in Care Solutions, we have a very good innovation with our biosurfactants. Another important factor is, of course, our cost efficiency, cost discipline. We have implemented effective cost compensation now in all of the units in the group, not only the operating business, but also in the administrative part of the group. So from that point of view, we compensate more than EUR 150 million per year in factor cost increase. Another factor in this is the supply chain optimization that we are working on, and that improves the profitability over time, but also the employed capital. And that brings me to ROCE, where I think we still have something to do. And we will have, in the first round, a slight negative impact in the short term from divesting Performance Materials as, of course, Performance Materials did not have a lot of growth investments in the past. So the asset base is relatively low there. But we have the positive levers in our hands, also for the ROCE development. CapEx discipline, I think, is one very, very important part of that. We have established that over the years. And you see from how we go restructure our capital allocation, that will be continued in the future as well. In the businesses, we are shifting towards more asset-light business models. So the CapEx projects tend to be not as big as in the past, so that helps as well. And of course, large projects from the past are starting now to deliver the returns. And I think the most prominent example is our PA12 plant here in Marl. Yes, to sum it up, we have improved our cash generation. That is a very good basis together with the divestment proceeds that we can invest into the green portfolio transformation, enhancing further our handprint, reducing the footprint. And these value-generating projects support not only our sustainability profile, but even more, our financial profile, our financial targets. So we can confirm today the 2022 target and also the midterm targets. Despite the challenging times, all our lever -- all the levers are in our hands. And with that, I hand back to Christian for the wrap-up of the presentation.

Thanks a lot, Ute. Thanks a lot, Harald. And for me, personally, it was great having the chance to listen to my colleagues, because it has enhanced my confidence that Evonik Industries is on a pretty good path into the future. We call it Next Generation Evonik. And from my side, I do hope, even a little bit more, I hope that I could have the feeling of being convinced that you do now have a pretty good picture about what Next Generation Evonik will look like. Harald, towards you, how sustainability is fully integrated into our innovation portfolio steering? That our innovation growth fields are pretty well on track, pretty well on track to achieve the target of more than EUR 1 billion additional sales by 2025, so in a very short term -- short period of time, short duration. And how Creavis, with the new growth areas, is already working on an even brighter future. Thomas explained how we'll grow our Next-generation Solution sales share to more than 50% and reduce, at the same time, our CO2 emissions by 25% until 2030. Finally, Ute described how we generate value with our investments into Next Generation Solutions and Next Generation Technologies and how our strategy execution is resulting consistently and permanently in progress toward our financial targets. I now will conclude on the cultural element of our strategy, because, ladies and gentlemen, it is all about people. And having said so, it is all about our employees. Our purpose and our values are inspiration, are inspiration and guiding principles of our culture. While safety that goes without saying has first priority and is a foundation of everything we do. Diversity is becoming more and more critical for our economical success. Our aspiration is to understand customers, the specific needs and challenges in all their complexity, and to offer them the best possible solutions. To be able to do so, diversity is keep it short, indispensable by increasing diversity and managing it properly, we create an environment that provides space to new impulses and helps us, helps us to overcome boundaries, learn from each other and consider as many perspectives as possible. We have set ourselves, in this respect, specific diversity targets, especially for the 2 most critical areas: first, gender; and second, the intercultural mix. But diversity is not only a numeric game for us. It is a matter of culture. The improvement, the improvement of our diversity culture is top of the agenda, top of the agenda of the entire Evonik management. With the top management, ladies and gentlemen, that serves as a prominent role model, with executives who have the necessary understanding and self-reflection to manage diversity and with employees, I've mentioned before, who appreciate different ways of thinking. Driver of this process is the Diversity Council, the committee that sets the strategic framework and is composed of members of the Executive Board, the divisions, regions and functions. All our measures regarding maximum diversity follow an integrated approach. We address the issue strategically, culturally and with an eye toward our processes. Ladies and gentlemen, this brings me to my second last chart. You've heard a lot today about how, how we are consistently integrate sustainability into our strategy and all of our processes. But finally, we also walk the talk by integrating sustainability into our management compensation scheme. The new system has to be approved at our AGM this year. The details will then be worked out until the end of this year, but it would make, from our point of view, very much sense to integrate, for example, our 2 sustainability KPIs into our long-term incentive, the sales of Next Generation Solution as well as a CO2 emission reduction. So this is my last chart. And I would hope that I do not even need it anymore. Over the course of the last hour, it should have become very clear why Evonik is an attractive investment and will become even more attractive as we depart into the next phase of our transformation. So let me kindly, cordially wrap up the key messages of today. First, we have established, we have established a strong track record of strategic and financial execution over the last 4 years. We are the enabler of sustainable change with a portfolio of attractive products circled around our 4 sustainability focus areas. Second, Sustainability is fully integrated into our 3 strategic levers: portfolio, innovation, culture. By the end of the year, our portfolio will be focused on our 3 attractive growth divisions. And we will exit Performance Materials in the course of 2023. Fourth, we will invest heavily into our green transformations, especially into our Next Generation Technologies and Next Generation Solutions. All of this, ladies and gentlemen, will drive us towards our ambitious financial and nonfinancial targets, and they will be integrated very consistently into our management compensation scheme. With that, thank you for your interest and your time so far, and we are now happy to take your questions, if there might be some. Thanks a lot.

