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Dear ladies and gentlemen, welcome to the conference call of AlzChem Group AG. At our customers' request, this conference will be recorded. [Operator Instructions]May I now hand you over to Mr. Andreas Niedermaier and Dr. Georg Weichselbaumer, who will lead you through this conference today. Please go ahead, sir.
Yes. Thank you for the intro. Good morning, everybody. Thank you for joining us today, and welcome to our analyst call for the quarter 1. As always, we start with an executive summary and then move on to the figures after the strategic issues. At the end of the presentation, Dr. Weichselbaumer and me are available for questions.So let's skip the Page 4 and go directly to the highlights. I hold on a moment that you have the chance to get the delay managed. And here is a brief overview of our highlights for the quarter 1. Despite the COVID-19, production, sales and earnings are stable due to diversified product portfolios and compensation possibilities within the AlzChem Group. So which we are particularly pleased about, the expected very strong growth of Creamino was successfully realized in the quarter 1 2020 and developed within the forecasted corridor.BioSelect rises to the star of the year, as we have always been represented in the DNA analysis kits. Due to the increased analysis triggered by COVID-19, the demand has risen significantly. We are delighted that the basic and intermediate segment is performing very well in what we see a challenging market environment. And this quarter was again better than the previous year, both in sales and in EBITDA. Those were the positive aspects. But what are the most concerned about is the steel and automotive industry. Products for this sector are, in some cases, showing significant declines.All in all, we can report a good start to the year 2020. EBITDA is in line with our forecast. In addition, the good business started lower capital expenditure and strict net working capital management led to a very strong cash flow. And this brings me straight to our next slide, the detailed cash flow analysis. So I think the slide should be switched.So we are starting today with our cash flow as we have been able to achieve an extraordinarily positive development here. The cash inflow from operating activities increased from minus EUR 2 million to EUR 8.5 million year-over-year, and this reflects the decrease in net working capital, lower CapEx and a strong operating business. The most positive aspect of the previous year, the cash flow being burned by the increase in stocks. This year, the decrease in stocks has boosted the cash flow almost twice. And this shows again how important net working capital management is.At EUR 4.8 million, the cash outflow from investing activities was lower than half of the previous year. The main reasons are, of course, the absence of major projects for the time being and somewhat lower CapEx activities due to COVID-19. As a result, we have a clearly positive free cash flow compared to the previous year.AlzChem's financing activities in the first quarter of 2019 were still largely characterized by the payment of the remaining loan amounts to finance the new Creamino plant in the amount of approximately EUR 30 million and in contrast, financing activities in the first quarter of 2020, focused on the scheduled repayment of loans and repayment of leasing liabilities. Overall, this led to a cash outflow from financing activities to EUR 2.7 million. Despite the cash outflow from CapEx and financing activities, cash and cash equivalents increased overall due to the strong cash inflow from operating activities.So after the first analysis of figures in the cash flow, a few words to the operating details, and therefore, I would hand over to Dr. Weichselbaumer and switch the slide to the Slide 6. So the floor is yours.
