AlzChem Group AG

XETRA:ACT

Earnings Call Analysis

AlzChem's Strong Growth in Specialty Chemicals Drives Financial Success

AlzChem reported a solid 4% sales growth, reaching EUR 415 million in the first nine months of 2024, with Specialty Chemicals driving this success, contributing 62% of total sales. EBITDA surged 36% to EUR 78 million, while net profit rose 66% to EUR 39 million, enhancing earnings per share to EUR 3.83. The company anticipates 2024 EBITDA exceeding EUR 100 million, supported by a margin above 17.5%. A significant investment for expanding Nitroguanidine production, partially funded by grants, underscores strategic growth plans. Despite anticipated sales near EUR 550 million, the outlook remains positive for continued growth in specialty products.

Strong Financial Growth in Specialty Chemicals

AlzChem Group AG demonstrated a notable performance in the third quarter of 2024, highlighted by a 4% increase in total sales across the first nine months, reaching EUR 415 million. In Q3 alone, sales surged by almost 7% compared to the previous year. The key driver of this growth was the Specialty Chemicals segment, which accounted for 62% of total sales, an increase from 57% in the prior year. This robust shift indicates a healthy demand for specialty products amidst modest price movements.

Margins and Earnings Surge

The company's EBITDA saw impressive growth, amounting to EUR 78 million in the first nine months, reflecting a 36% rise year-over-year. The EBITDA margin also improved, reaching approximately 18.5% for the nine-month period and around 19% for Q3. Increased margins were primarily driven by the higher-margin specialty chemicals business. Additionally, net earnings rose by an extraordinary 66% to nearly EUR 39 million, propelling earnings per share to EUR 3.83, an increase of EUR 1.52 compared to last year.

Stable Financial Position and Cash Flow

The balance sheet showed an increase in total assets by EUR 55 million to EUR 480 million, primarily due to improved cash flow and investments. The company reported strong cash flow from operations, totaling EUR 30 million in the period. Notably, AlzChem's strategy of maintaining stable working capital has allowed it to keep a positive cash position with EUR 40.6 million in cash, surpassing its bank debt.

Outlook and Guidance for 2024

Looking forward, AlzChem has confirmed its guidance for the full year, anticipating an EBITDA exceeding EUR 100 million and an EBITDA margin above 17.5%. The company expects to end the year with sales near the lower end of its guidance, projected to be around EUR 550 million, influenced by seasonal shifts in agricultural products. These targets signal a commitment to maintaining profitability despite potential challenges.

Strategic Investments in Growth

AlzChem is gearing up for substantial growth with the largest investment package in its history aimed at expanding capacities for Guanidine Salts and Nitroguanidine. The total projected capital expenditure is approximately EUR 140 million, with no additional debt required due to pre-agreed financing with clients. This strategic investment is expected to drive further growth, with commissioning of new facilities planned by mid-2026, positioning the company significantly in the specialty sector.

Shareholder Returns Through Buyback Program

In a move to enhance shareholder value, AlzChem announced a share buyback program aiming to repurchase 100,000 shares for EUR 6 million over 12 months, starting in December 2024. This program not only reinforces the company's commitment to returning value to shareholders but also potentially serves as a resource for future acquisitions or employee incentives. This strategy reflects a strong confidence in AlzChem's growth trajectory and the sustainability of its operations.

Resilience Amidst Industry Challenges

Despite some segments like Basics & Intermediates experiencing a revenue decline of about 10% due to competitive pricing pressures, AlzChem's proactive measures to avoid low-margin business have preserved overall profitability. The company remains optimistic about recovering demand as market conditions improve, particularly in the chemical sector in Europe, hinting at strategic maneuvers to capture value rather than volume.

Earnings Call Transcript 2024-Q3

[Operator]

Good morning, ladies and gentlemen, and a warm welcome to today's earnings call update AlzChem Group AG following the publication of the Q3 figures of 2024. I'm delighted to welcome the CEO, Andreas Niedermaier, CFO; and Dr. Georg Weichselbaumer; as well as CFO, Andreas Losle. So the gentlemen will speak in a moment and get us through the presentation and the results. So after the presentation, we will move over to our Q&A session in which you will be allowed to place your questions directly to the management. So having said this, Mr. Niedermaier. The stage is yours.

