Lanxess AG

XETRA:LXS

Earnings Call Transcript

[Operator]

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

[André Simon, Head of Investor Relations]

Yes. Thank you very much, Judith, and a warm welcome to everybody on the phone and to our Q2 conference call from my end here in Cologne. As always, I have with me our CEO, Matthias Zachert; and our CFO, Michael Pontzen. Please take notice of our safe harbor statement. And with that, I'm happy to hand over to Matthias for a brief presentation and afterwards, as always, the Q&A. Matthias, please go ahead.

[Matthias Zachert, CEO & Chairman of the Board of Management]

Thank you so much, and welcome from my side. I will jump into the presentation directly, Page 4. And brief comments on the key highlights for second quarter. All in all, we see that volumes are back on pre-COVID levels. Earlier than expected, clearly, I have to change my view here compared to where we saw the markets beginning of the year, so this is positive.We see a strong recovery in the divisions that were heavily impacted in Q2 last year. So especially as far as additive is concerned and Engineering Materials, profitability clearly strongly rising because they had seen sharp drops last year. As far as EBITDA is concerned, we are nearly back to 2019 levels with EUR 277 million. This is a, of course, an increase of around about 24%. It could have been more had shipping not been a constraint to us in especially as far as cross-ocean shipments were concerned. Let's say, this is something that is going to normalize in the quarters to come even though for the second half of the year shipments will still be a rare good.As far as M&A is concerned, we're active on both sides of the M&A markets, 1 on the divestment side, we closed the organic leather transactions in Q2 and collected the proceeds. And as far as Emerald was concerned, we went last week on third of August, closed the transaction, and I welcomed immediately our new LANXESS team members around about 500 chemical experts had a town hall with all of them globally.And on Friday last week, we had our session with newly formed management team, all clear chemical experts, pros and positive vibrations, I felt good afterwards. And I hope they felt even stronger as well. Focusing on organic investments, we opened up an R&D development center, APAC in the Shanghai area, so-called skip chemical park, one of the best chemical parks in China, but 1 of the most modern parks also internationally. So all in all, I think it was an active second quarter with sound financials or improving financials and sound moves on the strategic side.Page 5, let's move there. We give the cornerstones financially, on the Emerald transaction, this is how 2020 was. Just a heads up for you guys in order to update your model accurately, this is a business truly specialty, a very nice fit with the products in our consumer protection segments. Around about EUR 80 million of EBITDA was last year. We will bring this business in the 3 years to come to something like 22%, 25%. This is at least what is embedded in our business plan. So we consider here the business to develop nicely, but of course, it will be work that has to be done.Moving now to Page #6 shows you how we integrate the business in our portfolio. So basically, as far as the consumer facilities are concerned, the preservatives, animal health products, Flavor & Fragrances. We bundle this business also with the ingredients that we have in intermediates for Flavor & Fragrances so that will be bundled together. And we are on the basis of this, I would say, the leading player worldwide on bans products with a chemistry of benz or toluene chlorination, toluene oxidation.We are world scale with 5 plants here across the globe. This is unique. And of course, for this uniqueness, we see the prime businesses on the F&F industry clearly is our biggest customers combined with the beverage industry that we also supply to. So this is going to be a strong business going forward and it fits very nicely as a new business units into our division consumer protection.As far as the polymer additives are concerned. This is a business branded with the name K-Flex, it fits well to our Mesamoll products and pesticide additives. So we have here a substantial sales muscle, the parts of Emerald that have this end industry exposure are going to be added to our Polymer Additives division and of course, here under 1 of the biggest sales muscle that exists in the industry. So leading to, of course, most likely good top line synergies going forward.A glance on Page 7 shows you that we make our strides in the direction of further upgrading our recognition and award list and rankings in as far as ESG is concerned, I know MSCI is very high on your radar. And here, getting a double upgrade within 12 months speaks for itself. We are now in the AA ranking, which I would say is a further nice recognition next to the platinum upgrades we got for by EcoVadis. Also, this is a rating that is known. I like platinum and more of this, hopefully, to come.Page 8, a quick update on guidance. Despite all the uncertainties that persists on geopolitical issue that's still are out there on the pandemic. We are looking positively into the second half of this year. We think that industries will continue to be on a good momentum, basically all of our industries are improving, some not as quickly as others like aviation, I think this will still take time. But all in all, the businesses and industries are moving in the right direction.Of course, some regions are going to stabilize. I think we had a very strong rebound in Asia already last year in the second half, and therefore, growth definitely is going to be softer there. I assume that in Europe, this will still be good market environment growth-wise also in the second half of this year than Q4, most likely also with softer growth rates. But all in all, business environment seems to be healthy.Now as far as LANXESS is concerned, in light of the organic development of the business but also due to the inclusion of Emerald Kalama business, we up our guidance to EUR 1 billion and to EUR 1.050 billion. So this is what we see as of today. And with this, we would love to open up the call for all of your questions.

