Evonik Industries AG (EVK) Earnings Call Transcript & Summary

Right, ladies and gentlemen, as Chairman of the Supervisory Board, I would like to open this year's Annual General Meeting of Evonik and take the Chair of the meeting pursuant to Section 19 of our company's articles of association. I would like to welcome also behalf of the other members of the Supervisory Board and Executive Boards, our shareholders, the shareholder representatives, the ladies and gentlemen of the media, as well as our guests. Dear shareholders and shareholder representatives, with the consent of the Supervisory Board, the Executive Board decided to hold this year's Annual General Meeting in a virtual format. This decision was made on the basis of the new Section 118a of the German Stock Corporation Act as amended in 2022. With the Section 118a, the lawmaker provided the new format for the organization of virtual Annual General Meetings. This format enables the shareholders to exercise their rights by using the online service in a similar way as at an in-person meeting without having to travel to the venue of the Annual General Meeting. Thank you very much for attending today's Annual General Meeting. My words of welcome also go to our notary, Dr. Begemann, sitting to my right from your perspective, who is notarizing our general meeting today. The members of the Executive and Supervisory Boards are in attendance except for Mrs. [indiscernible] and Mrs. Alexandra Krieger. The company's voting right -- the Supervisory Board is also shown here on the picture right now. The company's voting right representatives are also in attendance here on site. So ladies and gentlemen, let us start with the formalities and standard housekeeping items. I've made sure that the Annual General Meeting has been duly convened and that all the relevant publication and communication requirements have been met. Our notary, Dr. Begemann is in possession of a copy of the publication of the invitation in the German Federal Gazette on the 17th of April 2023 which will form part of the notarized minutes. No requests have been received for amendments to the agenda that would have been subject to disclosure requirements. On item 2, one shareholder submitted a countermotion which has been published in accordance with the relevant requirements on the company's website with all the required information and which in this way was immediately made available to the shareholders. At this general meeting, you can exercise your right to speak and obtain information in the same way as an in-person meeting. The difference to an in-person general meeting is that you exercise these rights in a virtual format by way of audio and video communications through the online service. This means that spoken contributions have to be made by video communication. This also goes for the right to information, including the right to ask questions. Any other way of submitting questions other than by way of video communication through electronic or other communication channels is not provided for and, therefore, not possible. Since this general meeting has been opened, you have been able to register your request to speak through the respective function in the online service. You can also specify there which topic you would like to address. Please note that you have to be locked into the online service for shareholders with a shareholder number with which you would like to register your request to speak. As an authorized person for a shareholder, you have received your own access data for the online service with which you should kindly log into the online service and which enable you to exercise your rights by way of video communication. Following registration of your request to speak through the online service, I, as Chairman of the meeting, will in due course announce each individual speaker by name and will ask them to enter the virtual waiting room. A pop-up window in the online service for entering the virtual waiting room will then be displayed to every speaker. With your confirmation, you can enter the virtual waiting room where the so-called onboarding will take place for your respective contribution. The virtual waiting room that serves to check the proper functioning of your audio and video connection in preparation of your live contribution. Once you have entered the virtual waiting room, you will be met by our technical staff, who will check the audio and video quality with you. Please stay in the virtual waiting room until our technical staff gets in touch with you. Following the announcement of each cluster of speakers, I will take a short break to enable the announced persons to enter the virtual waiting room and to carry out the functional test. Following the successful functional test, I, as Chairman of the meeting, will call you up by name and give you the floor. Afterwards, you will go live and join the general meeting and can start with your contribution. All the other shareholders and shareholder representatives can then follow your contribution in audio and video mode in the online service. One more comment on the proper technical function of your audio and video connection only -- and I'm emphasizing this, only if your audio and video connection works properly, will I, as Chairman of the meeting, call you up and give you the