Thank you, Christian. I'm sure there will be questions. So for me, just for the starting of the Q&A session, a couple of organizational remarks and details. We will start with our guests here in Essen for the Q&A session, so they will have the opportunity to ask the first questions by just physically raising their hands. I know this might sound crazy after 2 years of virtual meetings, but just raise your hand, and we will pick you. [Operator Instructions]. And so that after that, we still have the opportunity to get some questions from the virtual guests and the virtual audience. [Operator Instructions] Again, I think I don't have to explain that after 2 years of pandemic. At the moment, they are all gray, so you can't do anything. As soon as the Q&A session starts, they will turn to black and are enabled then. So there, you can click on the black hand to register for the Q. And once you hear a name, please also enable the camera and the microphone, and they will then turn deep purple, our favorite color. And then you can ask your question here live into the audience. Before we start the Q&A session, just as a side remark, we also have a short feedback survey available in a couple of minutes. You will see the link in the conference tool and also on the website. So we would appreciate your feedback on the Capital Markets Day afterwards. Yes, with that, let's start the Q&A session. And the first question comes from Martin Roediger.

Martin Roediger, Kepler Cheuvreux. You mentioned already that you want to prolong the use of your coal-based power plant in Marl and reducing the gas need by 15%, but you have several other production facilities in Germany. So my question is how much do they depend on natural gas as energy source overall? And what is your best guess about the impact on earnings in case there is an embargo on Russian gas? We have heard a peer of yours, some flimmers up the Rhine River did this exercise already a few days ago.

Thank you, Martin. Christian, can you take the first part? Yes.