[Andreas Niedermaier, executive]

Yes. Thank you for your warm introduction, and good morning together. Thank you for joining us today, and welcome to our third quarter call. actually. As always, we will go through the presentation first and then be available for questions at the end. -- of the presentation. So let's give the first pages and go directly to the page. [indiscernible] to highlights.

There is a whole range of positive news to report this quarter for sure. So we are able to continue to set ourselves apart from the general downward trend in the chemical industry. So we have developed particularly strongly in the area of specialties. As a result, we were even able to grow revenue in the group as a whole increased EBITDA by 36% to EUR 76.8 million and, at the same time, increase the EBITDA margin to a very respectable 18.5% here. So in terms of the outlook, we assume that also we will achieve the sales at the lower end, we will perform in the earnings above EUR 1 million -- so EUR 100 million. So we will hear and have a more detailed financial analysis of the successful figures later from a colleague Andreas Losle. So this is only a short first summary year.

So what I personally was particularly pleased about was the inclusion in the SDAX. In recent years, we have worked very consistently to increase the liquidity of the share with the good performance of the figures and the inclusion in the SDAX, not only the share price has developed very positively, but also investor interest. For example, we are very well booked at roadshows and sometimes even so well that we cannot consider all interested parties, even though we have significantly increased our support capacity. So we would like to ask investors for their understanding and we are doing our best here. So the consistent work has also paid off in the area of ESG. Here, our company and not least, our ESG team were awarded the Platino metal for sustainable corporate management. This puts us in the top 1% of companies assessed by EcoVadis will wide. We have always taken ESG seriously and worked on it consistently. Now it will be up to us to maintain this high level and probably we will accept this challenge.

On the strategic development part, we have also achieved some in great Here, we have approved the largest investment package in the company's history for the further expansion of capacity of Guanidine Salts and Nitroguanidine and are already in the process of implementing it. And I can explain these to you in more details on the next pages.

For sure, you are already familiar with our bond model with the production family. Here, I would like to describe to you exactly where and when what take place and what a logic behind this. First step is already communicated expansion of Guanidine Salts capacities, which we have supplemented here with the expansion of Nitroguanidine capacities. In total, it is about a project in a CapEx of approximately EUR 140 million. Since the demand for Nitroguanidine as an application in 155-millimeter [indiscernible] can fluctuate greatly, we have agreed on a special capacity and financing model with our customers or are still in the process of doing so. The target is to have financed the entire CapEx sum together [indiscernible] and our customers with the completion and commissioning of [indiscernible] CapEx to such an extent that we do not need any additional debt financing here. All upfront payments well from customers or they are nonrepayable grants, this was particularly important for us as it allowed us to reduce the risk of the largest company CapEx very much in advance.

From mid-2026, we expect commissioning in the quarter and the sales forecast assumes additional growth in sales in the other double-digit million range with correspondingly significant positive earnings contributions in the Specialties segment. This is, for sure, the first step that we are implementing in Germany. However, there is also a second step planned for the USA. To this end, an undefinitized contract action has been concluded with the U.S. Department of Defense, which will extend over the next 2 years in the first joint project step. If a suitable production site is found during this period, the U.S. Department of Defense has already pledged an investment grant of EUR 150 million for the construction of a new Nitroguanidine production plant in the U.S. by the end of 2029, which will be operated by [ Eskom ] in addition to the facilities in Germany.

[indiscernible] under step 2, you can see this is as the beginning of a new production plant in the U.S.A. an internally formed project team will consistently drive forward the site search for locations and has already started with the project planning and preselection of locations. So the two projects under grants secured for them substantiate the importance that our defense products has become for industry and government agencies. So here on this page, you can see a summary of the two projects for Germany and the U.S.A. Both projects are prefinanced so that no additional debt should result on AlzChem's balance sheet from the CapEx after construction. However, we assume that we will need some interim financing as the payment dates for incoming and outgoing payments will not be harmonized. So these projects will make a significant contribution to the future growth of our specialty sectors and will transform the group more and more in a complete specialty group. So what else happens and how the other products of AlzChem have developed is analyzed here by my colleague, Dr. Georg Weichselbaumer, to whom I may also hand over the floor now. So the floor is now yours, please start.