floor. This means that the proper technical functioning of your audio and video connection is an indispensable precondition for your joining the general meeting live by video communication. Should the video communication no longer work properly during your contribution, I, as Chairman of the meeting, will stop your contribution. I'm already asking you now for such a case to then fix the problem and to ask for the floor again if you so wish. In this context, I recommend that you read the information leaflet on video communication. It can be downloaded and viewed on the homepage at www.evonik.de/hauptversammlung. It provides useful information for the optimum functioning of video communication especially on the appropriate hardware of your terminal device, Internet connection and on the correct position of your camera for your live contribution. If you'd like to submit a motion or nomination, I am asking you to submit your motion or nomination also by way of video communication, as just described and under the aforementioned conditions through the online service. You can only submit your motion by way of a live contribution. You can also register your motion through the function motion and section 131 Subsection 4 of the German Stock Corporation Act in the online service and specify the subject of your motion. In this manner, I can decide whether I should give you the floor with the exceptional priority or even after I might already have closed the list of speakers. One further comment, all contributions and questions have to be made in German. Should you speak in another language or change to another language while you are speaking I, as Chairman of the meeting, will stop your contribution, unfortunately. As usual, we want to combine the discussion on all the agenda items in a single general debate. In this format, every speaker can speak and can ask questions on all the agenda items. A discussion on potential procedural motions of shareholders is also possible as part of the general debate unless an earlier discussion is required for once. In order to allow for a timely and efficient proceeding of the general meeting, I'm asking all the speakers to focus their statements on the subjects of the agenda to be as concise as possible and to only speak for a reasonable length of time. Experience has shown that 10 minutes are typically enough for an appropriate contribution. In case you would like to withdraw your request to speak or your motion, I'm asking you, in the best interest of all the shareholders, to use the respective function in the online service. If required, I will impose a reasonable time limit on the right to speak and ask questions in the best interest of all attending shareholders or their representatives. In particular, I reserve the right to close early the list of speakers and possibly also the general debate should this appear to be necessary to conclude the general meeting in a timely manner. The entire general meeting will be streamed live through our online service for shareholders and their representatives. The first part of the general meeting up to the end of the report by Mr. Kullmann on the company's annual financial statements and development will also be streamed live on the Internet and can be retrieved there later on. Other than that, this Annual General Meeting will not be recorded in audio or video format by the management. Please bear with us that above and beyond this, the general meeting proceedings, that is, in particular, the general debate will not be broadcast on the Internet. Shareholders or their representatives following the general meeting on the Internet should remember that they have to log in to the online service to be able to follow the entire meeting and, hence, the general debate. The Executive Board will use the support of stenographers to take down questions asked and the answers. To this end, the stenographers will use temporary audio recordings as a working tool which will then be deleted again. I would kindly ask you to abstain from video and sound recordings. It is in the interest of an undisturbed cause of the AGM, but I also ask you to make sure that during the onboarding in the virtual waiting room and during your contributions to mute mobile telephones and to not post them directly on your laptops or personal computers. Ladies and gentlemen, all important pieces of information as far as the course of the AGM is concerned, including the possibility of voting on and objecting to resolutions during this virtual AGM are included in the invitation you will find on the website of the company under www.evonik.de/hauptversammlung as well as in the online service. If you have already submitted your votes prior to the virtual AGM, if you have done so yourself or via a proxy by way of postal vote in the traditional way or via the online service, or if you have already authorized a proxy of the company or another representative of the shareholders or shareholders association and have given authority and instructions, you do not need to do anything else. Your yes or no votes or abstentions can be submitted by postal vote electronically via the password-protected online service, and you can do so also during the virtual AGM, you can change them or cancel them, but only until the point in time I would have defined as the Chair