MBCC Group (SIKA) Earnings Call Transcript & Summary

So good morning, and welcome to this ad hoc conference. We have great news to share. The news is out. We are going to acquire MBCC Group. We signed yesterday evening the contract, and we are now going to present the rationale behind this transaction to you and I'll then later on also open for questions. Let me go into the key aspects of transaction. So the highlights and the KPIs. MBCC is a global player in the construction chemical industry, generates this year expected CHF 2.9 billion of revenue. The enterprise value, as we see it is CHF 5.5 billion, which comes down to 11.5 multiple on the expected EBITDA of 2022. And with the synergies that we expect in the range of CHF 160 million to CHF 180 million, this multiple will come down to 8.5. This transaction is highly complementary to what Sika is doing. It is in all our core technologies, an addition and the reinforcement, and it goes across all our construction target markets. The acquisition is, from the beginning, accretive. One aspect that I would like to highlight is the sustainability aspect. Today, we see products that are, let's say, coming from the past. Going forward, we need products for the future, solutions for the future, for a sustainable the CO2 reduced footprint in the construction industry. For this, we cannot just modify what we have been doing in the past. We need radical changes. We need innovations. We need a commitment and we need resources, and we need the volume, the leverage. Together with MBCC, Sika will be clearly a champion in sustainability for the construction industry. We haven't closed. We need approval from the antitrust authorities in many countries. So therefore, we have to go through this process, but we are confident to be able to close the deal in the second half of '22. The brief production to MBCC, as mentioned, CHF 2.9 billion in revenue, 7,500 employees. The regional split almost evenly between Europe, Asia and Americas. And they have 2 divisions, the admixture systems and the construction systems again, roughly 50-50 in their contribution. It is headquartered in Mannheim, Germany. Here, we see the activities of the 2 business units that they have and the segments. At the segments, I think they look very similar to our segments, tile fixing, flooring, waterproofing, repair, sealants and so on. Brands, in our industry, very important. They have fantastic brands with the master builder brands, the PCI, especially in the DAC region, ucrete and master builders in general. 60 countries are their platform for sales. Out of that, 10 are the top countries, which, as you can see, are also more or less the top countries that Sika has. Here, we see how this acquisition will add to our footprint and to our top line evolution. This is a pro forma addition as of end of September for the last 12 months net sales. And as you can see, all 3 geographical regions will nicely benefit. But in no region, it will be, let's say, an overproportional increase. It is in the range of 15% to 25%. Overall, the sales goes up from CHF 9 billion to CHF 11.8 billion in this pro forma view of the combined businesses. We expect, in 2023, to be above CHF 13 billion. I mentioned it already, but it's always good to have a visual on our core technologies. That's the foundation. That's what all we do is based off. Our core technology that then are translated into smart solutions and products for very different markets and segments. But as you can see, our 5 core technologies on the left-hand side, then if we attribute the MBCC business the way we look at the technology and then at the combined, and it's obvious we reinforce all our core technology. We have a very balanced core technology spread after the integration of MBCC. Now I'll let Philip talk about the target markets and some of the complementarity that we see.

Thank you, Thomas. Good morning, everyone. As Thomas pointed out, on the technology side, this complements all 5 of our core technologies, and it's -- the same is true for the 7 -- all 7 target markets that are linked to construction customers. On the concrete side, we really believe that it strengthened our product portfolio with some unique technologies that MBCC Group will bring to us. On the waterproofing side, it's really the complement of job sites where we have their strong presence in underground and our presence with the membranes. Roofing, we have, for example, the bituminous membranes in Mexico, flooring, the very strong of ucrete that will join our portfolio. Sealing and bonding, it's facade products, it's floor covering solutions. On the engineered refurbishment side, MBCC is a well-known group and producer with Emaco, the MasterFlow grout. And then also in building finishing, we see mainly in the dark area with the tiling or also in the North American market with their synergy brand of facade products. But let me go a little bit more into the detail. We believe that there are different ways that this acquisition will complement our current solutions. You have on the one hand side, the solutions that we offer to projects and customers. On the other hand, it's the channel that we distribute those products to our customers there's a geographical contribution, not every country, we have the same mix that Thomas just showed in his slide. So there we see also a local and a geography component of complementarity and, last but not least, on the supply chain. So let me take the next couple of minutes to walk you through some examples. On the solutions side, one of the areas that we very excited about is underground where MBCC with the [ UGC ] Group underground construction has a position with many products in -- fibers, but also injections and -- but they don't have the membrane portfolio that we have. So bringing the 2 offerings together will really complement our solutions to those customers. On the offshore wind tower that you see on the right, we have an offering for epoxy-based blade solutions, and they are very strong in the MasterFlow grout solutions for fixing those turbines to the foundations. The next example is we have also on concrete production where they have with the MasterGlenium superplasticizer, MasterEase, which is a product that works with sand that is contaminated, but also the accelerated technology of Master X-Seed. On our side, we just launched at the Capital Markets Day, the products and the technology use of recycled concrete. And again, the complementation of both technologies we see as an additional benefit for our customers. And then another example that I picked out is the floor covering solutions where we sell a lot of self-leveling underlayment. And the MBCC Group had acquired the wood floor bonding and luxury net adhesives that again, same application, same customer group that we can now complement our product offering very nicely. Then the channel I mentioned already, you see here, the biggest example here for us is the product range and PCI brands. In the DAC countries, Sika comes from a strong history of direct sales, but has always been a little bit underrepresented in the distribution channel. And here you see, for example, with Sika Germany, we do 75% of our sales directly to our customers, whereas the PCR product range is about 90% indirect sales through distribution center, whether it's builders, merchants and home centers. So we believe that with that strong presence in those centers, and us having a larger product portfolio for distribution, this is a nice way of combining the 2 product ranges and helping our customers to extend the offerings that they can purchase. The other part I mentioned already, while on group level, this looks very nice in terms of affecting all technologies and all target markets, unfortunately, we don't have a similar -- the same distribution that -- as even in all the different local geographies and -- but this is an opportunity for us when we look at the acquisition of MBCC. Here are just 2 examples, but there are many more. For example, in Japan, we have a stronger position in ceiling and bonding or roofing, and their strength is really with the concrete admixtures and engineered refurbishment. You see the example of Mexico, where that strength comes from Thermotek membranes and liquid applied membranes in roofing and waterproofing whereas we see that we have a stronger position in concrete, roofing, engineered refurbishment and building finishing. But as I mentioned, there are many examples, others that I could have used, whether it's Malaysia, China, Germany. So I think the respective strengths that we have here on local level complement each other very nicely. And then last but not least, another example is the complementarity on the supply chain. Again, I pick just 2 examples to illustrate that with the locations of the joint solution production. You see the yellow dots here are predominantly on the East Coast of North America, and MBCC Group has their main [ polyresin ] production plant in Colorado and would really help us to access customers and service customers better the western part of the United States. And then the second position, again, when we talk about wind products, there's 2 different technologies. One is products for onshore wind parks and the other one is for offshore. We have 6 locations where we produce those onshore wind -- and MBCC has a very nice plant located in Belgium that can service those customers that pick up the products in large barges before they go to those wind farms, to produce them and the harbors there near Belgium and Netherlands is a perfect location to ship those products to. So we believe that also in the supply chain, there's many opportunities for us if we combine those 2 groups. With that, I'm handing back over to Thomas for the next explanation.

