Clariant AG

SIX:CLN

Earnings Call Transcript 2024-Q1

[Operator]

Ladies and gentlemen, welcome to the Clariant First Quarter Figures 2024 Conference Call and Live Webcast. I am Sandra, the Chorus Call operator. [Operator Instructions] The presentation will be followed by a Q&A session. [Operator Instructions] At this time, it's my pleasure to hand over to Andreas Schwarzwaelder, the Head of Investor Relations. Please go ahead, sir.

[Andreas Schwarzwaelder, executive]

Thank you, Sandra. Ladies and gentlemen, good afternoon. This is Andreas Schwarzwaelder, and it's my pleasure to welcome you to this Q1 call. Joining me today are Conrad Keijzer, Clariant's CEO; and Bill Collins, Clariant's CFO. Conrad will start today's call by providing a summary of the first quarter developments, followed by Bill who will guide us through the group's financial for the period. Conrad will then conclude with the outlook for the full year 2024. There will be a Q&A session following our presentation. At this time, all participants are in listen-only mode. I would like to remind all participants that the presentation includes forward-looking statements, which are subject to risks and uncertainties. Listeners and readers are therefore encouraged to refer to the disclaimer on Slide 2 of today's presentation. As a reminder, this conference call is being recorded. A replay and a transcript of this call will be available on the Investor Relations section of the Clariant website. Let me now hand over to Conrad to begin the presentation.

[Conrad Keijzer, executive]

