Fuchs SE (FPE3) Earnings Call Transcript & Summary

Yes. Good afternoon, ladies and gentlemen. This is Lutz Ackermann speaking. On behalf of Fuchs Petrolub, I wish you a very warm welcome to today's conference call on the Q1 results. All the relevant documents have been uploaded this morning at 7:00 a.m., and you can find them on the IR section of our home page. With me on the call today is Isabelle Adelt, CFO of Fuchs Petrolub and Isabelle will walk you through the presentation in a second. [Operator Instructions] Having said that, I would like to hand over to Isabelle. Isabelle, please go ahead.

Thank you, this, and a warm welcome from my side as well. I'm happy to regrow the numbers of what we believe was the very successful start into the year 2023. We saw major improvement of all relevant KPIs we look at. Sales year-on-year compared to quarter 1 2022, is up 16%. That's a sales -- majorly sales price driven increase. And with more revenue revealed the successful implementation of price increases due to the raw material price increases we saw over the last 18 months. And now we can harvest the fruit of that. Did signal as well is that our EBIT is up significantly as well. So the price increases not only cover the raw material price increase, but at least partially the general inflation as well. We anticipated at end of Q4 that we saw the inflection point on the EBIT margin drop due to the very special situation last year with a war in Europe, the subsequent price increases in raw materials, and this now showed true. Our EBIT margin in Q1 is up 11%, so up 1.2 percentage points compared to Q4. So we see a sequential improvement here. Another good news is our free cash flow is up significantly compared to quarter 1 of last year. And we look at EUR 52 million worth of free cash flow, which is majorly due to the lower net working capital buildup compared to what we saw last year. So having said this, we are happy to confirm our outlook we've given to the capital markets roughly 5 weeks result. However, the economic environment we are looking at is still uncertain. So, assumptions we put into the outlook hasn't changed significantly since then. We're still looking at a war in Europe, we're looking at increasing tension between the U.S. and China. We are still in an environment of interest increases of high inflation rates. So this is why we are happy that we say we've started successfully into the year and confirm the outlook was given to you a couple of weeks ago. Looking into a little bit more detail behind those numbers. The number speaks for itself, EUR 936 million worth of sales, highest ever quarter, the record quarter to books in terms of sales volume. Volumes in terms of how many tons do we sell to our customers are stabling out. So this is still reflecting the wait-and-see mentality we see in the market currently. There's a lot of uncertainty out there. So if you look at the EFO consumer climate index, we are still way below 100, which we would somehow interpret is positive consumer sentiment. So as of today, we're looking at a number of 93. And this is something we can obviously feel when we talk to our customers, to our partners as well that there's a lot of uncertainty in the market. And this is something, obviously, that will still continue throughout this part of the rest of the year. Looking at our EBIT development. This makes us equally proud and happy as the development of the sales, 11% up year-on-year compared to quarter 1, and to reflect on that, I think quarter 1 last year was still a relatively normal quarter since January, February were not yet impacted by the war in Russia and Ukraine that only happened end of February. And we had a very good quarter, first quarter of '22 in China as well. So putting that into perspective, this is a result we are very satisfied with. To look into the details a little more, the sales growth we are looking at is purely organic. So there are no acquisitions that account for this. 17%, we managed to do out of our own efforts out of the excellent work of our sales force managed to put the price increases through and the management of our customers of our partners that volumes are stable. Currency impact, obviously, is something we are expecting as kind of a headwind for this year. If you remember, last year's numbers, we had a lot of tailwinds from currency. Since the euro became weaker against almost all other currencies, especially the currencies relevant for us to the RMB and the U.S. dollar. But this only happened majorly in quarter 2 and 3 of the year. This is why you still see relatively small numbers here, but we expect that number to increase throughout the remainder of the year and somehow we've seen a counter effect of what we saw in terms of currency development in 2022. Looking at our P&L, I think this is a performance we can be satisfied with. So gross profit is up by 10% as well, which means, obviously, we didn't only increase our sales, but our profit, and we have reached the inflection point. So I think same picture here. Obviously, compared to quarter 1 last year, we still see margins slightly behind, but we saw the inflection point as a sequential improvement of margin development compared to the fourth quarter. Functional cost is up as well. This