[Georg Weichselbaumer, executive]

Thank you, Andreas. Let's start with Basics & Intermediates. This segment continued the first 9 months of the year with sales amounting to approximately EUR 132 million. Compared to the previous year's level, this represents a decline by EUR 15 million or approximately 10%. In general, it can be said that the situation within this segment has not changed materially since our last reporting date. As shown is in the detailed sales analysis, the decline in sales is due to both volume and price effects and was somewhat expected. Overall, the decrease in cost for energy and other essential raw materials has mainly led to a reduction in sales prices through embedded price adjustment clauses thereby passing on cost reductions to customers. Price reductions amounted to approximately 5% of the sales decline. The decline in sales was further impacted by targeted volume reductions in certain product areas where the volume development must be viewed differently by product area.

The guideline for the [indiscernible] year also applies stating that volume reductions are consciously accepted if the market does not allow for profitable pricing. This still applies to areas where we compete with Asian price dumping.

Let you have us also look at our business areas and start with a positive development. In terms of volume and sales, we saw a positive development within our fertile BFS business with our brand [indiscernible]. Due to a significant recovery in demand revenue was substantially increased despite only slightly reduced price levels. Our nitriles business is still undergoing a period of transition. The competition within this business is currently almost only price-driven and the expected customer prices is sometimes far away from our cost structure. We made first steps to move away from standard applications and concentrate on specialized applications in the digital sector to gain a significant competitive advantage over the low-cost competition from Asia. Sales within our metallurgical business were also below previous year's level as we do act with price escalation sources with most of our customers within this business. Apart from that, the general economic situation of European producers also caused volume declines.

Despite the mentioned decline in sales, EBITDA increased by EUR 0.5 million compared to the previous year and ended up at EUR 6.7 billion. The deliberate avoidance of low-margin business and price competition with Asian or Russian competitors has positively impacted the EBITDA margin, which rose from 4.2% in the previous year. to 5.1% in the current reporting period. This reflects the effectiveness of the consistent pricing strategy and a stabilized cost level compared to the previous year.

As mentioned several times, the products of our basics and intermedial segments are not only sold to the market, but a very important raw materials for our volume production steps and all raw materials required for the growth of specialty chemicals could be produced reliably. We will now have a look at the development within this segment. As already explained by Andreas, our Specialty Chemicals segment remains the growth driver of AlzChem and was again able to significantly increase all major performance criteria compared to the previous year's period. The revenue of the segment grew by EUR 31 million which represented an increase of 13% and ended up at approximately EUR 260 million.

While the main driver of this sales development was volume growth, prices could be slightly increased as well. Compared to the previous year, the volume increase contributed almost 11% to the sales increase in the first 9 months of 2024 and price increases added another 2%. Across the segment, most product areas were able to contribute to the growth on wide to varying degrees. The success story of the first half of the year continued, and we could grow materially within the area of dietary supplements with our products, Creapure and Creavitalis with animal production nutrition without product Creamino and within the defense sector with our product, Nitroguanidine. As already mentioned at our previous quarterly calls, we can still benefit from the investment in our creatine capacities commissioned at the end of 2022.

After the initial smooth rent-up phase in 2023, we could produce and sell our products throughout the first 9 months of 2024 at high quantities, which contributed to the growth. The next investment is on its way and will support our growth with existing and new applications for creatine within the next years. My colleague, Andreas Niedermaier has already explained our current and future growth investments into our nitrogen business. Meanwhile, our suppliers of fitment into the defense sector are on a constantly high level. Creamino also developed positively despite a highly competitive pricing environment, significant volume and thus revenue growth was achieved. Also, the pharmaceutical sector with BioSelect and the automotive sector with DYHARD confirmed the positive sales trend. Within the automotive industry, we saw an increased trend from steel to lightweight construction where our DYHARD products are used and deliver high quality.

