Evonik Industries AG

XETRA:EVK

Earnings Call Analysis

Evonik Maneuvers Through Economic Turmoil

In the midst of a challenging economic climate, Evonik Industries AG has focused on cost discipline and cash generation, achieving significant free cash flow conversion. Despite weakened demand and lower earnings, their stringent net working capital management led to strong cash generation, with free cash flow conversion anticipated around 40%. Evonik is realizing initial savings in 2023 and is on track to reach a EUR 200 million target by 2025. They are positioned to close the year with earnings near EUR 1.7 billion.

Navigating Troubled Waters with Tenacity and Strategy

Evonik's latest earnings call paints the picture of a company steering through economic uncertainty with a firm hand on cost discipline and cash generation, key ingredients in its recipe for resilience in a tough market. Despite a gloomy global economy and flagging demand, Evonik displays the tenacity of a seasoned sailor, invoking Joseph P. Kennedy's adage about toughness in adverse times. They've adopted a pragmatic focus on these essentials to navigate a challenging chemical industry landscape.

Embarking on Cost-Cutting and Restructuring Voyages

As it braves the economic storm, Evonik is not only tightening its belt with near-term cost-cutting measures but also plotting a course for long-term structural change. Under the command of Christian Kullmann and Maike Schuh, the company is reorganizing its Animal Nutrition business, aiming for EUR 200 million in savings by 2025. Alongside, they're realigning infrastructure activities and administration, driven by the philosophy of leaner, faster, and more flexible support for their operating units. These changes point to a future where reduced complexity and cost will empower growth and efficiency.

Financial Fortitude in Face of Falling Demand

Evonik's Q3 shows their ability to pull strong cash flow despite earnings pressure, achieving a robust free cash flow conversion around 40% at year-end sales. They cite their thriving polyamide 12 business, a positive turn in their Animal Nutrition segment, and effective contingency measures as key factors underpinning this result. Though their specialty additives and smart materials segments feel the heat of intense competition and wavering volumes, strict capital management and ongoing contingency plans demonstrate resilience and preparation for 2023.

Navigating Competitive Seas with Sharp Focus on Investments

In the face of stiff competition, particularly from Asian exporters, Evonik isn't just bracing for impact but actively maneuvering to maintain its market position. By insisting on a disciplined investment strategy with a CapEx focus of EUR 850 million, they aim to bolster their capacity for growth. Despite a dip to EUR 75 million guided investment for 2023, they emphasize the importance of this prudent spend, particularly in next-generation technology, signifying their commitment to innovation as a means to differentiate and compete.

The Balancing Act: Price Pressures and Supply Tightness

The company is sighted on troubled waters with increasing caution from customers and price negotiations gaining intensity amidst falling raw material costs. Despite the rough seas, they express confidence in their EBITDA outlook, close to EUR 1.7 billion for the year. Plus, they're keeping an even keel thanks to a robust contingency plan and special considerations like a major upcoming maintenance shutdown in Singapore for Nutrition & Care. Here too, the interplay of strategic preparation and dynamic response helps Evonik maintain its course.

Dynamic Duo: Cost Measures and Raw Material Winds

Evonik presents a dual strategy to counter volatility: aggressive cost measures and flexibility in the face of raw material shifts. They are candid about the pressures from Asian competition across their product lines and openly discuss strategies such as temporary plant shutdowns and work hour reductions to adapt. Furthermore, there's a clear confidence that unique value offerings like their crosslinkers, essential for green technologies, will secure their market position in the long term despite the current trends towards commoditization in some product areas.

Preparing for a Better, More Profitable Future

Christian Kullmann's reflections on Evonik's upcoming administrative restructuring reveal a clear goal: to emerge from the current challenges as a leaner and more agile entity. This proactive stance stands as a testament to Evonik's forward-thinking approach, where executive communication strategies are aligned with stakeholder expectations. The transparent narrative serves to keep investors in the loop and the internal teams on their toes, rallying the organization around a vision of sustainable improvement and growth.