is subject to the high inflation rates we saw in some shortages, especially in Europe when it comes to energy supply. So obviously, we do not only see the full year impact of the price increases we put into place last year, but the full year impact of the cost as well. Major driver behind us was by far the personnel cost increase. So all the additional people we hired by the highest salaries to cater for the inflation rate and then higher freight, higher energy costs that went into this. CapEx above prior year level might be a little misleading. We still stand by the EUR 80 million total CapEx volume for this year. But what we see here is a more equal distribution throughout the year. So this is already catered for in our free cash flow. So a little bit more -- or a lower impact expected throughout the remainder of the year. Net working capital developed nicely as well. We see a small increase compared to what we would have expected, which is driven by the high receivables. You can imagine higher sales volumes like that come with a high amount of receivables but the growth is under-proportionate, which means that 25% working capital in terms of sales we saw at the end of last year decreased to 24% to the end of quarter 1, and this is a trend we like to continue throughout the remainder of the year. This, in total, means we managed to increase our free cash flow from EUR 13 million quarter 1 last year to EUR 52 million, and this is the number we are extremely happy with. Heading deep dive into the region. I think general message is that we saw good development in all of the regions. But I think special contribution this time came from EMEA. We saw high sales price growth -- sorry, high sales growth numbers of 15%. Usually, EMEA is a relatively mature region for us. So we expect to see higher growth rates in the other regions. In the first quarter, EMEA performed particularly well. The major reason for this was that we saw great development in almost all countries. You can see that here, Germany, -- Great Britain, South Africa, but as well countries in Sweden or Poland. First, negative currency impact has been recorded already, but obviously, at a lower scale than what we would expect in most of the other regions. Major driver behind that, obviously, is that a lot of our EMEA business is in euros. Our EBIT is at EUR 50 million. So that means EMEA accounts for almost half of the group and equity results on pricing efforts and so the contribution we see there, which is a very good result as well, given that most of our equity companies or some of them are in countries with very high inflation rates with hyperinflation. So this is something that was managed quite well by the local management teams as well to deliver the same result as last year. And that's attributable to management. Looking at the Asia Pacific region. This is a result we are happy with as well, but I'd like to put that into perspective for you a little. Sales is up compared to prior year, which is the result to volume recoveries to volume growth in a lot of the separations as well as the price increases wil surge into play showing the full year effect. But compared to last year, we still see a little shortfall in China. Q1 in 2022 in China was a very strong quarter, whereas quarter 1 for this year was still influenced by the ripple effect of the COVID lockdowns that were released in December. So we saw very high infection rates in January going well into February, the ripple effect of the Chinese New Year. So we see the economy in China overall recovering a little slower than we had hoped for at the beginning of the year. Quarter 1, we still have some impact; quarter 2, we see that it slowly starts to pick up, but we believe that it will take well into the second half of the year until China will be back to a more normal level of economic activity again. And what we hear from our colleagues in China is that it really takes some time until the stimulus packages that were issued by the Chinese government really show their full effect. Taking the China development out of the equation, all other countries we have from that region, so mainly Australia, India, Southeast Asia showed positive contributions. So the small decline, we see an EBIT of EUR 1 million is caused by the shortfall in China compared to the quarter 1 2022, which was a very strong quarter in China. All other regions -- all other subregions contributed positively with especially nice developments in Australia and in India. Last but not least, our Americas region, very good improvement as well. The sales grew by 28% compared to the prior year. Obviously, right now, still with a little tailwind from the dollar development. That is something we expect to turn around in the course of the year. But we saw very nice development all over the region. So high volumes in North America, so U.S. in Mexico, but in South America as well. But still the automotive market in the U.S., which will be the major growth driver, obviously, of this region is a little behind expectations. So initially beginning of the year, we expected the market to go back to 15.5 million sold cars in 2023. This will most likely not happen. So we expect to grow. But potentially not to the extent we had hoped for at the