The customer manufacturing business of our multipurpose plants is still confronted with a challenging economic surrounding. This business is clearly linked to the economics of the chemical industry in Germany and Europe and was impacted by a sales decline solely resulting from volume effects. We see this business as a chance and do believe to be back on the growth path if the chemical industry in Europe recovers. The positive sales development was accompanied by a strong increase in EBITDA and EBITDA margin. EBITDA after 9 months in 2024 reached EUR 67 million, which represents an increase of EUR 18 million or 36% compared to last year. Together with EBITDA with our segment Specialty Chemicals, the EBITDA margin also developed very positively. This also led to a significant increase in our EBITDA margin to 26% compared to 21.7% in the previous year. Thus, the growth trends in the Specialty Chemicals segment continues in the third quarter of 2024, which is also reflected in the EBITDA margin. In summary, we can say that we are mostly satisfied with the development within this growth segment.

Let us now move on to our third segment, [ AlzChem holding ]. The revenue in this segment was slightly above the previous year and reached EUR 24 million. This development essentially corresponds to passing on cost increases to the chemical product customers. The service is utilized by the chemistry of [indiscernible] park customers of AlzChem were predominantly of a variable nature and represented energy supply, technical service and network operations. The segment's result was slightly above the previous year's figure, which was associated with the increase in revenue for grid fees of the CapEx in our grid network last year. That was all for our detailed view on the segment development.

Let's now hand over to Andreas Losle and take a look at the overall group figures.

[Andreas Losle, executive]

Also good morning from my side, and thank you, George, for the insights in our segment development within the first 9 months of the year. As always, I will start with a detailed look at our group P&L figures first. In terms of sales, we continued our growth story and ended up with a sales increase of 4% and reported group sales of EUR 415 million for the 9 months period. Only looking at Q3 itself, we could report an increase of almost 7% compared to last year. As already seen throughout the year and mentioned from my colleague, the sales shifted again more and more to the segment Specialty Chemicals, which proved to be our growth segment. The sales portion of our Specialty Chemicals segment was 62% of total sales and this relationship amounted to only 57% within the comparative period and shows the current revenue trend into specialty products.

My colleagues already explained the reasons for this development. If we look closer at our sales analysis, it can be seen that we had a strong volume growth of 5% over the whole group, while price effects did not have so much impact on the group sales development. Price declines were mostly linked to price escalation clauses within our commodity business in basic and intermediate segment and usually do not impact our results as they only pass through the cost development.

On a regional basis and compared to the previous period, the revenue shift into our Specialty Chemicals segment also led to higher revenues in Asia and South America, while sales in all other regions are mostly stable. Our EBITDA development could also continue the trend as seen with in the first half of the year as we generated more sales within the higher-margin business of Specialty Chemicals, we could also increase our group-wide EBITDA enormously.

Within the first 9 months of the year, we earned almost EUR 78 million EBITDA, and this represents a strong increase of 36% or EUR 20 million. Just as a reminder for you, in 2023, we ended up with approximately EUR 81 million EBITDA for the whole year. Our cost structure remains stable, and most of our production plants are running on a very decent utilization rate, which helps to keep efficiency high. As we do more and more price escalation clauses within our segment, basic and intermediates slightly lower cost for energy and raw materials usually just passed through to our customers.

In line with our EBITDA growth, we could also materially improve our EBITDA margin which reached 18.5% in the first 9 months and approximately 19% within the 3 months ended of the third quarter of 2024. Bottom line, we also managed to increase our net results, which amounted to approximately EUR 39 million after 9 months in '24, representing a strong increase of 66% compared to last year. Our good EBITDA figures contributed the most part of this development, but it was also supported by reduced financing costs and material increases in finance income.

As a consequence, we increased our earnings per share to EUR 3.83 per share, which represents an increase of EUR 1.52 per share compared to last year. That was the big picture of our P&L.

Now let's move on to our balance sheet. After 9 months in 2024, we see an increase in our total assets by EUR 55 million to EUR 480 million which was mainly driven by our good cash development and increased investments, and I will now explain this in more detail. If you look at noncurrent assets, we can see an increase in fixed assets as we invested more again and the decline in deferred tax assets, driven by changes in interest rates used for the calculation of noncurrent provisions. We can report an increase of approximately EUR 50 million in our current assets as well, impacted mostly by the favorable development of our cash balances. While reported cash balances have increased by EUR 29 million, you can also see an increase in other current assets. Here, we invested excess cash of approximately EUR 12 million in the fixed interest period over more than 3 months and accounting rules require the amount to be shown in other assets instead of cash balance. Our working capital remained stable.

