Evonik Industries AG

XETRA:EVK

Earnings Call Transcript 2020-Q2

[Operator]

Thank you all for standing by, ladies and gentlemen, and welcome to today's Evonik Q2 2020 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the call over to your speaker, Mr. Tim Lange, Head of Investor Relations. Thank you.

[Tim Lange, Head of Investor Relations]

Thank you very much, and good morning from our side to our Q2 call. With me, as usual, are Christian Kullmann, our CEO; and Ute Wolf, CFO. And I will hand over directly to Christian for the opening remarks.

[Christian Kullmann, CEO & Chairman of the Executive Board]

Thanks a lot, Tim, and also very warm welcome from my side, and thanks for being with us today. I hope you're all in good health and successfully managing all the challenges the current situation is, demanding from us and personal and in business lines. I'm sure you had hundreds of virtual meetings, and calls during the last month and are now been used to today's format. So having said this, let's get right started and away with it.The highlights of the quarter. All in all, we have been managing the crisis successfully so far. The second quarter was the first and hopefully last quarter with the full corona impact. Back in May, it was hard to predict how things would turn out, but we tried to give you as much guidance as possible. Today, I can say we have again delivered on what we promised and even come out better than expected in the second quarter.While Performance Materials was hit hard, our growth segments have held up quite well during the crisis. But to be clear on this, the performance in the second quarter is not a result of emergency measures of panic-fueled cost savings. It is a result of all the changes we have implemented over the last year. We strengthened our portfolio and executed our efficiency programs early enough, so we were well prepared to address the challenges of the crisis. We did not have to cut too deep into our organization. Our teams could focus on managing the crisis and keeping our operations and supply chains up and running.Nevertheless, it was and still is a huge task to be solved, and we had to find quick and pragmatic solutions. And this is something we will carry forward, best practices and solution-oriented approaches to make this organization even better, to make it faster and more efficient in the future.Now a quick update on our crisis management. The health and safety of our employees remained our top priority. We stick to our global pandemic plans and carefully decide where a gradual easing is possible. Operationally, we've proven that we are a reliable partner for our customers even in these difficult times. We are able to deliver at all times throughout the crisis.Our liquidity remains very strong. We paid the first tranche of our dividend in early June, and we refinanced the bond maturing in 2021 with sufficient foresight.But despite all the short-term crisis management, we have not lost sight of the long term. By administering the right doses of crisis management, we'll master the current situation and emerge even stronger.With regard to costs, we did our homework early during the second half of 2019 and with a long-term view. So we are benefiting now from what we implemented well ahead of the crisis: CapEx reduction, the salary freeze for the nontariff employees, the reduced sponsoring for Huber diamond, just to name a few, and the ongoing execution of our SG&A program anyway.On the other hand, we have contributed to implement structural changes that will fuel our growth out of the crisis. Our new divisional structure is effective since 1st of July, and we have reorganized our research and development activities. In the new research, development and innovation function, we are pooling our expertise and technologies and creating a company-wide research, development and innovation unit. This makes it easier for us to share our knowledge, leverage synergies and develop new attractive market.With that, over to you, Ute, for the financial perspective on the quarter.

[Ute Wolf, CFO & Member of Executive Board]