of this meeting. I will point out what the end point is in due time. For the postal vote, you have to register the votes in the online form in the online service, and you have to submit these votes or cancellations by way of electronic submission. If you want to exercise voting rights for several shareholder numbers, please make sure that you have registered all shareholders' numbers in the online service and that you have to exercise your voting rights for all of these numbers. So proceed in the same way, if during the AGM, you want to give proxy or instructions to the proxies of the company or to any other agent or representative of a shareholders' association, if you want to change something or cancel your vote, the proxies of the company will only exercise your voting right if you have given them clear instruction. Only instructions concerning the resolutions of the administration or countermotions or election proposals are possible here. The proxies of the company will not accept any instructions for shareholder rights to be perceived for others concerning questions, motions or countermotions. In due time, prior to the vote, I will once again point out what the options of exercising the voting rights are. Nevertheless, I would like to ask you to make use of the options I mentioned in due time as in the live stream, despite of all precautionary measures, there can be some time delays. Until the end of the AGM, you can also use the online service in order to object to the resolutions of the AGM so that they can be taken to the minutes. I would like to point out that you can make use and should make use of this opportunity in due time since, as I mentioned beforehand, there could be time delays in a live stream transmission. In the same way, you can also file complaints in the online service in the context of your right to information. If you do not want to attend to the AGM until the very end, I would like to ask you to lock out from the online service, including all your shareholders' numbers. This is the way how we can update the attendance and you can also counteract the risk of any app use of your access data. Let us now start with the discussion of the agenda, and I would like to start by calling Item 1 on the agenda. Documents presented to the AGM according to Section 176 Subsection 1 Sentence 1 of the Stock Corporation Law. These are the following: the approved annual accounts of Evonik Industry AG as of 31st of December '22, the approved consolidated accounts as of 31st of December 2022; the combined management and group management report for Evonik Group and Evonik Industries AG, including the explanatory report of the Management Board concerning information according to Sections 289a and 315a of the Commercial Code. Then the report by the Supervisory Board of Evonik Industries AG; as well as the proposal made by the Management Board of Evonik Industries AG for the appropriation of profits. The consolidated financial statement with the unqualified auditor certificate is included in the financial report for 2022 as of Page 123. The combined management report is included in Page 14. And the report by the Supervisory Board can be read on Page 98. All aforementioned documents have been accessible via the Internet site of Evonik Industries AG since the invitation to the AGM. The Supervisory Board has examined the annual accounts and the combined management report of Evonik Industries AG and the group as well as the consolidated financial statement and has approved them in its meeting on 1st March '23, which means that the financial statement is thus established. In this very meeting, too, the Supervisory Board examined the Management Board's proposal as far as appropriation of profit is concerned and has approved this proposal. The Supervisory Board in this meeting has also dealt with the Management Board report on relationships with affiliated companies in the business year '22. This report has been audited by the auditor and been given an unqualified auditor's certificate. The Supervisory Board has not raised any objections to the report and also not to the auditor's results. As already mentioned, the report by the Supervisory Board is concluded in the financial report as of Page 98. Since all the details of the activities of the Supervisory Board are explained there, I would like to restrict to the following information. In the past business year, the Supervisory Board has, with great diligence, exercised all the jobs and tasks according to law and statutes, especially it monitored the Management Board with due diligence continuously and advised and supported the Management Board in strategic further development issues of the company. The Management Board provided us with all necessary information in due time and on a regular basis. As a Chairman of the Supervisory Board, I was also continuously informed in between official meeting dates and was in permanent dialogue with the Chairperson of the Management Board. A considerable part of the Supervisory Board's activity takes place in the committees. In these committees intensive subject-related discussions are being had with the management Board and technical questions are being decided. Decisions of the Supervisory Board are being prepared here. The chairpersons of the committees report on the work of the