Thank you, Andreas. Good afternoon, everyone, and thank you all for joining this call. Clariant delivered a good start of the year in the first quarter of 2024 with improved profitability driven by our performance programs and successful margin management in a deflationary environment. Our top line performance was impacted by stabilized volumes and lower pricing against a strong comparison base. Before we go further into the financials, I would like to highlight and acknowledge the safety milestone the entire Clariant team has achieved in the first quarter 2024. In the month of March, Clariant recorded 0 accidents across our offices and across our 73 production sites worldwide. This equates to approximately 2 million accident-free working hours. This is a great achievement by all our dedicated employees and an expression of our commitment to promote a safe and healthy workplace for all of us at Clariant. Let me now turn to the first quarter financial figures. In the first quarter of 2024, we delivered sales of [ CHF 1.14 billion ], representing a 6% organic decrease in local currency, an 11% decrease, including [ scope ]. Currency had an additional 5% negative impact. Our top line performance was impacted by lower pricing against a strong comparison base in the prior year. In the quarter, flat pricing in catalysts was offset by a 6% decline in Care Chemicals, primarily due to formula-based pricing and a 4% decline in absorbents and additives. Our priority remains to defend pricing in a deflationary environment. Sales were also impacted by stabilized volumes with a 2% volume increase in Care Chemicals, offset by a 2% decrease in Catalysts and a 7% decrease in absorbents and additives. While sequentially, we saw limited restocking activities from customers, uncertainties on the underlying demand remain. This is confirmed by the European chemical industry Council, CEFIC. Reporting that European chemical industry production volumes are still not recovering. Whilst there are positive signs, it is therefore too early to confirm if this is the beginning of an upward cycle in Europe. In China, the largest chemical market, Oxford Economics expects GDP to normalize in 2024 compared to the prior year, forecasting a 4.7% increase. The manufacturing PMI exceeded at [ 50.8% compared to 49.1% ] in February, indicating an improving environment. In the U.S., according to the American Chemistry Council, chemical production increased by 0.3% year-on-year in March while declining by 0.6% sequentially compared to February. The Electrical and Electronics sector reported the normal sequential decline but delivered a year-on-year increase in the first quarter. The International Data Corporation, IDC, expects global notebook and PC production to return to growth of 5% in 2024 compared to the minus 11% in 2023. Smartphone shipments grew in Q1 2024 by 4% year-on-year. For 2024, the IDC is forecasting growth of 3% compared to a 4% decline in 2023. Moving on to our performance by geography. Sales in the Americas grew organically by 4%, driven by volume increases in Catalysts and Care Chemicals and decreased by 7% in local currency, predominantly due to the divestments of our North America land oil and [ quads ] businesses. In Europe, Middle East and Africa, sales were down [ 16% ] in local currency, with declines in all businesses as economic activity in the region we [indiscernible]. Sales in Asia Pacific were down 6%, including [ scope ] and 4% organically. In China, sales were up 5% organically, with strong volume growth in absorbents and additives and Care Chemicals offsetting the volume decline in Catalysts. In terms of profitability, EBITDA in the first quarter increased by 4% year-on-year to CHF 173 million. This corresponded to a 17.1% EBITDA margin, 320 basis points above the 13.9% margin reported in prior year. Our improved profitability was driven by our performance programs and successful margin management in the deflationary environment. The lower some liquid impact and strong margins in our seasonal Aviation business also positively contributed to profitability. Moving on to our strategic priorities. We announced the acquisition of Lucas Meyer Cosmetics on October 30 last year and completed it on April 2, 2024. With this acquisition, we are taking another significant step forward in our purpose lab strategy, further strengthening our position as a true specialty chemicals company. With our new team members from Lucas Meyer Cosmetics, we are looking forward to the growth opportunities that lie ahead as we combine our personal care ingredients portfolio with Lucas Meyer Cosmetics to become a true leader in the cosmetics ingredients space. This is one of the most attractive markets in specialty chemicals, both in terms of growth and profitability. We are pleased to confirm that the Q1 2024 operational performance is in line with the historical growth and profitability levels, and we will consolidate the Lucas Meyer results as of Q2 2024. We continued to deliver on our performance improvement programs with CHF 11 million savings achieved in the first quarter. We have increased our 2025 savings target by an additional CHF 5 million to CHF 175 million due to targeted savings in additives. We are on track to deliver our increased target with CHF 146 million or 83% of the [ program ] already achieved as of Q1 2024. For 2024, we expect to achieve savings of CHF 28 million, bringing our total cost savings to over CHF 160 million by the end of the year. Our purpose-led strategy reflects Clariant's ambition to create value with innovative chemistry and a sustainability focus, putting customers, employees and the planet at the center of all our activities.This ambition is turned into action by our talented people, and their efforts are highlighted here. The latest launch from our active ingredients platform, CycloRetin is a natural retinal alternative based on a trendy molecule, a natural peptide extracted from nature. As society ages, there is increasing demand for skin care products that effectively support healthy aging with visible results. There's also growing interest in natural ingredients that are sustainable and gentle because many previous solutions failed to deliver noticeable results or cause unwanted irritation. Based on the strong market response, we have noticed so far, the efficacy of CycloRetin at improving skin firmness and radiance validated by several clinical studies is being recognized. This is just one product within our active ingredients platform, which is significantly enhanced by combining it with the products and technologies of Lucas Meyer Cosmetics. This will ensure we are strongly positioned to capture the highly attractive USD 1 billion active ingredients [ markets ] for premium cosmetics. People continue spending on high-quality cosmetics that make them look and feel at their best. Together with our new key members of Lucas Meyer Cosmetics, we are confident in our ability to shape the future of beauty. With that, I now hand over to Bill for further details on our business performance in the first quarter.

[Bill Collins, executive]