beginning of the year. We're now looking at what does this do with our liquidity, how does this contribute to the cash flow. Already stated, we saw EUR 52 million in the first quarter, which, for us, is a very strong quarter, is the first quarter. So high earnings after tax and an under-proportionate growth in net working capital, but the other changes we're seeing here is majorly caused by VAT impact resulted in EUR 52 million free cash flow before acquisitions. So we are well on our way to deliver on the outlook we've given of round about EUR 250 million for the entire year. Share buybacks are continuing as expected. The small acquisition payment you see here is the last payment we did for E-Lyte. This is a pure cash flow. In fact, it was already digested in our P&L last year with cash outflow only beginning of this year. So that means the first quarter enabled us to reduce the negative net liquidity and we expect to turn this back into positive throughout the remainder of the year. Taking a quick look at how our working capital developed because I know this has been a discussion a lot of us have had last year. We put a lot of effort into analyzing and actively managing our working capital since I joined the company and we are happy to see that the level decreased. We saw 25 million -- 25%, sorry, working capital with our sales end of quarter 4, and this now decreased to a level of 24% end of the first quarter. You can see that inventory slightly declined despite the higher sales volumes we saw there. And with our receivables minus liabilities decreased under-proportionately given the strong sales growth we saw. So I think that is positive news. And this is assets we will continue throughout the remainder of the year since we believe that's 25%, already stated that. It's not the level we are aiming for when it comes to working capital neither at 24%, but we now put into place the measures of monitoring and managing our working capital and expect that number so working capital percent of sales, to further decrease throughout the remainder of the year. Having relented those numbers, we are reiterating the outlook we gave to the market 5 weeks ago. So we are still aiming for mid-single-digit growth in terms of sales, which is organic growth only from higher business volumes and price lag effects. But obviously, of course, the full year impact of the price increases we put into flight has the highest impact in quarter 1 -- so the impact we will see in the subsequent quarters will be smaller, obviously, pure mathematical effect than what we saw in the first quarter. EBIT at EUR 390 million. The measures are still in place. The measures to track cost inflation to defined countermeasures are in place. But of course, we're still looking at the bigger impact of the FX impact to come. And the assumptions we put into that number hasn't changed significantly. So we are reiterating the guidance of EUR 390 million around about that in terms of EBIT. FVA above prior year due to the higher earnings and free cash flow at EUR 250 million, we believe we put a nice stepping stone lower working capital buildup has shown to become true. So we are confident that those numbers are still through as of today. To put a little perspective into what is our price development and how do our raw material prices of the products we purchase have developed. This is a little mixed picture. When we talked beginning of this year, we said for us, the biggest uncertainty is the development of our raw material prices of the raw material basket we buy. This statement is still as true today as it was a couple of months back. So what we saw is that our base oil in groups 1 and 2 further decreased slightly globally, even though we still saw some bounce back effect in EMEA. But I think as you can see nicely in this graph, we see that this -- the development of the price was coming back to the same picture we saw beginning of 2022, which is that the base of group 1 and 2 prices are somehow closer in the regions than what we saw throughout last year. Base oil Group 3, this is still influenced by, we call it, structural tightness here. But majorly, because we only have two [ bank ] companies that can provide the quality we need and one is still under pressure most of us have talked about this already. All other things we buy which, from a value point of view, accounts for roughly 60% of our spend remains on a very high level. From the indications we see so far we do not expect a huge change in Q2. So a slight decrease in [ this ] certainly summarizes of what we've seen at the start of the quarter. What does that mean for our pricing, it means there's not that much pressure yet, of course, to lower our sales prices as well. Even the price variation clauses we calculated now, they show some effect but not to the extent we expected at the beginning of the year. So what we can say the situation is more or less unchanged. Prices remain at a very high level from the input as well as from the output side, and we still need to wait and see the long-term trend of this will develop. And when this point will come that we see an inflection here as well with prices sustainably going down. Okay. So that brings me to the end of my presentation, and I hand back to the Lutz.