Thank you, Philippe, and I come back to the topic of sustainability. And I take this really as a major opportunity or a challenge, but this is an opportunity. And you have seen this slide before, it shows the cycles of construction. We've started with the infrastructure, then as markets are moving in a more mature direction than building standards there become more relevant and then, of course, repair and refurbishment. But the new element really is a game changer and that's the ESG and sustainability topic. And we see much more momentum there than eventually 3 years ago when we defined our strategy. And that's also at the core where we believe MBCC and Sika together, we are going to be the sustainability champion, and we will drive this transformation of the industry and size metals, as mentioned before. Here are examples of current activities of both groups. So we have -- on the left-hand side, we have the cement-reduced solutions for flooring, tile flooring. I think we also presented this at the Capital Market Day. And it is just enormous what can be achieved by reducing the cement content by alternative materials. This alone in China is offsetting all of Scope 1 and 2 of the Sika company. with this 1 modification. This shows that our contribution, our contribution to reduce the CO2 footprint is enormous. And it requires, of course, the smart solutions but it is in the Scope 3 of our customers where we can have the highest impact. Then on the lower side, it's the recovery process. We have presented that as well. It's a unique process to go fully circular with concrete, and bringing concrete back to its original version state and reuse it the same way as it was at the beginning. This is also a clear trend. We cannot just have a one-way material flow. We need a circular material flow. And this will also come more and more. On the right-hand side, you see examples from the MBCC group going in the direction also to extend the life expense of products, products that can be longer in use also have a much better CO2 footprint, so this matters. And products that have a shorter shelf life that needs to be replaced frequently, of course, are constantly adding to the balance. This is a picture that -- this is the direction that we want to go. We have declared 70% of our products are sustainably positive impacting the market. MBCC has a similar statement a bit a different definition. It's at 35%. And together, our aspiration is that we go above 80% with sustainability advanced materials going forward. That's the power of the 2 companies together. Now Adrian will guide us through the financials.

Very good. Thanks, Thomas. We talked about the strategic rationale of this transaction of the high complementarity of the sustainability capabilities of the joint company. Obviously, there is a high amount of value creation here. And this is also reflected in attractive financial metrics. We're talking about an enterprise value of CHF 5.5 billion, EUR 5.2 billion. This represents 11.5x 2022 estimated EBITDA of MBCC and taking annual synergies of CHF 160 million to CHF 100 million into consideration. This multiple will come down to 8.5x, including this full rate synergies. The transaction is also highly EPS accretive from the first full financial year in a clear double-digit manner. So also on that side, very value-creating for Sika and its shareholders. On the financing side, we have initially here a fully committed bridge loan facility in place where we will initially finance this transaction. And then over time, the long-term take-out, the long-term funding will be a combination of all the utilization of our strong balance sheet with cash on hand, also the bank facilities we have in place as well as additional capital market instruments. This will be mostly debt instruments, which we will put in place over time. Very clearly, we will continue to have a strong commitment to our strong investment grade, which in our reading means an A minus rating. Talking about synergies and value enhancement. This transaction will also have a positive impact on our margins here shown as a pro forma picture here based on our current EBITDA profitability. That's 12 months trailing numbers of Sika. If you add the run rate EBITDA of MBCC as of September 21, on top of it and the envisaged run rate synergies. We're talking here about an increase in EBITDA of around 35% on a pro forma basis and also the current EBITDA, not only of the MBCC Group, but of Sika as well to a higher level. Talking about synergies. We also, in this case, similar to Parex, we see a combination of revenue synergies, obviously translated into profit contribution as well as cost synergies. On the revenue side, we have seen before examples, obviously, of an enhanced supply chain but also an even stronger customer proximity through an enhanced footprint and obviously, more people the ground, strong cross-selling opportunities in many products and solutions in countries and also through the various channels. And last but not least, again, here the strong set of capabilities in terms of combined capability set when it comes to really driving sustainable solutions. On the cost side, it is clearly economies of scale in procurement but also on the formulation efficiency side, a lot we can learn from each other and draft also in this area. Obviously, also on the cost side and enhance the supply chain and logistic setup as well as increased efficiencies in SG&A. This all together is leading to expected synergies of CHF 160 million to CHF 180 million. expected to fully materialize by 2025 on an annual basis. Obviously, there is going to be a ramp-up over time, whereas the cost element is rather loaded and on the top line side more towards the end of that period. In order to realize this and for the integration, we expect onetime cost of CHF 200 million over the next 3 years. Also here, more front loaded in terms of the impact. Good. With this, I hand back to you, Thomas, for a brief summary and conclusions before we go into Q&A.

Thank you. Let me summarize the key aspects. Again, the sustainability topic. It's also great to have the next generation here in the room present that is listening and watching what we are doing. And I strongly believe this transformation will be a transformation now industry is science-based. The science must pull this. And therefore, our competencies that we have are key and, again, size matters. The more smart brains we can put together and work on this, the faster and the further we can advance. I'm strongly believing into this, and this will be clearly, for the next 5 to 10 years, a major game changer in the industry. We have seen -- we are acting in the same industry, but we are highly complementary. And here, you have to see as well we have 60 countries. And in these 60 countries, like we are decentralized. Every country has a different setup, has a different situation. And out of the 4, 3, 4, 2 will play a major role. So this is the power of Sika that this integration will play on local level and it will play on this complementarity that we have seen. Japan is different than it is in Germany, it's different than in the U.S. and so on, but it plays a major role. The value that this acquisition has, it's obvious. We are increasing the EBITDA overall with the business we take in and the synergies on top of that. I think this is a transaction that makes a lot of sense and generates a lot of value. Finally, again, I have to remind myself, the organization, the new soon-to-be colleagues from MBCC and our own organization, it's not closed. We are impatient, but at the same time, we have to follow the procedures and we go through this filing process, and we hope then to close the deal in the second half of next year. And with that, we would be up and open for questions.