[Operator]

[Operator Instructions] And the first question is from Christian Faitz, Kepler Cheuvreux.

[Christian Faitz, Equity Analyst]

Yes. I have 2 questions maybe. First, on logistics. Can you please give us an idea by how much percentage points or basis points, the higher logistic costs ate into your group margins and which segment was the most affected? And how do you see logistic costs evolving throughout the remainder of this year? Will you also push through higher pricing to compensate for the higher logistical costs? And then second question, a very simple one. How do you see working capital evolving for the remainder of this year?

[Matthias Zachert, CEO & Chairman of the Board of Management]

Of course, thank you for your question, Christian Faitz. So we will take them 1 by one, and Michael will take working capital, which obviously follows our seasonality, I will take up logistics. On logistics, we have seen now in the second quarter a high single-digit million incremental impact. Partly, this could be absorbed, partly it is still outstanding, and we have to massage that into our pricing going forward. So that should clarify the impact here on financials. So it's definitely a drag. Not a huge one, but it's a visible one.Second, however, is the delay in shipments that we, for instance, faced from U.S. to Europe, U.S. to China, China definitely was a constraint. As you have seen in the press, it was completely stopped in some of the harbors, congestions everywhere. I've not seen that so far as heavily as we currently see, and that's impacting everybody, not only us.And very clearly, I spoke to 1 of the CEOs of the big European transportation companies that have massive container capacity, and he clearly indicated to me, this is going to be a topic for the next 6 to 9 months because new capacities will only come within 2022 and 2023.So for the remainder of the year, it will be a drag. Fortunately -- I mean, we worked on this internally. Fortunately, our company has reserved close to 100% of our expected volumes. So we basically have capacities reserved. But even when you have capacity reserved, you sometimes face 1 to 2 months shipment delays. So that's basically the situation on logistics. And Michael will hammer all the answers on working capital. Come on, Michael.

[Michael Pontzen, CFO & Member of the Board of Management]

Yes, thanks for the question, and you're touching a point when looking in the cash flow statement, which obviously is an eye catcher, but unfortunately, to the negative, at least for the time being. As you all know, we do have this typical seasonality throughout the year that in normal years, like in 2021, for example, we have the increase in working capital in the first couple of quarters, and then the stabilization in the third and then the release of cash in the fourth quarter. And at this point in time, I do not see a reason why this usual pattern should be different this year.It was, of course, different last year. And that is the major deviation which you find in our cash flow statement. If you look last year, we were able, in the second quarter, given the circumstances, to release around EUR 56 million. And this year, we had to spend EUR 165 million. And if you deduct these numbers from the operating cash flow line, you will recognize that we had a rather good operating cash flow in the second quarter. And in fact, it was the best operating cash flow preworking capital changes in the past 4 years.So the focus on our side is clearly as well on generating cash but the pronounced development in the working capital in the second quarter was even, let's say, over-pronounced because there were 3, 4, let's say, additional effects next to the, obviously, highly sharpening, rising raw material prices, which did, obviously, have an effect on the inventories and on the receivables.Then on the receivables as well, we were in a position to record for a very strong month of June, which, in fact, then leads to a relatively high number of receivables at the end of June. And the third and fourth element, and that is the user seasonality is the preparation for turnaround, which you usually see in the second half of the year. And finally, Matthias was referring to it some shortage of shipments, which did have as well a small impact on the volume. So to cut a long story short, there should be the usual seasonality in place this year.