I take the first step and then I will over -- I will hand over for more precisely details to Harald. But beforehand, Mr. Roediger, have a look. If it would come to an embargo in respect of being provided with a sufficient amount of gas, and it doesn't matter at all if it would come from the Russians or from the Europeans, first question would be what is about our suppliers? Would they will be able to stand the pace of such challenge -- such an impact? To be honest, as of today, in Germany, thinking about the complexity of German industry, taking this in consideration, nobody could. Nobody could judge upon it. Second, think about not only the supply chains but in respect of growth, the value chains. What is about our customers? Would they be able to stand the pace? Are they willing to address their issues, their concerns about such an embargo to us beforehand? Even if they would, they could not because it is not possible reason for us. It's very simple. Here are some rules and regulatories by the official authorities who block and handed them. Third, now think about Evonik. We are prepared in such that we do have the chance, that we'll have the chance to make use of alternative energy supply if it comes to the utmost, if it comes to a gas embargo. And that is what you have mentioned, for example, by restarting our steam coal plant in Marl, for example. There are several other chances and opportunities we are prepared to make use of. But to sum it up, from my point of view, and as you know, I'm also the President of Chemicals Association in Germany. From my point of view, it is as of today, definitely really very, very difficult to give you a precise number, which is well based on facts and not on assumptions or not on best guess what it will mean. Because you have to contribute not only to take into consideration, we have to contribute also to the strategy, to the opportunities, to the options. Your customers, your suppliers could make use of, and don't forget about the utilities in this game. Because key, one key effect for all of this is that there is enough in the pipes, also that there is enough, let me say, pressure in or pressure on. So having said this, giving you -- trying to give you with very few words, something like an overview, I would ask my very honorable colleague, Harald to give you some more details, if need and possible. Harald, may I hand over to you.

[indiscernible] the framing by Christian, what we very quickly did is, of course, we set up an intense working group looking to not only the German sites, but all the European sites, what could be an impact. Of course, if there would be an embargo from Russian gas, that would not mean that there is no gas available. What we can't answer today is, of course, what relative share of gas availability would arrive at certain sites. Because, of course, the pipeline interconnection in Germany don't allow that you can supply to each and every site the same volume because probably, you all know that, it depends from where to where the gas stream typically goes and from where the gas comes. So in other words, in the South of Germany, we will have a different situation than in the North of Germany. And there, we will have a different situation than in Antwerp. But what we did is we investigated on each and every site what alternatives do exist. And we already, as a Board, decided that we take precautionary measures, and they are already in implementation that, for example, we can substitute on some of the sites the use of gas for producing steam and transfer it, for example, into oil. Oil use is an appropriate tool. So that's going on site by site. What unfortunately most probably will not be a possibility due to antitrust matters is that we could determine, for example, to which value chain, we would give priority. Because here, we are not probably -- in this discussion, that is what Christian just mentioned. We are not allowed to discriminate. In other words, we will need to do everything if we get 80% of deliveries when we need to reduce everything by 80%, if there is no different decision by the antitrust authorities in the months to come.

Thank you very much, Christian, Harald, for the answer. Next question comes from Thomas Swoboda.

Yes, Thomas Swoboda, Societe Generale. Thank you for taking my 2 questions. They are related. Knowing now the current situation and the higher energy costs now, would you again take the decision to invest in PA12 value chain in Germany? Or would you rather have considered a different location? And related to that, in case energy costs should stay at an elevated level in Europe, meaning higher again versus the U.S. and probably even higher versus China, would you still be happy with your portfolio? Or would that require a little bit more thinking about the mix?

Okay. Thanks a lot for your questions. Actually entitled, no doubt about. First, for PA12, Marl, in the deep western part of the Federal Republic of Germany is the best place for us to be there. Why? First, we have a very highly educated and definitely encouraged amount of employees down there. They have rolled their sleeves up and use the pandemic, due all those constraints and restrictions better -- irrespective of all those constraints and restrictions, they have done a brilliant job. And don't forget that a good amount of our customers is here located in Europe. Second, in respect of the portfolio transformation process, fair point. And that is one of our reasons why we have decided to say let's focus on specialties because they are less cyclical, they are less capital intensive. And instead of saying we talk about products to market, here, we talk about solutions to our customers. And we are convinced that is why we have dared to give you the progress in respect of our strategy here today, we are convinced that next steps in our strategy in respect of portfolio shaping and focusing on next-generation solution products with the related benefits we have mentioned today, we are, for this, pretty well prepared. So very few words, but I guess the message is crystal clear.

Again, Harald, some follow-up questions.