Thank you, Christian, and welcome from me as well. Let's start with a top-down view on business performance in the first half.Our portfolio transformation is bearing fruit, and this comes -- becomes more visible in the current pandemic crisis. Our growth segments have demonstrated resilience. Profit margins were broadly stable and above 20%. Nutrition & Care has even grown earnings in the first 6 months. In Resource Efficiency area supplying the auto industry are clearly impacted by low demand, while other businesses are performing quite well. Some business were even contributing with higher earnings year-on-year. The latest acquisitions of Huber silica, the toothpaste, and PeroxyChem for hygienic solutions are further improving the portfolio quality with their stabilizing nature.In Performance Materials, the first half was heavily impacted by the lower naphtha price that declined steadily from March onwards. Not surprisingly, earnings dropped significantly compared to 2019. Or in other words, 2/3 of the drop in the earnings at group level are attributable to Performance Materials alone.The first half was also strong in terms of cash generation. Despite a EUR 180 million lower EBIT, free cash flow is up year-on-year by more than EUR 100 million. And so far, this is not driven by destocking on the net working capital side.In the first half, we focused on supply security to serve our customers properly. This came along with some inventory buildup for those safety reasons.Now since supply chains have been stabilizing generally, we can take a step forward. For the second half, we will manage our net working capital more actively and not from a pricing perspective only. On CapEx, we are sticking to our tight budget, which we already lowered before the crisis.To summarize, free cash flow benefited from the high cash awareness and strict cost management from the lower bonus payments compared to last year and from tax reimbursements relating to other periods.A deeper look into the segments shows that Resource Efficiency experienced the expected corona impact, especially driven by lower volumes from the auto industry. High-performance polymers and silica for tires were hit most strongly, but the sustainable margin level above 20% demonstrates portfolio resilience, pricing power and high cost awareness. These characteristics also lead to stable to slightly higher earnings in areas such like Crosslinkers, Active Oxygens and Catalysts. Additionally, the oral care and Specialty applications in Silica demonstrated good resilience. Nutrition & Care delivered year-on-year as well as quarter-on-quarter higher earnings and a much improved margin. This is a strong signal while maneuvering through the crisis. The less-cyclical end markets as well as our structural efficiency measures in Care Solutions or Animal Nutrition are serving as a solid basis. As one can expect, the PU foam from Additives for auto and white goods suffered from lower demand and Baby Care is on the anticipated lower level compared to last year. However, this was more than compensated by the positive development in Animal Nutrition and the resilience and care businesses.Care Solutions recovered nicely after a weaker start into the year, especially in Asia. Health care continued to deliver earnings growth also in the second quarter. Performance Materials suffered from the drastic oil price decline and their formula prices based on naphtha. In combination with lower demand for tire rubber and fuel additives, this led to the sharp earnings decline.With that, back to Christian.

[Christian Kullmann, CEO & Chairman of the Executive Board]

Thanks a lot, Ute. For the year 2020, we confirm our EBITDA outlook range from EUR 1.7 billion to EUR 2.1 billion. Based on the solid second quarter numbers and the outlook for the remaining 2 quarters, our expectations and assumptions for the year remain largely unchanged. So the middle of the range at EUR 1.9 billion remains well underpinned.In terms of quarterly phasing, the second quarter was a tough quarter, although in the end, somewhat better than initially expected. The recovery path from here might be somewhat longer stretched, but we have laid a very solid foundation in the first half of this year.The resilience in many of our businesses, as proven in the first half, will continue into the second half. We're seeing a slow recovery in the auto and white goods businesses, and also Performance Materials is slowly improving from the low levels. Our structural efficiency measures will continue to give support. And by applying best practices and learnings from the crisis, we will make our organization even more efficient in the future. So overall, in a still challenging environment, there is a fair chance to generate sequentially higher earnings in the third quarter.As you know, from third quarter onwards, we'll start to report in our new divisional structure. That means higher transparency for you, but unfortunately, comes at the cost of having to rebuild your models. To make life a little bit easier, we have provided you with the quarterly financials as well as guidance in the divisional structure. And ladies and gentlemen, we are happy to discuss the trends by division in the quarter and answer session (sic) [ in the question-and-answer session ].But before that, maybe last but not least, a word on our upgraded free cash flow outlook for the full year. We have delivered strong cash flow in the first 6 months. And for the second half of the year, Ute already explained our approach to working capital. After supply security in the first half, we'll now manage our net working capital more actively. Additionally, our unchanged cost and CapEx discipline will provide good support. Based on this, we now see the cash conversion rate at least on prior year's level. From the midpoint of our EBITDA guidance range, this gives you a free cash flow of around EUR 650 million, maybe with some further upside potential.Thanks a lot for your attention so far.

[Tim Lange, Head of Investor Relations]

Hello. We would be ready for the Q&A session.

[Operator]

[Operator Instructions] First question is from the line of Mr. Charlie Webb from Morgan Stanley.