Thank you, Conrad, and good afternoon, everyone. I will now discuss our first quarter development by business unit, starting with Care Chemicals. Care Chemicals sales decreased by 4% organically in local currency and by 13%, including scope. Volumes increased by 2%, driven by Mining Solutions, Industrial Applications and Personal and Home Care, offsetting lower volumes in Crop Solutions and base chemicals. Sequentially, volumes were up 5%, supported by limited customer restocking. Pricing was 6% lower year-on-year, primarily due to formula-based adjustments linked to raw material prices. Sequentially, pricing decreased by 1%. By segment, we recorded volume-driven growth in Mining Solutions as well as in Industrial and Personal & Home Care, while oil services was flat, excluding scope. Base Chemicals declined due to lower aviation sales, while in Crop Solutions weak demand and destocking across the supply chain continued. Care Chemicals EBITDA of CHF 123 million resulted in a 21.2% margin. Profitability was positively impacted by decreasing raw material and energy costs combined with successful margin management, the positive impact from our performance improvement programs and strong margin in the Aviation business. Catalyst sales declined by 2% in local currency. Volumes declined by 2% versus the prior year due to the project nature of the business, while pricing was flat in all segments. By segment, we recorded sales growth at the mid-20s percentage range in Syngas & Fuels and at a mid-teen percentage rate in propylene with the remaining segments declining. In the quarter, reported EBITDA margin increased to 13.4%, mainly due to a CHF 8 million reduction of the negative operational impact from sunliquid and stable pricing in a deflationary environment. EBITDA before exceptional items was CHF 24 million, resulting in a margin of 12.8% versus 6.3% of the prior year. Sequential underlying EBITDA decreased by 41% as a result of the typical seasonal volume patterns in the first quarter compared to the final quarter of the year and the resulting impact on operating leverage. When excluding operational and exceptional effects related to sunliquid, Catalysts EBITDA margin in Q1 2024 was 16.1% compared to 12.9% in Q1 2020 rates. Looking at the sunliquid impacts in more detail. In the quarter, the operational impact was negative CHF 5 million, an improvement from the CHF 13 million negative impact recorded in Q1 2023 and the negative CHF 9 million recorded in Q4 of 2023. For 2024, we continue to expect a negative operational impact of up to CHF 15 million and exceptional items of up to CHF 30 million. The cash impact related to the closure cost is expected to be in the range of CHF 110 million to CHF 140 million. Moving to absorbents and additives. Sales decreased by 11% in local currency in the first quarter, with the decline both in volumes and pricing, primarily driven by additives. Absorbent sales were down by a low single-digit percentage rate as positive pricing did not offset lower volumes. Additive sales declined by a high-teens percentage rate driven by lower volumes with continued weak demand in key end markets. Pricing declined by 4% against a high comparison base in Q1 2023. Sequentially, sales decreased by 2% in local currency, equally balanced between volumes and pricing with some stabilization in additives market conditions and limited customer restocking from low inventory levels at year-end. EBITDA margin decreased to 14.6% compared to 18.5% in the first quarter of 2023. Profitability was impacted by CHF 9 million restructuring charges for additional steps to align our cost base with the lower volume environment and business mix. Impacts from lower volumes were partly compensated by benefits from the deflationary raw material and energy trends. EBITDA margin before exceptional items was flat at 18.7%. Sequentially, EBITDA before exceptional items of CHF 46 million was significantly above the CHF 21 million recorded in the prior quarter. The increase was driven by operating leverage with limited restocking and additives and lower raw material and energy costs as well as by the structural improvement efforts we initiated last year. We delivered cost savings of CHF 11 million in the first quarter from our performance improvement programs. As mentioned by Conrad, we increased our total cost savings target to CHF 175 million by 2025 against our prior target of $170 million and an original target of $110 million. Thus far, savings of CHF 146 million have been realized from efficiency and rightsizing measures as well as the initial savings from the implementation of the new operating model. And with this, I close my remarks and hand back to Conrad.

[Conrad Keijzer, executive]

Thank you, Bill. Let me conclude with the outlook, starting with 2024. While we expect a continued easing of the inflationary environment, we see limited indications for economic recovery in 2024 with uncertainties and risks remaining. We, therefore, confirm our expectations for low single-digit percent sales growth in local currency and a reported EBITDA margin of around 15%. We expect growth in Care Chemicals versus last year's comparison base that was affected by destocking. In addition to the positive impact of the acquisition of Lucas Meyer Cosmetics, growth in absorbents and additives is attributable to expected continued growth in absorbance and some recovery in additives. The performance of both business units is expected to offset the temporary slowdown in Catalysts, given demand-driven prolonged retail cycles and lower newbuild capacity additions. Our margin guidance also includes the impact of Lucas Meyer Cosmetics and sunliquid. Excluding the nonrecurring Sumeet operational and exceptional index, we expect an EBITDA margin of around 60% for the group in 2024. We will continue to focus on defending pricing in a deflationary environment. And as mentioned, expect ongoing cost benefits from our performance improvement programs of CHF 28 million. Moving to our medium-term outlook. As announced at our full year 2023 results, we remain committed to our medium-term targets as end markets recover and [ growth ] normalizes over the next 2 to 3 years. We confirm our expectation that 2025 will be a year of significant progress towards these targets with continued growth and substantial profitability improvement. In 2025, on the basis of an expected 3% to 5% improvement in key end market demand, we are targeting group reported EBITDA margin of [ 17% to 18% ] and free cash flow conversion at a targeted level of around 40%. We as shown in the bridge, we expect around 75% of the improvement in EBITDA margin from our full year '24 guidance level to our full year '25 ambition to be a result of our self-help actions. As end markets recover and growth normalizes over the next 2 to 3 years, we are well positioned and confident that we will deliver on our medium-term targets. We expect to realize the benefits of the Lucas Meyer Cosmetics acquisition, leverage our investments in China and take advantage of our well-filled innovation pipeline, offering sustainability solutions to our customers. With that, I now turn the call back over to you, Andreas.