Thank you, Mr. Niedermaier. We have often talked about Creamino and customer acquisition, which is why we have recorded a typical sales pitch here. The critical point of contact is typically with a technical person of the customer, this is generally a nutritionalist. It can take months, sometimes a year to get the customer to agree to such a meeting. As the benefits of creatine are not always well-known even to nutritionalists, the entrée is not simple. From the time of the first meeting, a time line of average 15 month starts until first commercial sales. It takes an average 3 months each to convince the customer and to prepare the trial. Usual duration of the trial is 3 months for fast-growing animals like chicken and much longer for pigs or cattle.Finally, the results need to be evaluated; and in case of a positive outcome, test production in the commercial plant will start. The feeding trial is the most critical part of this sequence and needs to be well designed and carried out in order to get reliable results. Breeders with trial farms operate those to solve their own problems first. Tests for new products are assigned on a priority base on the expected results. The feed for those trials need to be perfectly mixed and controlled. They require 2 comparable stables. Samples need to be drawn systematically and analyzed in calibrated equipment. We try to join those trials whenever possible and allowed by the customer to ensure that the agreed feeding protocols are at Tier 2.Through COVID-19, we see at one point or another that our customers are concentrating on their core business and testing fewer new products. So far, however, we have not seen any negative effects on our business.Now I would like to go to the next slide, where we will have a closer look at creatine and Creamino benefits. Reliable energy supply supports many functions in the body required for healthy growth. Healthy growth is key to sound economics in feed production and animal growth. Here, Creamino is the most reliable way for [ inefficient ] energy metabolism in the body. Creamino becomes creatine in the body, and creatine causes the main positive effects. Many of them are important for healthy growth.On this slide, you can see an extract of the effects starting with the positive nutritional effects: sustainability, reproduction, immune support, muscle strength and higher energy. Last time, we analyzed the energy effect. Today, we will take a closer look at the immune support arena.Creatine improves cell wall strength. Stronger cell walls make cells more resistant against disturbances from the outside. This applies, in particular, to gut cells. Also, those benefit from higher energy levels and have an improved feed absorption. This once again helps the robustness of the body in general.Infection resistance. Immune response requires energy. Because of better energy availability provided from creatine, macrophages perform better and the immune system is more robust. There are studies available to support this claim. As a consequence of increased creatine levels, mortality rates are lower. This positive effect was also demonstrated by independent studies. Excess energy has a positive effect on the immune response, muscle endurance and other factors. I would like to leave it at that and summarize that there are many reasons to use Creamino in feeding because not only humans, also animals need a strong immune system.The topic of immune system brings us back to our next topic, the coronavirus and its effects on AlzChem. Mr. Niedermaier, I hand back to you to continue the presentation.
Yes. Thank you. So on Page 9, we have drawn down some measures and some effects of the corona. And since March of this year, COVID-19 has had a strong grip on us in the corporate environment as well as in the private sector.How is AlzChem affected? So as early as February, we had set up a very close monitoring system for raw materials. So far, almost raw materials have reached us on time, even from the destinations, Italy and China. Only from India, nothing is coming in and nothing is going out at the moment. But so far, this has affected us very little. So we quickly updated the 2006 pandemic plan and set it up -- a task force. Very early on, we paid attention to the separation of shops. Hygiene measures were strengthened. Shift system changed so that people meet as little as possible. Shift systems were introduced in laboratories and workshops within short notice. Mobile working was increasingly implemented. Company agreements coordinated and agreed with the employee representatives. So crisis scenarios were calculated, and many topics converted to digital. So we produced and supported the districts with disinfectants and so on and so forth.As you can see, a whole bunch of additional topics and how does this affect the AlzChem business? We see this on the next page, it's Page 10. So on the basis of a highly diversified product portfolio, it was possible to almost completely offset the effects of the global economic disruption in connection with the COVID-19 pandemic in quarter 1, some of which were significant. Nonetheless, we are already seeing a clear downward trend for the steel and automotive industries in the first quarter, and for some products, for example, Creapure, as there was significantly less training due to COVID 19. On the other hand, the current environment also shows business opportunities for the AlzChem Group. In particular, the areas, animal nutrition, pharma have been characterized by an almost erratic increase in dynamics since the end of February. Especially in the field of BioSelect, we have always been part of the DNA test kits and therefore, now also part of the corona test kits.Based on long-term and thus, reliable, stable supplier relationships, the group has been able to maintain all major supply chains to date. The raw material supply of the AlzChem Group is with a few exceptions -- or supply bottlenecks robust and thus supports a continuously production process.What are