Yes. Thanks, Isabelle, for the presentation. And now we can come to the Q&A session. So operator, please take over for the moderation of the Q&A session.

[Operator Instructions] And the first question from Markus Mayer from Baader Bank.

Three questions if I may. the first one is on the gross margin side. It looks like that the gross margin in EMEA improved already, but not yet in Asia and America. And my question is does it have to do with the higher base oil 1 and 2 exposure in EMEA? And as such, the fact that [the 1, 2 ] basket in EMEA is already coming down, which is not yet the case then really in Asia and Americas, or is the pricing power stronger as you have a higher market share in EMEA than Americas and Asia? That would be my first question. Second question is on the strong free cash flow generation you have showed in the first quarter. This was, as you said, partly due to a lower net on capital outflow. Has this also to do with an effect that you received recently the customer approval for a new Chinese plant, and therefore, [ de novo and you ] have preserved this Chinese customer out of Manheim? And if so, is there further upside from this effect? And then lastly, on your guidance, I'm a little puzzled to be honest. I fully understand that you want to be conservative and be more as we just spoke a few months ago, when you full-year reported, other cyclic companies see Q1 as the weakest quarter this year. And in the weakest quarter, you have now achieved a result which stands for more than 25% of the EBIT guidance. So how is the view on the phasing of the earnings development of this year, you've baked into your EUR 380 million EBIT guidance?

So let me take the questions and please refresh us if I forget something. So gross margin development. I think your explanation covered the main points already. What we saw in EMEA when you look at the curves of the raw material pricing, obviously, a much steeper increase when Russia invaded Ukraine and the raw material pricing. That was not only true for base oil, but more or less for everything we bought. And we saw little blip but with a bounce-back effect, obviously, in EMEA. And this is, I would say, the major reason why we saw a better gross margin development or even higher gross margin development in EMEA compared to the other regions, it is just because the development of prices in general was flatter. But I'd say it's hard generally to talk about pricing power being different in regions which is more depending on the customer structure and the kind of business we are looking at and not that much on the regions. So this is due to the raw material price development in EMEA. Free cash flow, do we see a big impact of the approvals we got for plant localization yet -- not that much because most of the approvals were only granted in February and March. And obviously, it takes some time to still further ramp up to transfer some of the knowledge. So this is something to come. But I think to be fair, this will be a small impact, yes, because we're reducing the goods in transit. We are obviously reducing freight costs because we don't need to ship that over any more but the volumes are not that high that I really expect, I would say, an impact we can see on a global scale from those localization impact. Last but not least, guidance. I somehow anticipated that question to come and we discussed that quite lengthily as well. So I'd like to put a few things into perspective. Historically, usually Q1 was quite a weak quarter compared to the other quarters. That's true. But if you now look at the development we are expecting this year, I mean, obviously, we will have those two effects of the full price -- sorry, the full inflation impact as well as the full price increase impact. And of course, this will narrow down a little throughout the year, right? Since, of course, I mean, the full prices we've put into place now compared to quarter 1, it's still a bigger gap to the raw material prices, just mathematically for the quarters to come. And I think same holds true and this will be somehow it dates back in quarter 2 and 3 for the FX impact. As you remember, looking at our EBIT, we had a positive impact of roughly EUR 20 million last year. We expect that to turn around, so negative impact in the same full part for this year, and this will hit majorly in quarters 2 and 3. So this will be something we need to figure in as well. I would say a major reason behind why did we if not yet increase our guidance is that we did not really see a change in the uncertainty in the market, in the consumer sentiment when we talk to our customers. So what you see in the market is still kind of wait-and-see, and we are not doing huge CapEx projects, things like that discussion. And we don't really know when and if this will turn around in the different locations. So I think our sentiment of what has happened. Our expectation hasn't really changed since we issued our guidance beginning of March. But of course, we are reckoning that again after every month, and seeing do we see any trends that are pointing in either or direction. I think general uncertainty has not significantly changed.