Earnings Call Transcript 2023-Q3

[Operator]

Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining the Q3 2023 Earnings Conference Call of Evonik Industries AG. [Operator Instructions] I would now like to turn the conference over to Tim Lange, Head of Investor Relations. Please go ahead, sir.

[Tim Lange, executive]

Thank you very much, and good morning to our quarterly earnings call. With me, as you do this morning are Maike Schuh, our CFO; and Christian Kuhllmann, our CEO. And I hand over directly to Christian for the short presentation, followed by the Q&A as usual.

[Christian Kullmann, executive]

Tim, thanks a lot, and welcome also from my side and thanks for being with us today. Ladies and gentlemen, the global economy and the situation in the chemical industry has not improved since our last call. Demand still remains weak and has even weakened further in some areas. But as Joseph P. Kennedy, the father of the Legend on John F Kennedy already said more than 100 years ago, when the going gets tough, the tough gets going. That is why we at Evonik reacted early and focused on what really counts now, first, cost discipline and second, cash generation. And our 3 -- our quarter -- our third quarter results, please forgive me, our third quarter results prove our progress in these 2 areas. I'm glad to have Maike at my side with a strong stake in this achievement. And with this, I will hand over to Maike.

[Maike Schuh, executive]

Thank you, Christian, and a warm welcome from me as well. In the last quarter, we said we are running now the company on cash and stepping up our efforts to achieve our contingency target for 2023. With a fair amount of pride in the entire organization, we have shown with Q3 that we walk the talk. With strict net working capital management, we achieved a strong cash generation despite significantly lower earnings. A free cash flow conversion of around 40% at year-end sales within. Our contingencies are also fully on track and are more and more supporting our earnings, and we will continue these measures into next year. Our colleagues in Animal Nutrition are also making good progress in reorganizating their business. We are seeing the first savings in 2023, and we have laid the foundation for the full EUR 200 million by 2025. These are our self-help measures for 2023, but we are also working on midterm structural measures to come out of this [ down ] as a better, faster and more profitable company. Christian will give you some more insights here.

[Christian Kullmann, executive]

Thanks a lot, Maike, and I couldn't agree more. Going forward, we will focus even more on what really differentiates us in our markets, our operating businesses and the innovative strength, customer proximity and sustainability. Therefore, we will realign our infrastructure activities and our administration over the next years. For them, there's only one question. How can this serve our operating units as lean, fast and flexible as possible. Both projects are complex. Nearly half of Evonik's workforce is working in these 2 areas. So the realignment will take some time, but the target is clear. I might even say crystal clear. In 2026, our admin functions will be significantly leaner will reduce complexity, stronger business focus and significantly lower admin costs also compared to previous programs in these specific areas. And in technology and infrastructure, we have bundled our technology and engineering know-how globally in a separate unit. In infrastructure, our 3 largest European locations in Marl, in Antwerp and in Wesseling will be set up as legally independent entities, offering each of them better financing options, independent of Evonik. For us at Evonik, this means that we'll have more CapEx availability for our growth businesses in future [ times and terms ]. At the same time, we are consistently investing to our future growth, sustainable solutions, our growth engine, and they have the potential to change markets. Our biosurfactants are a prime example of this. Our plant in Slovakia is now mechanically completed in time and in [ budget ]. Going forward, we will develop our biosurfactant platform and also enter into industrial markets such as coatings on top of personal and home care markets. Now Maike will give you more details about our financials.