Again, we see a positive development within our equity and equity ratio. Equity amounted to EUR 193 million, which represents an increase of approximately EUR 30 million since last reporting date, which also led to an increase in the equity ratio to 40% by the end of September 2024. As long-term interest rates have increased, our reported pension obligation was reduced by this valuation effect within the first 6 months of 2024, we paid out approximately EUR 1.7 million as pension payments to retired employees. Our noncurrent liabilities increased mainly because of the ASP grant from the European Union. The amounts which already have been paid to us have to be shown in other liabilities until the amounts are really invested. Again, all loan repayments have been paid on schedule. That's it for the balance sheet analysis, and let's now have some words about our cash flow.

As mentioned already, we are very satisfied with our strong and healthy cash development throughout the year. Our very good result in combination with a very close look at our working capital management led to an operating cash flow of which represents an increase of EUR 30 million compared to last year's period. Investments are higher than last year when we followed the cautious investment policy, within the first 9 months of '24, we invested EUR 26 million already. Major amounts were spent for the completion of our photovoltaic park here in Trosper, the extension of our creatine capacity and infrastructure measures.

Furthermore, we already made initial payments into our growth project, Nitroguanidine in Germany, and we do expect additional amounts until the end of the year, mainly for down payments. Our financing cash flow was mainly impacted by our dividend payment of EUR 12.2 million and scheduled repayment of loan bank loans Again, we were neither required to use our short-term financing nor our factoring lines, but we could invest our excess liquidity for a short period and earned interest on that. In order to profit from better interest rates, we invested an amount of EUR 12 million over more than 3 months. And based on accounting guidance, this amount is not shown within our cash balance, but within other current assets.

Taking this into account, the cash balance of EUR 40.6 million within our balance sheet as of September 30 is even higher when we had the EUR 12 million are included, and this brings us to the positive net debt position in which we do have more cash than bank debt. As you can see, AlzChem is in a very stable and healthy cash situation and thus is prepared for further growth investments.

As we have now discussed in the past, let's have a final outlook on the remaining 3 months of the year. I start with a few last words on our guidance. First of all, as Andreas has already said, we can confirm our guidance as published within our half year reporting in July 24. However, based on the current developments within our basic and intermediate segment, especially within the seat steel industry, we do expect our sales to be on the lower end of our guidance, most probably at an amount of approximately EUR 550 million. In addition, there can be some shifts to the next year depending on the seasonal business within our agricultural products.

As the revenue in our Specialty Chemicals segment is pretty much in line with our expectations. We can confirm our EBITDA guidance and do expect an EBITDA of more than EUR 100 million for 2024. And as already communicated with the linear development of our half year results. Accordingly, the same applies to the expected EBITDA margin, which we expect on a level of more than 17.5%. All other performance measures are also in line with our expectations.

At the end of this presentation, I'd like to add some words about our recent publication on the share-backed buyback program. We decided to start a share buyback program with a goal to buy back 100,000 treasury shares via the stock exchange and we are willing to spend EUR 6 million over a period of 12 months to complete the buyback program. The program is about to start at the beginning of December 2024. The buyback is primarily for the purpose of using the acquired shares as acquisition currency or issuing them to employees of our company as we already did 1 year ago. However, other legally permissible purposes are not excluded. And this brings me to the end of our short presentation about the news in Q3 2024. At this point, I actually would like to thank you for your appreciated attention, and we are now at your disposal for possible questions.

[Operator]

Thank you so much for your presentation and congratulations on the results. So we will now move on with our Q&A session. [Operator Instructions]. So we first receive questions from Konstantin Wiechert. So you can speak now. .

[Konstantin Hammerschmidt, analyst]

Yes. from congratulations to the good quarter. A couple of questions, if I may. Maybe starting with 1 on the politics here. Looking at the turbulence that we've seen in the German government, it seems, again, highly uncertain which expenses the government can finance and which might have to be cut out. I understand that, obviously, it only happened yesterday evening, but maybe if you could add any context on what you think a failure to pass on budget plan for '25 could mean for your CO2 compensation that you received from the German government, which I think has been around EUR 10.7 million in 2022.

