LANXESS Aktiengesellschaft (LXS) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining the LANXESS Conference Call. I would now like to turn the conference over to André Simon, Head of Investor Relations. Please go ahead.

Yes. Thank you very much. Welcome to everybody to our Q1 2020 conference call from my end as well. Yes, first of all, I hope that you and your families are fine and healthy in these days. As always, I have with me our CEO, Matthias Zachert; and our CFO, Michael Pontzen. Please take notice of our safe harbor statement. And with that, I'm happy to hand over to Matthias for a brief presentation and afterwards, as always, the Q&A. Matthias, go ahead, please.

So a warm welcome from my side as well. I will go through the presentation and start on Page #4. EBITDA for Q1 2020, at EUR 245 million, 10% down versus previous year levels. More or less, we have been in line with what we communicated in March, around about EUR 20 million impact coming from corona. At the end of the day, it turned out that March was heavier impacted by corona, so therefore, the further decline. Margin held relatively robust at 14.4%. The nice thing that you're seeing now is Consumer Protection, it's no longer performance chemicals. This is Consumer Protection. It is a very strong, solid pillar in our portfolio with the strongest margin and even in tough times like these with an increase in sales and profitability. Specialty Additives held up nicely versus previous year. But also here, we will have impacts in the quarters going forward. So we rejoice about the stability this segment had. And I remark again that these 2 new segments have been created over the last few years, and they will become strong contributors also in the years to come. Temporary shutdowns in Q1 we had in China in all of our plants. Also, Italy was impacted, India as well, but the plants are up and running. Argentina was shut down, up and running again. The chemical industry has been detected by all governments as system relevant. So it's nice to see that governments around the globe realize if the chemicals are no longer up and running, all other respective industries are impacted right from the beginning. And therefore, we find great support from all governments to manage everything in a productive way. I'm very happy today that we, last year, addressed all the 5 divestitures and 1 acquisition. In today's time when nobody can travel, no due diligence can be made, no site visits can happen because of travel restrictions, it's nice to see that IPEL, the Brazilian acquisition on biocides, could be closed transaction-wise in February. We could close the chrome chemicals divestiture and the 2 organometallics divestiture in Korea. And with PMC in United States, again, had we not done this last year, most likely, they wouldn't happen this year. I turn now the attention to Page #5. Here, you see that we have addressed financial measures and operational measures very swiftly. And ladies and gentlemen, I was CFO in this company, in the same company, in the times of the financial crisis, '08/'09 when Lehman crashed. And what I've learned out of the financial crisis at that point in time, when a crisis kicks in, and I consider corona having most likely a stronger impact on the global economy than the financial crisis had, when the financial crisis kicked in, basically, 6, 9 months afterwards, liquidity was the thing to have. It was all about liquidity, liquidity, liquidity. So what we've addressed next to operational measures in basically the second half of March, we addressed liquidity. We also saw that the sentiment from the investor buy-side changed. We got from a lot of deep value force liquidity questions, and we understood why. Because Oliver, Michael, and me, we were all here when Lehman crashed. So what we wanted to demonstrate to all of you to the capital markets, we have ample liquidity. In order to give proof to the pudding, we drew our revolving credit facility so that you see that in the March reporting. So you see we have a open credit line that we can tap at any point in time. For the same reason, liquidity, we suspended the share buyback program. But of course, we suspended it, we have not canceled it. We've reviewed our CapEx projects and reduced it by EUR 50 million, notably in businesses that are impacted by steep declines, i.e., automotive industry. And we decided on cost containment measures of EUR 50 million, which are baked into our guidance. But we can move it up to EUR 100 million if need be. So further EUR 50 million will not address our capacity or structural profitability improvement that we had planned over the next 2 years. This is something that will not hurt our growth ambitions structurally. In April, we eventually concluded the sale of Currenta with the realization of the EUR 780 million. And of course, we had a profit participation, which is EUR 150 million and which has also been paid for us being a shareholder for the months of September to April, wonderful dividends. Now let's come to the operational measures. We have very early on, fortunately, introduced corona measures. We started with this when basically China started to have shutdowns. So we prepared a crisis corona team and basically prepared already our plants and around the globe that this might spread. And therefore, plans were implemented. And I think, for this reason, we made sure that infection in our company so far have been fortunately at a very, very low number. In Germany, we -- predominantly, but also in some other countries, we adjusted the shift model from 8 hours to 12 hours. This gives you 2 opportunities. One, if you have 12 hours, of course, automatically, you rotate shifts less often, and thus less contact happens. And on top of that, you have security flexibility. You have 1 to 2 shifts that you can send home and they stay there, should you have an infection point in 1 shift because then you have the risk that you have too little operational workers. We have now a model in place where we have definitely excess unaffected people, thus we can operate even if somebody is infected. So all in all, the infection that we have currently globally is at 31. 