Yes.

Christian Arnold, Stifel. Maybe a little bit premature, but nevertheless, in terms of your paid priorities. How much goodwill will that generate? Do you have a first assumption for us? Or how much intangibles, I should say, and from that, how much can you -- or do you have to then amortize over time?

The first indication, I mean, the intangibles will be around sort of CHF 4 billion, CHF 4 billion. Obviously, the exact allocation will need to be determined. But you can assume there is about CHF 3 billion goodwill included in that or thereabouts.

And the CHF 1 billion will be amortized over 10 years?

Yes. Also here, I mean, that we have to go through. But the amortization element will be around sort of 4%, 4.5% of sales of MBCC.

Okay. Then second question, I already asked Mr. Hasler, but maybe I try to get a little bit more out of it. You have some overlaps here. You have very strong positions in the market afterwards when it comes to admixture. I mean how big is the risk that you have to sell some of these activities? And do we talk here about 3%, 5%, 10%? I know it's very early, but maybe as a first indication.

Yes, that's a bit speculative and just we really don't like to bring up here scenarios. But it is very clear that we have a good augmentation towards the authorities. We have in-depth analysis on the situation. We see there are some areas where we will certainly have discussions and we have to see also how these discussions progress. But it's a bit premature to say that this will lead to some divestments or not. So this is really not yet ready to be communicated, but it is also very clear. We want to go through this process proactively, and we are open for any direction if needed to speed up the process. So for us, time is critical we want to go as expeditely as possible through the process, but we are just starting. We've -- today is day 1. After signing, we will very soon approach the authorities and then we have to listen, of course, also how they see we have a strong case that we have prepared to start the discussion. And it is -- maybe we can also say it is a much more positive picture in we have anticipated 2 or 3 years ago when we only did, let's say, an surface check. Now we have an in-depth analysis on the situation.

Okay. And last question, maybe I missed it from the synergies CHF 160 million, CHF 180 million, how much is top line synergies? How much is cost synergies?

You didn't miss it. I guess I didn't spell that out. The top line portion will be less than 50%.

[indiscernible] Deutschebank. Now even. I'm coming back to this overlap discussion, I'm afraid. Now aside authorities, I mean you focused your presentation on the complementarity. But I mean there are overlaps where 1 plus 1 is most likely not 2.5 but 1.5. Could you confirm that, overall, in all these regions and product areas, that there might also be some kind of streamlining closures and potentially even smaller disposals from your side, even if you don't have to do it by regulators?

I think this happens in every acquisition. I mean we're talking here about attrition that are part of every acquisition. Here, we do have areas where we have more of an overlap, and there, we also consider that this will have attrition. Just -- but this is not different to when we had Parex on the table. This also with smaller acquisitions in a country. In that country, you will have always bit of an overlap, and this is part of the normal process. So nothing special, but definitely, it's a fact that -- and also in terms of the footprint, and we take this very, let's say, in time. Once we have in-depth analysis on both sides, we do the smartest thing going forward. And this we have demonstrated with Parex, where we were able also to exceed the synergies that we have announced because of -- once we go deep, and once we take the time also with the acquired organization, we come up sometimes with even smarter solutions than anticipated during the due diligence process.

Okay. Then my second question, -- Is it correct that private equity paid CHF 3.5 billion 2 years ago?

I think that's correct.

Okay. And having said that, the difference in 2 years is now CHF 2 billion. Why didn't you buy it for CHF 4.5 billion 2 years ago? Of course, you had Parex okay. But what was the value added in those 2 years from the private equity side, which added CHF 2 billion on the price?

I mean it was 2, 2.5 years ago, we had this discussion on the group management. We had both on the table and both had an excellent strategic fit, but the circumstances being still part of this big conglomerate, so the carve-out that had to take place. On the other hand, the Parex that was ready, all entities ready to integrate the size certainly. Also, Parex was our largest deal by far at that time. This deal is even larger than the Parex deal there are many elements that steered us at that time, clearly, to do the Parex first, and time gave us right that, within 2 years, the majority of the work was done by Lone Star. We also see a nice improvement of the profitability of -- within these 2 years. This is sustainable. We track this. So I think the deal today really the sweet spot, much better than it would have been 2 years ago. I think we choose right to go Parex first. And then we got another opportunity and now we take it.

Is that also concerning the whole carve-out exercise which can be very cumbersome. So that is totally completed by now?

Yes.

Okay. And in the last small question, the bridge financing, could you share the conditions of that?

Yes. I mean, it's a EUR 5 billion equivalent. Here, there will be -- in terms of putting this financing in place around EUR 12 million sort of onetime cost over the next 12 months, not at the same time. And obviously, to the extent when we draw it and when this is being replaced, this will have an impact on our interest cost, current estimate is that, let's say, on a full year sort of takeout basis, the interest -- additional interest cost will be less than EUR 20 million on an annual basis.

Yes. Alessandro Foletti. Two questions, if I may. One on the price. I remember you said it went up 2 billion. But if I look at the numbers, it doesn't look extremely expensive to me. So well done. Congratulations for you. I wonder if there is any risk that someone pops up with a counterbid or if you have if you have sealed, so to speak, that there is in the contract that you signed yesterday.

I do think that we have a done deal or let's say. We have a very firm deal structure for both sides, and we like it that way. No, the only open item is the authority approval, but there are no other, let's say, elements in there that would allow either party to get out.

Great. Very helpful. Second question for Adrian. You mentioned on the financing that the capital market instruments will be mostly debt. It seems you don't exclude equity or maybe convertibles on -- do you have already some indication there? Or let's say, if I take the expected leverage today summing up the numbers, they come to 3.7 or something like that. Would you want to be around 2.5, for example?

No, I can give you some indication there. I mean you're right upon, let's say, first-time consolidation accounting any profit contribution from MBCC, we will be around sort of 3.5, 3.7 depending on the time. Obviously, if you then include a full year contribution sort of how we phase the synergies but also onetime costs, how they are faced. We will be down to more like a 3x leverage. But including sort of the full run rate synergies, it's already at 2.5x sort of on a pro forma basis. In terms of the instruments and the takeout, as I said, mostly debt instruments, it's not let's say, fully determined which ones. It is not envisaged to have, let's say, an equity increase here, but we will most likely work with our existing convertible we have out, which is maturing in 2025.

Tony. Also 3 questions. First of all, they seem to have quite a lot of production facilities, the 130 compared to you. And the size of the 2 companies. So do they have an underutilization of production capacity? Or can you feel that just, in general, their capacity utilization?