[Maike Schuh, executive]

Yes. Thank you again. And we have increased our adjusted EBITDA sequentially to EUR 485 million. We achieved this in an environment of persistently weak demand. There are mainly 3 reasons for this. First, our polyamide 12 business, where we now and finally have both plants up and running. Second, the positive momentum in our Animal Nutrition business. And third, the successful implementation of our contingency measures, combined with supporting effects from bonus provisions. These effects are also visible in our margin, which keeps on improving from the [ trough ] level at the end of last year. [ Visible ] is also our continued delivery on free cash flow, EUR 469 million in the third quarter are a strong outcome. And in the first 9 months, we are now almost EUR 100 million better than in 2022 with almost EUR 800 million less earnings. This is the result of tightly managed CapEx and our joint efforts to significantly reduce net working capital. Let's move on to some brief details side. Specialty Additives continues to be exposed to an unprecedented weakness in demand. Volumes were even down further sequentially. This is from a combination of weak end customer demand, still destocking in some areas and Asian exports into Europe and the U.S. Pricing turned negative year-on-year in this difficult environment, but falling raw material costs provided some relief on the margin side. Nutrition & Care clearly improved by more than EUR 50 million versus Q2. This was mostly driven by Animal Nutrition. [ In refining ], average pricing was still down, but we have seen the turning point and we'll see constantly rising prices in Q4 and especially in Q1 next year. In addition, we have built up inventories in preparation for our expansion shutdown in Singapore in the fourth quarter. This had a EUR 20 million positive effect on adjusted EBITDA, which will be reported in Q4.Smart Materials is in a similar environment like Specialty Additives. Overall, the environment has rather weakened further than improved. However, we were able to increase our EBITDA sequentially because our PA12 production is finally running at full capacity after the maintenance in Q2. Additionally, we were able to achieve an improved performance in Active Oxygen, mainly lower variable costs. Performance materials again has content with the highest earnings decline year-on-year. Despite continued strong MTBE spreads, weak demand and further weakening margins in virtually all other products had a negative impact on earnings. So far on the operational performance of our business. Before I hand back to Christian for the outlook, another comment on below the line item in the adjustments. We have done a EUR 230 million impairment on Superabsorber. Ahead of the planned divestment, we have adjusted the book values of the asset to the new normal of a sustainably lower earnings environment in the superabsorbent's market. But now one last time back to you, Christian.

[Christian Kullmann, executive]

Thanks a lot , Maike. With the third quarter, we have taken a significant step towards achieving our targets for the full year. For the fourth quarter, we will see similar operational trends as in the third quarter. Specialty Additives and Performance Materials should end the year in line with the normal seasonality. Smart material seasonality will be slightly less pronounced due to further PA12 capacity ramp-up in the [ charge ] market, plus some improvements in our silica tire as well as hydrogen peroxides businesses. We see the positive market momentum in Animal Nutrition continuing. And price is improving further. But the fourth quarter earnings will be [ packed back ] by the negative effect from the shutdown in Singapore. For technology infrastructure and other, after the exceptional second and third quarter, the fourth quarter will be clearly negative again. I'm sure we will discuss the different businesses and effects in more detail in our Q&A session. All in all, ladies and gentlemen, we will finish the year close to EUR 1.7 billion. On free cash flow, we will not slow down the pace and deliver a strong finish in the fourth quarter. No doubt, our targets set in March to reach a cash conversion towards 40% is in this challenging environment, really ambitious. But as of today, this number is still very much doable. And we would even say that the cash conversion should finally come out around 40%. With that, thanks for your attention and interest so far. And now we are happy to take your questions.

[Tim Lange, executive]

Operator, we would be ready for the first question. I assume there is a question. Otherwise, we have some questions for you, but this is not the purpose of the call. [Break]

[Operator]

We will take the first question from Andreas Heine from Stifel.

[Andreas Heine, analyst]

Yes. I was prepared for the question, as I've already heard that I might be the first. I have 3, if I may, very short ones. You outlined the sequential trend you expect in Animal Nutrition. Usually health care is very strong in Q4. And then home – on Personal Care, I would like to know whether you think that the inventory destocking has here come to an end? That's the first one. The second one is on polyamide 12, where you are now ramping those plants. I would like to know whether you see intensified competition from peers, which are also ramping up their plants. And then the final one is on CapEx. You have now the second year 2022 and 2023, where your CapEx was considerably below what you have outlined earlier as a run rate of roughly EUR 950 million. Going forward to ‘24, ‘25. And do you think that you can keep the CapEx on this current level of EUR 850 million? Or will it go back to this EUR 950 million?