[Andreas Schwarzwaelder, executive]

Thank you, Conrad, and thank you, Bill. Ladies and gentlemen, we will now take your questions. We would kindly ask that you please limit the number of questions to 2, thus providing more participants the opportunity to ask a question. Thank you for your understanding. We will now open the line for questions. Sandra, please go ahead.

[Operator]

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Jonathan Chung from Morgan Stanley.

[Ho Kan Chung, analyst]

I've got 2, please. The first one is on Care Chemicals. I'm wondering if you can quantify the volume dynamics in the Care Chemical portfolio? And what do you see in volumes across industrial versus personal care versus the [ icing and crop ]? And what do you see sequentially as we think about Q2? And my second question is around additive business. Your EBITDA was more than double Q-on-Q and your quote there is a positive operating leverage. Just wondering what was your planned utilization rate in Q4? And what was it in Q1?

[Andreas Schwarzwaelder, executive]

Jonathan, could you repeat the second part of your question because we didn't hear you clearly.

[Ho Kan Chung, analyst]

Yes, yes. So the second part of the question is additive business. EBITDA more than double Q-on-Q. What was the plant utilization rate in Q4 versus Q1?

[Conrad Keijzer, executive]

Yes. Sure. Okay. Yes. So first, on the various volume developments that we saw in Chemicals. So I think, first of all, if you look overall, our care chemical business volume-wise was up 2% from prior year. What we're seeing here, first across all these segments with the exception of crop is that destocking is really behind us. So basically, what you now see in our volumes is the underlying end-user demand. If you look a bit more specific by segments, we had very strong volume growth actually in our mining business.I will say this is not a reflection of overall mining, but we have actually engaged here clearly some share in particularly in Latin America, but we saw very, very good volumes in that segment. Then what we also saw good volumes is what we refer to as the industrial segment, but this is a little bit deceiving because in our base chemicals, we actually saw double-digit declines. What we report under the Industrial segment is, for example, paints and coatings. And arguably, if you look at the Deco Paints and Coatings, that is more a consumer segment. But here also, we saw, let's say, high single-digit growth. Finally, Personal and Home Care, we actually did see growth, low single-digit percent, but actually roughly 10% pickup from -- sequentially from Q4. So what we, therefore, sort of see in Care Chemicals is sequentially a further pickup as we're sort of going forward in the year, also because, obviously, the inclusion of the Lucas Meyer business. Then your question as it relates to the additives business, I think it's important to note that sequentially, we saw actually a pickup in our additive business year-on-year, we're still down. But keep in mind that we have here a very strong comparison this with the prior year. We also actually see that is very encouraging, particularly for our [ frame retargets ], normally, we don't break that out separately, but we saw actually a low double-digit pickup in that business as well on a basically sequential basis. So that is very encouraging as well. Finally, as far as the EBITDA margin uplift that we see in Additives, please note that we've done a lot here on the cost base. In the quarter, we also took a CHF 9 million restructuring provision, which will actually deliver us a CHF 5 million annual further cost improvement for this business.

[Operator]

The next question comes from Matthew Yates from Bank of America.

[Matthew Yates, analyst]

On your catalyst business, you note there was mid-60% growth in the Americas, which stands out. Can you say is that just the lumpiness of one big project? Or is there any kind of more enduring structural driver behind the catalyst performance in Americas?