That's half of their business is in the admixture business. The admixture business is a business that is very, very local. I think Philippe showed the picture of Japan. In Japan, Sika has 2 locations, 1 in Osaka, 1 in Tokyo, and that's also limiting where we can sell. They have 16 facilities to cover all of Japan, and it's an attractive market. They have a strong position. So on the admixture side, you have clearly more than when you look at our portfolio with the adhesives with the larger motor plants and so on, you have more consolidation. That's the explanation.

Okay. And so on the paper, it looks like you can just shut down 1/3, but that's not in reality, correct?

That's too easy.

And regarding IT systems, are they on the same level? I remember you -- I think you have a global pricing complex system and so on. How easy will it be to integrate?

On the system and here, clearly also coming back to the question before. Obviously, this business is fully carved out. It's operating and functioning very well on a stand-alone basis with sort of the latest infrastructure in place, which is very similar to ours from a system point of view. So there will be obviously a transition. But very clearly a lot less complex and complicated compared to a carve-out situation. And obviously, in terms of the transparency, I mean this is a well-run business, and we will eventually fully aligned this so that there will be no difference in terms of the ability to act quickly.

And the last question, in terms of margin, of course, they have the lower margin. But when I think that Sika is 3x bigger, actually, I think they have very good margins compared to yours. I mean I'm not saying that yours is not good, but just looking at the different sizes, actually the target has a very attractive margin. Why is that? Do they have -- I mean, you showed the product mix, but where is the sweet spot of them in terms of margin?

I think, well, first of all, they have obviously clearly evolved from a few years ago. And I would say, there is still obviously a sizable difference, which we will be able to leverage. But yes, the -- also the, let's say, the product mix is somewhat different also the country mix. There is many elements in there. but clearly, a lot of potential going forward to lift and to create additional value

Thanks. Patrick Rafaisz from UBS. I took the time this morning to go through my notes on the many discussions we've had on BASF construction chemicals over the last years. And there's 2 comments I would like to get your updated views on. The 1 is maybe a bit of a follow-up on what we heard earlier, the asset mix of MBCC. Paul Schuler back then suggest that you think you can squeeze out another 1 billion of revenues from that existing footprint in an optimistic case. Is that still a view that you think is fair?

I don't know exactly what he meant about squeezing out 1 billion. The infrastructure, that the assets that the MBCC carry, this 130 plants and a lot of them in the admixture, typically, these are factories that have one shift utilization. So if you want, you can certainly push through more through such factories than. For instance, from a membrane in our adhesive factor, which usually run on 24/5 or even 7 days, where you don't have these capabilities. And they have, of course, many factories where you can say you can easily sell more out of those facilities. Maybe that was his reference, but yes, that's the only thing I can see.

Okay. And another comment was a reason for now doing the deal back in the day, right? And you talked about some of them and Parex was clearly more attractive at that point in time. And one risk that was mentioned back then was customer attrition from the combined entity becoming too important of a supplier and that there was a risk that some customers might build up alternative sources. Now of course, the landscape has changed, your sustainability offering is changing, right? So it's a fluid situation. But what's your view on that on the potential attrition losses?

I mean that is always a part of our consideration, and that was at that time and it's also now, I think, as you mentioned it correctly, customer needs have changed over the last 3 years. And especially large customers are looking for partnership to help them to elevate and get a better footprint. And I talk about the larger salmon producer, for instance. They are keen on getting traction and support. And so the future is much more collaborative than it used in the past. And that means also that I think the lineup of suppliers will change a little bit. where in the past, there was more commodity-based. It is now really on the ability to support the sustainability transformation. And this will and thus require that you are working with the right suppliers. So I see the risk much lower than maybe 3 years ago.

And the last question is just on the channel mix. Parex, of course, balanced your sales more towards distribution. And now I believe this will be again maybe a step more towards direct sales than somewhere or well, or tell me where will you end up on the group level?

I mean this is I think we have seen examples but Philippe, Parex distribution, I think, in China, in France, has helped a lot. Now here, we have a different situation with PCI in Germany. And so we really have all these opportunities depending on the individual markets. It's not the one or the other. But they have competencies in both and we as well, and they are complementary when you look on a country level. Very often, when you have an organization like ours that has over many decades evolved, then you are either very strong on the direct business or you are very strong on the indirect business. Our Latin business, for instance, in Latin America is very strong on the distribution. That is a bit the tradition. So there, the direct business, the MBCC has a stronger position there. And in Europe, the picture is a bit different. So this has a big to do with the heritage of the company. And Parex has a different one or had a different one. Then Sika and MBCC, again, so we see that also a very attractive possibility where you can jump to the next level when you make such a move with even 2 players in the country, 1 direct, 1 more indirect.

We change a bit, and we have really now -- really a hand of people virtually joining as well to the conference. And let's do 2 questions from maybe Cedar Ekblom from Morgan Stanley first. And then afterwards, from John Fraser-Andrews for HSBC.

Can you hear me? Can you hear me?

Yes, we hear you.

I don't know if you could see me. I've actually only got one question, and it's a little bit on the integration from a human perspective. You've spoken about your IT systems and the footprint and all that kind of stuff. But if we think about the history of this asset, it was owned by BASF. Then it's gone through a change in ownership owned by private equity. Now it's going to be owned by you. And obviously, capturing the value in this deal, the integration is really, really important. Can you talk about how you think about bringing the people into the business, how you hope to get your sales teams working together so that we can have one Sika offering to the customer? And just talk a little bit about the cultural fit between the organizations, particularly considering the history of this asset

Thank you for the question. That's a very important question. And maybe it also signals our approach here. We have this let's say, audience here that we present ourselves. But at the same time, we are having town hall meetings around the globe today, tomorrow, depending on the region also on Sundays. And we are in front of the people. We are physically there wherever possible. We have streaming. We present ourselves on the day 1 to the MBCC organization. We strongly believe in our values and principle, we share them. Our people are there. The country manager present -- Sika present a few of the slides here why we are so excited, of course, but then also we talk about culture, we talk about our values. We talk about the integration experience of the many integrations we have done. We have many senior managers that have from the outside into top positions in our company. We want to share this. We want to have a first impression on the very first day. And then, of course, we know we have to be a bit careful how we interact with. We built a platform where they can always follow the evolution in a way that they stay connected. We try to do the utmost for the next 12 months to make them feel comfortable. We strongly believe the culture when it comes down to service customers who have a smart solution is very, very similar. We are very dedicated. We want to do a job that the customer perceives as a better more value way of doing things. And so we see that. And also the first reaction that we have, the interaction is very positive. So we are taking this very serious, and we need them very much to understand who we are, and we just do it our way and straightforward. That's how we are. That's who we are, and that has worked best also in the other transactions that we have done in the past years. Very valid point.