27 are already back and went through quarantine and are back to work. So right now, the infections in our company, fortunately, are at an extremely low level. I am fascinated by the procurement and logistics team. We had no breaks anywhere in our value chain. So that ensured that we could produce. If you have no raws, if you have no logistics, of course, you are stuck and your production goes down. In such a situation, of course, you have to also change the way you manage the company. Next to corona team, that's with corona responsibility, teams in each country, in each business, and of course, with respect to reporting, I mean, this, I think everybody has, but next to this, we've started again to the Board's daily liquidity status. Each business had to do in the last 4 weeks a scenario modeling. We've done that at Board level for the entire group. So we have extreme cases, bid cases, up cases, whatever. And as a matter of fact, normally, we meet in the Board -- in the management Board every 2 weeks. And we have now nearly daily Board meetings in order to organize the measures, put them in place, discuss them with the next line globally and orchestrate everything that you have to do in order to be very speedy and fast. And I think this you need to do in order to steer your ship safely and in a good way through corona crisis. In a crisis situation, we want to give more deeper insights to the capital markets because we understand that this is something where you need not less information, but potentially more information. So we add a slide here on Page 6 so that you better understand our cost containment measures and respective CapEx measures. The first thing that we decided relatively early in the management Board before we went out with the communications on what we want to reduce in the world -- in the businesses, the first thing that I discussed with the management board was that we immediately go for a voluntary reduction of our bonus. So this was happening mid-March. I had 2 sessions on this with the Board members. And in the second one, everybody agreed on a personal contractual way to reduce the bonus by 50%. When this happened on the next day, we had a conference call with the global leadership team, i.e. business unit heads and the staff functions, and I proposed to them that they also cut their variable pay by 25%. No objection to this. When I presented this yesterday to the Supervisory Board, what we had agreed in the management's global leadership team, the Supervisory Board also agreed to cut their pay by 20%. After we had taken this decision mid-March, we then went out to the next line of management and basically said, "Now we will take costs out where it makes sense." So we delay various projects. Consultancy are, therefore, going down. We make -- of course, obvious because you have travel bans, we make -- we will make significant reduction in travel. But more importantly, we focused cost cuttings in business units that are especially impacted. This relates notably to the automotive industry. This relates to the aviation industry. This relates also to the oil and gas industry. Definitely, there is a general cost containment for the entire organization, so not only for the business units but staff functions and country organizations need to review their budgets, too, so they get a haircut. Nobody objected. And in countries where feasible, we now start to prepare for short labor. Currently, we have round about 350 people in Germany in short labor. It will go up most likely going forward because we still see that automotive industry is heavily impacted. But at this point in time, compared to other companies, at least what I see here in Germany, we are at a lower end of short labor. Let's address CapEx. Clear commitment to safety. So as far as maintenance CapEx is concerned, we don't touch it. We are addressing, of course, our shutdowns as well, our maintenance shutdowns, where technically possible. This will not be possible everywhere. So for instance, the HPM and Virkon shutdown will most likely happen. And we've reviewed our growth CapEx projects and suspended them in some areas where we had CapEx for the automotive industry, we will most likely cancel them. So total CapEx spend should be going down by EUR 50 million so that the CapEx envelope for the company is EUR 450 million. At this point in time, we don't have redundancies. So there will be literally low to no onetime costs. Having said this, we might later, depending how long this crisis takes and how strongly it impacts global economy, we might later adjust for capacities in a second step. That will then, of course, have respective OTCs. But at this point in time, we don't want to structurally change our profitability profile. If you take capacities out, you, of course, adjust for future growth. With this, I turn my attention to Page #7. And you see here, there is plenty of liquidity that this company has. An investor legend once said, "In crisis times, you have opportunity times." LANXESS is prepared for a lot of opportunities. When I was in the financial crisis, I saw after around about 9 months that a lot of distressed chemical assets came on the market. At this point in time, we had not a lot of liquidity and we had rubber, and therefore, we