committees on a regular basis to the Supervisory Board which means that there is a close cooperation and an adequate flow of information we can guarantee at any point in time. Together with the Management Board, the Supervisory Board has prepared the declaration on corporate governance which includes all the relevant details. This declaration on corporate governance is included in the financial report as of Page 106. The corporate governance of Evonik Industries AG, which has top priority on the agenda of Management Board and Supervisory Board, is presented in all its details. Special focal points as far as the activity of the Supervisory Board and its committees are concerned in '22 with the course of business, the situation and development of the company, including corporate planning. The Supervisory Board particularly looked into the construction operation of a lipid production plant in the United States and the construction of a PA12 production line in Germany. Furthermore, the Supervisory Board looked into the capacity enhancement of [ methionine-integrated ] facilities in Singapore, the network strategy and the optimization of precipitated silica in the United States. The impact of the Ukraine, war with all the consequences, such as the Russia business of Evonik and the gas supply in Europe, have kept the Supervisory Board very busy in the past business year. These topics as well as the consequences of the corona pandemic have led to a situation where the Supervisory Board corrected the original target values of long- and short-term remuneration of the Management Board as the underlying conditions of the original targets were no longer existing. In the Management Board, with the effect of 1st April 23 there has been a change in the remit of finance. Mrs. Ute Wolf resigned from the office as member of the Management Board with the effect of 31st of March '23. The Supervisory Board has approved the premature termination of Mrs. Wolf's nomination and has done so in its meeting on the 7th of December '22 upon recommendation of the Executive Committee. And on the other hand, has also, upon recommendation of the Executive Committee, decided to appoint Mrs. Maike Schuh as member of the Management Board responsible for finance with effect of 1st April '23. We are very happy that we could win Mrs. Schuh as a successor. She's been active within Evonik for 8 years now and brings along well-proved expertise in controlling and accounting as well as precious experience in the operating business at home and abroad, especially when she was Head of Division Performance Materials. On behalf of the Supervisory Board and certainly on behalf of all shareholders, I would like to thank Mrs. Wolf cordially for their merits, for the further development of the Evonik Group. Since 2013, Mrs. Wolf had been member of the Management Board. And before that, for 7 years, she was in charge of finance. She has actively supported the IPO and put her stamp on the company. During Mrs. Ute Wolf's term of office, there were 4 takeovers in North America, which were successfully integrated. She is a renowned expert and is also active in external committees, as for example, in the Advisory Board of the Frankfurt Stock Exchange and the [ DRSC ], the German Accounting Standards Committee. After almost 10 years in the Management Board of Evonik, she would like to focus on activities in Supervisory Boards and Advisory Boards in the future. Mrs. Wolf, we wish you all the best for the future. In the past business year, there were 3 personnel changes also on the employee side on the Supervisory Board. Mr. Jens Barnhusen resigned from his office with effect of 31st of March '22, so he's no longer a member of the Supervisory Board. His successor is, Mr. Gerd Schlengermann. In the framework of the employee selection to the Supervisory Board in 2018, he had been appointed substitute member according to codetermination law. Mrs. Birgit Biermann and Mr. Frank Lollgen also resigned from the office at the end of the ordinary General Meeting on 25th of May '22. As successor for Mrs. Biermann, the District Court Essen has appointed Mrs. Alexandra Krieger. And as a successor to Mr. Lollgen, they appointed Mr. Harald Sikorski, both with effect of 26th of May '22, and they are now the substitute or the replacement member of the Supervisory Board. Due to the personnel changes in the Supervisory Board, there were also personnel changes in the committees. Mr. Schlengermann and Mrs. Krieger are successors to Mr. Barnhusen and Mrs. Biermann in the Audit Committee. The Supervisory Board elected Mrs. Krieger with effect of 26 May '22 also as a Vice Chairperson in the Audit Committee. The Supervisory Board elected Mr. Sikorski with effect of 26 May '22 as successor to Mr. Logan as Member and Deputy Chairman of the Innovation and Research Committee. Also with the effect of this point in time, the Supervisory Board elected Mr. Sikorski as successor to Mr. Logan to the Finance and Investment Committee. On 20th of February this year, our long-standing colleague of the Supervisory Board, Mr. Ulrich Weber passed away after a long-term illness in the age of 72 years. He was a member of the Supervisory Board and had been so since 2016. As a member of the first Management Board and Labor Director of Evonik, Mr. Weber actually put an