[Conrad Keijzer, executive]

Yes. If you look at our catalyst business in North America, you mentioned it already, there is a certain project element to this business. We did have actually strong volume growth if you look at Syngas & Fuels. I will say, if you more broadly look at our Syngas business, we are extremely pleased with the performance of our catalysts in this specific segment, not just in the Americas, but we are clearly the preferred option right now for Syngas catalyst, particularly if you look at ammonia production, we have arguably the most selective and robust catalyst that is out there right now in the market.

[Matthew Yates, analyst]

So does that in any way change your expectation for the year? I think previously, while you continue to expect Catalysts to have a down year, any change to that thinking?

[Conrad Keijzer, executive]

Yes. So basically, what was baked into our guidance was actually a continued performance in Syngas, which we already saw starting last year. So the guide still for Catalysts is actually a mid-single-digit decline. We had in Q1, minus 2%. But if we look at the weakness in the order book, we still see this ending at a mid-single-digit decline for the year. Keep in mind, the second quarter last year was particularly strong in Catalysts as a comparison base.

[Operator]

The next question comes from Andrea Heine from Stifel.

[Andreas Heine, analyst]

Yes. Thank you give me the opportunity to ask 2 questions. The first is again on additives. If you look on the first quarter earnings, is there anything one should avoid extrapolating these earnings levels you were talking to some restocking, but not too much. In additives, you outlined that electronics should improve across the year. So that's the first question. And actually, adding to this in additives, are you done with restructuring? Or are there more costs coming in the coming quarters? And the last second one on the corporate line was a good outcome in the first quarter. Was there something unusual or do the cost savings you achieved impact that line as well?

[Conrad Keijzer, executive]

I'll let the last question for Bill, and I'll make some brief comments on additives again. So yes, in additives, I think there's a few things, Andreas, to keep in mind. So the first quarter, actually last year was still particularly strong in additives. So we are actually talking here about a very challenging year-on-year comparison. As mentioned, we saw a sequential pickup already in additives versus Q4. And we also are actually seeing some good traction with our new plant for additives for flame retardants in China. We started up this new plant in October. We're working ourselves through the various customer approvals that are necessary here, but you should actually sequentially see a buildup here in volumes in additives in the coming months that -- as far as costs in additives, more specifically, because we needed to adjust to the lower volumes we did actually implement Kurzarbeit, specifically in this business. Last year, we had literally 300 colleagues on Kurzarbeit. In Germany, what happens right now is we are unfortunately initiating restructuring because with also the new capacity onstream in China, we feel that we structurally will run at lower run rates at our Knapsack facility in Germany. Bill.

[Bill Collins, executive]

Yes. So corporate, the figures look a lot better than they did last year, mainly because of the impairment that we had to take on [indiscernible] last year. I guess, actually, the technical term would be that we had to take our 20% share of their losses into our P&L in Q1 of last year. We were basically consolidating that investment in equity, which required us to do that. That changed at the end of the first quarter to a financial investment, which is why you didn't see any further impact through the year. But year-on-year, it's simply because we had the CHF 11 million losses in our P&L Q1 last year, nothing this year.

[Andreas Heine, analyst]

So is the Q1 expense line, we see a good run rate for the year then?

[Bill Collins, executive]

From a Q1 standpoint, absolutely. I mean we've done a lot of work in the corporate functions and in the corporate activity centers as part of our new operating model, actually. So we've -- if you remember, we've basically taken all of the functions and redesign them to be top quartile in terms of cost performance. So we do expect to continue to see positive momentum on the cost front.

[Operator]

The next question comes from Thea Badaro from BNP Paribas.

[Thea Badaro, analyst]

Yes. One question on the Catalysts division, if I may. I'm conscious you normally have 6- to 9-month order book visibility in that division. Can you comment on your order book for the rest of the year to the extent that you can so far?

[Conrad Keijzer, executive]

Sorry, we again, I couldn't hear the first part of your question. Can you repeat it, please?

[Thea Badaro, analyst]

Yes, of course. I'm conscious you normally have 6- to 9-month order book visibility in that division. So I was just wondering to the extent that you can, can you comment on your order book for the rest of the year so far?