[Matthias Zachert, CEO & Chairman of the Board of Management]

Wow, that was a long answer. I hope that clarifies everything. So let's move on.

[Operator]

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

[Matthew John Peter Yates]

A couple of questions. The first, I think you've raised the guidance for your exceptional items this year by about EUR 50 million. I guess some of that relates to the Emerald deal, but can you disaggregate the moving parts in that, particularly if it's anything relating to IT spend, for example, why your assumptions now are different versus earlier in the year?The second question is around your lithium project. And I know there's still a lot of work here being done to evaluate and get all the answers before sanctioning. But I just had a question around the structure of the project. It potentially is a very sizable CapEx investment for the group. So I'm just wondering what sort of equity share you feel comfortable with in order to capture the long-term potential profit opportunity here? But also manage the shorter-term execution risk and what is potentially quite a complex and unproven project?

[Matthias Zachert, CEO & Chairman of the Board of Management]

Matthew, good to hear your voice. So Michael will address exceptionals, and I will pick up lithium. So on lithium, I mean in light of the fact that standard lithium is now also listed at the NASDAQ Stock Exchange. Of course, we have to be very humble on making any statements relating to other companies. This is at least the legal advice.So I will share what can be legally shared. The structure on the joint venture, we have explained already in our Capital Markets event in November 2019. The equity share in this joint venture will be according to the underlying understanding of both parties between 60% and 70%. And this is the working assumption as we speak. And of course, we would only inject money once proof of concept from a full -- from our perspective is fully there in all aspects.And lastly, what I would like to say is, of course, we are advancing now more and more, not at the speed of light yet, but we are advancing in the positive direction. And once we have new information that is worth sharing, we will share it, of course, with our investor base as well. And Michael, please explain and give transparency to exceptionals.

[Michael Pontzen, CFO & Member of the Board of Management]

Matthew, thanks for the question. In fact, there are 2 major drivers, which you basically hit one of. That is clearly the Emerald Kalama effect which we are expecting, as we have now designing already -- the closing already done last week. So we think we are able to already put some money into the system this year.And the second is clearly the M&A project. On the 1 hand side, all the projects which came to an end in Q2, like Trinseo in touch, the divestiture of the leather business. And then in the third quarter, obviously, the closing of Kalama. And as we all know and recognize as markets are picking up globally when it comes to, let's say, operational market, we see as well clearly a pickup in the M&A market. And that is as well an aspect which is driving the expectation on our side with regards to spending on exceptionals.

[Matthias Zachert, CEO & Chairman of the Board of Management]

Yes, we have been in 1, 2 further projects recently over the last few months that did not materialize. But we are in further projects going forward and perhaps 1 or the other might materialize, but we are quite active in this regard. And therefore, we will take, of course, then always legal charges, bankers charges, you name it because we go into DDs in a professional way. We really turn around every stone, so that we don't buy black cats in a dark basket, whatever the saying is.

[Operator]

The next question is from Chetan Udeshi, JPMorgan. Mr. Udeshi, you can ask your question.

[Chetan Udeshi, Research Analyst]

Yes. Apologies. I was on mute. Just 1 question from my side, which is, in second quarter did the price increases that you guys put through, did that offset entirely the inflation in raw materials and logistics and energy? Or did you have -- or do you have some catch-up to be done on that regard in second half of this year?