important step on the company. It's thanks to him that all staff members of the predecessor companies with all the different cultures were combined under the roof of the new Evonik. His great commitment, intelligence and vision, he was always able to do justice to the requirements of the group and the interests of the employees also in times of deep structural changes. We will always thank him for this. Now at the end of today's AGM, the term of office of all Supervisory Board members will come to an end as well. And this is why we have, as an item on the agenda of today's AGM, the new election of all shareholders' representatives of the Supervisory Board. Mrs. Professor Barbara Grunewald and Dr. Volker Trautz will no longer be available for a further term of office on the Board. Dear Professor Grunewald, for you, too, it will be the last AGM of Evonik Industries AG today in which you are going to participate as an active Supervisory Board member. I would like to cordially thank you for your tremendous and long-standing commitment. All know good lawyers are hard to find, be it in court, at the university or in industry, even with a specialty chemist such as Evonik. Dear Professor Grunewald, your excellent representative of your profession who studied in Bielefeld, Tübingen and London. After your doctorate and habilitation you took over chairs at the Universities of Mannheim and Mainz before you followed the call to Cologne University in 1992 -- '99, excuse me. The Chair for Civil Law and Commercial Law at Cologne Universities was held by you until your retirement in 2019. Your conservative personality with your own style and a good sense of [indiscernible]. This is no surprise because you come from Bonn. I think a good sense of humor makes things run smoother especially also when it comes to legal issues. Also in the Audit Committee, your legal expertise was in high demand, especially when it was about special knowledge about the application of accounting standards and the internal control processes. Now the fact that life offers more than only academia is something you have come to appreciate since you have retired. Now with the end of today's AGM, you will no longer have appointments with Evonik which means you can now start to enjoy the nice things of life even more. I wish you all the best. Dear Dr. Trautz with the end of today's AGM, you also will resign from your term of office on the Supervisory Board in Evonik Industries. This is a cut for you, for the Supervisory Board and, of course, for Evonik as a whole. Since December 2007, you have been a member of this Board, it's almost as long as this group has existed. I would like to thank you for your tremendous commitment, your excellent and trust-based cooperation with us. Dear Dr. Trautz, you have contributed to setting the cause for Evonik right from the outset. You constructively supported strategic decisions of the group on its way to become one of the leading specialty chemists. Also as a member in the Executive Committee and the Nomination Committee and the Mediation Committee as well as in the Innovation and Research Committee, you have always contributed your expertise and help to set the right course. What comes to my mind, for example, is the successful IPO, the focusing on specialty chemistry and many important investment projects, up to the construction of the new lipid production plant at Tippecanoe in the U.S. Yes, for you, too, there had been a life before Evonik, as we can see in your CV, you studied chemistry at the Stuttgart University, where you got your doctorate before you joined BASF in Ludwigshafen. In 1995, you became a member on the Management Board. After 5 years, there was another leap in your career ladder, you became the CEO of Basell Polyolefins. And this leading position is something you had, even after the merger with Lyondell until your retirement in 2009. Now this brief retrospect of you makes clear how tremendous your expertise is. The Supervisory Board and I personally benefited from your expertise, from your critically constructive contributions. Evonik owes you a lot. The strategic alignment of the business you supported so much, the business that promises sustainable and profitable growth is one of the good examples. Dear Dr. Trautz, I wish you all the best for your future, and stay safe and healthy. The Supervisory Board proposes to today's AGM to replace Professor Grunewald and Dr. Trautz and Mr. Weber and newly elect to the Supervisory Board the gentlemen, Dr. Cornelius Baur, Dr. Christian Kohlpaintner and Mrs. Dr. Ariane Reinhart and to reelect the other shareholders' representatives who are still in office. The election is valid until the end of the AGM which is going to ratify the acts for the fourth business year after the end of the term of office. The business year during which the term of office starts is not included. Very probably the term of office of the candidates proposed today will end with the AGM of 2028. The 3 persons who are proposed for election are present today. I would like to give them the opportunity to briefly introduce themselves. Dear, Dr. Baur, I would like to give you the floor first. Then after you, Kohlpaintner. And after that, dear Dr. Reinhart. Maybe this is not the usual way, but it's in alphabetical order. So Dr. Baur, you have the floor.