could not act. If such a situation happens in this crisis, we would be ready. We are prepared, and we will be ready. If there are no distressed assets, I mean, share buybacks of our own shares is always a good acquisition. But the one thing I can tell you, if this crisis lasts 1, if this crisis lasts 2 years, you better have liquidity. And we will sail through, that's for sure. With a EUR 3 billion of liquidity compared to our size or compared to our market cap of EUR 3.9 billion, it seems that we are one of the strongest companies with the highest liquidity. I pay my attention now to Slide 8, 2020 outlook. So our view is that COVID-19 will impact worldwide economy hard, many industries but therefore, also private consumption. We expect that not only different to March -- early March guidance, we expect that not only Q2 will be impacted, we also assume that Q3 will be impacted. As a matter of fact, I prepared my company for a hard recession this year. And I say to my people, "Let's even be prepared for 2 hard recessionary years in -- for the entire worldwide GDP." If you take a stronger preparation and it comes better, you rejoice. And therefore, this is the approach that we take here at LANXESS. Disruptions of value chains cannot be excluded, also disruptions in the logistical value chains, and this, of course, we have to monitor. Now I come to the guidance. We have discussed that in the management Board for quite some time. Do we give a guidance or do we stop giving a guidance? Well, we went through an entire day last Wednesday with our global business units one by one. We went with them through order book, April, May. Of course, June is still unclear. We went through them through different scenarios on their business expectation for the entire year. And we decided, despite all volatility out there, we decided we have more data points than you guys have. You sit behind your Bloomberg, Reuters screens, and you cannot look into our customers. You cannot look into our end industries. And therefore, I clearly state it is extremely difficult in this current environment to give a guidance, but we have far more data points that you have. We have an April book. We have a May book. We can look into this. And based on the orders on hand, we decided that we want to give a guidance for Q2. This is incremental because we knew -- we know that you need more information rather than less information. And we have also provided a guidance for the entire year. I say it again, we don't have a crystal ball, but we have decided we want to give you more information on what we know today. So let's come to Q2. EUR 200 million to EUR 250 million is our Q2 guidance. In the management Board and in the business reviews we had last week, we consider that the midpoint of the quarterly guidance is currently the right view. My feedback, clear feedback to you is these are volatile times. I know that some sell-side analysts always say a record guide in a conservative way. This is not the case. I would rather recommend you be on the low end of this guidance. I think this is in the current volatile time for the sell-side investors, you speak to your investors, and I would recommend to you, be in the lower part of this range. Implementation measures are implemented here, and we have implemented so far for this entire year, EUR 50 million. If it comes harder, we will move up. If we move to EUR 100 million, of course, we somewhat adjust our growth profile going forward, which at this point in time, we don't want to do. Let's come to the full year guidance. We lowered it by roughly EUR 100 million. I have to tell you that this is emotional for me. It's the first time in my entire life that I adjust the guidance. But our strive, and this is for us most important, our strive is not to have egos. Our strive is to manage companies in a professional way, to be as accurate and rational. And that's life. Corona impacts the economy hard, and therefore, we adjust our guidance to the EUR 800 million to EUR 900 million. The last point I would like to state to you as far as the outlook is concerned, we are, of course, seeing right now that next to the volume decline, raws are going down, especially in the oil chain. If you look into the derivatives that we partly use in the -- from oil like benzene, toluene or cyclohexane, they're all going down. And therefore, you also should assume, here I'm speaking notably to the analysts on the phone, you should also assume that this has an impact on top line because prices will be adjusted. And in our case, this might be between EUR 300 million, EUR 400 million, EUR 500 million. At the end of the day, this will not have an impact on the profitability as we can see because raw materials, since we have sold rubber, really don't matter that much. But for your models, we try to provide clarity. So you should also assume that sales will be adjusted, whilst the EBITDA guidance is the one that we have communicated. Well, final wording from my side. I think we had a very strong team culture here before. And what I -- the positive thing that I take out of all of this, it moves strong teams even stronger together. You might see that in your company as well. I'm fascinated by the teamwork. It's an unbelievably powerful team, and it has moved us in the last 6, 8 weeks together. I'm really impressed by every contribution by the Board team. It's operating in a unbelievable, speedy, professional, and teamwork way, but I see that also in the next levels of the organization. It has moved the LANXESS team together. And this, as I always said, I was proud of the slogan, that's for me, true energizing chemistry. And with this, ladies and gentlemen, let's address your energizing questions.