[Charles L. Webb, Equity Analyst]

Brilliant. I have a couple of questions, please. So first off, you kind of alluded to it that you might provide some more color. But just around Q3, clearly, you helped us ahead of Q2 kind of guiding around EUR 400 million as we think about Q3, perhaps you can give us some sense of the kind of volume run rate you're seeing kind of through July, how you think that sequential recovery looks like relative to what you delivered in Q2, just we can get a better sense on that and maybe some additional details kind of through the divisions of how that varies.And then second question, just on the cash flow, obviously, citing improvements in net working capital in the second half. Maybe you can just help us with the various pillars to how much working capital do you think you can release in the second half, I guess, normally seasonally, but also kind of pulling the strings a little bit tighter that you didn't maybe do in the first half, just understanding what kind of magnitude that working capital release will be as we look in the second half and just a reminder to us any changes on CapEx guidance or any more you can do there or whether as it looks like it can broadly be in line with your expectations before this, but just double checking on that, would be great.

[Christian Kullmann, CEO & Chairman of the Executive Board]

Okay. Thanks a lot for the question. I will take the first one about the monthly patterns throughout the second quarter and something about start into the third quarter, and then I will hand over to Ute. She will give you a precise picture about the next question. So let's get right started.Talking about the performance in the second quarter, it was that we've not seen huge differences in sales and volumes throughout the single months of the quarter. As you know, the April was the first month with clearly lower volumes year-on-year, whereas May volumes were down a little bit further. But on June, we have seen some volume recovery. So maybe in a nutshell, the overall of the second quarter was something like a mixed picture. Many businesses have shown pretty good stability throughout the whole quarter, for example, like health and care, our additives for agro, for example, the Smart Materials for hygiene, Personal Care and our environmental applications, too.And yes, some businesses have seen in June something like volume pickup. For example, the PU foams for our coating additives, too. On the other side, the automotive-related business, here, we have seen similarly low volumes throughout the whole quarter. That holds true, for example, for high-performance polymers and the tire silica.If we look now ahead into June, we will see some further recovery, for example, in our auto and white-goods-related businesses, which is pretty nice. Additionally, I guess it is just to -- it is too early to call this something like a broad-based and quick recovery straight back to the pre-crisis levels. But nevertheless, there is a further recovery what we see.Now maybe look into the third quarter, yes, we'll see further resilience, of course, in our -- as described and mentioned, stable businesses and maybe steady -- looks like a little bit longer stretched recovery in the -- as given to you, more impacted businesses. I guess that is maybe as a starter for you, and now I hand over to Ute.

[Ute Wolf, CFO & Member of Executive Board]

Yes. Christian, thank you very much. I'll give you some more details on the divisions and the new structure, starting with Specialty Additives. So what we have in there, additives for agrochemicals, packaging and textiles. Here, we see an ongoing robust development. And that's, I think, a fair assumption as well for Q3 and Q4. We have some additives for composites, for instance, for wind energy solutions in China. So here, we see ongoing healthy trends. We also can expect a certain recovery for coating additives and PU foam additives, which has been first visible, some signs visible in the -- at the end of Q2, basically driven by the Chinese market. Auto and mobility related activities might have seen some improvement in June, but I think they will also remain on subdued levels for Q3 and potentially also Q4, depending how the auto industry picks up. So in general, Specialty Additives will see another solid third quarter with attractive margin levels. And I see -- I think, from the timing, a slightly delayed recovery phasing more towards the end of Q3 as they are later in the cycle, positioned with their -- or later on the value chain with the positioning of that product.Nutrition & Care, I think that's maybe the most visible one these days, unchanged positive performance in our Health & Care businesses. Care Solutions assets stabilized in Q2, recovery in Asia here, especially after a weaker start in Q1, rhymes off and disinfectants very strong positive development. In active ingredients, health care, they have had a strong pipeline over the years, so I think that continues. Here and there, they have maybe a small tailwind from the actual situation, but it's really more driven by the new projects the business has acquired and won in the last years. So from that point of view, Q2 was already well above Q1. And of course, we see further sequential upside for the next quarters. But again, that's more a function of the pipeline than a function of the overall economy.Animal Nutrition, very strong first half, especially on the volume side. For Q3, we expect a calmer quarter, both in terms of volume and prices, so volume growth still very intact for the full year, but prices subsequently -- excuse me, lower volumes in Q3 as we had the strong volume development in the first half.Smart Materials, we see ongoing resilience in organics, disinfectants here, especially Active Oxygens. Oral Care, as mentioned, they continue to benefit from the crisis. Silica for tires, here, we see some first signs of improvement. The polymers -- high-performance polymers, here, we have a more pronounced volume decline. White goods, here, we see some recovery. But in automotive, very slow signs of improvement, so here it remains to be seen how that will develop in Q3 and Q4. On an individual basis, we had a maintenance shutdown in Q2 in high-performance polymers that is now finished. That will, of course, not reoccur in Q3. So overall, in that division, sequential recovery in Q3 is a fair assumption.Performance Materials, the situation remains really challenging. And we see very, very little signs of recovery. We have seen gradually increasing naphtha prices. This is beneficial for the C4 business. So within Q2, things have become a little bit better here. But on the sales side, butadiene remains challenging. Demand for MTB is somewhat improving, so we have more driven miles that helps. We have an unplanned maintenance in the C4 chain. That will affect a little bit Q3 with a single-digit million amount. Baby Care, which also now then belongs to Performance Materials, low volume and price environment that will persist throughout the year, so on low levels. I think they are doing the best they can, but not much improvement to be expected in the second half. So overall, PM, within the next quarters, sequentially higher earnings. But overall, of course, very low levels.For our free cash flow, you asked about the net working capital. We had an inventory buildup of more than EUR 100 million in the first half. So I think that's the main task, to drive that down again and bring inventory levels now to more normalized amount or basis. And that is a very strong driver for the free cash flow. Of course, taxes will normalize, but we all have that here in our forecast. If you take an isolated view, that's the inventory management on the other side. Lower costs also helps the cash flow. Lower payout for restructuring, that are all qualitative elements, which help the cash flow generation, but they have been in our forecast all the time and are now as well in our forecast.