Maybe just as a complement to the framing of Christian. One aspect certainly is we are in a completely different investment environment today. In other words, the CapEx volume would be a completely different one in today's world because, for example, steel is at a different level than it was. So to answer your question, actually, it's almost not possible. But what is clear, our competitors are in the very same situation. So the other PA12, 11 producers are sitting in the same energy cost environment. That means the system competition of the product and the applications where we are in still is metal. And metal, of course, is still to be substituted in -- especially in automotive application. And here, at the end, our PA12 will win the race for the higher fuel efficiency in the years to come due to high energy costs. The higher the energy cost, the better for the application at the end. That's not what I wish for, but if it stays there, good for the substitution.

Thank you very much. Next question, I don't know who is next. Sebastian, you want to take the next one?

Yes. Sebastian Bray of Berenberg Bank. I just have 2 questions, please. The first is on the divestment or the planned divestment of the C4 chain. Why is the JV the preferred option? When I've looked at this in the past, my thinking was that the degree of backward integration was always small enough that Evonik could get away with divesting the asset as a whole. Why would Evonik want to hold on to a portion of this asset post divestment? My second question is also on portfolio management. At the start of 2021, Evonik split its oil services segment into technical and infrastructure and enabling support and other functions. Does the next-gen Evonik also include all of the technical and infrastructure provided for external parties as it stands? Or could divesting this be a way of increasing the rate of improvement in ROCE?

Maybe I take the second one, and then I would hand over to Ute for the first one. On the so-called GI technical infrastructure is a core element of the company. It provides our businesses with a high standard of services. And that is the reason why, on our way to become best-in-class specialty chemicals company, we do desperately need their competencies to serve and to better the quality of our production facilities all over the world. So let's call it -- metaphor, it's something like a backbone holding the body of Evonik and keeping it together, filling it in. And with having said so, I do hand over for a second -- for the first question for the most prominent question to Ute.

Yes. Thank you, Christian. Yes. I think the C4 business is a good business, has a lot of good technologies, also innovation and technologies. It's clear, we do not have the financial framework to invest in that. So that's why a JV, of course, gives more freedom on that side, and we can still participate in that development. On the other hand, it's very much interlinked into our 2 big sites in Marl and Antwerp. So a JV might also help in the separation process step by step. You know that we have a lot of own use in butadiene as well. So these are all elements and arguments that speak for a JV. That's why we said we strive for that. How it will end up in the end, depends on the market, depends on the offers we have, but these were the thoughts in our head when we said we go for a JV option first.

Okay. Next question, Oliver Schwarz.

Oliver Schwarz, Warburg Research. May I come back to the CapEx outlook, please? Can you remind us how much of your CapEx in the past went to projects in relation to Performance Materials? And secondly, I guess, connected to that, what was just being said is, looking at the absolute level of CapEx, there seems to be a little leeway for, let's say, a prolonged period of inflation. Would that be a fair assessment? Would you be willing to invest more if inflation levels remain, let's say, elevated for the next couple of years? Or would you rather stick to the absolute number you've provided in the press release?

Yes. I think PM is the EUR 65 million that I mentioned also before from that point, that is the level. Yes, if we talk about CapEx levels, that is always also a function of the cash generation. If we had a crisis, less cash generation, of course. The CapEx number would be also assessed very strictly and most probably also decrease from that point of view. When we think about a scenario with inflation, we are able to pass those inflation on in our prices, in our contribution margin. That piece of this pie also increases then the cash flow, also gives some room also for CapEx, of course, not one-to-one, but with a certain extent. And on the other side, I think inflation is one thing. What we see is also availability and doability of projects. I think that's maybe today the even bigger problem. So from that point of view, I think, as of today, we can work with that scheme. Of course, here and there, you have cost increase. But this is something we are used to work with and can handle that in the future.

Okay. Next question was from Andreas Heine.