[Operator Instructions] And the first question we received is from Tom Wrigglesworth, Citi.

Matthias, a couple of questions, if I may. Obviously, I can understand the cost cuts and the remuneration changes. But I'm kind of -- I'm quite surprised that you're cutting CapEx given the resilience and strength of your balance sheet. And I think you kind of alluded to it, but I'd love to hear your thoughts on countercyclical investments organically and your ability to really use that balance sheet to drive future growth and how you're thinking about those CapEx cuts. Second question, bit of a technical one, is, you talk about this -- well, you've announced this profit participation of EUR 150 million. How much cash do we expect that will come through as? And just from a reporting perspective, where will that number actually come in the accounts? And a third one, if I may. Obviously, strong performance in specialty additives. But could you give us a little bit of a flavor of how the lube add business is doing versus effectively the brominated products within that?

Yes, Tom. I would take number one and number three, and Michael will take number two. So CapEx, if you assume that we would be in a recessionary environment and that some industries will be impacted hard, and this basically impacts, from our point of view, the aviation industry very hard, so we had the lube add, also, as you know, aviation lube adds that are going into the turbines, very nice business, high, high margin. We presented that in the Capital Markets Day last year. Aviation industry is down nearly 100%. So if nobody flies, you need less aviation lube adds. And we have, for instance, also CapEx plans in this field. And we've taken these product -- products or projects out. The same relates to the automotive industry. The automotive industry will be heavily down this year, and it will take quite some time that at least our assumption that automotive industry comes back. If you have, in United States, 30 million people unemployed and now an unemployment rate of more than 20%, I've never seen that in my entire life, at least when I was officer, and unemployed people normally don't buy cars. Germans are fanatic about cars, but we have now 10 million people in short labor. If you are in short labor, you don't buy cars. And that's what we are seeing basically now also in April. And therefore, we cut CapEx projects in HPM that we originally planned for the automotive industry. I mean, look at Great Britain. You had a reduction of car sales of -- in the 90s or 98%. So this impacts the automotive industry currently heavily. So therefore, in all of these industries, we adjust our CapEx plans. Now as far as Specialty Additives is concerned, additives are going everywhere. And in all the industries, we've listed this in the segment reporting that we have in the slide deck for additives. Additives go everywhere, automotive industry, aviation industry, oil and gas industry, electronics industry. Also, electronics are impacted, not as heavily because televisions are still bought because everybody sits at home and wants to watch telly. And therefore, tellies are still needed. But other electronic devices are being adjusted if these are big, big -- bigger pay investments. And with this, I hand over the profit participation question to Michael. Go on, Michael.

Thank you, Matthias. Hey, Tom. Hi, everybody, as well from my side. Hope everything and everybody is fine with family in these crazy times. Coming to your question with regards to where do we see the effect from the Currenta transaction. So in the P&L, you will find the results, the total number in the financial results, and the corresponding tax effect in the tax result, obviously. It holds true as well for the additional EUR 150 million, what we told you guys, for the EUR 780 million, that the overall tax number should be in the range of, give and take, 20%. With regards to the cash flow statement, in the cash flow statement, you will find the inflow in the investing cash flow and the tax effect in the operating cash flow. And that is already a hint that in the second quarter, because in the second quarter, there will be a larger number being paid for taxes, you will recognize in the second quarter, and therefore, see a tremendous change in the tax line in the second quarter.

And the next question is from Patrick Rafaisz, UBS.

Three questions, please. The first one -- and thanks for providing a guidance, not only for the year but also for the second quarter, haven't seen that much in this reporting season. At the EUR 200 million to EUR 250 million, even at the lower end, does that include any special items, either positive or negative? I'm just wondering because it seems that it's a pretty modest decline from the first quarter, just given the scale of the downturn we're seeing. And the second question is around the working capital for the full year. And I appreciate you did a lot of work on that last year. Q1 was also better than last year. But how should we think about this, about the potential working capital release on a full year basis? And then the last question is on the lithium brine project, which was pretty much on plan when we last spoke on occasion of the fourth quarter results. Where do we stand here? Is that one of the projects that's potentially on hold now for the time being?