[Matthias Zachert, CEO & Chairman of the Board of Management]

Chetan, good to hear your voice. The mute thing is something I always have on my side as well, but this time, I don't need to touch the button, so it has so far not happened. Your question is a very good one. And let me address this in the following way.Loss, by and large, we have in second quarter, you can see that 10% pricing in Q1, we had basically 0% price increase. So the 10% clearly show you that we have been extremely active. And by and large, I would say, we have nearly rolled all rolls over. Some kept up here and there potentially still lagging, but majority-wise we addressed it.Energy is still out there. And my assumption is that energy is definitely more difficult because in many of our contracts, we have long-term contracts where energy prices are not included because normally, we don't have these swings. This, from my point of view, will be a not only this year activity, it will take us most likely 12 to 18 months to address contract by contract.If you have big underlying contracts, that simply takes longer and the discussions this is not done from 1 day or 1 quarter to the other. But the positive statement to you is loss basically nearly all addressed. Energy, we are working on it. And therefore, I mean, let's see how we advance in this regard. I hope that clarifies your questions, Chetan.

[Chetan Udeshi, Research Analyst]

And if I follow up, of course, you've given a full year guidance which is useful. Can you help us understand how do you see Q3 at the moment? It seems at least in the past, we've seen a bit of seasonality that Q3 is slightly lower than Q2, and then bigger seasonality in Q4. At this point, would you say there is any reason to believe it will be different than that in Q3 and Q4 just from a normal seasonality point of view?

[Matthias Zachert, CEO & Chairman of the Board of Management]

Well, I don't think that we will see a summer dip. I think overall, the world is still bringing things back in place, in order. So we saw that Q3 last year markets rebounded. So the comparable basis, volume wise at least, are better than Q2 but we still see distortions in the system.We said, as things are normalizing, we now provide guidance on full year and basically don't really see the necessity to slice quarter-on-quarter in 2 pieces. But by and large, we see a softer seasonality compared to the historic average. Of course, August always tends to be softer in some countries like Europe, Southern European countries. But we will not have -- I don't expect anywhere a sharp summer break because the business and industries are on the rebound still.

[Operator]

The next question is from Andreas Heine, Stifel.

[Andreas Heine, Managing Director]

Yes, a small number of straightforward questions, please. If I take these rubber chemicals out with, let's say, a margin of 0, then I get in Specialty Additives, to 18% in Q2, which is basically where you were in 2019. I think the ambition is 2020, and you outlined that the high-margin aerospace loops in oil and gas is not back, if that's coming back now next year, is that something which would be on the agenda to lift a specialty additives margin, including the business from Emerald Kamala to this target of 20%. That's the first question.The second, the Currenta exclusion, could you clarify whether in any way LANXESS might be affected by this in your operations? And in the industrial and the Advanced Industrial Intermediates, you have produced also some products which you have in Emerald Kalama. Will the marketing from -- of those products be now done from the SCP segment by -- led by Emerald Kalama or will that be still separate? These are my questions.

[Matthias Zachert, CEO & Chairman of the Board of Management]