[Tim Lange, executive]

Thank you very much, Andreas. And sorry for the technical issues. I hope you could all follow the speech, and we are back online for the Q&A. Thanks for the 3 questions, Andreas. I suggest that Maike starts with the CapEx question. We then do the question on PA12 and competition and last question on Animal Nutrition and the development in Health & Care Solutions.

[Maike Schuh, executive]

All right. Let's do that. Now starting with CapEx. Andreas, you're absolutely right that we have been extremely diligent on -- in 2022, 2023 with our investments. And the efficient CapEx allocation is, of course, one of our absolute focus areas. In 2024, we will keep on a very, very strong focus on investments on defined investments. So going forward, we understand that the long-term sustainable CapEx level will be around EUR 850 million. However, I don't see that coming in 2024. Just to -- on a side note, even though you have not asked that, but this is of importance for us that the next-generation technology CapEx is still in our 2023 and also will be in our 2024 CapEx included, so we had initially guided for EUR 75 million in 2023. That has been, of course, a bit reduced, but it is for us important that we focus on this area as well.

[Christian Kullmann, executive]

Okay. Andreas, Christian here, I will provide you with the current news about PA12. Let's give [ you axis ] over the course of the last quarters, the high demand has exceeded the tight supply for sure. And as of today, there are no volumes from our competitors in a noticeable way coming into the market. There's still no kind of official announcement of a start-up of the new capacity from our colleagues from [indiscernible] in Singapore. And therefore, there are no new volumes of them visible. I guess, the material of our Chinese competitors, there is a tiny amount, a very small amount, which is coming in the market. We do have learned that it's somewhat like testing their qualities and if they will be able to stand the pace of the quality competition approach. First --second, the demand, I guess, you see the key question you've asked, the demand is still pretty good. But we have to realize that some customers have become a little bit more cautious, in particular, for example, thinking about dishwasher baskets. But on the other side, situation in the automotive area here, in particular in the so-called e-vehicle area is really pretty attractive still. So outlook for the next year, that depends on when and if our competitors will bring the capacities into the market. But for sure, we do see up to the end of this year, let me say, an attractive position because the tightness will remain. That is about PA12. And then there was... Okay. Sorry.

[Maike Schuh, executive]

And then I take over again regarding Healthcare & Care Solutions, Andreas. So health care, yes, we have this -- what we see is the usual year [ end ] quarter, call it, strongness in our next 3 months forecast. So we have the usual, let's say, hockey stick in the year. And with regard to Care Solutions, at last year's level in Q3 – [ Q2-Q3 ], sorry, there was actually quite an achievement, especially regarding access. And you're totally right that we have these. We, of course, see also in these 2 product lines, the low net working capital levels, but so far, we see that for 2023, we are on track.

[Operator]

The next question comes from Gunther Zechmann from Bernstein.

[Gunther Zechmann, analyst]

Christian, Maike here. Two questions, if I may. We're now in November. Could you please share how you see current trading into year-end? And as far as order book visibility is perhaps into January? And secondly, looking into next year, there's clearly a lot of self-help going on. Can you elaborate more on the announced extension of the contingencies, please? And how much overall contribution from this and the measures that you're taking in animal nutrition as well? Should we expect net in 2024?

[Tim Lange, executive]

Thank you for your questions, Gunther. I suggest that we start with the first one, looking into year-end. So what do we expect for the fourth quarter. Christian will start with that and probably also Maike has so much to say on that. And then we continue with your question on the contingencies and outlook into 2024.