Then the second question would be a bit more on your Creamino, if I've seen correctly, I think Evonik Animal Nutrition said they grew about 3% and this year so far and seem to have gained market share on that growth as well. You point towards a [ helices mangadu ] in the German version of your 9-month statement. So I would appreciate if you could give some more color on what that means in terms of numbers and whether you have any particular market segment that's outperforming or what's driving this stronger performance in comparison to the overall market.

And if I may squeeze in another one. now that you are basically in the fourth quarter, mid of the fourth quarter almost already, do you have any visibility on how your neighbors such as beer are looking at the pricing of your infrastructure services given the good profitability you show in the holding segment this year. Do you expect any pressure for next year? Or is that kind of that we should maybe assume a similar profitability in the others on boarding for next year? Any color on that?

[Andreas Niedermaier, executive]

Yes, thank you, Konstantin, for your questions. So may I start with the answer of the question about the German government and the expenses. So from our point of view, there is already a stability behind that. I do not expect any surprises about the CO2 compensation. So from my point of view, that should be financed through the funds, they already reserved for that. And from that point of view, I do not see any problems to our side. .

So then about Creamino, I would hand over to George.

[Georg Weichselbaumer, executive]

I think on Creamino, we need to point out what the market looks like. [indiscernible] skin develops the market and Evonik follows. So our development is associated with developing new customers and new applications. And then when the market is developed onsets in with pricing I do not know whether they have the numbers from with regard to gaining market share, then the [indiscernible]. And the third question, Konstantin was -- with regard to our, let's say, sales power in our other and holding business, as we mentioned in the presentation, in AlzChem Holding, it's not only our customer service to our chemical customers, it's also passing on or charge of green fees for our electricity network, which we charge not only to our chemical business partners. And -- but also to other third parties for our electricity network. So the major increase of this year, as we mentioned, is increased fees compared to last year, which were based on higher CapEx we made in the last year. And so automatically, the group fees for this year are higher at the grid fees for the next year will be calculated together with our authorities by the end of the year. So we do not see any concerns from our chemical business partners here as this increase relates to another issue.

[Konstantin Hammerschmidt, analyst]

Perfect. And if I just may follow up again on the Creamino. Is there any way you could share sort of what is megawatt means in terms of numbers? .

[Andreas Niedermaier, executive]

So [indiscernible] usually, we try to avoid to give too much information on the basis of that, as you know, there are only, let's say, one competitor around, which is a German company ahead of a Chinese company. And from that point of view, we are not willing to give more sense about that.

[Operator]

We will move on with the questions from [indiscernible] Murta. .

[Duarte Liquito Murta, analyst]

First, congratulations on another very strong quarter. I have a couple of questions. Firstly, President Trump has made strong comments with regards to implementing tariffs? How do you see this possibly affecting demand for the AlzChem products in the U.S. And his possible tariff policy actually accelerate your need to invest in a U.S. plant making it perhaps worth playing a bit of a higher price to secure market share. Yes, that will be the first question.

[Andreas Losle, executive]

Okay. And as you can imagine, we kind of expect the discussion First of all, we have to say that in the very small niche markets we are operating in. We do not compete with U.S.-based production companies. And so there's actually no need or we don't see any need to protect any any companies in the U.S. because they are not our competitors. And the second step, as you probably know, most competitors coming from China, and giving the relationship between U.S. and Europe and U.S. and the Chinese and what we heard in the past, we can imagine. We do not know, but we can't imagine the tariffs for our Chinese competitors, which would be much higher than the tariffs, which would apply to our goods. And the next thing is if our goods are sold on the U.S. market, and there is no competitor in the U.S. who could profit from this tariff. That's what only increase the prices in the U.S. for the end customers. And we do not think that this all happen, but it may happen, but we don't see a threat here.

[Andreas Niedermaier, executive]

And let me add some additional things. So I think the tariffs on the Chinese would be even higher than on the German and from that point of view, it could be more on margins than a disadvantage. So coming back to the production plant in the U.S. from my point of view, there is an undefinitized contract behind, and that contract is already closed. The EUR 150 million are reserved for us, that grant is there. And from that point of view, I don't see any danger for that. I think more that the Americans want us to come over to the U.S. and to build up that plant. .