Yes. Sure, Patrick. The EUR 200 million to EUR 250 million are versus previous year in the EUR 280 million. So therefore, second quarter normally has always been our strongest quarter. So if you look at the bench last year, of course, if you go to the lower end, this is a -- then a severe drop or significant drop. And therefore, if you go to the midpoint as well as the lower end of the guidance, and therefore, it is a steeper drop than in the first quarter. There are no special profits that we bake into this. But I clearly say to you, industries are shut down. We have partly -- the entire supplier industry in Germany for the automotive industry, which has shut down, I cannot see the order book of June. And therefore, I'm trying to recommend to you be cautious. But I see the order book of April and May. And therefore, in these times, my recommendation, you speak to your analysts or to your investors, I alert you to be cautious. We are not here taking in special profits. This is what we are seeing. On working capital, Michael will take this question. Lithium, the project was running well according to plan, but nobody can travel. The Canadians of Standard Lithium cannot go to El Dorado. The German engineers cannot -- are not even allowed to enter the United States. As a matter of fact, I would not recommend them flying anyway. We have a travel ban around the globe to everywhere. We can go to our sites, but we don't ask people to travel anywhere. So the project is basically on hold, and we have to see when we start traveling again and when borders are being opened again. At this point in time, countries are pretty sticky to basically complete the border stoppage. Michael, come on, working capital.

Patrick, with regards to working capital, it's difficult this year because you might not see and we might not see our typical seasonality because we don't see the typical seasonality when it comes to earnings and business or we don't expect them for the next quarters to come. As we just told you, second quarter is expected to be even below the first quarter, which is not a usual pattern. But if you take a look what happened in the first quarter, at least you should get some relief if there are concerns that we are taking well care of our working capital. The level of inventory didn't move nearly at all, at least not from a volume perspective, which is untypical because usually, we have an increase in volume in the first half of the year, stabilization in the third quarter and then a decline in the fourth quarter. When you take a look at the payables, the payables are as well rather flat in the first quarter, which is as well not a usual pattern. Usually, the number is decreasing versus year-end accounts. But what happened here, and that is what Matthias was mentioning, we saw, especially starting in March, a huge decline in our raw material prices. And this decline, you first recognize in our payables. And that is why the numbers didn't enlarge or didn't change that much over year-end. On the other hand, in the receivables, we see a huge enlargement because we saw in December 2019 relatively low revenues, and the March was a relatively good quarter -- month, especially compared to December numbers. And that is why the receivables were enlarged. Over the next months to come, giving the fact that the raw material prices massively come down, you should as well expect the top line will come down. And therefore, receivables will come down. And therefore, you should see a cash in from the pricing.

And the next question is from Andreas Heine, MainFirst.

There's only a few small ones, please. Other companies have given some indication on April sales, and the rough number we hear several times is in the magnitude of 20% sales decline. Is that something you would also see in your business? Second, on Consumer Protection, which indeed had quite a nice outcome in Q1. Sequentially, do you expect this business to improve? Or will that be for whatever reason also hit? I would not expect this. And the last is in looking on the engineering plastic, of course, it was hit quite a bit in Q1. But is that where most of the hit comes in the second quarter? Or is it more broad-based?

Can you repeat the business you did in your second question? I didn't get the name.

Consumer Protection, yes, that segment, whether that is -- sequentially might see an improvement.

Yes. So on April, I mean, I think we've provided you color on Q2. We will not go now on April. As a matter of fact, we see from the business review, things in order in April, but I will not start giving monthly sales. I think this goes a little bit too much. As far as Consumer Protection is concerned, I mean, this is a business that is growing. This is a business that has 24% margin or more or -- I mean, let's say, above 20%. I've always stressed that there are 2 pillars in it. Now -- and I stressed last year that Saltigo will emerge. After it has already went up in 2019, it will emerge further. And therefore, I'm looking at Consumer Protection as a very strong pillar, new pillar in this company, that, that will most likely in 2020 grow from its profitability. And this will be one of our most resilient businesses going forward. On engineering plastics, well, except Consumer Protection, all 3 segments will be impacted for the rest of the year. Of course, Engineering Materials or -- especially here, the polyamide business, as it has the biggest exposure to the automotive industry. Of course, here, we will see the volume but also price decline. It will still be an okay business, but the decline in an absolute basis for 2020 we consider will be stronger than the decline we have seen last year because simply, nobody buys cars these days, and I'm not sure that the appetite for the consumer will rebound strongly globally. We will see in China a reduction in absolute car production. We will see that around the globe. And therefore, in HPM, we will definitely see a stronger decline compared to 2019.