[Charles L. Webb, Equity Analyst]

Well, and then just one quick follow-up on the quarterly -- on the guidance you gave there in terms of the segments. When you say sequential recovery, should we be taking that off the base of kind of 475, so the number, excluding the turnaround in the polyamide business, excluding the kind of higher environmental provisions? Are we seeing a sequential improvement on that 475 or we're seeing a sequential improvement on the 455? Just to be clear.

[Ute Wolf, CFO & Member of Executive Board]

Yes. I think, as we have an unplanned maintenance, NPM on the group level, I think maybe there is not a big network effect. But if you just take high-performance polymers on an isolated basis, then I would say, if you take out the maintenance, maybe there is a small improvement, of course, with the maintenance as the bigger one.

[Operator]

The next question is from the line of Gunther Zechmann from Bernstein.

[Gunther Zechmann, Research Analyst]

Christian, Ute and Tim, it's on raw materials, please. You mentioned earlier that you haven't seen a significant benefit from lower raw material costs yet. So can you give some guidance, please, on when you expect that and how much? And if you could, please also split that out, what you see on the cost of goods sold. And then with regards to working capital, what benefit we might see on inventories over the next year?

[Ute Wolf, CFO & Member of Executive Board]

Yes. Thank you for the question. So I think the effects are different within the different divisions. Of course, in Performance Materials, on an isolated basis, we have much lower raw material costs. But on the other side, of course, that's more or less one-to-one translates into lower selling prices, plus we had the distortions in the respective markets. So overall, the effect from the oil price drop was negative in Performance Materials, clearly negative. Nutrition & Care and Resource Efficiency, where they have oil-based raw materials, there is some positive effect, but it does not really -- it's not the biggest driver for the margin development overall. For the growth segment, it's a slightly positive effect for Performance Materials. It was a clear distortion for Q2. In the coming quarter, we see a slight increase for some of the materials for acetone, propylene or even methanol. If we look at the inorganics, here, we expect a more flattish environment. So overall, the risk from raw material prices are limited and should be limited. But again, if you take it division by division, of course, the effects can be very, very different.If you look at the net working capital, of course, lower raw material prices, on one hand, lead to lower value of inventories. On the other hand, you have a lower amount of payables. So that is then also a negative effect. So I think, more or less, that compensates, to a certain extent, this effect then in the cash flow statement.

[Operator]

Our next question is from Matthew Yates from Bank of America.

[Matthew John Peter Yates]

Just a couple of questions, maybe direct to Ute. Just the first one is on foreign exchange. You said your guidance is based on 1.10 euro/dollar. And that's slightly down from what it was prior, whilst, obviously, the spot rates are moving up towards 1.20. So kind of a -- is the FX budgeting not kind of mark-to-market each quarter? Or is it protected by some sort of hedges you have in place?The second question is around the pension, where you've taken the discount rate down a bit sequentially. I was just curious that BSF are using 1.1 for their discount rate and you're at 1.4. Can you just remind me how the discount rate is set? Does it depend on the composition of your pension scheme? Or do you have some discretion there?