[Duarte Liquito Murta, analyst]

Yes. I agree. I also think that's what they want to with the entire tariff policy. That's why I ask if there was perhaps a bit of urgency with the results of the election. A final one from my side. Regarding your policy on return to shareholders. you announced a EUR 6 million buyback. And this just seems a bit odd as free float and liquidity are already quite small. So could you just give me some guidance just some light on the choice to pursue buyback instead of either increasing dividend or issuing even a special dividend and buybacks the way to go going forward whenever you want to -- when if you have extra performance, you want to get that to shareholders. Thank you. .

[Andreas Losle, executive]

First of all, yes, we have agreed on the buyback program, but the intention for the vibrant program, as you know, we are -- as a Andreas Niedermaier said, we have already started the site selection process. And we do believe it could be a good thing to have some acquisition pricing power on our balance sheet and that in some kind of deals, a certain number of treasury shares could help to have some kind of acquisition price here, and maybe we can spend the treasury shares for an acquisition process.

And on the second step, we had last year we distributed some treasury shares to our employees, which was a very successful program. We have very satisfied employees here, which we are able to receive the stocks by, let's say, 1 year ago. and you can see the stock price increase since then. And we do think it could be a good idea to set up a program like this again. And that's most [indiscernible] reasons both -- the reason why you set up the [indiscernible].

[Andreas Niedermaier, executive]

And to answer one additional thing. We don't think that we want to take that shares out of the market completely. So that [indiscernible] will come back to the market very quick. So we don't plan to have the shares on a long term on our balance.

[Operator]

So we will move on with the questions from a personal who is alling by a phone over the ending 553, [Operator Instructions].

[Peter-Thilo Hasler, analyst]

Yes. This me, Peter Hasler. Thanks for having me in the line for questions. I would like to know if you could if there could be an impact of the Trump election on your M&A search activities. And if there are, maybe you could explain them? And second question is you mentioned that the price of energy further raw materials decline that had an impact on inventory. So not so on profitability due to the price collection closes. But I remember that you said that you expect the inventory to reach the peak level in the third quarter. And since we have had this situation in the third quarter now with this decline in the prices, do you -- is this still what you expect that inventories will go down in the fourth quarter or that could remain on the same level. And the first question, if I may, what's the current days with Creapure regarding the increase of production capacity.

[Andreas Niedermaier, executive]

Yes. Thank you for your questions. [indiscernible] Andreas answering here. You asked about the impact of the Trump election. So with regard to the M&A topic. So to be honest, that's actually to really to elaborate on that. But I don't really say that will be difficult in the future to purchase a company in the gas. So we have several M&A topics and several M&A topics on the table, we can evaluate actually. And from that point of view, I don't think so that they will keep out the German purchasing US companies. So they invited us more than doing that than avoiding that. So from that point of view, I don't think that there will be a negative effect on that.

So prices hinge inventory level, I hand over that to Andreas.

[Andreas Losle, executive]

Yes. Your question was related to the development of the inventory by the end of the year, I guess. And as we pointed out, in the first quarter, we had we have assumed to be on the inventory peak by the middle of the year and Q3, and that's what actually happened. For the end of the year, we see a slightly probably slightly decreasing of inventory level, but mainly be stable on the level right now, but we do not expect any increases.

[Andreas Niedermaier, executive]

And then the last question with regard to the pure production capacities. So we are in the middle of that process. Actually, we have enough capacity to fulfill all the demand -- on the market demand actually. So please put in a purchase order and then -- and the next projection will be on stream and when the market need that capacity. Excellent. I did that already last week from that point of view.

[Operator]

So before we move on to the questions from [indiscernible], [Operator Instructions].

[Unknown Analyst]

Okay. I'd like to begin with respect, I want to address to you for the year long way that led you to these numbers. And now some questions -- three questions on your U.S. business and your Nitroguanidine business. First, on the revenue side. how much additional revenue are you expecting not only for your European expansion in nitrogen titin but also for your U.S. business? Second question is on the margin side. In the specialty segment, your EBITDA margin is 26% at the moment in this year. Is this a good guess also for this additional Nitroguanidine business? And the third question is on the future. You talked about first joint projects that in the U.S., how would a second or a third joint process step in the U.S. look alike.