[Christian Kullmann, executive]

Maybe the first message is the key message for our call today. And therefore, it is to say that we are really confident to deliver to come in respect of our EBITDA close to the EUR 1.7 billion. So it is to confirm our outlook here in this way. Now about current trading. You will remember, in August, we have adjusted our outlook, assuming no further recovery until year-end. And this kind of info we have shared with you this assumption is still proving right. So far, no demand recovery is visible and customers remain cautious. On the first few days of our last quarter of this year, they have really confirmed this kind of development. On the other side, raw material costs are falling, but price negotiations that goes without saying with our customers continue because of that a little bit tougher. And as usual, you are familiar with it. As usual, the fourth quarter EBITDA will stay a little bit below the level of the third quarter. Operationally -- sorry, operationally, we see similar trends in the fourth quarter like in the third quarter. For sure, our contingencies will continue to ramp up here. We are focused on this. But you should take in mind that also some special effects Maike has given to you already during a speech. Those special effects in the division and especially in the segment, Others, we have to consider too. By giving you this, I hand over to Maike, and she will provide you with some more details.

[Maike Schuh, executive]

Maybe starting with the divisions and then ending over or going over to your question regarding contingencies. So current trading Specialty Additives and Performance Materials, we will see the usual, let's call it, year-end seasonality for specialty additives, probably like roughly 20% PM up to 30%. We have in smart materials. We won't probably see this year in seasonality, not as [ pronounce ] usual because, as we mentioned before, we have the new PA12 capacities ramping up in a still – as Christian outlined is still tight markets. And we might also see some improvements from low levels, unfortunately, really low levels in silica in H202, mostly because of lower variable costs. Nutrition & Care, again, we've mentioned that before, ongoing positive momentum in methionine and also the -- as explained regarding health care and care solutions, the focus on Q4. So that's fine. However, Nutrition & Care underlying the negative effect from the expansion shutdown in Singapore Q4, we said that there was an effect of EUR 20 million in Q3. So this is obviously then negative for Q4. So that was an earnings shift from Q4 to Q3. [ T&I ] and others there. Actually, this is, of course, because we have so many employees there. The contingencies are really ramping up here. Q4 is typically the most negative quarter, and we will see that -- we will still see that in 2023. We have, on the one hand side, the year-end settlement for IT licensees for invoices communication. And we will have some negative onetime effect this year because you're probably aware of the situation. Argentina, we will have negative FX effect because of this high inflation of the Argentinian peso. We have some more onetime inflation compensation payout for workers, and we will also have a less negative bonus -- sorry, bonus effect in Q2 and Q3 -- Q2 and Q3. So basically, we expect a minus EUR 60 [ million ] negative EBITDA in T&I and others. And with that, I hand over to the [indiscernible] and Christian.

[Christian Kullmann, executive]

Thanks a lot, Maike. Gunther, let me be straight with you in respect of our cost saving, contingency measures and effects in 2024. Therefore, let's tackle 3 buckets…[Technical Difficulty] end of this year, here, we talk about gross effect of roughly give or take, EUR 40 million, half of savings. And so here, we talk about EUR 100 million should be reached by end of next year and the targeted full EUR 200 million we're going to reach, we're going to strive by end of 2025, which means we will see the full beauty of this restructuring program in 2026. Third bucket, Tailor Made. Here, we are striving to realize to create structural savings. That means we will provide you with the -- some updates, some details in first half of next year. But for sure, you will see first savings in 2024 already. And -- sorry, the complete realization of the savings program we will give to you in 2026. So one title, cost saving [indiscernible] will be extended. And one message we will stay very [ put here ] being keen on not on the way this – good kind of crisis in this respect.

[Operator]

The next question comes from Chetan Udeshi from JPMorgan.