John Fraser-Andrews?

Can you hear me there?

Yes, and we see you.

Two questions for me, please. The first 1 is the fundamental rationale for this deal, means very clearly that this is about embracing the sustainability challenge. Can you tell us what MBCC bring to the party in terms of of their products in their 35% of sales? And am I right in thinking that this is about having the network in place, the capacity to code with a tipping point in the sustainable products? So at some point, it seems you're anticipating in the coming years that there'll be a significant shift to lower carbon cements and motors, and this deal gives you the capacity to cope with that en masse with the biggest customers? That's the first question.

Okay. I mean on this side, we have to reflect or we cleared the 70% and the 35% are not exactly the same. They have a bit of different foundation. But why is it so synergetic? The strong competencies of MBCC over the past years, also their investment into R&D, the strong R&D where we have seen over the past years, their capabilities, clearly at the good level, this is the foundation. When we bring this together with our competencies, this will add, this is then 1 plus 1 becoming 3 on the science space. And giving critical mass to this challenge.

And the evolution of that, Thomas, is it about at some point, you expect a significant transition from current cement and mortar manufacturer to new methods, and this enables you to embrace that on a mass scale?

We are -- I would say we are an enabler. We have solutions already today that can significantly reduce. But there must also be a pull. I think as we speak, there are hundreds of people meeting in Glasgow, talking about 2050 and 2040. What we need is clear directions for the next 5 years. This next 5 years will be very decisive and we need this direction. But this will not just happen in a way that everybody will automatically shift. The regulations, the standards need to change. And if we think about the cycle of building standards, which traditionally is very conservative. It takes maybe 8 to 10 years to bring in a new concrete and say, okay, if that's the mode of operation to drive this change, then sorry, we will not see such a high impact in the coming years. So we need really, let's say, the regulators, but also the authorities to drive this. And we see good elements in there. I think I mentioned it on the Capital Market Day that France is building higher standards for the energy efficiency, and this is driving immediately activities. Italy is doing the same. These are meaningful activities, but it's by far not enough. We need structural changes that then drive the industry. The industry is ready, but it will not happen just by itself. If we talk about leaner production, if we talk about instead of, let's say, 1,000 cubic meter of concrete, we can build that structure with 500. That's a huge CO2 impact, but it requires that you are allowed to design and engineer with 500 instead of 1,000. And for this, you need, of course, probably more performance material. These are things that must happen. We have -- we are an enabler. We have many solutions that can contribute. But when you asked how fast and how quickly will it pick up? It is picking up. But the speed is by far more, let's say, in line with what's discussed in Scotland at the moment. We need more firm directions helping to make this transformation faster.

And my final question is back on the sales synergies that Adrian mentioned. I might think that the bulk of those is cross-selling your products into the sort of 4% market share where MBCC is not strong in those products and obviously some the other way. But is that the bulk of it rather than the Parex style of sales synergy was roll out of your product into distribution. It sounds like you've spoken about Germany, but there might not be the same distribution channel opportunity as there was with Parex and perhaps it's more about cross-selling to customers.

John, I mean, it goes both ways, and we have shown these different examples. Obviously, there is a different market to market. So there is clearly potential for the Sika products to be sold through the channels of MBCC and vice versa. That is no different. It's less so than, let's say, rolling out 2 additional markets of completely, let's say, new product lines, but more specific elements market to market and channel to channel.

Credit Suisse. I have 3 questions, if I may. The first one is also on people. So on management. Can you tell us how much of the management private equity deal is still on board? How much of the current management will come over to Sika? And do you believe that you have to broaden your Executive Board going forward as it still is a sizable company? This will be question one.

Okay. That's a lot of questions. The separation of the group from BASF has removed, let's say, a layer of management, which we couldn't see really very value-oriented. What we now see the new structure that they have established is much more related to the business and it is our aim to bring as many as possible over just like what we did when Parex was joining. And this doesn't exclude any hierarchical level. So this is also the Executive Board is eventually a possibility. We don't have, let's say, vacancies where we desperately they are looking for. But I would say we treat them from day 1 as equal. There is not a Sika and others, it is just Sika. And we take the best performance, give them career opportunities. And when we talk about people, it's also many questioning, do you have too many? In fact is we have too few. We are growing. We -- our challenge is that we don't get enough talent that we don't get enough people. The shortages on the labor market is a big trouble. And we see this as an excellent pool and we want actively to work with this pool, make them comfortable that they are really belonging to ask that they are equal and they have equal opportunities and the opportunities do not stop at any ceiling. This is my goal. This is -- this is how we approach it. And yes, for the next 12 months, it is a bit more difficult to bridge because we cannot be as close as we would want to be. But once we close, then we have our programs very quickly, and it works very well. I think, again, our culture is very people-oriented. We are straightforward. We walk the talk and we respect and we empower people, which generally is one of the key aspirations that people have. They want to have a possibility to create something and they want to have the possibility also to take the career in their own hands and have a fair chance.

Okay, then, then from the PSF annual report, we know that operating cash flow of the group has been CHF 29 million in 2019 and CHF 46 million last year only for 11 months. But can you remind us what happened there that we have seen such a big drop in the operating cash flow? And then where we are today, are we closer to the EBITDA as a proxy? Or are we closer to a level we have seen in 2019? And then with that as well, cash flow from investment activities was around CHF 110 million, CHF 120 million. Is this a recurring CapEx level or how we should see that?

In terms of the cash flow, obviously, the previous years and what was reported, I mean, there's a lot of impact from these carve-outs and changes. If you look at the business fundamentally, I mean, there is no difference in terms of cash conversion from -- when you look at the MBCC business to ours. Talking about capital expenditure, they are somewhat higher level, not much. This is more related to size. Here, we would expect that this would be coming down slightly over the next years and basically rather approaching our level.

Okay. Very helpful. And then the last question, you said several times that you want to maintain A- rating. Can you remind me what the KPI you are looking at, I believe you said a 2.5x leverage, but what's about the equity ratio? And are there other KPIs you see you have to fulfill or to reach?

The 2 main KPIs is net debt to EBITDA as one which I mentioned and also funds from operations compared to that. And going forward, we will very quickly move into these metrics. Again, obviously, it depends a bit on the time of closing also -- but within 2023, we will be commensurate with these metrics.

Maybe some more questions from the virtual side. We have here Glynis Johnson from Jefferies that will be next, and then Matthias Feinberg from Deutsche Bank.