the specific figures now? We see this on the next page in the first quarter of 2019 -- 2020, sorry. Sales increased by 2.8% year-on-year to EUR 94.7 million. Most of the sales growth was achieved in the Specialty Chemicals segment, although the Basic & Intermediate segment contributed slightly as well.In this quarter, we grew structurally above all with 1.7% in volume, 0.6% in price and 0.5% in currency. The EBITDA decreased by approximately EUR 0.9 million to EUR 12.3 million compared to the same quarter of the previous year. This development was due to an anticipated increase in personnel cost increases in connection with the market launch of Creapure derivate, LIVADUR and Your Encour!. And some postponed deliveries of PGR to the next quarter.Earnings per share fell from EUR 0.54 to EUR 0.43 per share. The decrease is due to the following issues: on the one hand, the lower result led to this; and on the other hand, depreciation is also significantly higher due to the high investments of the past. Significantly lower interest rates and somewhat lower taxes had a positive effect but could not offset the overall effect. Overall, we think we have made a very good start to the year compared with the current environment. We would now like to invite you to join us in analyzing some further details of the different segments. And therefore, we turn the page to Page 14. So the Basics & Intermediate segment comprises the production of basic and intermediate products that are required for the manufacture of specialty chemicals or marketed as stand-alone products. The latter serves a wide range of applications, for example, agricultural, steel production, automotive industry and pharma.Sales in the Basic & Intermediate segment in the first quarter of 2020 were up on the previous year despite initial setbacks from the steel sector. The market environment here is currently very short term in the steel sector, so that we have to decide on the volume distribution within the [ anti engine ] virtually from week-to-week. The volume development of our NITRALZ product range was encouraging. Although, the color pigments business also had to contend with order cancellations in connection with the decline in demand from the automotive sector here.Basic chemicals for application in the pharmaceutical industry, among others, are showing strong demand and thus contributing to the segment's positive development. The intensive effort to expand the areas of application in countries for PERLKA are reflected in the sales volumes above the previous year's level as well.So above-mentioned raw material, electricity price effects had a positive impact on the segment's EBITDA margin. In line with good sales, we were also able to convert the whole interim EBITDA of EUR 1.9 million, which already represents a significant improvement compared to the previous year.The decrease in sales was driven on the one hand -- the increase -- sorry, the increase in sales was driven on the one hand by more or less balanced volumes, on the other hand, by price increases and change in product mix with 1.3%. Additionally, there was a positive currency effect of 0.3%. So much for the Basics & Intermediate, let us now move to the Specialty segment. This is on Page 16 (sic) [ Page 15 ]. I think the page is already shown. So only to remember, the Specialty segment produces and sells high-quality specialty chemicals such as Creamino, Creapure, BioSelect, DYHARD and Dormex, for example. So developments within the Specialty segment were generally in line with the forecast. Creamino has enjoyed pleasingly strong growth, although this was already expected.In the environment of creatine, we accompany the marketing offensive of our new product, LIVADUR and Your Encour!, with high resource input. And in the area of custom manufacturing, we successfully reversed the downward trend of the first quarter of 2019.There was also a stronger demand for existing molecules, especially for the pharma sector. And our special product Dormex was not quite able to match the previous year's level. However, this is merely a method of monthly delivery postponements into the second quarter. So the development within the Specialty Chemicals segment was basically in line with forecast sales in the first quarter, amounted to EUR 52.2 million after EUR 50 million in the prior year period. And as planned, our EBITDA and EBIT were negatively impacted by marketing activities in connection with the Creapure derivate and unplanned by the decline in demand in the global automotive sector.We see lower deliveries to the dietary supplement market as an indirect consequence of the COVID-19 pandemic and less training activities here. So last year's quarter was very strong in PGR revenues which this year has partly shifted into the second quarter, and therefore, we expect a really good second quarter this year.So let us now move on to the third segment, this is Others & Holding. And I turn the page to Page 18. The Others & Holding segment comprises all other activities not allocated to other segments. These services are mainly related to the chemical park, Trostberg and Hart, which AlzChem operates also for third parties. In addition, administrative services are allocated to this segment. So the business volume in the chemical park in Trostberg and Hart remained essentially stable. Sales revenue totaled EUR 6.5 million compared to EUR 6.6 million in the previous year's quarter. The segment's earnings reflect a price increase based on planned cost increases. It also shows that the cost discipline measures introduced are having the desired effect, especially decreasing consumable costs can cover other cost increases, for example, in labor costs.So let us now take a look at the balance sheet. This is in Page 19. The balance sheet in total decreased from EUR 342.6 million to EUR 338.9 million. There were some essential changes to the assets in line with lower CapEx. Tangible assets decreased by EUR 3.3 million to EUR 183 million. And compared to December 