Yes. I would like to come back to the capital allocation, the M&A and dividend specifically. It's obviously more difficult to get to a nice return on capital employed with acquisitions. And the reason why the ROCE is not that high is also because of the acquisitions you made. In recent years, you have done rather less in acquisitions, smaller ones, more dedicated ones rather than the larger ones. With the proceeds you will receive and the free cash flow you have, you could go for more. So I would like to know whether you would have that in mind or rather what we have seen in recent years is more in the agenda. And also on capital allocation, you said there is more room for the dividend. Could you be a little bit more precise what you think this free cash generation you have of EUR 1 billion, how much of that might be then reserved for the dividend? And how the dividend path will look like in the next 8 years?

I take the first, Ute takes the second. In respect of M&A., I guess, I assume it's a little bit unfair of us to focus on size. M&A for Evonik means not talking about size. Size is not a criteria for us. It is about how does it fit to our portfolio in respect of we stay put by doing M&A to strengthen our already strong positions exclusively in our 3 key core future growth divisions, first. Second, you should have in mind that we, in respect of our geo strategical approach, want to balance our portfolio much more out in respect of having something like a deeper footprint in the United States of America. That is what we have already reached, better to say already gained by doing M&A there. Here, we would think about Porocel and catalysts. Here we think about PeroxyChem. Here, we think about silica or [ fuba ]. Here, we think about specialty additives of Air Products and so on and so on. So we will stay put to our decent and disciplined M&A approach, what we call bolt-on in respect, I've tried to explain it to you. Second, it is not about size. It is about quality. It is about profitability. It is about our assumption, our evaluation about future growth. And it is about strengthening our strong positions in markets where we are tip of the tops already. Why? Here, in those markets where we want to strengthen our strong positions, we know the customers. We know the competitors. We know the markets and we know the technology positions of our competitors, which translates into, that before hand, reduce any kind of integration risk to the utmost. And on the other side, we enhance and lift up synergy potentials. That is what you have seen, observed and analyzed in the past. And that is, ladies and gentlemen, what you could expect from us in the future. With this, thinking about future, I think about Ute and now I will hand over to Ute.

Thank you very much. Yes, the dividend also follows, of course, the earnings per share. And from that point of view, our approach is we need to develop the dividend step-by-step with increasing earnings with, of course, step-by-step increasing cash flow. So I think an ideal path would be a little bit of an increase every year. That is maybe not possible every year, depending what kind of overall geopolitical or economic environment we have. But I think that is steady, we have steadily and yes, increasing and developing the dividend.

Thank you very much. Yes, yes. We also have a couple of further questions. I don't know who's first? Sam, you want to go first? Sam Perry?

Sam Perry from Credit Suisse. Just wanted to ask a question on your organic growth targets. If I look at what you achieved x PM from '15 to '21, it's already at the 4%. And that included sort of depressed years through COVID and auto in '19, and you already get to the 4%. So where do you think you can get to in sort of a more blue-sky scenario? And I guess the same question for margins as well.

All right. Ute?

We have more than 4%. So it's clear, the 4% is not the target. I think if you look at our markets, 5% to 6% is in reach. But as you said, some years are easier, some years are more challenging. So we feel comfortable, with the over 4%, we're clearly better than before. With the margin, it's the 18% to 20%. And we are just at the lower end of the range. Of course, we want to move up more towards the 20%. And if you look at the product mix, how it can change over time, I think that's also very realistic that we get there.

Ute, is it allowed to add something?

Absolutely.

You should have in mind that thinking about next, the shift to 50% of our total amount of sales to next-generation solutions, we talk about definitely about an EBITDA margin, which is above 20%. So that might be really helpful in this respect. And in addition, ladies and gentlemen, let me underpin and therefore, proudly point out that thinking about the EUR 500 million of sales we have gained from our innovation pipelines, and Harald is very keen on here to bring it to EUR 1 billion in 2025, we talk also about an EBITDA margin, which is definitely above 20%. So that maybe gives you more confidence about the future growth potential in respect of margins of Evonik. And for us, it is the beloved, let's say, tailwind we want to explain and to give to you.

Okay. Then we have the next question from Michael, Michael Schaefer?