[Conrad Keijzer, executive]

Yes, sure. So on Catalysts, indeed, we typically have a sort of a 6-, 9-month lead time and for that period, indeed, the orders are in our books right now that we have baked into the [ guide ]. And we actually in terms of the order book, we don't see the strengthening yet. Clearly, the order book is down from prior year, but there's basically 2 reasons for that. First of all, last year, we had a record number of new build plants in that business. And secondly, we were running at relatively low operating rates, particularly in Europe, which means that the refill cycles are actually longer for that business. But yes, we've never disclosed the exact amount of the order book, but it is down from prior year, and that leads us to the guide of mid-single digits down actually versus prior year.

[Operator]

The next question comes from Chetan Udeshi from JPMorgan.

[Chetan Udeshi, analyst]

Conrad, you mentioned also, Bill, you both mentioned deflationary trends in raw material prices throughout your comments at the beginning. I'm just curious, what do you see right now in your P&L? Do you still see deflation? You've seen some inflation and how that sort of changes the equation, if you will, in the second quarter and the full year in terms of the, let's say, net pricing trend? And the other question I had was just in terms of the order book across your divisions. We've heard from a few companies talking about good start to the Q1, but then sort of things petering out or even moderating through Q1 in terms of order book. Is that something you have also seen? Or have you seen a bit more consistent, sticky order book across your businesses, especially in your in your Care Chemicals side of things?

[Conrad Keijzer, executive]

Yes. Thank you for these 2 questions. First, as far as the level of deflation that we're seeing right now in the P&L, looking at raw materials, year-on-year, we are down now 12% actually versus prior year Q1. But keep in mind that if you look at the development over the year, this number will ease, and actually, the gap will be smaller. But we're now comparing actually versus sort of peak levels Q1 last year, Q2 last year. We've seen this reduction in raw materials actually in our Care Chemical business, but also actually in the other businesses. So it's not only sort of ethylene, propylene and derivatives, but it's also -- if we look at our metals pricing for Catalysts. Energy, also an important still an important topic for us. Energy year-on-year down 22%. If you look more broadly, what is happening, let's say, right now in the period that we sort of talk about is that there is a sequential increase in some of the raw materials, particularly if you look at ethylene, propylene, we actually saw that up low single digits. So there's still quite a bit of volatility, let's say, in and around raw material likewise, with our freight costs. But all in all, we're very pleased with the development. If you look at our minus 5% on pricing overall, in local currency, compared that to the minus 12% on [ loss ]. Clearly, we've seen some margin expansion from it, and we will try to hold on as best as we can to that. Then your second question on how have the orders developed and how has the revenue developed during the quarter, and what do we see at the beginning of Q2. I also saw some peers reporting actually sort of a strong start of the year because of the sort of restocking after high -- or after low inventory levels at the end of the year and then actually business leveling off towards the end of the quarter. We're not seeing that in our businesses. So we actually, yes, had a good March. And also, if you look at the second quarter, we're actually quite pleased with the start of the second quarter, how it comes in, in terms of top line.

[Chetan Udeshi, analyst]

Can I follow up on your second quarter comments? So when you say a good start into Q2, -- given that in Care Chemicals, there is a seasonality because of the aviation business, but do you think the Lucas Meyer acquisition will mean the seasonality will not be seen in Q2? Or do you still expect Q2 performance in Care Chemicals to reflect that typical seasonality? And sort of one other question was you mentioned sort of your market share gains, at least I heard you mentioned some market share gains in your flame retardants business. Maybe can you talk a bit more about that? Is that versus any particular chemistry set, especially we hear some concerns on dominated flame retardant that business that is coming to you from brominated flame retardants?

