Evonik Industries AG

XETRA:EVK

Earnings Call Transcript 2020-Q4

[Operator]

Dear, ladies and gentlemen, welcome to today's Q4 full year 2020 earnings conference call of Evonik Industries AG. At our customer's request, this conference will be recorded. [Operator Instructions] May I now hand you over to Tim Lange, Head of Investor Relations. Thank you.

[Tim Lange, Head of Investor Relations]

Ladies and gentlemen, good afternoon this time to our Q4 earnings conference call on a rainy day in Essen. We'll try to bring some sun into this call at least, and Ute and Christian will try to do so. So with that, I hand over directly to Christian for the short introduction.

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

One thing is for sure, I will try my very best. And thanks a lot, Tim. And also a very warm welcome from my side, and thanks for taking the time to be with us today.First of all, I hope you and your families are in good health and managing well, both personally and professionally, in these persistent difficult times. Today, we are reporting a solid performance in, to say the least, a very unusual year 2020. And I will share with you the strategic progress we've made. And Ute will guide and provide you with our financial achievements. And we will give you our perspective on 2021, in other words, a year in which we have set for growth.Ladies and gentlemen, when I look back at the last year, 3 headlines come to my mind: delivery, quality, and progress. First, it was another year in which we managed to extend our track record of promise and deliver, and this despite the very difficult environment. This, second, is not a coincidence, but harvesting the fruits of the improved portfolio quality we have built over the recent years. Third, I'm proud. I'm proud to see the progress we have achieved on our strategic path in the last year. And at the same time, we have set ourselves ambitious targets. And we will not stop here. We'll continue to work on our strategic agenda with similar speed and consequence also in this year.Now let me give you some more color on each of the 3 headlines I have provided you with the minute before. I do really think I do not have to elaborate on the macro environment we had to cope within 2020. Global GDP at minus 4% says it all. Thanks to immediate and strict actions taken, we were able to protect the health of our employees while still reliably servicing our customers. Consequently, we again delivered on our targets. We guided, as one of the very few, an EBITDA at the midpoint of EUR 1.9 billion already back in May, kept track all year, and finally delivered spot on. On free cash flow, we even increased our guidance twice, and finally, significantly overachieved our goal. Also, we continue to steadily work on our sustainability targets. For example, like cutting CO2 emissions by half until 2025. We are fully on track and have already reached a reduction of 44% at year-end 2020.This delivery on our targets was only possible thanks to the increased resilience of our portfolio. 95% of our total earnings are generated by the core and heart of our portfolio, our 3 high-quality growth divisions. Their growth is supported by 2 elements. On the one hand, the high share of sustainable solutions, and on the other hand, our new products and solutions from our innovation growth fields. Both elements clearly differentiate us in the market and in the offering to our customers. This portfolio quality is reflected in our numbers. Our growth divisions finished the year only, and it is worth to repeat it, only 3% below the prior year level. During the pandemic, we did not refrain from pushing forward our strategic agenda. On the contrary, we made good progress across all dimensions. We implemented a new RD&I organization to improve the effectiveness of our innovation efforts. We drove forward the integration of Porocel and PeroxyChem. And on the cultural side, we stood together as one Evonik to navigate the company through the crisis. You could even say that the crisis was, to a certain extent, a kind of booster for our efforts on the costs side.Last but not least, I would like to highlight an area of progress which often does not get the necessary attention, although it has been part of our DNA for long, I dare saying since ever: our advancements on sustainability. Sustainability is deeply embedded into the reason why Evonik exists, for example, into our purpose, leading beyond chemistry. Thus, we take responsibility for our environmental footprint, like reducing our CO2 emissions from scope 1 to 3, or our absolute and specific energy consumption. But for us, sustainability is not only a responsibility. Even more so, it is an important element of our business model and a growth driver for our businesses. These 2 aspects, responsibility on the one side and profitable growth on the other side, are 2 sides of the same coin. When we talk about sustainability as a growth driver, we talk about our next-generation solutions. They are, in other words, our handprint. The environmental and social benefits in the use of our products and solutions, and they outweigh by far our footprint. In 2020, we were able to conclude the sustainability analysis of our entire product portfolio, and the results are quite remarkable. 90% of Evonik's products have a positive sustainability benefit that is at or above the market reference. 35% of our portfolio are even clearly superior, clearly superior to the products of our respected competitors. These applications of above-average -- of our above-average growth potential. Our aim is, therefore, to further increase the sales share generated by these sustainability winners.Therefore, we have defined 4 sustainability focus areas, which we'll target with our next-generation solutions: fight climate change, drive secularity, safeguard ecosystems, ensure health and well-being. On Slide 8 (sic) [ Slide 9 ], you will find one product example for each sustainability focus area: materials for electric batteries; products from our strong biotechnology platform, like our biosurfactants; or drug delivery systems. Messenger RNA is the latest and most prominent delivery technology here. And there are many more, many more product examples.Over the next month, we will integrate sustainability even deeper into our management processes across all elements of our strategy. That means sustainability will become an even more important factor in portfolio management, capital allocation and innovation management.With that, I hand over to Ute for the financial perspectives.