Michael Schaefer, BHF. Maybe coming back to the organic sales growth target. You put one topic in there, which is related to more aggressive pricing or putting this at the higher end of the management agenda. So I wonder what you're going to plan to make different in the years to come than compared maybe to what you have done in the history? And what kind of, let's say, pricing potential you see there for your products and contributing to the organic sales growth target? And the second one is more an operational one on bio surfactants. If I'm not totally wrong, basically, this is next single largest CapEx project you have in front of you. So I wonder whether you can update us on the timing on planned ramp ups and how we should think about contributions over the next 2, 3 years from this one?

With an ever-increasing specialty share, pricing power goes up. With the exit of PM, pricing power goes up. With a portfolio shift within business lines, what Ute explained earlier, take cash solutions, for example, by shifting from more standard products to specialized products, pricing potentially goes up and pricing power goes up. By, for example, taking into operation our PA12 complex, pricing on overall Evonik power goes up. So this is, at the end, a pretty easy math. Then update on the rhamnolipids. I was just visiting the site recently. So construction is going on. Everything is still on time. So we have no delays. That means by the end of next year, we should be close to the finish line. So everything for the time being is as announced.

Okay. Let me see if we have another question from the room or if we move to virtual. Oliver, you have another one, a follow-up? Happy to take it.

Thank you for taking my 2 follow-up questions. They are basically interconnected. So it seems like a large chunk of you being able to achieve the Scope 1 and 2 targets by 2030 is the procurement of renewable energy. Are you willing to invest yourself in the generation of green energy in the next years due to the fact that -- I mean, this is no secret. Any energy-intense industry will scramble to reduce the amount of energy derived from fossil fuels and will head for the procurement of renewable energy. But there seems to be only so much to go around. And some may lose out. So to be on the safe side, would you be willing to invest in the production of green energy yourself? And the second question is partly interconnected to that. When we are looking on CO2 certificates, where are you currently on that level?

Okay. I'll take the 2 questions. I think from what we see today, you don't need to invest yourself necessarily. So that is how we see the market. As of today, you can buy shares and volumes. That might be accounted like an investment, so like a lease, but that's maybe more the accounting technique. So from that point of view, our approach is more towards long-term contracts. I think that is true for many input material and also for energy. So I think that is the preferred way we go. And for the next years, that seems very much implementable. With the greenhouse gas certificates, CO2 certificates, we have the hedging strategy not only for the energy itself, but also for the related CO2 certificates. So we have already 60% covered for next year, 20% for '24. For this year, it's almost covered. So from that point of view, we have that hedging strategy according to our other energy items from that point of view. We, of course, have bought certificates some while ago at lower prices of -- than today. But it's more about really the rolling-forward hedging strategy, but that goes hand-in-hand with energy, and so you really know what you need.

Thank you very much. Next question here from the floor is from Constantine Vishat from Bhara.

Maybe 2 from my side. First would actually be on the active cosmetic ingredients. You say that you plan to become a market leader there also through M&A. Can you maybe give us an indication on what size of M&A we should look at? And maybe a second question. In light of the higher energy costs, do you think -- or do you agree with me that investments into fermentation-based production should accelerate? And therefore, do you believe that methionine might be produced on fermentation base anytime soon, let's say, 2030? And if so, how confident are you that Evonik will be a leader in this shift?

I'll take the first one, and Harald will take the second one. The answer to the first one, we'll have only 2 letters, but one clear message, No. Why? It depends on what is coming to the market. And we would think about it in a way that we would say, okay, if there would be, let me say, a very attractive bolt-on opportunity, we would tackle, we would think about it in a different way. So it is just, first, definitely too early. And second, from my point of view, please forgive me, it would be not very prudent to give you here a precise number, but you can be sure that we screen the market with open eyes in this respect and having said so, with bright and open eyes, I would hand over to Harald.