Okay. And then also coming back to the guidance, the Q1 free cash flow development was the same line as your expectation because I at least -- my gut feeling was completely wrong, but I have the feeling that you at least in the full year conference call indicated more than free cash flow generation from that from capital reduction, in particular to come in Q2 to Q3 and Q4 and not already in Q1. So was this free cash flow generation better than you've expected?

I would say it was in line with our expectations. I mean we even saw a slight increase in working capital, as you saw at roughly EUR 40 million. This is pure volume impact from receivables. And of course, once numbers are flattening out to that we will not see this step up again. So that was more or less in line with the expectations.

The next question from Riya Kotecha from Bank of America.

I have a few questions, please. First, can you talk about structural growth and the development of your strategy? There's a mention of pleasing business development in North America. Does this refer to new contract wins and share gains? And can you give more color on end products and markets that you are achieving this in? Second, can you talk about China? How did you see China develop sequentially over the months of Jan to April? Have you seen a turning point in terms of sentiment on the ground? And is the weakness year-on-year coming from demand or supply constraints? Third, with regards to guidance, what do you need to see bottom up to become more confident on the EBIT guide? The 1Q figure was over EUR 100 million, setting up a strong run rate for the year, and the second and third quarter are seasonally stronger to my understanding. So is it just a question mark on China at this point?

So talking about the growth and where it's coming from, I would say very difficult questions because this is a very different looking into the different regions. I think we talked about our segmentation strategy sufficiently already. And what we see, I would say to mix back of structural market development. We're winning a lot of new and very interesting projects currently throughout the board. So some really nice EV projects, for example, in China, some very nice projects in North America for wind energy, but this is really, I would say, really diverse. A lot of meat in the food market was mine. So I think what we see now is that the segmentation strategy we push into place is showing effect in terms of we can leverage what we know in different regions. Is this the full effect already? I don't think so. Why is that? Because this is somehow still mixed with the, I would say, rather cautious consumer sentiment. So what we see as I would say the base business is somehow robust and stable, but we don't see a lot of new investments in the market, the new contacts from our customers, which would increase our volumes. But what we do see and what makes us confident is really a new strategic and structural projects where we develop some things together with our customers. When we look into China, the development we saw was purely demand-driven. So I think the supply chain is more or less intact in China. And this was really, I think, only driver behind this was I wouldn't say lockdown because we released the lockdown, the rapid effect of releasing those lockdowns in December we saw impact of overly high infection rates of partially more than 80% of our employees. And this means that our customers' suppliers as well, well into February. When we started the year, we expected that we will go back to normal in the market somewhere during Q2. When we talk to our colleagues in China right now, they say they are very confident it will come during this year, but it's somehow underestimated how long it will take for, point one, everybody to somehow be infected and recover and point two for the stimulus packages the government directly put into place to really show their effects. Because what you can see now, and this is, I think, more a general sentiment, you see not of us in China, but on the population in China, people are becoming a little more cautious because this is something the Chinese population was not used to in terms of growth. It's not always coming automatically. It's always going upwards. But now you have a lot of very young people being unemployed, you have people thinking about, okay, when will we go back to the growth rates we saw before. And what we hear when we talk to our people, when we talk to government officials is they expect things coming back and sentiment becoming better somewhere during the second half of the year. Looking at our guidance. I would say what would need to happen for us to somehow increase that guidance at one point in time. This is two things. On the one hand side, to really get a better feeling of when we'll see this turning time in terms of pricing from our raw materials as well as, of course, with our prices, what we do with the customers because what you saw under way back the way of last year will be the same pattern we will see on the way down. So that's for us, obviously, will be something very important to see when do we see this turning point of sustainable decline in raw material prices -- and then something we are watching very closely as well as the consumer sentiment is, for us, the certain impact once we have more as a consumable provider to see when does this turn around? And when this is uncertainty we see in the market somehow get a little better. What we usually like to look at apart from all we're talking to our customers, talking to our countries, it's the IPO Consumer Climate index. Usually, you find once this step above a 100%, consumer sentiment is positive. And this right now is only at 93%, which somehow of course, makes us think okay, when will the general upward trend pick up again.