[Ute Wolf, CFO & Member of Executive Board]

Thank you, Christian, and a warm welcome from my side as well. Indeed, the consistent execution of our strategic agenda is very improved also on the financial side, and our progress on free cash flow is probably the best example. In 2020, we have increased our free cash flow and the cash conversion rate quite substantially, and that despite lower EBIT and higher CapEx. The higher CapEx was partly COVID-related, as we had to cope with some disruptions in material supply chain and implement additional hygienic standards at our construction sites. Also, bear in mind that 2020 was the peak year for our polyamide 12 investment project, with a total CapEx volume of well above EUR 400 million. Over the next years, we will manage our CapEx volume to a sustainable level of EUR 850 million, which will result in further free cash flow potential for the next years.Also for the longer term, we have made significant progress on the free cash flow side. Within only 3 years, we managed to double our cash conversion rate. This is quite an achievement and reflects the strong focus we have put on this area, not only me as CFO, but the whole organization.What are the main structural improvements behind this? firstly, a strict working capital management. We are holding the net working capital to sales ratio at a very satisfying level of around 16%, also in times when sales are decreasing. Secondly, strict focus on CapEx optimization. We reduced the level from above EUR 1 billion some years ago to around EUR 900 million currently. And we have further potential to go down to the EUR 850 million. Thirdly, our pension cash-out benefits from the CTA reimbursement we have started 2 years ago. This gives us a sustainable relief of more than EUR 100 million per year.These structural improvements will underpin the strong cash conversion level of 40% also for the next years. And I am optimistic that we will even achieve some further gradual improvement over the next years.Another very visible result of our progress on the financial efficiency side are our admin costs. You will remember we promised you EUR 200 million of SG&A savings back in 2018. And if you look at our P&L today, you will find very visible and tangible savings of EUR 200 million. And this is even a net number. We have completed more than 1,000 individual measures across all SG&A functions. Strict project management and regular monitoring on Board level were the main success factors for this achievement. We will now make sure that the cost improvements are sustainable. Therefore, we have just completed an SG&A benchmarking with an external consultant to measure the success of our SG&A program. Overall, we are broadly in line with peers in most functions, but have also identified some areas for further savings potential.We have made good experience with our continuous improvement program OpEx on the operational side. We will now transfer that mechanism to the SG&A side. The target is to fully neutralize sector cost increases on the SG&A side, plus some additional net savings on top. And we will do this without larger programs or without any larger restructuring costs.Let's now have a look at our operational performance. A main pillar for the proven resilience in 2020 is the division, Specialty Additives, with more or less stable earnings and a sustained high margin level of 27%. Across virtually all applications, our additives are back to or even above prior year level in Q4. And even the lubricant additive, which so far were lagging behind the recovery, showed a clear recovery trend. Crosslinkers had a strong year, also supported by government subsidies in the wind energy sector in China and favorable supply-demand picture. Overall, I have no doubt that our leading additives portfolio and our strong market and technology position will continue to be an important pillar for our resilient and attractive growth in the next years.Our second resilience pillar is the division, Nutrition & Care. Nutrition & Care earnings are up year-on-year by 20%. This is supported by the robust growth of our end market. We have experienced an unchanged strong demand, especially for active ingredients in care or for our pharma polymers. On the efficiency side as well, all businesses have structurally lowered their cost base. Examples are the Adjust 2020 project in Animal Nutrition or the Oleo 2020 project in Care Solutions. And there is more to come on the costs side. In Animal Nutrition, we observed a growing contribution from solutions for sustainable, healthy nutrition, like the latest probiotic in tablet form for rapid use via the drinking water system or our GAA product, GuanAMINO, which supports the energy metabolism of livestock.Smart Materials have shown a nice sequential improvement in the second half of the year. Operationally, Q4 EBITDA is back to prior year levels. Inorganics for hygiene, personal care and environmental applications are already exceeding prior year levels. Our innovations in 3D printing and membranes for energy-efficient gas separation are nearly unaffected by the pandemic and show ongoing strong growth, already accounting for combined sales volume of close to EUR 100 million. In the auto-related businesses, silica for tire shows a clear sequential recovery and the same applies to PA12.The division, Performance Materials, suffered from trough levels in 2020, and we are far from the prior year results. Since November though, we record improving demand and corresponding volumes. Additionally, a favorable environment for butene-1 and oxo products signal positive prospects for the start in 2021. However, MTBE remains under pressure and the recovery in butadiene seems to be rather temporary and driven by competitor outages. So far from my side. Back to Christian.