The next question is from Martin Roediger, Kepler Cheuvreux.

Three questions from my side. First one is on your guidance for Q2. You say EUR 200 million to EUR 250 million EBITDA. Can you provide us with the parameters, i.e., volume assumption or sales assumption, which is attached to the low end or to the high end of that guidance range? And especially at the lower end, what you are guiding for would be interesting for me. Secondly, again on the guidance, now I refer to Page 8 of your presentation. You write in one of -- on the slide that the -- you expect the burden of the pandemic to accelerate in Q2 and Q3. Q3 is a bit different to what we have heard from other companies. So do you want to convey that the impact from COVID-19 will be in Q3 similar to Q2? Other companies say that they expect a sequential improvement in Q3. And thirdly, it's on the raw material fluctuations. You mentioned basically it's a pass-through, so lower sales, but no impact on earnings. Would you agree that this volatility in oil price and therefore in chemical prices makes it difficult to find the right price point as also customers read the newspaper, and thus, that could delay any business?

Yes. Let's address them one by one. So as I stressed before to Andreas Heine, we give you -- we would -- we give you data points. I will not start now going into the next line of assumptions. So we have -- we are the only company that's provided a data point to you on Q2, but now we don't start providing more data points. Of course, what I've indicated in this conference call, you should model in businesses that we have that has automotive exposure, you should model strong volume declines because production was shut down by most of the suppliers to the automotive industry in April. So automatically, they order less. And of course, they -- here and there, you have to also adjust prices. So having said this, this is qualitative, and I hope this clarifies. Now on Q3. Again, I have no crystal ball. But you have to take certain assumptions. And the assumptions that we take into our -- and I think I've indicated very clearly in March that Q2 will be impacted strongly, and it happens -- or it will happen. Now in Q2, our assumption for Q3 is the consumer will adjust his purchasing approach around the world. And you will see that also that in Q3, the back -- the world will not come back to normal levels. My assumption is that August, the holiday season will be used by many industries to again reduce their production. The automotive industry that normally doesn't produce in August most likely, in order to make sure that inventories will not move up, will be humbled and, like in the financial crisis, will prolong the holiday season so that the production is being delayed. So our assumption is clearly that due to the unemployment that is currently rising around the world, modestly only in Germany because we do short labor, but in other countries, we see that unemployment goes down substantially, and the unemployment is going up in Q2. Automatically, if you look into macroeconomics theory, automatically, after unemployment happens, consumers start to spend less. And therefore, we have decided to take here a humble approach on worldwide economy. And thus, we assume that Q3 will not be back to happy times. And also Q4 will not be back to happy times. And that's the assumption we take in how we steer the company. If it comes better, we are all happy. On raws, well, the impact on oil has happened. And through the oil derivatives chain with some few exceptions, this is going through. And therefore, we have many pass-through contracts. And for that very reason, we don't currently consider that this has a negative impact for us, but I wanted to give help to you for modeling sales. And that's, therefore, my indication. I don't think that this will -- I mean, from what I know today, I don't think that this will dramatically change the purchasing behavior because the collapse in oil prices and in the derivatives has already happened.

And the next question is from Peter Spengler, DZ Bank.

I appreciate you very much that you provided guidance for the full year. This is not a given in your peer group, and excellent introductory speech as well. Unfortunately, Martin has asked one of my questions. So I have 3 left. On the guidance as well, you lowered the guidance by EUR 100 million, the range. But the expected COVID-19 burden remained the same. So is it the negative consumption effect that you mentioned several times? Then the second question, will you propose the same dividend i.e., EUR 0.95 as before? And the third, there was a high depreciation number in the first quarter. And this is more than 25% of the EUR 450 million that you are guiding for the full year. So is there a decline then in the coming quarters?