[Ute Wolf, CFO & Member of Executive Board]

Yes. Thank you for the question. FX, we have a rolling hedging scheme 15 months ahead. So this year is hedged for a longer time. You are right. The 1.10 in our document seems a little bit outdated, but dollar really has moved within the last days. So we cannot really change that on a daily basis. We have some formalities to go through here. So if the dollar jumps around like this, our files cannot reflect every daily movement. But overall, FX is hedged 15 months rolling forward. So when we do the budget for the next year and when we give the outlook to the market, that rate is well known and fixed. Of course, there is a small amount still open, but that does not move the needle for the whole group too much.Pension discount rate depends very heavily on the duration and the tenor of the underlying pension promises. And as we have a relatively long duration, normally, that's the main explanation for higher rates, for higher discount rates, compared to other companies.

[Operator]

Our next question is from Andreas Heine from MainFirst Bank.

[Andreas Heine, Managing Director]

On your comments on Animal Nutrition, with the normalization in volume, so volume indeed was very strong in the first half. Do we have to think about falling volumes or just lower growth? If you could specify on that.Specialty Additives, yes, sales were down double digit, and the margin was even slightly up. Is that a mix effect or raw material effect? Or how do we think about this? If it is a mix effect, then is that something where we can be even more hopeful on?

[Tim Lange, Head of Investor Relations]

Sorry, for that we have Chris?

[Andreas Heine, Managing Director]

Sorry. On the Capital Market Day, my understanding is that there is little upside on Specialty Additives margin. Maybe you can clarify this.

[Christian Kullmann, CEO & Chairman of the Executive Board]

Thanks a lot for the question. I'll take the first one about methionine. Generally, in the first half of the year, we have seen strong volumes, well above the long-term average. And we do expect a normalization of those volumes during the third quarter before we see the usual, and that is what we do definitely expect, we'd -- before we will see the usual seasonal pickup of demand in the fourth quarter. I guess this was about your first question. And then I hand over to Ute.

[Ute Wolf, CFO & Member of Executive Board]

Yes. The margin in Specialty Additives, of course, the raw materials helped a little bit for that is an influential sector. Then we have the ongoing cost-efficiency programs. They also help the margin there. Going forward, it will also be a function of mix here and there. We have mix effects. If we look at coating additives, they had quite a good development in Q2. So there is a mix of effects, which kept the margin at these good levels and also give some margin potential for the future.

[Christian Kullmann, CEO & Chairman of the Executive Board]

Andreas, please forgive me. It is not because of intimating the answer of the price development about methionine, I've just forgotten. Please forgive me. So talking about the price side, we do believe that we are pretty well covered for the third quarter already. And it's fair to assume that the average contracted price levels will be more or less the same as on the second quarter.

[Operator]

The next question would be from Mubasher Chaudhry.

[Mubasher Ahmed Chaudhry, Vice President]

I just had 2 quick ones, please. On the free cash flow, I think the 1Q guidance was for it to be -- for the full year 2020 free cash flow to be higher than 2019. And based on your quick numbers, you said it's about EUR 650 million of free cash flow for 2020. So I just wanted to check whether that guidance as of 1Q is still relevant or not.And then the second question is related to that. With the strong cash generation and the better-than-expected performance that you've seen in the business, could we expect Evonik to execute on bolt-ons within 2020? Or are you remaining cautious and favoring balance sheet strength at the moment?

[Ute Wolf, CFO & Member of Executive Board]

Could you repeat the second question because the line somehow swallowed it.

[Mubasher Ahmed Chaudhry, Vice President]

It's okay. Sorry. The second question is around the strong cash generation of the business. And given the resilient performance, could we expect Evonik to execute on bolt-ons within 2020?