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

Thanks, Ute. Ladies and gentlemen, let's dive into our full year outlook.The direction is clear, maybe crystal clear. After having proven our resilience in the last year, we are set for growth in 2021. Visibility has improved, but with the pandemic anything than behind us, still remains lower than usual. The underlying assumption for our 2021 guidance is a continued and steady macro recovery over the course of the year. Looking at the latest macro indications and our good start into the year, this is realistic, although not without risk, as we adjust at the beginning of the year.Based on the assumption, we have set ourselves a clear growth aspiration for the year. We aim to achieve earnings well above 2020 in the range of EUR 2 billion to EUR 2.3 billion. This is not a particularly conservative guidance. I would say, it is a more realistic one. It is a sign of confidence to the external world and an ambitious aspiration level for the internal organization. And as of today, I can say that we had a pretty good start, that we had a pretty good start into the year. That is what gives us confidence, confidence to deliver clear year-on-year growth already in the first quarter. The driving force behind that, our 3 growth divisions, the specialty core parts of our portfolio. So this is not only a macro-driven commodity recovery. We expect an adjusted EBITDA of at least EUR 550 million for the first quarter, despite and already including negative effects from the adverse weather conditions mid-February, especially in Germany and in the United States.As Ute indicated, the high cash conversion rate achieved in 2020 is not, definitely not a 1-hit wonder, but a level we want to sustain going forward. Accordingly, we guide for a stable cash conversion under the high prior year level of around 40%. Based on the guided higher EBITDA level, this translates into a higher absolute cash flow number for 2021.Ladies and gentlemen, let me close our session with some save the dates. Last year has shown very drastically how dynamic and uncertain the environment around us can be. Thus, it is of utmost importance to have a clear strategy and to stick to its consistent execution. We will continue to work on our strategic agenda going forward. And we'll continuously evolve and adapt it to the changing environment. Therefore, we thought it is a good idea to give you an update on our strategy. So on October 7 this year, my Board colleagues and myself will invite you to a condensed Capital Markets Day. On this occasion, we will give a strategic update, but please do not expect a revolution, rather an evolution, an evolution of the successful strategy over the last years. Plus, we will focus on 2 growth dimensions of our portfolio: first, sustainability; and second, innovation. I understand that this is still a long time to go and you probably can't wait to get this update from us. So to shorten the waiting time, over the first half of this year, we will be hosting a division spotlight series. The heads of our 3 growth divisions, Lauren, Johann-Caspar and Claus, together with colleagues from the management teams, are looking forward to highlighting the growth potential of their specific divisions and some of the most promising areas of growth.With that, we thank you for your interest and for your time so far. And now we are happy to take your questions. Thanks a lot.

[Operator]

[Operator Instructions] And the first question we received is from Charlie Webb of Morgan Stanley.

[Charles L. Webb, Equity Analyst]

Three questions from me, if I can. So first off, could you perhaps provide a little bit more detail on some of the key building blocks for the guidance range? Just a better -- so we can get a better understanding where we sit within that. What gets us to the top end of the range? What gets us to the bottom end of the range? And perhaps some additional color by division. I know you gave some kind of qualitative comments. Any kind of further thoughts there would be helpful.Second question, just on your healthcare business. Recently, you put out some, I guess, ad hoc news around your biolipid business and the opportunity you have with BioNTech on the vaccine. Could you provide us perhaps of any kind of details in terms of what that business should contribute in 2021? And what we should expect in the years ahead? How significant could that become given the investment you're making? And then finally, just, I guess tying back in a little bit to the guidance. But what methionine price assumption are you making for 2021 in your guidance range? And how is that shaping up? It looks like it's been a quite a strong start to the year. So just any kind of comments or thoughts on that market as we look through 2021 would be very helpful.