[Foreign Language] On guidance, thank you for your comments. But of course, I say this with the caveat to it that I've made earlier. I know the times are very volatile, and I know that's extremely difficult. But I have explained the reasons for giving the guidance. And we mentioned the EUR 50 million to EUR 100 million corona impact in March. I'm not aware that we have reiterated this. If we have reiterated this, this is complete wrong. Entire decline in profitability is corona-related because the underlying demand is corona-related everywhere. And therefore, now it makes no sense to distinguish between corona impacts global economy everywhere. Dividends, we've decided on dividends in March. We've now not decided yet on the AGM. But at this point in time, clearly, we stick to our dividend decision. And depreciation will be answered by Michael.

Peter, yes, with regards to D&A, the number for the quarter was EUR 115 million. If you multiply it by 4, you get to EUR 460 million, which is a little bit higher than the given guidance. We always have currency effects in there, and there can always be a shift of a couple of million here and there, given the leasing contracts. So all in all, the number is around EUR 450 million for the year, and there might be a deviation of a couple of million every quarter.

The next question is from Matthew Yates, Bank of America.

I just had one question around your intermediates division. And when you look back at how that business performed in 2009 crisis, if I'm not mistaken, I think volumes fell more than 10% back then, and profits maybe fell by about 30%. So the Q1 volume decline of 1% that you've had, is that expected to get much worse through Q2 as some of your customers scale back their production runs? And then just when you compare that business now to a decade ago, is there anything significant around the cost structure or the mix that would make the profit profile different in a downturn like this?

Matthew, very valid question. So we assume that the volume decline also in AII will go up. And therefore, AII for the first time in the last 10 years will have a reduction in absolute profitability. Margin-wise, they will be still doing okay. And as far as cash conversion profile is concerned, it will be also still one of our strongest cash contributor in this year. '09 -- versus '09, the situation or the profile of this business has changed. I mean, we have, on the one hand side here, changed the configuration of the mix in this business, one. Two, we have expanded the very profitable business products over the last 10 years. And therefore, many of the business product lines that I have reviewed also last week, they are relatively robust. So as far as 2009 business profile is concerned compared to 2020 business profile, I would say the business has substantially improved. And therefore, I don't see that whilst AII was relatively doing well in '09 versus other business product lines like rubber, it has now become one of the strongest business units in our profile. And I would like to make also -- if I look at LANXESS today, look, we had a tough year 2019. 2020 will be even tougher. I would not like to talk to you about a downturn. This is a steep recession that we currently face. But in 2009, the company posted a profitability Q1 of EUR 66 million. We now post a profitability of EUR 245 million. LANXESS has changed dramatically to the better. And for that reason, I look at this crisis with optimism. There will be opportunities. You have to wait for them in a very disciplined way, but then you go for them. And I say that in all clarity because I know what kind of business platform we have. We have strong businesses. Some will even grow in this crisis, and the others will manage the crisis. And the opportunities will come. We are prepared for that.

The next question is from Georgina Iwamoto, Goldman Sachs.

So I've got 2 questions. The first one is just on the guidance. I think everybody thanked you and me too for providing a table from the second quarter and for the full year. But I was just hoping that you could give us a little bit of understanding about why you think you have better visibility on the full year versus your peers. And maybe another way of thinking about it is, what makes you comfortable that it's not going to be below the lower end of the range that you've given for the full year? And then my second question is, if you could give your kind of views on the recent news flow around stimulus in Europe for the automotive industry. A lot of the capital markets are getting quite excited about that.