[Chetan Udeshi, analyst]

I just wanted to confirm one thing that, I think, Maike, you said in your opening comments that you have a good visibility at least on Q1 in your Nutrition & Care business. Is that just because you see the current methionine price sustain into Q1? Or is it more a lag effect that you actually see the full benefit of the current prices more in Q1 just because of the lag in the contract structure. The second question, I was just looking at your margin in Smart Materials, the titer of that division suggests that this should be probably the highest margin business, smart materials, but it actually is a pretty low-margin business right now, 10%, 12% EBITDA margin. But what is happening in this business? Why the margins are so low. I mean just given when I look at your closest competitors, they all do somewhere close to 20%, if not higher margins in their special businesses. So what is going on with Evonik Smart Materials business at the moment?

[Tim Lange, executive]

Thank you, Chetan. Two questions. The first one, Smart Materials. Maike will answer and on the margin side and what we are currently seeing in the business. And the second one with visibility in Nutrition and Care and Nutrition into Q1. Christian will take over after that.

[Maike Schuh, executive]

Yes, why is Smart Materials or what was the margin development of Smart Materials? Yes, I mentioned before that what we see actually is that [ silica ] is really underperforming. So we are in -- we are operating in mature markets, silicones, non-tire rubber goods. They are mature. And actually, they also suffer from imports from Asia and also from low demand from specialty silica. So we see actually an increasing price pressure in these markets. Same [ times ] for the silanes, we are really operating in a very soft environment, very low net working capital in our client base, maybe some more destocking in some segments. Regarding catalysts, again, we have several Asian competitors that are putting pressure on prices to get the volumes out. We see that for several product groups, for example, the oil and fat catalyst for olefin polymerization catalysts. And the new business we have put in the Catalyst business, our Alkoxide business. That was really -- that suffered a bit in the last quarter because of Chinese competitors that we slotted the market, the biodiesel market with low prices. Last but not least, coating and adhesive resins. They also face in markets with strong price pressure, especially in Europe. And so if you look into Q4, maybe one last sentence, we see some recovery, especially in the tariffs. Overall, the order level now is slightly above prior year quarter, but we expect it to move on a little bit more, but pretty much no big movements here.

[Christian Kullmann, executive]

I take your second question, as Tim has already announced. Visibility. The visibility for [ our signing ] pricing for the first quarter is pretty good. Why is it? We are signing the contracts for the signing now. So here, we are in a position to have good insight and therefore, to give you some comments about on a very safe level. And that means, in other words, that the pricing in the [ fourth ] quarter will be up and that we will have a further step in the first quarter of the next year. So in other words, further price increases are implemented for the fourth quarter and for the first quarter to come. And I guess let's use answer to your question. So good visibility, plus the further price increases we have implemented in last -- in this quarter and fourth quarter, and we will do further in the first quarter of next year.

[Operator]

The next question comes from Thomas Swoboda from Societe Generale.

[Thomas Swoboda, analyst]

I have 2 questions, please. Firstly, on cash generation, congrats on how 2023 is shaping. My question is more towards '24, there will be less support from working capital most likely. So my question is, what are your thoughts on the conversion rate? Can you keep that up in '24? My second question is on RAG. I happen to notice that RAG reduced its stake by 3% to now 53%. I'm just wondering if you have any insights on the plans -- and regarding this stake, they have in Evonik, you can share with us.

[Tim Lange, executive]

Thomas, thank you for your 2 questions. Very interesting and happy to go into more detail. And I think the natural order is that Maike starts on free cash flow. And Christian does RAG, I think everything else will be [ a bit straight ]. Maike, go ahead.

[Maike Schuh, executive]

Thank you. Thomas, and thank you very much for your kind comments on the free cash flow. Basically, as I mentioned before, it's really an achievement of the whole company. And so well, we are now happy to proceed with that. And yes, you're totally right. It will be, of course, difficult to bring the cash conversion rates into the same magnitude in 2024. However, I mean, this is one of our targets, a cash cover rate of 40%. And this is absolutely clear that it will stay like this in 2024. So we have committed us to this cash conversion rate, and we will definitely focus again in 2024 on net working capital, and we will have -- I mentioned that also. And Andreas Heine asked, we will have a very strict discipline on investments. And with that, I hand over to Christian.