Perfect. Okay. So I have 2, if I may, and actually both focused on the profitability. You Give us a sales breakdown by region. But I'm just wondering if you can help us out, are there big differences between the profitability in those regions? Are there certain areas which are more skewed in terms of profitability? And will the synergies have a similar SKU i.e., are you going to try and looking at profitability in the regions up to similar levels? And then just how does this business fit in with your medium-term EBIT margin target, the 15% to 18%, does it push it further out? Is there more scope on the upside? How should we think about that context?

On the -- thanks for that question on the breakdown. On regional level, and that's probably not the sort of the most sort of or the best way to look at it. There's no big difference. Obviously, there is always as in our business, differences from country to country depending on the circumstances. But in terms of the regional impact, there is no big differences. In terms of synergies, obviously, we're -- we have been building this up, also looking here at the at the major geographies. The biggest impact will also be here on the big ones. But let's say, if you look at regional level, also not major differences in terms of where we would believe there is an overproportional element of that. In terms of our targets going forward, Obviously, it will depend a bit on timing. There will always be an initial dilution. We talked about the amortization on EBIT level. But currently, there is no, let's say, change to our overall guidance, what sort of the profitability targets are concerned, but obviously a bit dependent on the timing than when we can close the transaction.

If I can just follow up on that first question. I asked you about regional because I didn't think you're going to tell us about on a country basis, but maybe I pushed you a little harder. Can you maybe give us the top 5 countries in terms of the contribution. So we can see which ones are the most meaningful or any kind of color that would help us understand how that breaks out?

Yes. I mean in terms of size, I mean, it's the U.S., it's Germany. It's China as the big as the big ones. These are the top 3 and also Japan.

Okay. And Matthias Pfeifenberger, please.

Yes. Hope you can hear me. Two questions from my side. I just want to push on Glynis' question a bit more the 15% to 18%. So we're looking at -- so congrats on the deal, by the way. It's I think a good one, we cannot agree -- You're getting a lot of praise in the financial markets. So it's just a bit more scrutiny on the financials. -- it's maybe 3% to 4% normal DNA and then you said 4 to 5 pp DNA, if it's closed mid next year, it's half a year of earnings contribution, but you're getting the full load on the balance sheet at once -- So this will be quite dilutive on the EBIT margin and even more so maybe on the returns where you saw a lot of dilution from the Parex yield. And you said you're going to bring it up again, now that's distorted by another big deal. So how do you think about that? I mean we could be looking at I don't know, 2 years with all the distortions with the consolidation scheduled, the PPA of being below that 15% depending on what the energy costs are doing. So how do you plan to handle that? Are you going to strip out the PPA? Or what's the plan? And then maybe also on the returns, must be quite dilutive on the returns. And the second question is on the sustainability. I don't want to be the party crasher. You said there's a change in definition from the 70% to the more than 35%. So how do we get to the 80%? Is that just ramping all your sustainable products into their distribution and getting to a similar level? Or is that being diluted from 70 to, I don't know, 60 for 2 years and then having to work yourself up again to the 80.

Maybe I'll take the first one here. And Obviously, that's why I was mentioning the time of closing. And you have now mentioned the first of July. Obviously, this is not certain. And so this will have a bit of an impact. I mean, if we do look at 2023, we will also, as an overall group evolves during that time. And I would sort of make a caveat here in terms of the onetime cost. But again, from this point of view, there is no change. We have to now see how we progress through this phase and when we will be able to close and we'll then give an update. But fundamentally, of course, on EBIT level, there is, as you point out, this dilution, but there will also be the synergies against that.

And then on the sustainability topic, yes, it is our statement, the 70% positive sustainability impact and there are not identical. So the 80%, of course, are based on our definition. We want to bring the combined further up our own will have to grow as well as theirs. It's a bit speculative where they would be if we apply our metrics for the sustainability best guess would be probably somewhere in between the 2 numbers, between 35 and 70, but we don't have the in-depth. So we take how they declare to public their sustainability footprint. -- and compare it with ours. So here, we have to be generous in understanding. They are not exactly the same. But our aspiration going forward is based on our definition, and it goes from 70 up and it applies to both businesses.

Okay. Can I just follow up with one detailed questions on the numbers. You gave us the half with the fully load on synergies but you also gave us the CHF 440 million in terms of pro forma '21. So if I do the math, you're already baking in some increase for MBCC for next year, CHF 475 million. And I guess it's fair to assume we won't do a lot of synergies in year 1. That's what you hinted in terms of back-end loaded. Is it fair to say that on a real 2022 basis, the multiple -- the takeover multiple will be half a notch or a notch higher, if we just do the real math like MBCC improving, but probably not a lot of synergies, maybe CHF 475 million to CHF 500 million. I mean the CHF 440 million you're referring to, I mean, this is basically the run rate, including the sort of the full year impact of, let's say, there measures how they're progressing. And on that basis, there is -- this calculation is pro forma is being displayed. You're absolutely right. There is a ramp-up of, let's say, synergies. This is not, let's say, a reported or a real 2022 or 2023 number. But on a pro forma basis, how this will evolve in terms of profitability development. Obviously, what this does not include is the underlying progression of the business and the growth, which we'll add to it.

[indiscernible] of Asset Management. Two for me. The first one is you compare the EBITDA but maybe on return on invested capital, how the 2 businesses compare? I don't need the details on the -- during the ramp-up of the synergies. But over time, especially because of the various ownership of the business. How do you expect this to evolve, the 2 of them? And then -- and the second one will be on the regulatory proceeding, how many jurisdictions are involved you've seen relax to this, but you can share some details how complex that will be.

Maybe on the return on capital question, I mean if you look at the business itself, and it goes a bit in the direction of -- and the working capital and basically the return or the cash conversion. There is really no fundamental difference between the 2 businesses in terms of return on operating assets. Obviously, including now the synergies we will -- sorry, the goodwill, we will have a dilutionary impact on ROCE and sort of similar pattern as we have had with Parex, but we'll move that up to above the 20% combined by 2025.

Okay. And then maybe on the antitrust filings, it's very clear here we follow the size. So the EU is very key, the U.S., Canada, China, Japan, Australia, these are really critical key jurisdictions. But then there are furthermore. And you can say it's probably in the range of a dozen that also require filing, and we take this serious and -- but it's clear when we need the top to move fast and fastest relative, it's not all within our hands. But a lot of information requirements will come in. But it's -- yes, it's several jurisdictions that we go in parallel. But the top 6, 7, has mentioned, of course, clear priority to get clearance as quickly as possible. Yes?