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

Thanks a lot for your questions. Maybe I would try to give you something like an overview about our expectations for 2021. And then Ute would give you some more color and would go into some more details.Let's start like this. Last quarter of the last year, most of our businesses have already been back, back to prior year's level. And it is worthwhile to mention that several of them have done even better. So -- and this trend, this trend, that is what I could really provide you with is, that this trend is still ongoing. This trend is continuing. So in other words, and let's keep it very simple, it is fair to say that we had a pretty good start into this year, a pretty good start into this year. And despite the fact that the uncertainty around is somewhat still high, we are committed, yes, we are committed for growth. And therefore, we have set our sales to gain a higher level of growth in 2021.And having said this, Ute will now provide you with some more details about our divisions. Ute?

[Ute Wolf, CFO & Member of Executive Board]

Yes, absolutely. Thank you very much, Christian, for an introduction. Yes. I will discuss a little bit the divisions and then give you an idea what drives or what or what would drive the EBITDA towards the higher end of the corridor. So maybe that is something you can then work with. And we said it several times, the visibility is still really limited and the macro environment remains really difficult to predict. But again, I think there are a lot of positive indicators for growth, and this is how we see the world.If we look at Specialty Additives to start with, they had a strong and resilient year in 2020, stable pricing. EBITDA, really very, very close to precrisis levels. Going forward, we see good growth potential across the division for all of the businesses. But we should keep in mind that there were some extra positive influences. Last year, for crosslinkers, for instance, they had a very strong year 2020, with the specific benefits from the subsidies in China for renewable energy. The government stimulus will be lower this year. But of course, depending on how strongly Chinese players will then build renewable energy, wind parks and so on, of course, there is also an upside, yes. We will hear on a more realistic side, but of course, if the renewable energy in China remains a strong momentum, of course, there is also upside for this business. So that, to give you one example, comfort and insulation, very good year. I think very good prospects. So that is, overall, why we say we expect earnings around strong prior level. I think the upside here is clearly very much in the renewable energy market in China. We'll see how that materializes. I think the rest of the businesses are in good shape and continue their growth tracks.Nutrition & Care, the structural trend shows really resilience here in the end markets, health care, Personal Care, even Animal Nutrition. This will continue in 2021. Of course, the division will continue its work on the cost efficiency side. So we will close our German ethylene plant by end of March. So that is yet to come in our overall P&L, to just to give you one example.The health care M&A business is one example for further growth. So I think this year, that will be a smaller impact. As you know, the production of vaccines is just starting, and I think there's more to come in the next years. And I would like to point out that mRNA is used in many, many other medications as well. So we started, of course, a long time ago in that field where vaccine was not on the horizon yet. So overall, Nutrition & Care is expected to deliver slightly higher earnings. As I said, a lot of these businesses are very resilient, so not so much fluctuation with the economy -- with the economic development. Smart Materials, also here, many of our products have shown a resilient performance throughout the year if you think of our active oxygen or the catalyst business. On the other side, we had in our automotive export business, like high-performance polymer or silica, really some decrease last year. Here, we see really an improved environment since late Q3. And of course, they are set for strong growth in this year. So there is a very clear upside potential for Smart Materials in 2021. I think they can also really go to precrisis levels. So that, I think, is -- from the momentum there, a very strong upside here.Performance Materials, of course, they suffered the most in 2020 due to the oil price drop, lower volumes and spreads. Now with higher oil prices, of course, this helps them. And they are also very sensitive to economic developments. So the stronger the economic recovery is, the stronger and the quicker they come back to their normal levels. That is also something which can -- which will influence the overall level and can bring us to the upper end of the range. So that is really the upper end of the range. It also would be fueled also by businesses that benefit from economic upswing, so are a little bit more, yes, volatile yet now in a positive sense. So this is what we see for '21. I hope I have given you some color how the positioning can be in the range.