Valid questions. I start with your first one. You're completely right. If you back out the numbers of the businesses that have been transferred into additives i.e., the rubber additives. The business would be around about that 18% already, despite aviation still lingering and lowering, looting margins. So overall, you see that the division additives rebounded nicely, and it should rebound further, at least this is our expectation, next year.The second point to this is, however, the rubber additives will never be a 20% margin business. So this would clearly linger and dilute the underlying margin of this business. So this needs to be kept into perspective.Now to your third question, the K-Flex products are margin-wise, the lowest 1 in Emerald. I don't think they will lead to an improvement in the margin. There will be where the margin currently rather is in the area of 15, 16 percentage points, so it will not be an incremental booster. The consumer products, they are the heavy hitters. The K-Flex products are below the average of -- definitely below the average of consumer protection products.Now the marketing, to your last business question, the marketing will all be in 1 business unit. So the F&F products that are currently embedded in the Intermediates division and the sales reps and marketeers, they will all join the new business units. Otherwise, we create complexity. So we clearly make management carve-out products, business carve out completely.So that here really a champion is being created in the F&F space, and it's a difference if you have 500 people, 500 pros on F&F compared to 1,000 Pros on F&F with 5 assets world scale, worldwide positions than in just 1 region being positioned. So here we clearly make a step change in terms of specialty supplier to the F&F industry globally. We see that all big accounts are with us. This is a unique setup and therefore, it will be a unique, strong, unified team led under 1 business structure. And let's see how they are going to accelerate in the years to come.So this is basically my feedback on the business and you've addressed a horrible accident that really has emotionally hit everybody here. And even though we are not directly impacted, you feel sorry, you feel sorry, condolences, which we expressed to the entire Currenta family on behalf of the Board, on behalf of the employees, our employees, I mean these are so-called brothers and sisters.I think that is the -- that is what weighs heavily. Financially, there will be something like EUR 5 million to EUR 10 million operationally losses. This is embedded in our guidance. On everything that is higher than this, we have protection, financial protection through insurance, et cetera. But this is just a side point. The big point is the accident itself and the shock to the environment and region. And now we need to work on it. Something like this simply may not occur. Full stop.

[Operator]

The next question is from Peter Spengler, DZ Bank.

[Peter Spengler, Analyst]

I have 2 questions left. First, in the view of the good volume demand this year, do you see a need for capacity expansions that you did not expect before maybe there is a segment or a division where this is now possible earlier? And the second question is, do you expect an increase in administrative costs or bonuses this year due to the elimination of COVID measures?

[Matthias Zachert, CEO & Chairman of the Board of Management]

Very valid question, Spengler. On capacities. I mean the 1 thing that, of course, we would like to flag our -- we are still in the process of working on battery chemistry. And so this is something where when we step in, we will step in and that we'll need CapEx.Second, for Emerald, we clearly already flagged that here we do see opportunities on debottlenecking, the ultra purified benzoates. This is something that we will engage in because here, the market is pretty tight. This is a super duper growth area in beverage industry and biocides, you name it. We are short of capacity.So this is something we will definitely take on board because of the juiciness of the business plans that I've seen so far. It needs to be double checked. Now we own the business, but this was 1 of the fundamental drivers for our business plan in the M&A analysis. So we look at this quite positively.Now on your second question, definitely, I mean, this year, we will pick up more SG&A costs. And 1 big driver for that is a bonus. Last year, the management Board, among others, cut the bonus to 50% max. I hope and I would be happy that the entire managerial grades worldwide will get a bonus 100% or above if we excel. And therefore, that, of course, paying bonus is something that for the entire managerial grades worldwide is always double-digit amount. If it's 50%, it's of course, half of what you have when you have 100%. So therefore, this is something that will lead to an increase in the admin costs, for sure.Second driver, but not as big as a bonus is traveling, our assumption is that now traveling will occur again in the second half, gradually increasing. At least we have communicated now since August, after discussion on the management board that everybody who is double vaccinated is allowed to travel, who is not vaccinated has to stay wherever he is in home office or in the office, but traveling is then not allowed. But vaccinated people can travel from now on as long as borders are open. And of course, travel costs, therefore, will also increase going forward.

[Operator]

The next question is from Jaideep Pandya, On Field Research.

[Jaideep Mukesh Pandya, Analyst]