Martin Flueckiger for Kepler Cheuvreux. I have 2 questions, actually, and they're both on the competitive environment. Now that you've achieved, I would think around 14% global market share, you're already ahead of your target of 12%, I think, which you used to have by 2023, if I remember correctly. So what are your new ambitions going forward? And what are the pathways you envisage to achieve that target? That's my first question. My second question would be -- Do you expect any particular market reactions from competitors in any of your key markets? I mean this is quite a transformational deal for you. I think it's the biggest one in corporate history of Sika, if I remember correctly. I think Parex was the biggest 1 at the time, and this one is considerably bigger. So are we here to expect particularly the U.S. players, but also potentially in Asia to react in a maybe different way than we have seen in the past.

Okay. I mean on the -- what our expectation, we have a long-term growth strategy with 6% to 8% growth. It's clear. With this transaction, we will be a few percentage points up -- But then we have a new base. And from there, we want to continue to have our 6% to 8%. And we see it's a fragmented market. If it is 12 or 14 or it's still 85% at least is still fragmented out there, and we can continue our let's say, over-proportional growth expectation against the market and the 6% to 8%, we feel comfortable. We will certainly review when we come forward with the next strategy, how that then articulates, but I think it's a bit a precursor to say the 6% to 8% has been a good guidance in the past, and it will continue. We just make now on leap step and we will continue. The reaction of the competitors, we have seen not, let's say, very huge reaction to the Parex transaction. And also here, we don't expect too big reaction. It's a fragmented market. It will be different from country to country. Of course, there are reactions -- Some see there's an opportunity. But nothing out of the ordinary, I think, will happen. So this customers will reflect will diecast as always and value balance their options -- And I think we have done in the past, a pretty good job in convincing that this is also for them, value generating and not putting them at a disadvantage. But this will be also again a major task of our sales force to bring this message and also demonstrate again that we walk the talk.

Yes. 2 quick follow-ups. Given the long transaction type of the deal, do you have implemented any bonus in Malus instruments in the deal? This would be the first one.

In terms of the deal itself or...

Yes, from the price, if a company should go wrong next year, I don't know, accident, a claim or whatever can happen any risk which appears, so that probably you would pay too much or too less whatever or that you motivate the management, I don't know. If they succeed, they get retention, so you have to pay a bonus or also to the private equity company, so in this mindset.

I mean there is, in that sense, not an earn-out component, but there is an element which is related to, let's say, the cash generation.

Okay. And second one is, given the appreciation of the Swiss francs we have seen recently, can you tell us at what exchange rate you fix the deal -- And secondly, did you hedge 100% of the deal or only partially?

Yes. Here, I mean, there is actually quite a good hedge in terms of, obviously, the profitability and the financing. But we have, let's say, from a cash flow perspective, we have not hedged the transaction.

Okay. Thank you, I think we have 2 -- we have still 5 people from the virtual room that have questions. So let me just give them as well the chance to come with their questions forward. First, probably Yves Bromehead from Exane BNP. And then second one, Yassine Touahri from On Field Investment research. So please, start with your question.

Good morning. one Great. Sorry, I don't have a video. I'm afraid. But just a few questions. So first one for you, Adrian, -- Your background is actually originally from BASF and even Degussa in financial, strategic, but also as to a General Manager of the Construction Chemicals division. So I guess I wanted to get some insight as to helping us to better understand the drivers of the underperformance of the BASF construction chemicals historically. What were they not doing as good as Sika? Where were they doing better? And why do you think that within Sika, you can work into becoming a much more value and growth-oriented business?

Okay. Well, it's obviously been a while. So I have to use my memory here a bit. But I think Thomas mentioned it before, I think fundamentally, let's say, on country level, how the business is being conducted, there is actually quite a strong alignment. Obviously, the business has gone through different ownerships for various reasons. I think there's a little for me to comment there. But -- and we are very convinced that going forward, this will be a very strong combination of the 2 groups, how will act in the market. There is probably not that much more to say about this.

And maybe a second question on the assets that you're acquiring. It's much more concentrated on concrete admixtures, cement additives and markets a few of your competitors actually made a few acquisitions and presented what they believe is the market growth expectation in those markets, which is in the high single-digit range given what Thomas, you've just said on the medium-term top line ambitions, is it fair to assume that maybe your organic growth can accelerate as you integrate this asset into your business?

I would not deny, but I'm also not confirming. I mean I'm very optimistic about the market growth going forward. The drivers, I think we have explained many times. I'm also confident with our setup, with our resources, with our the centralized approach that we will take more advantage than others. And surely, this should translate also in a nice organic growth pattern. But yes, we will reflect that in the next strategy.

We'll go to Yassine. Yassine, please.

Yes. So we'll have 2 questions. First, can you give a bit more color on what MBCC can bring to Sika in terms of innovation, given their existing portfolio of proprietary chemical molecules. Do you have any metrics in terms of patents or new product as a percentage of sales?

That to use to monitor innovation for both Sika SCA and BCC. That will be my first question. I think as Thomas and Adrian pointed out multiple times, I think the way the 2 companies operate it to bring innovation to our customers is very similar. And if you look at their patent portfolio, there are certain patents that in areas where we always wish that we would have had them and probably, hopefully, on the other side, it's the same. And I think for that sense, it's -- I think we see in both on the cementitious products that were mentioned also on the admixture side. We see opportunities for us to use -- to cross use those patterns. And so -- We think that they have strong R&D capabilities in multiple centers, similar setup that we have with certain centers acting globally, certain centers having original competencies. So we feel that the complementarity of this IP, not only patents, but also formulation know-how can benefit both sides and allow us to offer better products to our customers.

Would you have a concrete example of one of these patents, for example, that analysis has that you don't have or any concrete example to illustrate the complementary the latest one that is -- that I also mentioned in my slides as they came up with a way of accelerating cement in a different way. It was also on the sustainability side with a seating technology that was really unique and that we don't have in our portfolio. Just as a 1 example

Just as 1 example. And the second question is more on the growth I think over the past 2 decades, Chris, which is a close competitor of MBCC in concrete and cement its, I think they generated an average sales growth of 8% per year. Do you have the average sales growth that MBCC generated in the past decade? And do you think that MBCC could generate higher sales growth in the next decade than 8% given the stricter regulatory environment and also your commercial synergies.

Maybe on the sales growth. I mean, historically, it was clearly below the 8%. And yes, I mean, clearly, the decarbonization is a driver -- We talked about some of the synergy and growth expectations. But obviously, 8% is a high number. I would see that within sort of the context of our organic sales growth going forward.