I have a follow-up on the raw materials. If I look on the -- if I look at the chart on Page 13 of the presentation deck, I can see in April '23 had a tick down in the base oil 3 in the European market. Do you expect that to continue into the quarter? And then -- is that in any way sort of a lead indicator for the Asia Group 3 price and the U.S. Group 3 price because the European Group 1 and 2 base oils started to decline before these other groups as well.

Unfortunately not. So what happened here is that the market for base oil 3 is very tight. So we basically only look at [ Hyenesta, Commenesta ]. Now Chevron only have 2 suppliers, and they still have some issues with their production plans in Finland that hasn't eaten up. But what happened in the market is that not only us, but all their customers were looking for alternatives to substitute the base of 3 against something else. And this -- of course, I mean, demand for supply somehow led to prices coming down a little, but we do not expect this to be sustainable, unfortunately. This was more the same narrow market, not a lot of supply available. We start to substitute. So when the supply became available, demand was not a crisis for anyone.

[Operator Instructions] And the question from Lars Vom-Cleff from Deutsche Bank.

Just a quick question. I'm still looking at your volumes and the volume development, and you already indicated that you see volumes stabling out or that you have seen volume stabling out? Are you also seeing them recover during the current quarter already? And maybe you could split your volume observations also by region, I think we are welcoming that you're publishing the organic growth, but the underlying volume growth or volume decrease would be very interesting for us as well, I guess?

I'd say, do we see a lot of growth in volumes, not yet. I would rather say it's pretty like stabling out. Why is that? Because the consumer sentiment is still kind of -- well, we don't really know what happens. We don't really know where it goes. So volumes are, I would say, stable throughout the group, more or less, slightly different developments within the regions. Obviously, China, we already talked about. If we see higher volumes, it's mainly due to new project wins, but what we didn't see yet is that economic activity is picking up a lot and that this basically volumes grow significantly -- so I would rather say stabling out is what we saw over the first quarter.

The question is from Martin Roediger from Kepler Cheuvreux.

I have three questions, if I may. Just one clarification question, Isabelle you mentioned that the effect from the price variation clauses which you see right now is not the same what you have expected at the beginning of the year. Can you provide a bit more color? Is that there is a further delay because the thresholds are not reached? Or what does that mean i.e., the -- that, for example, you can keep your selling prices relatively high also for these key customer groups? Second question is, in particular, on Basel Group 1 in Europe, so the SM100 Rotterdam. And thanks for the chart that you showed this 50% drop in summer last year. But in recent weeks or few months, you see some slight recovery. And we hear from one of your suppliers that they've met some -- admitted that some Southeast European countries have the ability to buy cheap Russian oil and can produce therefore, very low or cheap base oil price. So do you see that is continuing and therefore, the structurally Group I base oil price will remain low? Or is there any signs that some other players will get out of the market and beyond the maintenance, there will be some impairment shutdowns. And thus, there will be a lower supply, which would mean then, of course, higher price for base oil Group 1 in Europe? That was my second question. And thirdly, at your Capital Markets Day, you have been quite vocal about easy fluids with this potentially $3 billion market value -- and you said that 50% of that market is relevant for folks. You indicated already that you had some benefits, but maybe you can more vocal on that or more color on that. To which extent you have already benefited from that opportunity in recent month because we see that EV production is quite strongly growing. So you might see some meaningful sales already in the last couple of months. Maybe you can give more insights here.