I just want to basically look at the cash flow that is on LANXESS today. And I'm sorry, but I'm going to compare it to the old days, this is back when you were the CFO and Rubber was in the company. The CapEx to sales those days was 7% and these days is also 7%. And then on top of that, you guys are spending, let's say, about 1% to 2% on exceptionals for the last sort of couple of years. So in principle, when we think about EUR 1 billion, EUR 1.1 billion EBITDA range. By the time we deduct CapEx and exceptionals, we're left with EUR 300 million, EUR 400 million in the bank.So the question really is what is the underlying CapEx maintenance sort of CapEx level of LANXESS today, and are you spending a lot of money in projects which we haven't seen EBITDA for yet, where hopefully, you will give us some longer-term EBITDA guidance or earnings guidance on May 5 -- sorry, November 5, which will allow us to sort of see the growth profile of LANXESS. Because obviously, right now, there is a very frustrating circle where despite all the recovery, cash in the bank at the end of the year is, if I may use the term, disappointing. That's my first question.And the second question really is around your bromine business. Your sort of Western peers have about 50% or so of longer-term contracts. And so if you can just give us some color of what is the contract profile for LANXESS. And are longer-term prices adjusting every year, and therefore, the sharp rise in bromine prices that we've seen this year should be reflected really in the P&L next year?

[Matthias Zachert, CEO & Chairman of the Board of Management]

Yes. Well, let me -- I'll just take note of your questions. Let me give you a high level answer on cash. And if this suffices, fine, otherwise, you can come back to it, and then Michael will pick up on the details.On -- if I look at cash flow, if I look at operationally. Of course, we saw last year the inflow through the implosion of prices. So we had a strong influence, net working capital. And this year, we would see the opposite, which the entire industry is facing. So there is no change here. You will see also that our second half year cash flow is going to improve so there is no change here. The 2 topics you have addressed was CapEx and exceptionals. Now on CapEx, there are 2 elements that currently drag on CapEx and lead to 6, 7 percentage points to sales that you have mentioned.The one related to upgrade of plants. We bought and deliberately pointed out that the plants that we bought in the U.S. needs to catch up on investments in order to reach the standards we have. This will, by and large, still be something for 2022 and will then move downwards. So this is 1 element on CapEx.Second element on CapEx, which we also state is activation of software costs that we incur. We are running here big projects that will come to an end for the big countries next year that was adding to the CapEx envelope around about EUR 40 million, EUR 50 million. This is happening every 10 year when you upgrade SAP and the like. So this is something that currently drags on CapEx, but automatically, these 2 points will come down.Second, then on exceptionals. I would clearly like to mention 2 points. We are in a heavy portfolio management circle right now. You've seen projects, you have seen in every year that we engage on big projects like rubber divestment in '16, rubber divestment in '18, these were big projects.On such projects alone for bankers fee, lawyers fee, environmental tax, la la la, you pay on average for projects which are in the billions. I mean, each rubber project was leading to EUR 1.2 billion, EUR 1.4 billion of cash on the accounts. You have something like EUR 10 million that you expense. If you look into Currenta, I mean, you are in the double-digit million. So if you look into Emerald, you're on double-digit millions, et cetera, et cetera, et cetera.I think all of these M&A projects were taken positively by investors because either we got proceeds. Like on leather chemicals, we got good cash and the commodity business went out. I think everybody liked that, but you need to pay for it. And the portfolio change process is not over. And therefore, we are doing the seconds.There are innovation projects that we have in exceptionals like CheMondis. I think people like CheMondis, but it incurs costs in low double digit millions. This is booked in exceptionals because CheMondis somewhat is an exceptional project. One day, we will open up. If this continues to be on a successful path, we will open up. When we open up, investors, hopefully, will see proceeds. If we don't consider this as a viable project, we will stop it. And then we will no longer take EUR 10 million, EUR 15 million on a yearly basis. But then we will basically make sure that cash drain is reduced. But from all of what we see right now, we think this is a viable project. That should explain I think the 2 questions on CapEx and exceptionals.As far as bromine contracts are concerned, the volatile markets, definitely here is the Asian market, the Chinese market, China is on spots. As far as Europe and North America are concerned, you are normally on a contract basis. So most of the projects here have -- products here, contracts, you have a 1- to 2-year duration. And whenever prices in general move up, which they currently do, you see a positive pricing impact than 1, 2 years following the tightness of the market. I think that answers both questions, Jaideep.

[Operator]

The next question is from Mubasher Chaudhry, Citi.