Thank you very much. Good morning, Chairman, dear shareholders, ladies and gentlemen, I would like to thank the Supervisory Board for nominating me at today's general meeting as new representative of the shareholders, and I am happy about the opportunity to briefly introduce myself to you. I am Cornelius Baur, and I'm 61 years old. Following my training at Siemens and university studies of business administration with a PhD at Ludwig-Maximilians University, LMU for short, in Munich, I started my professional career as a consultant with McKinsey in 1990. I worked for McKinsey at home and abroad for over 30 years and held various management positions as a partner, member of the shareholder committee, managing partner for Germany and Austria, as well as a member of the Global Executive Board of McKinsey, I concerned myself for many years with the continuous improvement of operations in listed companies. In this context, I found out that Europe needs even more world-class corporate champions. There are already quite a few around, and Evonik ranks among them. This has been demonstrated, for example, by the latest developments in the field of biotechnology as far as the development of corona vaccines is concerned to which Evonik contributed significantly with its lipids. Successful business performance and entrepreneurship nowadays relies more than ever on researchers and laboratories who develop products from their ideas to create benefit and added value for mankind. The chemical industry is right at the center of this process because the green transformation cannot be accomplished without chemicals. Living up to the standards and fostering even more innovations requires not only partnerships between universities and companies but also the promotion of venture capital and startups as well as fast and unbureaucratic consenting procedures. Evonik has already established numerous first-rate cooperative ventures with universities and is also well positioned with the Evonik Venture Capital GmbH to create strategic value and growth opportunities for the group. I'm happy to contribute my economic expertise and business administration knowledge acquired during my university studies and professional career to the Supervisory Board in order to support and advise Evonik. I'm looking forward very much to a successful and trusting cooperation with you. I would like to thank you very much for your attention. Thank you.

Yes. Thank you very much. Dr. Baur without chemistry, the green transformation cannot be mastered. And I think this is nicely fitting in with our company. Dr. Kohlpaintner, you have the floor.

A very good morning. Dear Chairman, dear shareholders, ladies and gentlemen, first of all, I would like to thank the Supervisory Board members of Evonik that you proposed me as a shareholders' representative to today's AGM. And with pleasure, I would like to briefly introduce myself. My name is Christian Kohlpaintner, and I'm 59 years of age. I started at the Technical University at Munich. I studied chemistry. And after that, I also did my doctorate at Munich University. In 1993, I started my professional career with Hoechst, AG. And for Hoechst AG, I held various management positions abroad and home in the areas of research and development. Further career steps were with Celanese AG with management positions in the areas of production and technology, marketing and sales as well as innovation in Germany and the United States. After a total of 10 years with Hoechst and Celanese, in 2003 I became member and later on the spokesperson of the management of the Chemische Fabrik Budenheim. In 2009, I became the member of the Group Management Board of Clariant AG, and this is where I was responsible for growth business and the region of Asia and in part, I was basically headquartered or based in China. Since the year 2020, I've been the CEO of Brenntag SE in Essen. Ladies and gentlemen, I have spent more than 30 years of my professional life in the chemical industry, and I love this industry. Every day a new chemistry is indispensable for modern life and we're all using chemical products on a day-to-day basis. Evonik is using its innovation power in order to offer resource-efficient solutions. And let me underline that: the home of specialty chemistry is still Europe even though competitive pressure for chemical companies is steadily increasing also for Evonik as it were. And they have the right response, innovation, more sustainability and enhanced specialization. This is good, and this is the right way because changing market conditions require varying answers. My chemical knowledge I acquired during my studies and my doctorate and also the experience I have in my various careers in the chemical industry are attributes I would like to contribute to the Supervisory Board of Evonik. Thank you very much for your attention.

We thank you, Dr. Kohlpaintner. Chemistry is indispensable for modern life. I quote you, this is once again nicely fitting with our company. Dear Dr. Reinhart, you have the floor.