[Ute Wolf, CFO & Member of Executive Board]

Bolt-ons, yes. Bolt-on was the word that was swallowed. Okay. Yes. Cash con, we said now we will have the cash conversion rate minimum of last year. So that's the guidance. Of course, that then applies to the EBITDA amount from that point of view. Of course, that does not automatically mean that free cash flow this year is higher than last year. I don't know if I got that question correct, but that's how it sounded to me. Then on the development of the portfolio, we had use of cash or application of capital, allocation of capital. We have always said, of course, organic growth is an important part for the development of the group, but also bolt-on acquisitions. Of course, in a crisis scenario, it is somewhat more difficult to really get the right view on operating performance of potential targets, find the right valuation levels and so on and so forth. So we will, of course, look at such opportunities very, very diligently like we did in the past.On the other side, of course, crisis also bears some chances, so it would also be not prudent or wise to exclude it fundamentally. But again, it's a question of analyzing the target, getting an adequate valuation, the strategic fit. And of course, in that moment of decision, to be sure we have the financing ready. But as of today, we have quite some reserve. We have cash on bank. And so from that point of view, there is room, both financially and strategically, but it really has to make sense and it has to be also prudent against the background of the economic development we are in.

[Mubasher Ahmed Chaudhry, Vice President]

Just coming back to the first one, sorry. My question is more around the guidance that was provided for the full year 2020 at the 1Q results, which state that the 2020 free cash flow is expected to be higher than 2019. So I was just wondering whether that's still relevant.

[Ute Wolf, CFO & Member of Executive Board]

We have always focused on cash conversion. So I'm not sure if really higher it wasn't at that, but we'll look at -- we can look it up, but what was always meant, cash conversion at least at 30%, and now we changed that to at least last year's level in cash conversion rate.

[Operator]

Our next question is from the line of Chetan Udeshi from JPMorgan.

[Chetan Udeshi, Research Analyst]

A couple of questions. From memory, I remember in Q4 last year, you had roughly EUR 40 million of licensing income in the Resource Efficiency business. I mean what is the outlook for licensing contribution in second half of this year? If you can give us some color there, that would be useful.And second question was just a clarification on the Performance Materials numbers in second quarter. The price decline of 20% seems much lower than the declines we've seen in prices for butadiene and MTBE. So can you maybe help us understand the difference there in terms of dynamics between the -- some of the product pricing versus Evonik's due to pricing in Performance Materials.

[Christian Kullmann, CEO & Chairman of the Executive Board]

Okay. I take the first one about the licenses. As of today, we do not expect to sell a license from -- during this year. But with an expected recovery of the economy during the next year, there might be a good chance to sell some licensees and to have one as the economy will recover next year. So in a nutshell, we do not expect it for this year, but there is a good chance to have one next year.

[Ute Wolf, CFO & Member of Executive Board]

Yes. And on the volumes in PM, I think we had especially a volume drop in butadiene. I think that was the most prominent one. MTBE volumes have recovered in the course of Q2. Also in summer, of course, there is a higher content of MTBE. And also, the plasticizers developed relatively well. So one butadiene remained relatively solid throughout the crisis, and maybe that explains the observation you mentioned.

[Operator]

Our next question is from the line of Michael Schäfer from Commerzbank.

[Michael Schäfer, Analyst]

You provided already with the new segment reporting. Looking into the second quarter, the segment, you reported EUR 168 million, i.e., EUR 50 million quarter-over-quarter increase in EBITDA compared to basically flattish sales for the segment. And this holds true for both Animal Nutrition and Health & Care. So I want to get better understanding basically what was the key driver basically for the quarter-over-quarter and what of this is sort of to expect it or heading into the second half as being sustainable? You already alluded on the pricing side and volumes slowing down, but the numbers to some -- potentially something else to push this one? This would be my first question.And the second is on the -- also related to the Health & Care segment. You reported on, let's say, stable and robust developments. But nevertheless, sales have been down 2% in the first half. So I wonder, if you can shed more light into the performance of the second half. Should we see those pipeline -- this pipeline you talked about in health basically to become more as a driver for the second half? Or how should we think about the performance of this subsegment basically looking into the second half?

[Ute Wolf, CFO & Member of Executive Board]

Yes. Michael, thank you for that new look on our segments. So I hope I can answer everything to your satisfaction. Sales in health care is maybe at least -- maybe not the only indicator to look at because they have their projects that they do and maybe the sales number, also volume development, might look not so great, but then the contribution margin and the profit might look very good. So from that point of view, I think there is some caution if you only look at sales in Health & Care. So as a general remark.Overall, of course, we had better pricing in Animal Nutrition. So that helps, of course, both sales and the earnings. We had -- if you compare to Q1, lower volumes as Q1 had a very strong volume growth, especially in Animal Nutrition. And also on license, we had some slightly higher prices or again, here, some lower volumes, and I think that's more or less the explanation to what you have seen there.