Thank you very much. And then one more question to Markus Meier. Please be brief now. It's a bit timing, and we'd like to give you all the chance really to bring your questions. Markus Mayer from Baader Bank, please.

Maybe my first question is more on the history of this business again. Maybe I'm a little more critical as I know this business from the BASF gusa,but it underperformed since decades and therefore, -- My question is what do you see have been the key big points of the business and how do you want to change them? And also, when I remember when put this business up for sale. You also said that the culture of the business might be one of the weak spots, how do you want to change this culture of the from a BASF colleagues. My first question. The second question would be what has changed since the ownership of Lonestar? And I see the margin have changed, but has low also invested properly in this business or is the CapEx catch-up effect for the next years? And then the last question would be in one of the problem childs of this business, which was the Middle East business, which was struggling quite a lot over the last years. How do you see the outlook for this business?

Okay. Maybe I'd take the first question, which -- we have to be precise. It's correct that the -- this business has over the last decades underperformed. And that's mainly attributed to the ownership of that business, being a small segment in a large chemical conglomerate with a very clear upstream DNA and then having to talk about ad mixtures for sites, 16 locations in Japan, you don't get a lot of attention. And certainly, also, they don't recognize what you're talking about. So the -- it's clear, the mother company never had really a full investment into the business. And the business, therefore, was not able to perform at its best, which ultimately also was recognized in Ludwigshafen when they said, "Okay, this is too far down, and we spin it off. And when we talked in the past about BASF, it was -- we could see managers within the BASF conglomerate that took over construction chemical coming from a complete different commodity, and that is just that's great. They until they understand what an admixture is 2 years past, but the whole organization was at the same time on their side, kind of paralyzed because educating somebody that has a polymer background that has a real upstream chemical background, it was, for them, unfortunate, further down when you go into the business, then it got much more, let's say, to the substance and the competencies and the products as also Philippe mentioned, they have competencies, but they never could really demonstrate to its full list. And that's, of course, what we see is a great opportunity for us. Now they are in a company where the business is construction chemical. And I would say it's a home coming for the organization, and it's for good. It will stay. It is core business. It's our business. And this is a very strong motivator also, I believe, for the organization to do its utmost. And I have no doubt that we will quickly have a complete different momentum.

Go ahead with your second questions.

Second question a quick one on the Lone Star ownership. I mean they have obviously clearly manage this as a construction chemicals business, also continued to invest in R&D, have made 2 or 3 smaller acquisitions also in terms of CapEx I mentioned this before, even slightly higher, actually, no change to before. So they clearly have managed this well under their ownership.

Two remaining questions. The next one goes to Manish from Societe General. And then the last one to [indiscernible] Hagen, but please Manish first this time.

Hello. Yes. Can you hear me?

Sure.

Yes. So my question was mainly on the mandatory convertible that you have for 2022. So you mentioned with synergies, the net debt-to-EBITDA pro forma will come down to 2.5x. And if assumed these convertibles are converted, so probably the Sika net debt will come down to less than 2x. So you can confirm this number and can also mention will you still continue to do these bolt-on M&A still after this acquisition? This is my first question. The second one is just on the synergies. I mean, you mentioned CHF 170 million, CHF 180 million, maybe like more than half is cost. So probably 100 million synergies from the cost. But just looking at the numbers, CHF 100 million, it looks slightly less given the size is CHF 3 billion and maybe the OpEx is like CHF 2 billion, more than CHF 2 billion. So are you a little bit like it cautious costs in giving this synergies number.

Good maybe firstly here on the instrument and the leverage. If you talk about the mandatory convertible, I mean, that's already equity. I mean this will be in January 2022. This will convert. I was referring to the traditional convertible bond with a maturity in 2025. And obviously, this will provide an additional equity content when it matures, but it is not foreseen to have any additional here equity as part of the financing. In terms of the bolt-on acquisitions, obviously, I mean here, we go through this process, we will close that transaction and integrate going forward. There will, as Thomas mentioned, I mean, the market continues to be very, very fragmented there will be additional bolt-ons going forward, but we take this, obviously, step by step. And on the synergies, I mean let's put it that way, the $160 million to $180 million, that's a number we feel very comfortable with. It also includes what we have talked about potential attrition effect as well. But overall, a number, we can clearly stand behind at this point in time.

So just one thing more. Like I thought these mandatory convertibles have some element of some parts, like it's a hybrid one. So probably some also purged in the bed side, maybe like something like CHF 1.3 billion? And when it is converted, it will compete into equity, but that will also go off CHF 1.3 billion or something like that. Maybe my understanding is not correct.

I mean, technically, the debt component you're referring to, these were the coupon payment of around CHF 45 million each over 3 years. The last 1 will be paid in January. 2022 upon conversion, but there is no impact on equity that's already in the books.

Okay. And the last question goes to Ilana.

Hello, can you hear me?

We hear you, yes.

Yes, sorry, I don't have a time. But I had a quick follow-up on the debt. We're talking about the leverage target, if I mention currently of 2.5x by 2023. That's what we plan to do because if I do the numbers right now, based on 2021 numbers leverage around 3.6x, many the synergy credit and wins on working capital, I'll get to 3x. So I'm wondering with that 2.5x also includes some equity credit of potential additional -- or convertible or maybe a high person that we are planning to add to the looks to refinance your proclaim. And my second question would be, have you had conversations with S&P already even that you feel optimistic that you can keep your A- rating, even though they restake your outlook from meaty stable in February

Yes. Let me try to answer here. It was a bit difficult to hear, but I guess your question was on the leverage and what is all included the 2.5x net debt-to-EBITDA, I was referring to basically was on the basis of 2022, including, let's say, a full year stand-alone profitability of MBCC as well as the eventual CHF 160 million to CHF 180 million of synergies on a pro forma basis. Obviously, there will be a phasing. There will be, let's say, additional growth and development of both businesses. But that's a bit here the anchor point. So you can already see that this is quite reduced leverage compared to the first time consolidation where you basically don't have any additional profitability against that additional capital or debt. And in terms of Standard & Poor's, yes, they will reflect on this. We had briefing and the discussion on that transaction, and they will obviously have their opinion on, let's say, the rating or the outlook and that will, at some stage, be published.

Okay. So Dominic, we are done?

All questions or put here forward and no more questions.

Then thanks a lot for coming, especially on short notice. I hope we were able to bring the rationale of the transaction across and that we could answer your question to your satisfaction. I say goodbye to the people that have joined virtually. And I would like to invite the ones here present to join us for a brief lunch in the background. We have some time, so we can also chat a bit casually about many things, eventually also the deal that happened last night. So looking forward to see you for a few more moments and thank you for coming to this media conference.