Yes, sure. Let me elaborate on that. So the price variation clauses, I mean, what we anticipated beginning of the year is obviously, maybe let me try to put that together with your -- with a question -- second question you asked. What we anticipate is that at one point in time, we would see raw material prices coming down. And how does those price variation clauses usually work? Well, for the big products, we define some kind of raw material basket we look at from kind of indices and then take some kind of average for the quarter. And when we started, we expected that average for the quarter to be much lower. And this is what you already said when you look, for example, have a base oil 1 development, which is one of the major ingredients of, for example, engine oils you're looking at -- we expected that when we saw this drop in February to somehow stay at a lower level, but we saw a small bounce back effect. Do I expect this to be something structurally? I will say a few words about this because in South or Eastern Europe, they buy cheap oil from Russia. I don't think so. For me, this is more an indication of the market coming back to a more normal level, where usually base oil 1 prices have been very similar in all 3 regions. What I would not expect is that we would see any impact here especially for us, putting that into perspective from, let's say, company to buy cheap oil from Russia because we are very diligent in making sure we comply with the sanctions that have put out towards Russia. And all of our suppliers had to confirm to us that they comply with the sanctions as well. So would we be very surprised to see an impact from this in our P&L because for actually every one of our suppliers, we've got the letters that they agreed to comply with all the sanctions. So I believe that this is something that could potentially have a small impact on the overall picture looking at the indices, but not for us. And then for your last question regarding the capital market line. You were talking about the indication of EUR 3 billion market, where half of that is relevant for us. So what we see is a lot of progress with the projects we are in. So this is something that is happening in the Chinese market a lot with all the major Chinese players for automotive production, but as well as the, I would say, charging infrastructure production, there's cooling fluids that go into the charging piles. We've seen less product groups grow already but I would say from the overall volume for us, it's not yet at a significant volume. I mean you see EV everywhere, of course, volumes are picking up, but from a very low level. So when you put into perspective of the demand for traditional combustion engines sits on a global scale, this is something, obviously, we need to consider when we look at our market that we are a global company and we're in 50 countries. I would say the demand we see, overall for combustion and on production is still a lot higher than what we see for EV production.

The next question from Riya Kotecha from Bank of America.

You mentioned that you expect additive pricing to decrease into the second quarter. May I ask what gives you this impression? Is it conversations with suppliers? If I listen to what if one Evonik-Lenzing say, for example, they talk about holding prices here, given there's more specialty area for them. And related to that, can you remind me of the breakdown of your raw material basket by value between the groups of base oils and additives?

Yes, sure. So as an additive pricing, and do we expect that to decline? I would rather expect that to stable out [ of the two ]. So we said we expect a small decline at best and this is based on what we saw during the first quarter during April now and on discussions with our suppliers. So far, I would say it remains on a stable -- it remains on a high level. With that, we see for some special chemicals the price has come down very, very slightly. So this is why we say, at best, a slight decrease, but rather stabling out further in Q2. When you look at our overall raw material price -- our raw material basket, sorry, I would say you can say roughly 40% in terms of value is base oils and 60% is additive, specialty chemicals. And out of those bases oil, I would usually say 1/3 Group 1, 1/3 Group 2 and another 1/3 Group 3 PAOs in ether. But I would say majority of what we buy, so roughly 60% is not base oils.

There are no further questions at the moment.

Okay. So this is the case. We have come to the end of our conference call and the Q&A session. Thank you very much for the participation, and we are looking forward to the next event that we have next week on Wednesday, we have the AGM. So there will be a live stream on our home page, if you want to participate that event. Having said that, we will say goodbye and wish you a good day. And -- yes, you too.

Hoping to see a lot of you next week at our general assembly. Have a nice weekend.