2019, inventories came more or less on the same level. Receivables always rise in quarter 1 due to seasonal products and reached to the level of EUR 39.3 million here.On the liability side, there are some obvious changes again. Equity increased by EUR 19.8 million to EUR 81.1 million, mainly due to the revaluation of pension accrual and good operating business. This led to an equity ratio of 23.9% compared to 17.9% in the previous year. Following the pandemic, long-term valuation interest rate increased from 1.1% to 1.7%, which has an effect of approximately EUR 21 million on the pension provision. In contrast, there are still deferred taxes so that circa EUR 15 million was recorded in equity as a result. In addition, the scheduled repayment of loan liabilities led to a reduction in noncurrent liabilities of approximately EUR 3 million here, and EUR 61.3 million current liabilities are more or less stable compared to the year 2019. So that's it for the balance sheet analysis.Let us now move on to the targets. This is Page 20. So before the coronavirus determined everything, our goals were and are the following: further development of the market for Creamino will be our main priority, and we are absolutely on schedule with this goal. The further development of NITRALZ strategy with the next capacity expansion and CapEx is also an important topic for this year. Here, we are in the evaluation phase and can possibly say more about -- the next report.We also intensified the topic of sustainability. The 2 most important topics are 0 accidents and the goal of CO2 neutrality. In terms of accidents, we started lower than last year, thanks to the excellent safety work of our employees. As far as CO2 issues are concerned, we are in the middle of the analysis phase and may be able to say more about this in our next report.And as already described at the beginning, we are trying to generate our first sales in LIVADUR and implementing our strategy here. In detail, this will be the following topics: training pharmacists, push various promotion activities, analysis of Asia market entry, do first test sales in the U.S. branded by Your Encour!. And here, we are also on the planned route. And we can probably tell you more about this in the next report as well.So corona unfortunately controls a big chunk of the complete daily routine, and we are in the process of meeting all hygiene regulations. So far, our plants are up and running. And we have made a good start to the year also due to our important product portfolio. For example, we sell raw materials critical for essential drugs, we supply chemicals for virus test kits, and we are well positioned with our agri products even in the crisis and have a stable raw material base due to our backward integration. Nevertheless, if corona cases occur more frequently, we cannot rule out that our plants are shut down by the health authorities despite a good order situation. If this happens, it will be very difficult to make forecast at all. If this does not happen, we can imagine that the forecast could look as follows on the next page. So this is Page 21.The sales growth is planned to be achieved organically. Volume effects are anticipated to be the primary growth driver. Business development in the segment could show good growth depending on the duration of corona shutdown. In the Specialty Chemicals segment, we expect the main growth within the Creamino business and the BioSelect part. Basic & Intermediate segment will be supported by further growth in the NITRALZ product area. The agricultural part of the business is expected to remain at least stable. And the steel sector should suffer even more with the recent closure of production in the automotive sector. The Others & Holding segment is expected to generate stable sales at the chemical parks in Trostberg and Hart.On the profit end, we see positive signs from the raw materials sector. And given these conditions, we expect group revenues to rise slightly to strongly on an organic basis. And adjusted EBITDA to remain at least at the previous year's level [ until ] parallel to revenue, a strong increase.So some final words to our presentation. No one would have believed a few weeks ago that the crisis situation like the corona pandemic could catch up with us as quickly as we are witnessing it right now. As of today, our business has hardly suffered at all from the global restrictions. Here and there, we see some bottlenecks in the logistics, some customers are reducing orders and others are increasing orders.All in all, we have not yet experienced any major economic problem. However, the overall situation is already demanding a big portion of our time. It is essential to separate employees and reduce social contact in order to minimize the risk of infection. And without doubt, the health of our employees is our top priority. At the same time, however, we also try to keep our business running and consistently implement our target as we have presented today.So we hope that we were able to give you a good overview of the current situation and are now available to answer your questions, if there are any. Thank you.
[Operator Instructions] The first question we received is from Laura Lopez of Baader Bank.
First, I will start with -- last week, you announced CapEx announcement for BioSelect or an expansion. So can you maybe give us a guidance on how much will the investment be and maybe how long will that take? I can imagine that you have to react quickly as demand is going up significantly rapid. And maybe also how big is this capacity expansion? So how much can you actually increase your capacity, so kind of easily? Or are you building like a whole new building production plant? And then maybe together with that, if you can give us a guidance for CapEx for the group. I know that the Nitro investment is still pending, but let's say into what has been decided until now, more or less, where are you CapEx guidance for 2020? That's the first one, and then I move to another one.