[Christian Kullmann, executive]

Thanks a lot, Maike. I guess it is fair to say that since [indiscernible] days, you're arguing and that is a market perception that there is a constant kind of overhang and placement risk by the RAG-Foundation. And ladies and gentlemen, [ you know what ] from the last placement, the last placement of RAG-Foundation was in January 2020. So it is, I guess, fair to say that serve them RAG foundation haven't reduced the stake, as you have mentioned, from 58% to 53% as of today. That was something that has happened more or less unrecognized by the market. Let's keep you like this from what we have understand what I have learned, it seems to be that they have mostly sold the stakes to other long-term investors. And by having said so, I dare saying it's a fair assumption that now it seems that this is the strategy of them to reduce their -- the main strategy as then to reduce their stakes by selling to long-term investors. So that is what I can share with you about what I -- what we think and believe what RAG-Foundation is having in mind about Evonik.

[Operator]

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

[Matthew Yates, analyst]

A few, please, if you don't mind. The first one, you mentioned the impairment of the Baby Care business. Could you just say what the absolute book value now stands at on the balance sheet for that business? Second question, Maike, you gave some really interesting comments around the competitive landscape for Smart Materials. I was wondering if you could do something similar for additives. I've never heard Evonik, be so outspoken in the past about Asian export competition. Is that something structural? And are there particular areas of the portfolio that look vulnerable? And then maybe, Christian, can you just help me understand, particularly referencing Slide 6, with the structural cost reduction measures that you're looking at. Obviously, there's no numbers that you're giving us today. What -- why did you need to or choose to talk about these measures today, if we're not in a position to quantify them until next year.

[Tim Lange, executive]

Thank you, Matthew. First 2 questions, obviously, go to Maike on the SAP remaining book value, superabsorbents book value and the environment that we are currently seeing in Specialty Additives and the third one and then to Christian on the savings program.

[Maike Schuh, executive]

All right. Then good morning, Matthew. And regarding superabsorbents, so if you look into our balance sheet, we have classified superabsorbent as asset held for sale. And so we have -- on the one hand side, we have -- sorry, but I have to go to details now EUR 262 million assets. And on the liability side, we show EUR 191 million [indiscernible] liabilities. And so if you take these numbers on the asset held for sale part, we end up with roughly EUR 70 million -- EUR 71 million to be precise, net asset value in our balance sheet. And so this answers your first question. And regarding to the competitive environment for Specialty Additives, we mentioned Asian exports for Smart Materials. And yes, this is also one case for Specialty Additives. The volumes were down. This has a couple of different answers to that. So on the one hand side, the [ weak ] end customer demand. We see that our customers run like we do, obviously, lower inventory levels compared to the past [ that counts ], especially for crosslinkers and [ performance ] additives. But actually, we also see Asian exports into Europe and into the U.S. So not -- maybe not as pronounced, but partly here as well. It is so -- it's more and more difficult to keep prices up in these different code environments. So we see a further margin pressure. We are reacting to that. So temporary shutdowns, we have short-term work at selected plants. I think we discussed that in Q2 already that we are looking into that. For example, crosslinkers in Germany and the silicon platform globally is our 2 plants that will count into this short-term work and the temporary shutdown. But basically, we'll also see some positives here. So the volumes in China are really slightly better year-over-year. The [ PU ] forms, the oil additives are even slightly above prior year because of the strong pricing and the contingencies are working here as well. So we see lower fixed costs. And with that, I hand over to your last question to Christian.

