EVKIY - Evonik Industries AG (EVKIF) Q3 2023 Earnings Conference Call Transcript
2023-11-07 12:57:06 ET
Evonik Industries AG (EVKIF)
Q3 2023 Earnings Conference Call
November 7, 2023, 05:00 AM ET
Company Participants
Tim Lange - Head, IR
Christian Kullmann - CEO
Maike Schuh - CFO
Conference Call Participants
Andreas Heine - Stifel
Gunther Zechmann - Bernstein
Chetan Udeshi - JPMorgan
Thomas Swoboda - Societe Generale
Matthew Yates - Bank of America Merrill Lynch
Presentation
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. Throughout today's recorded presentation, all participants will be in listen-only mode. After a short introduction, the Management will be answer your question. [Operator Instructions].
I would now like to turn the conference over to Tim Lange, Head of Investor relations. Please go ahead, sir.
Tim Lange
Thank you very much. And Good morning to our quarterly earnings call. With me this morning is Maike Schuh, our CFO, and Christian Kullmann, our CEO. And I hand over directly to Christian, for the charts presentation, followed by the Q&A, as usual.
Christian Kullmann
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 of 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, John F. Kennedy, already said more than 100 years ago, what are the going gets tough, the tough get 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 quarters three, our third quarter results, -- please forgive me, our third quarter results prove our progress in these two areas. I’m glad to have Maike by sight, was a strong stake in this achievement.
And with this, I do hand over to Maike.
Maike Schuh
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 networking capital management, we achieved a strong cash generation despite significantly lower earnings. The free cash flow conversion of around 40% at year end is within group.
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 reorganisate in their business. We are seeing the first savings in 2023 and we have laid the foundation for the full €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 downturn, the better, faster and more profitable company. Christian will give you some more insight here.
Christian Kullmann
Thanks, Maike. And I couldn't agree more. Going forward we'll focus even more on what really differentiates us in our markets. Our operating businesses and their innovative strengths, customer proximity and sustainability. Therefore, we rely on our infrastructure activities and our administration over the next years.
For them there's only one question, how can this serve our operating our operating units as lean fast and flexible as possible. Both projects are complex. Nearly half of Evonik’s workforce is working in these two 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. We will reduce complexity, stronger business focus and significantly lower admin costs. Also compared to previous programs, in this specific areas. And in technology and infrastructure, we have bundled our technology and engineering know how globally in a separate unit. In infrastructure, our three 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 turns. At the same time, we're consistently investing into our future growth, sustainable solutions, our growth engine, and they have the potential to change markets. Our Biosurfactants are 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
Yes, thank you again. And we have increased our adjusted EBITDA sequentially to €485 million. We achieve this in an environment of persistently weak demand. There are mainly three 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 trust level at the end of last year.
Visible is also our continued delivery on free cash flow. €469 million in the third quarter, our strong outcome, and in the first nine months, we are now almost €100 million better than in 2022 with almost €800 million less earnings. This is the result of tightly managed CapEx and our joint efforts to significantly reduce networking capital.
Let's move on to some brief details by division. Specialty additives continues to be exposed to an unprecedented weakness in demand. Volumes are 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 and care clearly improved by more than €50 million versus Q2. This was mostly driven by animal nutrition. In [indiscernible], 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 expansion shutdown in Singapore in the fourth quarter. This had a €20 million positive effect on adjusted EBITDA, which will be reverted in Q4.
Smart Materials, is in a similar environment like specialty additive. Overall, the environment has rather weakened further than improved. However, we were able to increase our EBITDA substantially 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 oxygens, mainly with lower variable costs.
Performance Materials and has the content with the highest earnings declined year-on-year. Despite continued strong MTBEs print, 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 and other comments on a below the line item in the adjustments. We have done a €230 million impairment on Superabsorber, ahead of the plant divestment, we have adjusted the book value of the asset to the new normal of a sustainably lower earnings environment in the superabsorbent market. But now, one last time, back to you Christian.
Christian Kullmann
Thanks, Maike. With the third quarter, we have taken a significant step towards achieving our targets for the full year. For the fourth quarter, we'll 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 materials seasonality will be slightly less pronounced due to further pH world capacity ramped up in the tight market. Plus, some improvements in our silica Chia ash [ph] well as hydrogen peroxide businesses.
We see the positive market momentum in animal nutrition continuing and prices improving further. But, the fourth quarter earnings will be pared back by the negative effect from the shutdown in Singapore. Our technology infrastructure and other after the exceptional second and third quarter, the fourth quarter will be clearly negative again. I'm sure we'll discuss the different businesses and effects in more detail in our Q&A session. All in all, ladies and gentlemen, we'll finish the year close to €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 target 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're happy to take your questions.
Tim Lange
Operator, we would be ready for the first question. I assume there's a question, otherwise, we have some questions for you but this is not the purpose of the call.