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

I take the next question. It is about the mRNA. For me, for us, mRNA is something like a revolution, a revolution in the pharmaceutical industry. And that translates in business terms into tremendous growth, options and opportunities. And we do have a very strong position in this value chain with our, for example, with our lipid nanoparticle technology. I would say this mRNA technology can't work, can't heal without our lipid nanoparticle technology because we are something like the ferry man. Or maybe more business-wise formulated, we are producing the excipients for this vaccine. So having said this, we do see a sales potential of clear triple-digit million in the midterm. And so it won't be any kind of a surprise for you that, having said this, we have extended our strategic partnership with BioNTech, for example. And we have started to extend and expand our health care facilities down here in Germany. For this year, we do expect an attractive growth, but already not -- or maybe we will not yet be able to reach this triple-digit level. But there is a very attractive opportunity for us, and we are keen on making use of it by extending and expanding our position, by deepening the partnerships, for example, with BioNTech. And here, it is a promising situation for us. The next question was, and for sure, that is what will be true -- what holds true. At any time and for any time, what is the good talk, what is a good talk? Could it be a good talk, a good conference call not talking about any sign in expectations. So I really appreciate this question. What do we see in methionine? The sentiment, the market sentiment has changed, started in the last weeks of last year, from a somewhat long market towards a higher supply security approach of our customers. So from long to becoming more short. This momentum, let's call it positive momentum, has extended into the first weeks and months of this year. So bring it straight to the point. For 2021, we do really expect another solid and successful year for methionine. This positive momentum I have tried to describe and to provide you with, that is what we do see for sure for the first half of this year, with good demand and a gradually, gradually increasing global contract price. Why do I underpin contract price? It is worth to mention. It is worth to mention, ladies and gentlemen, that if I look to feed info and then provide you with information that the volatility is high, that holds true for spot prices. And no doubt, that is right. But in here, we talk about a range of EUR 0.70. But it is totally wrong talking about global contract prices. Here, we do talk about a range of, give or take, roughly around EUR 0.30. In other words, here, we talk half of the spot price range. So I guess this was your methionine question. Thanks a lot for your attention.

[Operator]

The next question received is from Gunther Zechmann of Bernstein.

[Gunther Zechmann, Research Analyst]

On your cash flow guidance, the midpoint of your earnings outlook, that implies a further 10% increase year-over-year, which sounds impressive, especially if I assume the reacceleration in volume growth as well as the rising raw material costs that you guide for. Can you talk about what you assume for working capital this year? I think, Ute, you mentioned earlier 16% of sales being a good number to look at. And if there are any other drivers other than the CapEx that you've already guided for, please.

[Ute Wolf, CFO & Member of Executive Board]

Yes. Absolutely. What are the main moving parts for cash flow in '21? Of course, we will continue with our strict net working capital management, higher sales, of course, on one hand side, and higher raw material prices are -- some challenges here. So if you look at our cash flow statement the last year, so we had a positive contribution from working capital. I think that will not be the case this year. So it will be a slight outflow. But also, on the other side, higher raw material prices bring higher payables, and that helps on the other side a little bit as well. CapEx will be lower year-on-year. So we said around EUR 900 million, maybe even a little bit below that. We'll see. But that gives another EUR 50 million. And we have introduced since many years, for instance, for projects in health care or other bigger projects that we have some customer prepayments to really support our CapEx. That is something you do not see in the CapEx line. That is in other assets. So there, you see here, it is included and you don't see it explicitly. The CTA reimbursement will keep the pension cap out -- pension cash-out low. Of course, we also had some contributions in the last bit -- in some local schemes like the U.S. or U.K., so that will not reappear. Cash taxes, they are maybe a little bit higher. Bonus payments, on similar low levels, so like 2020. So from that point of view, I think, with higher EBITDA, so then that should help the cash, free cash flow and the conversion rate, I think. If you put this together you will also come to that conclusion.

[Gunther Zechmann, Research Analyst]

Then can I just follow-up on the cash in from the customer finance investments? You mentioned EUR 50 million in the press release. Can you describe in a bit more detail what's behind that? It seems new to me. And what your outlook for that number is as well, please?