[Conrad Keijzer, executive]

First, in terms of the start of the second quarter and more granularity on Care Chemicals. And your question is Lucas Meyer going to offset, let's say, for [ deicing ] chemicals for airplanes. This is actually always quite a significant impact, which is not recurring. So let's be clear about that. We saw both at the revenue line, but certainly also in from a margin impact, we saw a big contribution in Q1 from the deicing chemicals, which is not recurring. So Q2 will be somewhat weaker because it doesn't include that. As far as flame retardants, this is definitely long term what will happen that brominated flame retardants will be replaced by Halogen-free solutions. That's also the whole reason that we expanded our capacity here, including now our footprint in Asia. Keep in mind, this is not something that will happen tomorrow. So this is -- there are quite lengthy approval processes for some of these products, but we are working on it. And yes, we are expecting sequentially building through the year, a pickup in the flame retardant business, particularly in China.

[Operator]

The next question comes from Jaideep Pandya from On Field Research.

[Jaideep Pandya, analyst]

Your first question really on Lucas Meyer and your Personal Care business. if you put your personal care has been a difficult market. And I guess it's seeing some green shoots now. So how have you seen demand evolved in your business? And what is your take on Q1 for Lucas Meyer. And then just comparing the margin profile of the legacy Clariant versus Lucas Meyer, would you say that Lucas Meyer is significantly more profitable? Or would you say that your own business is sort of like maybe a few percentage points lower than Lucas Meyer? That's my first question. The second question is on Catalysts. Is there anything sort of to worry about the ethylene portfolio? Or was it just a year-on-year comp issue? And when you look at your Catalysts, out in the '25, at least what I can see is that quite a lot of new PDHs are popping up in China. So how is the order book looking for '25? I mean, should we see sort of margin improvement in '25 versus '24 in Catalysts? And the last question really is coming to sort of Chetan's point, we've seen on the price versus raw materials, a big push on the pricing side in the beginning of the year from the upstream side. And now raw materials have gone up on the downstream side. How do you -- how confident are you that you will be able to pass this raw material spike that we've seen in Q1 and upstream in your businesses in Q2 and Q3?

[Conrad Keijzer, executive]

Yes. So first, on Lucas Meyer and what we're seeing on the demand side as well as margins. Yes, last year, that business was down a little bit. That was primarily destocking is what we said at the time. And we're very pleased that we can confirm that. So if we look at the Q1 numbers for Lucas Meyer, they're actually very much in line with their historic performance, which is like a 10% CAGR and then high 40s in terms of the EBITDA margin. So we were very pleased with that. Comparing that to our own business, it's fair to say that the EBITDA margins in Lucas Meyer are substantially above ours. And that's not always because the products are so much different. It is really the way that they put these products into the market. So they really prove efficacy. They always have these clinical trials that indeed prove that certain active ingredients have a certain property and a certain mechanism. This is something we can learn from. This is one of the synergy elements that we've identified. Lucas Meyer came from a pharma background, and we're very pleased to learn from this. And in terms of the integration, the Lucas Meyer management firmly in place of their business, and we've actually brought several of the Clariant products that we feel really can benefit from the same business model under that roof to benefit from that synergy. Yes. Then your question on catalyst on ethylene, specifically on year-on-year comps and volatility, I think you mentioned it already yourself.That is actually there is an inherent volatility and ethylene actually has that even more than some of our other segments in catalyst because the refill cycles for ethylene are extremely long, which means that you have a very high dependency on the new build business there. And that's actually the reason that we see this significant reduction right now in the quarter because in terms of new build, this year will be weaker in terms of our outlook, you briefly touched on that for next year in terms of PDH and some of the other segments. Outlook for next year is much stronger. It is more so built on refill picking up next year than on new build picking up next year. But the outlook for Catalysts definitely for next year is very positive. Now final question you had on raw materials and what's going to happen here if and when raw materials creep up further. I think it's fair to say that it's right now not an easy environment to raise prices. But if that's necessary, we obviously are going to do that. I will say if raw materials indeed would pick up, that also would only happen if demand picks up in a serious way. And if and when that happens, we are actually very comfortable with the overall impact on our P&L given the improved operating leverage and the higher margins that basically we have achieved on a relative basis.

[Jaideep Pandya, analyst]

And if I can request one comment, which I made before we could have a bit more detail about your Personal Care business when you integrate Lucas, because I guess you will be as big as the #1 player [ quota ]. I know it's going to be difficult reporting-wise. But if you can give us a bit more color on growth and margins.