[Mubasher Ahmed Chaudhry, Vice President]

Just a couple left, please. the results didn't really have an impact from the auto chip shortage in the second quarter. Are you seeing some sort of restocking from your customers? And then should we expect more of an impact into third and fourth quarter? And then coming back to the bromine comments, are you seeing increase from your side, given 1 of your U.S. peers is having issues with their own growing commitments. So is that leading to more volume queries on your side? Or are you kind of fully -- strong, fully committed and therefore, we shouldn't expect a volume like this?

[Matthias Zachert, CEO & Chairman of the Board of Management]

Very good questions. Thank you, Mubasher. So let me address one by one. Well, as far as Q2 is concerned, we did not see -- I mean, looking to the Engineering Materials division, the pricing volume was extremely strong. So we didn't see any impact on the chip -- difficult words, chip shortage, I hope I've pronounced that correctly. On the chip shortage in Q2.I discussed with a big CEO in the automotive industry on his feedback, pre-Q2 earnings call. And the feedback I got there was -- and he gave an example for the industry. The industry could have gone up higher. But basically, the industry went up in many of the regions by around about 10, 11, 12 percentage points. This would have been 3 percentage points higher. But anyhow, 10%, 12% is strong growth.Of course, on a modest basis, but in Q3 and for the full year, if they continue growing double digits, then everybody will be happy but their growth could be even more pronounced. The rebound in the automotive industry, however, is stronger than the decline or the shortage of the semiconductor industry. So we currently don't see that in our order book. We still see that the automotive industry tries to stock up, but they can't because we cannot produce as much as they want. We also see now that the polymers for -- or the polyamides are kicking in for e-mobility.We always said that e-mobility eats or longs for more specialized polyamines, which we have prepared. And therefore, we now see a strong pull from the electro mobility industry for our products called Pocan, this is a PBT product, but also for our polyamide. So as far as Q3 is concerned, we see a strong volume coming from the automotive industry and not a reduction due to shortage of semiconductor chips.Now on bromine, second question. Yes, I mean we could sell more, but we -- I mean, our bromine wells, as you know, are in El Dorado in Arkansas. And first of all, what you have to do is you have to have trucks to ship. Trucks or truckers -- truck drivers are a rare specie in the United States, so you need to have more truckers. We find them, but not enough, once you found truckers, you need to get ship containers.Also this is a rare specie in the harbors. And therefore, anybody who has a shortage on chlorine, whatever, we could sell more, but we need to find truckers and ships to export the products which are scarce at this point in time. I hope this answers both questions.

[Operator]

The next question is from Geoff Haire, UBS.

[Geoffrey Robert Haire, Managing Director and Equity Research Analyst]

It's Geoff Haire, UBS. Just wondering if I could ask 2 quick questions. First of all, would you be able to give us what the exceptional costs will be for Emerald, please? And then also, you mentioned in the statement that you had new long-term contracts in Saltigo. What does that translate to in terms of numbers?

[Matthias Zachert, CEO & Chairman of the Board of Management]

Geoff, I would take Saltigo and Mike will take your Emerald question. Basically, if you look at the -- we bought it into the comments of our quarterly, just in order to explain the price effect in SCP and consumer protection. So this basically relates solely to Saltigo. In Saltigo, we have with some of the big customers agreements on contracts, normally long term.One long-term contract came to, let's say, an end and was renegotiated. And basically here, we made the agreements in this particular case that we take ownership of the entire value chain for the managing of raw materials, et cetera. Normally, what you have in these contracts often is the big customers provide certain intermediates to you, which you further go and synthesize because we only make the high-value synthetic steps.With this particular contract, the customer agreed to, we can also take care of the precursors, which we'd like to do because we saw opportunities here to improve the pricing. Bottom line, therefore, means prices for the product were adjusted. However, this margin-wise, is a positive for us. And volume-wise, we get more volumes.So bottom line, financially, this is clearly now turning into long-term contracts, which is more accretive to the P&L than before. But you see a negative pricing effect which we tried to explain so that nobody needs to bother. But that's behind it. I will not give now numerical details because this is business intelligence, but I think it explains the question in -- fully fledged to you and Michael will address Emerald.