[Ute Wolf, CFO & Member of Executive Board]

It's not really new. We started with that in health care some years ago, where we really had quite high investments for longer-term supply contract. And then we were able to negotiate with our customer to say, well, give us some upfront payment to make it better, workable for us. We also applied that principle in our PA12 project. This is really a big project, a lot of CapEx for us. And of course, there are some customers that we also sell intermediates to. So that there is where we also applied that. I think it's hard to project a number going forward because it depends really on the nature of the project. So as we are still above our EUR 850 million normalized level, I think it's very necessary to have those prepayments or participations. Once we are in a more normal state, that might be lower. So from that point of view, I think let's focus on the net number, and I think that helps then in the end.

[Operator]

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

[Matthew John Peter Yates]

A few hopefully short, simple questions. Firstly, on Smart Materials, how are you factoring in any start-up costs for the big PA12 plant in the second half of the year? Is that something that we need to be conscious of for margins in the back half? The second question, really just across the group, obviously, there's a lot of raw material inflation at the moment. Are there any particular business areas where you have to work quite hard to pass that through? And in particular, I'd be curious to get an update about how the profitability of Baby Care is evolving. And then if I can ask a third one around cash flow. The pension deficit is now close to where it was prior to the old top-up payments. Does that mean, at some point, we have to think about putting new top-up payments into the pension to keep the deficit under control?

[Ute Wolf, CFO & Member of Executive Board]

So I hope we wrote all the questions down here. So if we forget something, please give us aid.Maybe I start with the pensions. The pension deficit is -- it's a balance sheet representation number. So that is really an actual value of cash-out in a very, very far future. So from that point of view, of course, if interest rates goes down, that goes up. That is in the balance sheet. It is a liability for us. But it does not influence payments in the nearer term. Yes? So the payments stay the same regardless what the pension discount rate is. From that point of view, our reimbursement works fully fine because those cash flows are known for a long, long time. To have further voluntary funding, I think that is also one part of your question, I think at this time, would not be very efficient for us. As, of course, the interest rates are so low, we try to really mirror in our asset management strategy the liability profile of our pension liabilities. We are around 2/3, which is a good funding ratio. So -- and we are really very well set for the reimbursement scheme. So nothing has really changed there. So from that point of view, I think we are in a good position and can keep it like this.Then you asked for the start-up costs, PA12. They are, of course, already our guidance, and they have already started in last year because we had to employ people. We have already parts of the overall facility are already finished and are running. So there are some part of that is already included in last year. Then you asked on raw material prices. Yes, raw material prices were down last year quite dramatically. But in our case, it was mainly driven by the raw materials that are used in Performance Materials, so everything which is oil and oil derivatives. In Specialty Additives and Smart Materials, the raw materials only decreased by a couple of percent. So from that point of view, I think it's really a very differentiated picture. For '21, we expect a rebound in raw material prices, and we have incorporated something between 10% and 15% here on group level. However, that will all mainly materialize in Performance Materials, where we have, of course, tried to pass on pricing mechanisms so that overall, we think there is not a big risk to our guidance from raw material prices or even further. We have incorporated that and we see in many markets that prices pick up. So that even if there should be some smaller price increases, we are ready to cope with them and will even compensate them.

[Matthew John Peter Yates]

The only one -- sorry, I know I asked a lot. The only one we didn't touch on was the Baby Care performance at the moment.

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

Yes. I think Baby Care is still in a difficult market environment. So the market is still oversupplied. So from that point of view, I would say, stable on relatively low levels.

[Operator]

The next question is from Andreas Heine of Stifel Europe.

[Andreas Heine, Managing Director]

I save my best for 2 questions. The first is the pension outflows you have. They were pretty low in 2020. Can you elaborate whether they can sustainably that low? I think they were only EUR 14 million, EUR 15 million; the year before, slightly EUR 60 million, EUR 70 million. Is that the range you should look for, for the coming years? Or were something special in here? And looking on your order book, can you give already a flavor how you expect the start in the second quarter? So we learned that Q1 was very strong. Do you have already any flavor from your order book? And how this will continue?

[Ute Wolf, CFO & Member of Executive Board]

Okay, Andreas. Thanks for the question. So the pension payout will stay on low levels. That was exactly what we were targeting with the change of the strategy in our pension payout schemes. So the reimbursement is designed for many, many years. And as I said, even with the low interest rate, that is all very robust and stable. So yes, yes, it will stay on this low level. And now it's Christian on the second quarter.