Georgina, nice to hear your voice. So I don't know what the debates were in the other companies. And some companies definitely have more commodities in their profile, in their business profile and potentially, therefore, has more volatility. And therefore, I cannot judge what other companies are doing. But I come back to what I said before. First, we have -- our company established over the last several years bottom-up feedback and forecasting processes. We do them basically organized before conference calls. So it's a process that is implemented here so that we inform the markets according to our best knowledge. And I referenced earlier, we made a entire business review meeting with our businesses last week, so I could collect my data points. And we concentrated here on Q2 trading discussion and also on our best understanding where we will go until end of next year. But here, I said that in all clarity, we take a risk. Forecasting in these times are extremely difficult. We took this -- the decision as we have more data points we communicate, point one. Point two, in some of our businesses, we have contracts, underlying contracts. I'll give you one example. AII, it's a big ship. We have underlying contracts with take-or-pay clauses. If we go to the Consumer Protection business, MPP will grow this year. We have disinfection products, and disinfection products currently are going through the roof. We have given as present, I don't know what the English word for that is, [Foreign Language]. Donation, that's the word. We have given a donation for 1 million disinfect liters to various states, to schools, to hospitals so that they can use Rely+On Virkon. So the disinfection business that has been presented to you in the Capital Markets Day last year will grow volume-wise, potentially pricing-wise. Saltigo, we have underlying contracts. Saltigo will grow this year despite a humble agro market. I mean, we worked on Saltigo, and I said that over the last 2 to 3 years, we worked to change the profile of Saltigo, and it's coming. And so Saltigo will grow this year. Our water purification business, I said this is more and more regulated into 100% industrial water recycling, that our current view, LPT will be stable. And therefore, you will have 1 segment where we have from contracts clarity that this business should be doing well. Engineering Materials and also additives, due to the end markets that they are selling into, of course, will have an impact. Also, AII, as I indicated, it will have an impact, but we can somewhat model the impacts if we look at the underlying contracts. But we take a risk. Forecasting is not without risks these days. We decided to give you more data points. Now on automotive industry, your second question, well, second quarter, you had the production shutdowns. So therefore, second quarter will be rough. They will ramp up production again. But here, I come back to what I have said before. Consumers around the globe are currently in a situation, we see that in Germany, that they withdraw from purchasing behavior. And therefore, Q2 is impacted because the automotive industry has had the shutdown. Q3 and the quarters afterwards, from our assumptions, will also be impacted because then the consumer will -- basically due to unemployment and being concerns, will start also not buying. And that's how we look at the automotive industry.

The next question is from Knud Hinkel, Pareto Securities.

I have 3 actually. My first one would be on the share buyback. Maybe you can share your thoughts on the suspension. Is this because your share price isn't depressed anymore because of the other opportunities you mentioned? Is it because of liquidity-related consideration or all of the above? That would be our first question. Second question is on the disposals you closed in Q1. How much should we expect as a result from discontinued operations for the full year? I think it was minus EUR 50 million in the last year. And the third question is on Saltigo. You mentioned that the business on -- is in a good way. I know you've been awarded a number of contracts from the industry. Do you see beside these -- beside this also a recovery -- a broader recovery of the agricultural industry for the time being?

Yes. Thank you for your questions. I hope you can still hear the answer because I assume that your telephone is ringing.

Yes, correct.

So on the share buyback, it has nothing to do with where the share price is. I think our share price is at depressed levels, that's my personal view. That's the reason why I bought myself shares in March. I would not have bought shares at current trading levels in March if I had not believed that there is a opportunity, and this was, of course, after we released our numbers. So it was disclosed in directors' dealing. M&A, no, it's not -- we don't move up liquidity for M&A. Currently, you cannot really do M&A if you cannot make due diligence. Therefore, the M&A market is literally, I think, is literally currently down as well. We canceled the share buyback program for 2 reasons. First one is liquidity. But second one, if you start going into short labor in your sites, if you are prepared to discuss with unions, tougher measures like salary cuts, et cetera, having a share buyback program running in parallel is simply difficult and creates resistance. And we are a company that has always shown when we need to take costs out, we take them out and find support also with the unions and the workers' council. So these 2 reasons were basically the reasons for canceling the share buyback -- sorry, not canceling, postponing it. Discontinued -- well, discontinued, we still have the mine in South Africa. The mine was negative in EBITDA last year. It will be negative EBITDA this year until we have sold it. Saltigo, I'm not conveying that agro markets returns. We see the agro markets a little better than last year but not rebounding strongly. It's simply -- we've changed the business profile of Saltigo. We have entered into other contracts. We've got new contracts also in the fungicides markets, which are highly attractive. And therefore, we've simply changed the diversification, one. But we have also new contracts, and we will get further new contracts, so that we are considering Saltigo to be on the very positive side 2020, but also 2021.

There are no further questions at this time. I hand back to our presenters for closing comments.

Well, ladies and gentlemen, thank you for participating. You will not see us, unfortunately, face-to-face, but on virtual video conferencing, which are popular these days. We are looking forward to this. And we thank you for your support. Keep distance and stay healthy. Bye-bye from LANXESS.

Ladies and gentlemen, this concludes the LANXESS conference call. Thank you for joining. And have a pleasant day. Goodbye.