Thank you, Laura, for the question. You asked about BioSelect, how quickly can we ramp up, what is associated with the ramp-up. When you look at the very, very dynamic situation in the market, we cannot take too much time to increase our capacity. And that more or less answer, I think, both of your questions. We will try to maximize the available technical capacity by addition of people, which gives us already quite a strong increase, and we can only take 1 or 2 months to increase the capacity because otherwise, the market will be taken by other participants. What does that mean in terms of volumes which we can sell? We think that we can at least double our capacity within the [ group ].
Okay. And this doubling of capacity, that is coming mainly from just hiring more people and not so much like in the operation itself. Did I understand that correctly?
Yes. That's the right answer about this question.
Okay. Very good. And then moving maybe on LIVADUR and Your Encour!. Can you maybe tell us what Your Encour! is? I think this is the first time I heard about it. What is the difference with LIVADUR? Or which market are you targeting with that product? And then can you give us any guidance on how high were the marketing costs in the first quarter?
For the end user products, which we have, which both LIVADUR and Your Encour! are, we have decided to go with different brand names into different markets. In Europe, we will have more scientific approach, supported by the brand name LIVADUR. In the U.S., it's more of an emotional campaign, supported by the brand name Your Encour!.
Okay. That is clear.
Yes. So we are in a very early stage of the market penetration and marketing costs are below EUR 1 million, so between EUR 0.5 million and EUR 1 million for the first quarter. And we hope that we can show you some positive effects already in the second quarter. And therefore, we will stress this topic more in the second quarter report then.
And this marketing cost, will they continue about the same level for the remaining of the year? Or do you expect them to increase?
No, I think this will be flat for the year. This will be more or less the same level but in the future, should be balanced out by sales and by earnings from the products.
Okay. And then maybe I ask one more. Can you maybe give us a guidance on the volume drop on steel in April? And I don't know if you already have an indication on the first weeks of May. I think we have heard from other steel companies, volumes drop of over 40% in April. And in general, in the chemical industry, let's say, the majority have already reported, they have mentioned something like 15% in April. So can you maybe give us a guidance in -- for you in the businesses that are more impacted by the current situation? How has the volume development been in April?
I mean, for April, the answer is fairly simple. For the development in the next couple of quarters, it is almost impossible. So what we did for our planning purposes, we assumed that the decrease in deliveries to the steel industry will be a number, which is double digit, and which is approaching 15% to 20%.
Okay. And that's for the remaining of the year, so not only second quarter, but you're also planning for such a development for the full year?
It is too early to make that call. We have established those plans for the second quarter and update it almost daily because the reports which we get are frequent.
Okay. Very good. And maybe just the last question related to that. I remember in the first quarter, we discussed that you were being able to, let's say, partly compensate a very weak demand by lower exports coming from China. And that's why your demand, let's say, did not correlate at 1:1 to the very weak performance that we were seeing in the market. Are you still seeing this? Or now that China is ramping up again, are exports again, let's say, becoming also more available for the steel industry with regards to the products that you sell? Or are you still partly being able to compensate that by, let's say, lower demand -- lower exports from international markets?
So this is an effect which was fairly small in the first quarter. And compared to the bigger effects, which we now see in the second quarter, it doesn't play a role anymore.
[Operator Instructions] And we've received a follow-up question of Laura Lopez of Baader Bank.
Okay. Sorry, me again. Now that I have the opportunity, I will ask a couple of more questions. One is on the dividends. I think I didn't saw anything regarding that. So does that mean that the dividend payment is still standing for 2019? And then the AGM to date is still the one that you have communicated? And then maybe on Creamino. So you did mention higher volumes year-over-year in the first quarter. Nevertheless, I remember at the beginning of the year, we talked about an acceleration towards the second half. Is this still what you are expecting? I mean, you also mentioned in your presentation that, of course, the current situation impacts, like the market penetration of new products. So maybe what is your view on that? And is there any update on the whole situation with Evonik? Do you still continue to be there on conversations with the company regarding the brand and the future production of Creamino also by them?