[Georg Weichselbaumer, executive]

Let's start through the final question. I mean we have signed, as Andreas mentioned, a contract with the U.S. company, which consists of several steps. The first step is to jointly find and we will look for it, but it needs to be approved by the U.S. government for the production site for Nitroguanidine, which is the first step and then in the second step, AlzChem will build Nitroguanidine plant, which then would be commissioned and operational, and that's the steps which are out of the program. .

[Unknown Analyst]

So we are not talking about additional revenues out of this U.S. investment?

[Andreas Niedermaier, executive]

For sure, we are talking about additional revenues. So as we already reported, we think that we are on a lower third digital million range of additional turnover for the European plant. And for the U.S. plant, that could be more or less the same. But let's see -- so that's far away from today's point of view. And let's see what demand we are faced with. So -- but in principle, it could be more or less the same as for the European additional plan. .

[Unknown Analyst]

And [indiscernible], .

[Andreas Niedermaier, executive]

Okay. Yes. You asked the margin question. As already pointed out for the Creamino question today, we do not publish quantities or amounts on certain products that -- you mentioned the 26% average EBITDA margin within the Specialty Chemicals. The margin itself, the average margin itself is a good prediction for the future. But for sure, we can have in this profit center, some products below 26% and also above to 26%. But please note and that we do not publish any EBITDA margin on product level, especially if we have so less competitors in this area.

[Operator]

So then we just come back to Konstantin as he has some further questions. .

[Konstantin Hammerschmidt, analyst]

If time allows, I would have a follow-up on the Creapure and I want to ask a bit on two ways, I think, first of all, you said that you have enough capacity currently to serve all your customers. which I think is sort of a slightly different wording than compared to the past because there have been, if I remember correctly [indiscernible] where you had been in allocation mode and could not serve every customer. Looking again, sorry to bring again Evonik on the field here. But they pointed towards that especially the cateogenic amino acids are performing particularly weak. And as far as I understand, these are important immuno assets for the fitness consumers. So taking this and your comment on Creapure, is there then you view any sort of weakening or softening in demand for -- from the global fitness industry? Any color on that would be great. .

[Andreas Niedermaier, executive]

So let me begin with cytogenic amino acids and give you some impressions about my U.S. driven. So I need a chance last week to join the trade fair of dietary supplements in Las Vegas. And I'd tell you, there has been a end-of-term. But what was very interesting is that there are many customers available they are taking Creamino, Creatine and Creapure, at least. And the promoting Creapure. So there is always a fluctuation on the market demand for sure. But I think there is no direct connection to [indiscernible] amino acids, actually, I don't see that. So from the capacity, I think I hand over to George because he is the guy he fils on the capacity.

[Georg Weichselbaumer, executive]

Yes. I mean we were internally could outrun the others in terms of demand and production and for quite some time. We were actually, as you said, on allocation, but those pipes are over, we have invested into capacity and we can fully supply the market is still growing, and that's the reason why we decided to invest again into clear team capacities. I need to say because creatine is not just Creapure, but it is also Creavitalis, our new product, where we're also making good progress. Yes. And we have a very detailed plan how to grow that business, and that's the reason for the next step of the capacities. And we think that the next step of capacities is needed next year and then we can grow for [indiscernible].

[Operator]

So with the look into empty check box, and there are no further vital hands. It seems everything is discussed. So we will come to the end of today's earnings call. So from my side before I hand back to Mr. Niedermaier may have for some final remarks, just let me thank you. It was a pleasure to be a host for you today. I wish you all a lovely our remaining week. So Mr. Niedermaier, last words belong to you.

[Andreas Niedermaier, executive]

Thank you very much for all the questions and the discussion here. We can now offer as always you the opportunity to visit us again virtually or in person at the conferences, as shown here on that slide, Otherwise, we will be back with the year-end reporting on February 28. Thank you for your support. Stay safe in tone and stay in our good presses and goodbye, until then.