[Michael Schäfer, Analyst]

Okay. Can you elaborate on the cost side of things, so I have -- how much just this -- did this change basically from quarter-to-quarter? Was there any meaningful contribution and any relief there?

[Ute Wolf, CFO & Member of Executive Board]

Yes. We have ongoing cost-efficiency programs in Animal Nutrition. So on a continuous basis, they are executing their Adjust 2020 Program. So they have the second wave now.Care Solutions also started a severe program in looking at their product portfolio, looking at the product mix. So that also hurts the sales and the volume development in the first half, but helps in the overall profitability. So they are taking out costs quarter-by-quarter. That's an ongoing program that will go on. We described the program several times. And that's what they do, and there is no big push then in Q2 compared to other quarters. That is coming more or less on a continuous basis in the past and in the next couple of quarters as well.

[Operator]

Our next question is from Georgina Iwamoto from GS.

[Georgina Iwamoto, Associate]

It's actually, just -- it happens to be a bit of a follow-up to the previous question from Michael. I was wondering, has the full ramp-up of the Singapore plant in methionine been supporting profitability in Nutrition & Care? And now that you have experience of that plant being up and running at higher utilization rates, do you have confidence to consolidate the rest of your assets in methionine as volumes normalize?[Technical Difficulty]

[Tim Lange, Head of Investor Relations]

Operator the next question.

[Ute Wolf, CFO & Member of Executive Board]

One second. We have a little bit of a technical issue here.

[Christian Kullmann, CEO & Chairman of the Executive Board]

About your methionine question, as you know, we are the market leader. And as you know, we are really keen on in bettering our cost positions, taking any kind of measures, which we -- which are in our hands. And that is an ongoing process. And in the future, that is, therefore, what you could expect that we will further extend our cost leadership and therefore step to ideas of optimizing our global production footprint. And we see and see to it that is key that we have to optimize supply, that we have to improve our fixed costs here and that we will have an higher plant utilization. And the backbone of our methionine capacities in the long run will be our 3 global world-scale hubs. And I guess that is what I -- and how I could comment on this as of today.

[Operator]

Our next question is from Thomas Swoboda from Societe Generale.

[Thomas Swoboda, Research Analyst]

Sorry, I have just 1 question left, and it is on growth CapEx. Concern this opinion seems to be that the demand recovery from the auto sector will be very long-lasting. And my question is regarding your growth projects, for example, PA12, do you see any need to trim this timing-wise? Is there a need to postpone some of the CapEx growth projects to -- as a response to the COVID-19 crisis?

[Ute Wolf, CFO & Member of Executive Board]

Yes, Thomas, thank you very much for the question. Generally, all projects that are in construction, it makes also financially more sense to really finish them, to complete them. Because if you just delay a project, normally, it gets much more expensive and then you have technical difficulties. So our PA12 project is fully on track and will be constructed and built in time. So that is no question.But of course, if you look further down the road, if growth is lower, and this year we have negative growth, of course, that determines then the need for new growth projects. This is something we will analyze. We are already analyzing, especially now in the second half. I think, towards the end of the year, we have maybe some better view on how really the pandemic crisis influences the overall economic growth patterns. And then we can decide what is then for the next year or even the next 2 years the right framework for growth CapEx, again, as we had volume declines in some of our business that leads capacity in the existing facilities, plus there is especially whether it's a better production. There are projects underway, how to utilize existing capacity better and smarter. So that all is taken as carried out and will then influence growth CapEx for the next year, over the next 2 years.

[Christian Kullmann, CEO & Chairman of the Executive Board]

So ladies and gentlemen, we've really enjoyed having had you during this call. I guess it is the proof that Evonik is going to stamp and steam through this crisis. Having said this, that closes today's call. And from the bottom of our heart, we wish you good health and take care and hope to hear or to see you soon. Goodbye.

[Operator]

Thank you. That concludes our call for today. You may all disconnect. Thank you all for participating.