[Michael Pontzen, CFO & Member of the Board of Management]

So for this year, we expect the exceptionals in the ballpark of roughly EUR 15 million, 1-5 million. The same number holds true for upgrading the assets, like Matthias said. And the synergies should sum up to around EUR 5 million that is for '21. Then for the next 3 years, we expect the further exceptionals and CapEx and, of course, synergies, and they will sum up to, in total, some EUR 25 million on synergies, on exceptionals EUR 35 million, on CapEx EUR 55 million. And we provide a split over the next years in the slight deck in the backup.

[Operator]

The next question is from Rikin Patel, Exane BNP.

[Rikin Patel, Research Analyst]

I just got 2 left. Firstly, on Emerald. You've mentioned the 22% to 25% margin target. Can you just give us some color on what profitability will look like this year? And any comments on organic growth in F&F would also be helpful. And then secondly, you mentioned, came on this earlier, just any update on how the monetization models are progressing and how your customer rollout has progressed as well in the last quarter would be helpful.

[Matthias Zachert, CEO & Chairman of the Board of Management]

Well, Rikin, thanks for participating today and for your question. So the 22%, 25% is the -- of course, the margin guidance. For this year, the incremental EBITDA stemming from Emerald in euros. And based on our current understanding, I mean, we now need to do the technical stuff with converting from U.S. GAAP to IFRS. We've done that high level wise, but it needs to be, of course, made 100% clear. Then we need to look into how they report cost-wise, category-wise and bring that into our own accounting standards' reporting guidelines.So these are rough numbers. Michael will give a more precise update on Emerald numbers latest with Q3. But on the basis of our knowledge today, the incremental EBITDA stemming from Emerald for the remainder of the year is EUR 35 million. And of course, going forward, we are not going to report business unit numbers. We will always keep them on divisional level. I think this is standard in the industry.Now as far as monetization CheMondis is concerned, we are still out here and testing. The difficulty that we currently have on platforms, not only ours but also other platforms. You've seen that last year, in terms of pandemic platforms we saw around the globe that traffic on platforms just exploded because everybody went digital.Now the opposite is happening not on the customer side so much, but on the supplier side because as you know, as we report, as everybody reports in chemicals, products are short. And what people are doing right now is that suppliers rather sell to their A and B customers.Platforms are basically another outlet. But as you are here, rather trying to find outlets for your incremental volumes that you cannot get into other channels, you currently lack the supplier offering. And therefore, the platform currently commodities not -- has not reduction in buyers. Buyers are still extremely active on the platform, but the offering of the suppliers in the last 3 months has reduced by 30, 40, up to even 50 percentage points. And we need to basically wait until the suppliers come back on the platform, the time will come.And then, of course, we would see here that the matching to orders will go up again. But therefore, the monetization that we basically had on the -- that we brought into the platform, we now need to change gears and work on bringing, first of all, suppliers back on the platform, which will take some time, and then we will test the monetization again. So this is where we stand on CheMondis. I hope that clarifies everything.

[Operator]

We have no further questions, so I would like to hand back for some closing remarks.

[Matthias Zachert, CEO & Chairman of the Board of Management]

Okay. So then hopefully, we've answered all questions. Michael and myself, we would like to thank you for your attention, for your time and your interest, and we will, of course, will be on road show now in the digital or physical way, at least Oliver and Michael are now going physically on the roads. I would be digital wise on the road and hopefully physically then in the months to come. I wish you all the best. Have a good summer time and stay healthy until the next call. Thank you from LANXESS in Cologne. Bye-bye.

[Operator]

Ladies and gentlemen, thank you for your attendance. This conference has been concluded. You may disconnect.