[Operator]

The last question comes from Konstantin Wiechert from Baader-Helvea .

[Konstantin Wiechert, analyst]

Gentlemen, First, I would maybe start with a follow-up on your Personal and Home Care. Given the double-digit growth that we have seen, for example, given [indiscernible] the first quarter, even though you said already that sequentially, you also had double-digit growth, low single-digit growth year-over-year seems a bit sluggish. So I'm wondering whether this is just not a great comparison or what else might be the reasons for that. So maybe some color on that would be helpful for me. And then maybe a question on the product that you've shown today, CycloRetin, if I see this correctly, this has pretty similar characteristics now to a typical Lucas Meyer product. So would you also expect similar margins on that product? Or is there anything missing? And if I may squeeze in the first one because you already mentioned [indiscernible], I think that [indiscernible] Germany, at least has announced [indiscernible] so the question is basically if you could shed some light on what impact you would expect from that on your remaining stake?

[Conrad Keijzer, executive]

Yes. I'll leave the last question on [indiscernible] to Bill, Konstantin. As far as Personal Care and Home Care. So I think yes, let me first repeat the numbers that you also mentioned yourself already. We were very pleased with the, let's say, low single-digit increase versus prior year and especially the, let's say, around 10% increase sequentially from Q4. Some of the [ payers ] that you mentioned are not entirely the right costs. So be aware when we speak about Personal Care and Home Care, there is a very sizable home care element in that business. And whereas personal care typically delivers higher growth rates, you're entirely correct about it, Homecare is a much more sort of a mature business, and it includes loan reformulations and cleaning products. So be aware that, that comp is not entirely correct there. Finally, to your point on Lucas Meyer, yes, we are very pleased, and this was actually our own team who came up here with a bio-based peptide, which was very well received at the cosmetics show in exhibition in Paris actually last week. So this is exactly the type of product that fits together with Lucas Meyer. And like I said earlier, it will be all sitting under one roof, and we're going to, yes, aggressively try to grow that business together. Bill on [indiscernible]?

[Bill Collins, executive]

So when it comes to Hub, you probably knew that we have a 20% equity stake in [indiscernible]. We actually fully wrote that equity stake off at the end of last year. So that write-down was already included in our 2023 figures. So the financial impact of an ongoing, I guess, in process bankruptcy [indiscernible] on us is actually quite limited now. We have a few million of open receivables, half of which were actually impaired in Q1. So it's really, really a tragic story what's happened. But from our perspective, we're, I think, well covered.

[Konstantin Wiechert, analyst]

Perfect. And maybe as I think there was the last one, maybe I may squeeze in another question. But I think where we talk about stakes, I think you still have a sizable [ unstructured ] stake. And I was wondering if you still plan on to divest this in the foreseeable future? And if yes, if you could cast some light on a potential time line there?

[Conrad Keijzer, executive]

Yes, we would not comment on individual M&A. So yes, at the moment, there is no active project running on this.

[Operator]

We have a follow-up question from Matthew Yates from Bank of America.

[Matthew Yates, analyst]

Just on agriculture. As you mentioned, that's one of the few businesses that is maybe still working through its destocking cycle. I know it's a very seasonal business. But is there any indications from what your customers are telling you that we may see some improvement during the course of this year? Or are we really going to have to wait until 2025 to see a turning point in the [ ag ] cycle?

[Conrad Keijzer, executive]

Yes. So if you look at agrochemicals, you saw the year-on-year number, I think, on some of the slides actually down more than 30%, which is pretty dramatic. I think what is important to realize is that sequentially, we were up actually in crop high single digits versus the last quarter. So there is some improvement. There's still an elevated inventory level, but we're expecting for the second half an improvement here. It is primarily destocking, but I will say also crop season in Latin America has been a bit weaker. So the conditions have not been as good as they were in the prior year.

[Andreas Schwarzwaelder, executive]

Okay. Thank you, ladies and gentlemen. This is Andreas speaking. This concludes then our -- today's conference call. A transcript of the call will be available on the Clariant website in due course. And obviously, the Investor Relations team is available for any further questions you may have. Once again, thank you for joining the call, and good afternoon.

[Operator]

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