[indiscernible] to look into the rear mirror. If you look into the rear mirror, you see that we have acquired, we have acquired Botanica. We have acquired Infinitech. And those are very, very specialized activities contributing to the fast growth of our Active Ingredients business. We were limited on just by size to only a few countries. And through the global reach of Evonik, we certainly will propel the growth there. And that is, in the meantime, an integral part of our Actives business just as a complement to what Christian said. And those have been pretty small or minor acquisitions. Then should we invest into fermentation? Yes, there's a clear yes. That's why we move on with the rhamnolipids. And we are pretty certain that the capacity loading of the plant will go up pretty quickly because the market pull is really there. And actually today, we struggle to supply new areas because the stuff we have today, we're always sold out. So that is for the short term. For the longer term, yes, of course, we need to think already about the next steps. And your last question was on the fermentative route to methionine. So we do own [ IP ] on the fermentative route. But so far, there is really no breakthrough inside, and there's no publication inside. That fermentative route would be more competitive than the way we produce methionine today.

Thank you. Last question maybe from the audience in Essen, Sebastian for our questions, Sebastian Bray?

A quick follow-up on the innovator projects. As you've shown on Slide 7, with the tag line from 0 to over EUR 500 million in just 6 years. The big jump came in 2021. And I assume most of that was the FighterByontech RNA-related sales for the lipid nanoparticle and the polar lipids. Can you give us an insight on what your assumption is for that number in 2025 versus where it is today? Because there are some concerns that those sales might fall off if vaccine sales decline.

Definitely it will be a, let's say, decline if vaccines will not be in that high demand as of today. What our assumption is that new technologies will kick in. What we see is a full load of projects for our lipid nanoparticle technology. So there are more and more companies, and we actually can't satisfy the development needs because of the full pipeline. So this is why we ramp up our capacities. But there definitely will be a -- let's say, a dip in the lipid nanoparticle, but that doesn't hinder us and will not hinder us to reach the EUR 1 billion because a very big chunk -- and we just talked out Actives in Cosmetic Solutions, a big chunk was also the nice increase in that very area. And another nice piece is I was talking about the membrane business, that is also very nicely growing with -- I mentioned the number, with about 30% per year. So we have no doubt that the EUR 1 billion will be reached in 2025, regardless of what's happening to lipid nanoparticles.

Okay. Thank you very much. As a reminder and follow-up, you know that last year, it was EUR 100 million of sales of mRNA. So we are not talking about all of the innovation sales here. So it was a part of that but not all of that. And as Harald said, we'll see that ramping up in the future again. We will then turn to questions from the virtual audience. Not sure if we have some there already. I've received some via mail, which I'm happy to read if we don't have any live questions into the event. That's not the case. I will -- I have received questions from Chetan Udeshi from JPMorgan, happy to read that. First question is about circularity targets, about recyclability and biodegradability rate of Evonik's portfolio and our efforts to improve that. And the second question is on bio surfactants know-how and on our IP, how we can use that beyond the home cleaning product space into other applications as well.

I start with the last question. The home cleaning is the most prominent because we have the already announced projects together with Unilever. But this is not, let's say, the only area where we are in. We already today supply a lot of that product into also -- in the cosmetics area. So this is to be continued. We will supply it into the pharma area in the future. So there is a vast array of future applications for the rhamnolipids. Then what was the second question, Tim?

Second question was on circularity biodegradability of the products of the portfolio [indiscernible]

Yes. So we just recently announced our target that through circular economy, we strive and we will make it, like with the innovation growth fields, to reach EUR 300 million additional sales through technologies we provide to the industry that circularity can be reached. Because, I mean, you know we are always the enabler to do something, and that is in terms of circularity, also the case. So just to give you a few examples. We do have a very nice project in recycling mattresses. That is one area where we are active and then also the decomposition of polymers on the chemical route using our [ Alcovcides ], which will be transferred from the Functional Solutions business line into the growth divisions in the year '23, most probably. Then bio, I mean, I already said, we work a lot on the fermentation routes. We pulled together all our activities in the biotech area into the biotech platform. That was scattered a bit, but with the reshuffling of the RD&I unit in mid-2020, we created a biotech platform to have a good springboard into the bio arena, which is much stronger than it was in the past. And then there was the question on IP, if I remember well. So of course, we do have covered the field for the rhamnolipids also, of course, on the IP side to be, let's say, on the safe side.