[Christian Kullmann, executive]

Mathew, let's keep it like this. If we do start program like Evonik Tailor Made, which is tackling, which is including the complete global administrational organization of Evonik Industries -- so in other words, if we do convey our ideas of the future structure of leaner and faster and quicker and more efficient administration organization of Evonik to the teams, to the respective executives. It means, in other words, that this kind of information will become immediately public, and you will get it and you will hear about it. So my understanding is to be a fair partner of my investors, to be a fair partner Europe, as well as of the analysts and therefore, to inform you what we do have in mind and how we strive to create a better future than presence is and here it means to tackle a greenfield approach to create a complete brand new administration organization for ionic industries following the land versus greenfield approach if that is what we are aiming for? That is our goal we want to make.Saying so, it's a program we will start first days of the coming year and to announce it to bring it to public means also to have the chance to inform you step-wise about the progresses we have made here. And if you would now consider that I'm going to create by doing so, by having chosen this kind of communication strategy by also creating some slight kind of pressure on my respective teams, Matthew, I would say that I couldn't agree more. So that's a fair and very open-minded answer to your question.

[Tim Lange, executive]

Okay. From what we understand, there's no further questions in the line. If that is…

[Christian Kullmann, executive]

One more.

[Tim Lange, executive]

So we have one more. Martin, please go ahead.

[Martin Roediger, analyst]

If I may, 3 ones. One is a follow-up question to Matthews's question about Specialty Additives. And I understand that you faced some rising competition by Chinese products lending in the U.S. and Europe. And correct me if I'm wrong, that is related to crosslinkers and coating additives. Are these previously specialty chemical products on the edge to become a commodity and in case your Western customers are satisfied with the quality of cheap Chinese products. Why should they switch back to the more expensive Evonik products. That is my first one. The second one is on the tax rate. Can you explain why it is massively below your guidance? And third one is in Nutrition & Care, the EUR 20 million earnings gain in preparation for the maintenance shutdown in Singapore in Q4, that EUR 20 million gain was booked in other operating income. Can you explain the accounting, please?

[Tim Lange, executive]

Okay. Martin, as we know you pretty specific questions. The second and the third one, Maike will take on the tax rate and on the accounting on the EUR 20 million, let's see if we have that or not, otherwise, we will follow up. And your first question on Specialty Additives will go to Christian. Maike, will start on the tax rate.

[Maike Schuh, executive]

Okay. Martin, I'm trying to bring here your excellent questions together. So starting with the tax rate, so the easy answer here is and basically, it is really true, I had some really phasing topics here. So we had some topics that [ we ] benefited to other periods. So maybe -- but giving you some more ideas is we had really a lower earnings level. And so altogether, we had so many specific effects other than the lower earnings level in Germany, especially with the high tax countries that we -- yes, we show the lower part here. So then the next one is regarding Nutrition & Care, the Nutrition & Care, the EUR 20 million EBITDA actually. It has shown in the EBITDA. And so because it's an inventory effect, we show it in the operating earnings. We will -- actually, we will follow up on that one because I would be highly surprised that if you see a usual stock out the stocking and the net working capital that we show it in a different line. So I think we have another [indiscernible] income that doesn't have anything to do with Nutrition & Care. And then the last no one goes to Christian.

[Christian Kullmann, executive]

Martin, good to hear you. I'll take the third question in respect to the future of our crosslinkers. And to keep it simple, we do strongly believe in the need and the chance to create a CO2 emission free global economy, which means, in other words, the only chance to get it done is it is not [ to set our ] ourselves, please believe in that, you know me. It is not to set ourselves, but the only chance to get it done is to make use of the crosslinker business of Evonik Industries and very few of our competitors because without our crosslinkers, no [indiscernible] would be able to work, whether it's the rotor blades, won't be able to stay at the pace of the first wind. In other words, here in this respect, we are really confident that in future times and terms, we will be able to even enhance – to even enhance our volumes, and we will benefit from this global economical approach for sure. And that is why I'm really not afraid about our Asian competitors, by the way, I do [ honor ] very much.

[Tim Lange, executive]

Thank you, Martin. And I think now we are at the end of the call, no further questions. Thank you all for your attention, and goodbye. Talk within the next couple of days on our roadshows conference in the next [indiscernible].

[Christian Kullmann, executive]

Take care.

[Maike Schuh, executive]

Thank you.

[Operator]

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.