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

Andreas, I appreciate your question, but it is not my intention to skip the conference call for the second quarter. We do appreciate inviting you and having you and having you on the press conference and the analyst conference for the first quarter. Having said this, yes, the start into the year is a pretty good one. And we do see good, for example, ongoing good momentum from the cosmetics industry, the demand for specialty additives. Think about coating, think about our consumer goods, is really good. And we do see and we do have a very strong push here in this areas -- in these business areas in China and from China. And also, our lubricant additives, they have suffered a little bit in the last year from the market environment. They do have a pretty nice recovery. They are back. Active oxygen, think about active oxygens and our specialty applications here in this area, they continue to grow. They continue to grow. And I dare saying they're really blossoming up here, so it's great to see. High-performance polymers, they are already back to the precrisis level. Think about 3D printing, think about the ongoing recovery in the automotive area. So here, we are good on track, pretty good on track, I dare saying. Silica, if you think about silica, you have to think about the situation that they are already, as of today, above prior year's level, pretty nice, fostered by the strong growth in China. And so having said this, on these trends, we do see -- we do -- yes, like, we enjoy. Might be in the first quarter this trend, we could observe, and that is all I could provide you with. These trends are going to continue into the second quarter. I hope you are a little bit satisfied about the quality of the answer.

[Operator]

The next one is from Sebastian Bray of Berenberg.

[Sebastian Christian Bray, Analyst]

My -- I would have 2, please. The first one is on the margin within Nutrition & Care. I think Evonik has in the past been on the record of saying that it makes an over 20% on your EBITDA margin within methionine within Animal Nutrition. I'm just wondering, is this the case? And if that is so, is Health & Care EBITDA somewhere in the mid-teens at the moment? The reason I ask this is because it's quite clear that the company is doing fairly sophisticated chemistry in Health & Care, and I'm wondering why the margin isn't higher. Is it just that you're being generous to your customers? Is there a prepayment issue to be taken into account here in the health care business? To what extent could this change?My second question is on CapEx. What are the big growth projects at Evonik post polyamide facility? And related to that, could we have an update on Veramaris? Am I right in saying that there are about EUR 60 million to EUR 70 million of annualized sales from this project?

[Ute Wolf, CFO & Member of Executive Board]

Okay. I'll start with the margin question on this the health care. If you look at health care, it's a very diverse portfolio. We have, on one hand, our pharma polymers, which is really a very specific drug delivery product. And we talked about the lipid nano technology, which, of course, is even more sophisticated. And on the other hand, we have more like exclusive synthesis products. So this is really active ingredient on one side and base products on the other side. We are developing our pipeline since many years more towards the active ingredients and higher, of course, higher-value products, but there is still some portion more in the base product space. So from that point of view, then the overall margin is not so high as you would expect it if you were only producing active ingredients. But very clear, the track is more towards higher share of active ingredients. We described some very, very exciting projects. And we also did some technology acquisitions in the last years is -- exactly in those fields of active ingredients and drug delivery.

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

Okay. And I take the Veramaris one. The JV we do have with DSM is a pretty good and fruitful one. That is, for sure, and before I end worth to mention. Talking about the specific project, it is that sales and utilization is as of today further ramping up. And we do expect EUR 150 million, as mentioned, to EUR 200 million sales from this JV facility, with an above average margin. That is for sure, and that is what holds also true for today and in the perspective. As you know, those biotech processes, they do not ramp up very linear. That means, in other words, you have to consider to this. But nevertheless, everything is here well on track. We have started in the meanwhile to become more diversified here in this business. So we have adjusted our focus and building up presence, for example, in the pet food area and expanding our footprint into, for example, warm water fish and shrimp areas. And that is what is developing pretty nice. Let's keep it like this.But you have to be aware of the fact that because of the COVID-19 and the impact COVID-19 has, for example, for hotels, restaurants, catering businesses, the major sale market is here also touched -- have also been touched by this in the last year. So for 2021, for this year, message 1 is we will further increase our sales, and that is definitely in line with increasing capacity utilization. And message 2 is that we are confident and convinced that this business is an attractive one. And that overcoming the pandemic, that we will see here very attractive margins and good growth.

[Tim Lange, Head of Investor Relations]

Did we miss out a question, Sebastian? Was there a third one or was it all...