Okay. Then we have a couple of other questions via mail, both Georgina from Goldman and Chetan from JPMorgan are asking, and I'm disappointed that it didn't come up yet, but happy to take it now asking on current trading and our outlook on the more short term. Looking into Q2, how that is evolving and developing. Ute, over to you for some current trading comments.

Yes, absolutely. Thank you, Tim. Yes, I also tried to address it in the very first beginning of our speech that we still see a very good and healthy demand for our products. If we look at the different divisions, of course, Nutrition & Care is very resilient. In Animal Nutrition, there is even a little bit of booster, now with higher soft commodity price -- prices to use our amino assets. Health Care, we talked about the specific projects. PM is a beneficiary of higher oil prices. So that is something we see on the other end of the portfolio. If we look at Smart Materials here, we also see a good demand for our energy and sustainability-oriented products. So high energy prices are also a chance for business as it increases its demand for energy efficiency solutions. So from that point of view, we still also have from that a very strong underlying trend. So overall, as I said, we have good order books. We see a continuation of the good trends from Q1. Maybe here and there in China, if we have logistics challenge we have some difficulties getting the product out, that might here and there, play a role. But overall, I think from today's point of view, Q2 has the clear potential to be a very good quarter again.

Okay. Thank you. Then we have a further question here via mail from Georgina from Goldman, I will take. That next question is on our annual CapEx guidance and the raise of our annual CapEx guidance versus our more asset-light portfolio approach. Georgina question is whether the majority of the increase is then about meeting the decarbonization targets and therefore, likely be the case for the whole industry and not just for Evonik.

[indiscernible] refers to our EUR 700 million next-gen technology, yes, that's -- I think that's true. So we will have some CapEx put in. But as you see, it's really stretched out over 10 years, so we can really digest it very well. And it is really a very profitable CapEx. So with good returns. So from that point of view, I think it's really a good path to go like that. In our case, we will also allocate part of the divestment proceeds. So I think it's really also a portfolio shift here. So that seems very well workable for us from today's point of view.

Okay. Then last question from Georgina and maybe also here, we are coming closer to the end of the Q&A session and to the end of the event. I may remind you of on the feedback survey, we would be -- would appreciate very much if you fill out our short form, just 5 questions, at the end of the event. And maybe as a last question, we take the last question from Georgina. Georgina's question is, after the divestment of Performance Materials, are we seeing any other cyclical businesses in the portfolio? Any businesses that are still giving cyclicality to Evonik?

It is the obligation of the Board of Directors to permanently, continuously analyze the quality of our portfolio of our businesses and to judge upon their future potential. That, I, guess is -- that goes without saying. Having said so, we do, in the future, focus on our 3 growth divisions: Specialty Additives, Smart Materials and Nutrition & Care with tremendous room for growth and for profitable growth and for profitable green growth. So in other words, for the foreseeable future, I do not see, we do not see any larger divestment candidates in our portfolio. And I guess that is as crystal clear as I could convey the answer to you.

Thank you, Christian. And as crystal clear, I think we may now take some of your closing remarks on today's event. I hand over directly to you.

Yes. It is a short one. Ladies and gentlemen, it was our great, great pleasure having had you today, joining our Capital Markets Day. And for those who are here in the room together with us, we appreciate having a chance to invite you to have a slight lunch with us, to join lunch with us. For all the others and from the bottom of our heart, we do wish you a pleasant summer and take care and hope to meet you and to see you soon in person. And that is what ends our Capital Markets Day 2022. Thanks a lot.