So I think regarding the dividend, we will decide this next week on Tuesday when we have the General Annual Meeting. And therefore, we see no change. We will stick to our dividend level of EUR 7.6 million, or I think it was 0.75% -- EUR 0.75 per share. So no change there. About Creamino and the situation of Evonik, Dr. Weichselbaumer, you can answer this question, I think.
Yes, I think I'll do it more broadly to address all of your questions. I mean, we were very pleased with Creamino development in the first quarter, and the product is still going very strong. We also, at the same time, see that as we have mentioned that before, the testing is not as quickly and as efficient anymore because customers do not operate the testing facilities as much anymore, and they have switched to different priorities. This has not had too much of an impact on the business development so far, but it remains to be seen how it continues, and it's beyond our knowledge what will happen.With regard to Evonik, I mean Evonik is one of our customers, and we will and are going to negotiate and serve them as we do it with other customers as well.
Okay. And then the last one on agro. You mentioned or you reported a strong first quarter, maybe how has the situation started in April? And you mentioned new applications or new markets for PERLKA. Can you maybe give us a little bit more information there? And just is PERLKA actually a margin dilutive part of Basics & Intermediate?
It is, yes. It is, yes.
Okay. Yes, I just wanted to confirm that.
Yes.
And regarding the new markets or applications will be nice to hear what is going on there.
The market -- the sales for PERLKA in the first quarter was very strong, and it was particularly strong outside of Europe. This is a strategy which we pursue to diversify more, and we were able to get more deliveries into the Southeast Asian market.
Okay. Great. And I think that will be it from my side. And you have very solid numbers. So hopefully, it continues to be like that.
Thank you. We hope as well.
[Operator Instructions] And we received a further question of [indiscernible] of [ MPPM ].
The following question to the relationship to Evonik. You mentioned Evonik is a client, a customer, a normal customer. Does it mean you sell Creamino to Evonik? Or does it mean that Evonik is -- took a license from you to be able to produce Creamino elsewhere?
Those are 2 questions, which are independent from each other. To address the question, is Evonik a client? Yes, Evonik is a client, and we negotiate with them as we do with every other customer as well. It's also correct your assumption that Evonik has taken a license in order to be able to market Creamino. And that's independent from any negotiations, which we have with them on potential sales to them.
Okay. And you mentioned you're satisfied with the development of Creamino in the first quarter. As I remember, in the first quarter last year, we had situations in the market with the overhang of Creamino still from Evonik that the base from last year wasn't as high. Taking this into account, are the volumes really satisfying? And are you on plan, meaning ramping up your capacities, which would allow to sell 5x more?
We do not compare sales, particularly in the first quarter to what we have sold in the first quarter of last year. If we did that, we would have a very, very pleasing development because as you clearly said, the growth compared to the first quarter of last year was tremendous and is not the basis of our further planning. The sales plan for Creamino anticipates the ramp-up of volumes. We have been able to follow that ramp-up plan in the first 4 months of the year consistently. We have looked at the potential effects, in particular also of the corona and there is and there are some effects. We have adjusted our development for that. And we still are confident that we will be able to grow Creamino sales not to what we had anticipated without the pandemic, but to a very significant level.
And the production capacity is available. There is no problem. The production is up and running, and the capacity is there. So whatever we want and we plan to sell is available within the production.
Okay. So maybe last question from my side. As always, to the share restriction, did you get any information of change, mainly to the major shareholders, the majority shareholders did they use?
No. From our own point of view, not. So our strategy is, as it always was, to increase the free -- shareholders. And therefore, we are working hard on this issue, but we don't have seen any sign that one of the big shareholders will sell shares within short notice. So -- but we are not involved in this process at the end of the day. Therefore, it could happen, but we don't have this information available.
Okay. So as we have no further questions, I hand back to Mr. Niedermaier for some closing remarks.
Yes. So thank you very much for your questions. We can offer you the opportunity to visit us virtually at our Annual General Meeting next Tuesday on May 19, or to return not later than the next quarterly call on August 11. Stay well, and stay healthy. And thank you for being here. Goodbye.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.