[Sebastian Christian Bray, Analyst]

Dare I -- perhaps it is I'm outstaying my welcome, but I had a question on if there are any substantial growth projects of note, as in of EUR 100 million-plus scale post the completion of the polyamide facility on the CapEx side.

[Ute Wolf, CFO & Member of Executive Board]

Yes. I think going back, where we invested well into growth in the last year. So I think it's now also time to make use of the new capacities. Also, the setback of the pandemic now gives a new view or a different view on our capacities. I think one work stream is to really use existing capacities more efficiently. This is possible where you do not have a continuous production but more a batch production. So I think that is very important to us that. Is now carried out. If we look at what might come in new products, I think we talked a lot about our biosurfactants. That will not be a EUR 100 million project. So well, maybe it's not the size that you have in mind. But of course, that is a very, very exciting new product. It really pays into everything in sustainability. It's very well received by the customer. So I think that is definitely a growth project which is more or less in front of our doors.

[Operator]

And the last question for today is from Sebastian Satz of Barclay Capital.

[Sebastian Satz, Director]

Three quick ones, please. First one is just coming back to methionine again. I'm just wondering what effect do you think the import duties in the U.S. will have on your prices and then potentially the competitive intensity in other regions? And second one, just quickly coming back to your guidance in Specialty Additives. We don't expect any growth even though volumes were down quite a lot, particularly in the second and third quarter. So you should have relatively easy comparables but really only due to crosslinkers. And if it's only crosslinkers, is that just the China renewable energy demands that you've pointed towards? Or are there also some issues on the supply side and potentially the raw materials? And just lastly, could you give us some quick update on the Baby Care disposal, please?

[Ute Wolf, CFO & Member of Executive Board]

Yes. I'll start with the second question, guidance on Specialty Additives. You really have to see that Specialty Additives had a very good year in '19 and in '20 as well relative to the background. So from that point of view, I think it is also not very realistic to see that they will produce a very strong growth from that very strong basis. So what we see really in crosslinkers are 2 things. One is that the subsidy schemes in China for wind parks are a little bit adjusted, are a little bit changed. And in last year, there was really a very tight market situation in Asia, as we were more or less one of the very few who could deliver. Now we will have one who are entering the market, so that this supply-demand situation will normalize further, and that will influence earnings. We will have a resilient growth. But of course, we will not have this very specific situation of a shortage or a perceived shortage in material for Q1. Now however, of course, we see a fair chance for slightly higher earnings for the division. But I have to admit they were already last year a little bit affected from the COVID crisis in Q1. They were a little bit the early movers in our portfolio. So this is more or less what we can say to that.

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

I take the second one. It was about Baby Care. Doing M&A means it's all about timing. And having said so, it is first to say that the market growth in this business area is definitely intact. We do see year-on-year market growth about, give or take, 4%. And what we do see too is that the recent expansions in this area have been very limited. So the -- we do expect -- having said this, we do expect only very limited capacity expansions until 2022, first. Second is, yes, our work streams are pretty well on track, and so it is that we stick definitely to our time line. And that means, in other words, that the separation, as we do have announced it, will be finalized, as mentioned, mid of this year, and thereafter -- and it is prudent thereafter to evaluate any -- any kind of options and all options, like, for example, selling or, for example, finding a partnership for this business. That is what we will see if we come to this bridge, if we come to this point. And then there was a third question. I guess it was about methionine, and it was about the antidumping investigations the American authorities have started. What does it mean for Evonik? Let's keep it like this. First of all, it is to say that those companies who do have sites and plants in every growth region all over the world -- like Evonik, we do have one in the United States of America. We do have one in Europe. And we do have one in Asia. They are, from this geostrategical point of view, in a preferred position. And that is for Evonik now paying off because we are in the American market and, therefore, not touched by these antidumping investigation measures. So for us and for our market position in the U.S., it is, to be very honest, it is helpful. And if you look to our cost leading, world-scale site we do have in Mobile, we are confident. We are confident that we could in future expand and extend our cost position and, therefore, our market position in the U.S. so far.

[Operator]

Ladies and gentlemen, we will now close the Q&A session. And I hand back to Mr. Kullmann.

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

Yes. Ladies and gentlemen, it was a pleasure having had you, for Ute, for me and for the Investor Relations team. That is thanks a lot for your attention today. And there's one thing we do wish you from the bottom of our heart, and that is stay healthy and take care. And having said this, goodbye.

[Operator]

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