Christian Kullmann
Hopefully, we have not lost the operator.
[Technical Difficulty].
Operator
Ladies and gentlemen, please hold the line we lost connections with the speakers. Thank you for your patience.
Question-and-Answer Session
Operator
Ladies and gentlemen, the speakers are now connected back again. We will take the first question from Andreas Heine, from Stifel, please go ahead.
Andreas Heine
Yes, I was prepared for the question, as already heard that I might be the first, I have three, if I may, very short ones. You outlined the sequential trend you expect in animal nutrition, usually healthcare, and is very strong in Q4 and at home and personal care, I would like to know whether you think that the inventory destocking as here come to an end? That's the first one.
The second one is on polyamide12. Where you are now ramping boost plants, I would like to know whether you see intensified competition from peers which are also ramping up their plans. And then the final one is on CapEx. You have now the second year 2022 and 2023, that your CapEx was considerably below what you have outlined earlier as run rate of roughly 950 million going forward to '24 '25. Do you think that you can keep the CapEx level on this current level of 850? Or will it go back to these 950? Thanks.
Christian Kullmann
Thank you very much, Andreas. And sorry for the technical issues. I hope you could all follow the speech, and we're back online for the Q&A. Thanks for the three questions, Andreas. As 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 development in healthcare solutions.
Maike Schuh
All right, let's do that. Starting with capex, Andreas, you're absolutely right, that we have been extremely diligent in 2022 2023, with our investments, and the efficient capital 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 €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 important 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 €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
Okay. Andreas, hi. Christian, here. I will provide you with the current news about PA12. Let's keep it like this, over the course of the last quarter, 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 is still no kind of official announcement of a startup 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, very small amount which is coming into the market. We do have learned that is a somewhat like testing their qualities and if they will be able to stand the pace of the quality competition approach, first.
Second, the demand and I guess the key and core 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, and here in particular in the so called EV area is really pretty attractive still.
So, outlook for the next year that depends on when and if our competitors will bring their capacities into the market, but for sure, we’ll 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
And then I take over again, regarding healthcare and care solutions, Andreas. For healthcare. Yes, we have said, what we see is the usual year and quarter, call it strongness, in our next three months forecast. So we have the usual let's say hockey stick in the year. And with regards to care solutions, we are back to last year's level in Q3, Q2 -- sorry, there was actually quite an achievement, especially regarding active and you're totally right that we have these, we of course see also in these two product lines the low networking capital levels. But so far, we see that for 2023 we are on track.
Andreas Heine
Thanks a lot.
Operator
The next question comes from Gunther Zechmann from Bernstein. Please go ahead.
Gunther Zechmann
Good morning, Christian, and Maike. Two questions, if I may. We're now in November, could you please share how you see current trading into year-end and size order book visibility's perhaps into January? And secondly, looking into next year, as clearly a lot of self-help going on. Can you elaborate more on the announced extension of the contingencies plays? 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? Thank you.
Tim Lange
Thank you for questions, Gunther. I suggest that we start with the first one, looking into year end. So what we expect for the fourth quarter, Christian will start with that. And probably also Maike has some words to say on that. And then we continue with your question on the contingencies, and outlook into 2024.
Christian Kullmann
Good morning, Gunther. Maybe the first message is a key message for our call today. And therefore it is to say that we're really confident to deliver to come in respect of our EBITDA close to the €1.7 billion, so it is to confirm our outlook here in this way, now, we're about current trading. You will remember in August, we've adjusted our outlook assuming no further recovery until year end. And this kind of info we have shared with you, this assumption is still proven 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 have fallen, 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.
So, operationally we see similar trends in the fourth quarter, lag 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 her speech, those special effects of the division and especially in the segment, others we have to consider to by giving you this, I hand over to Maike, and she will provide you with some more details.
Maike Schuh
Yes. Gunther, good morning, also from my side. Maybe starting with the division and then heading 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 pronounced as usual, because as we mentioned before, we have the new PA12 capacities ramping up still, as Christian outlines still tight markets.
And we might also see some improvements from low level, unfortunately, really low levels in silica and H2O2, mostly because of lower variable costs.
Nutrition and care. Again, we've mentioned that before ongoing positive momentum in [indiscernible] and also the as explained regarding healthcare and care solutions to this. They focus on Q4, so that's fine. However, nutrition and care underlying the negative effects from the expansion shutdown in Singapore Q4, we said that there was an effect of €20 million in Q3. So this is obviously then negative for Q4. That was an earnings shift from Q4 to Q3.
T&I and others there, actually this is of course, because we have so many entries there, they continue contingencies are really ramping up here. Q4 is typically the most negative quarter and we will see that -- we will still feel 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 effects 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 if -- positive sorry, bonus effect and Q3 -- Q2 and Q3. So basically, we expect a minus €60 million negative EBITDA T&I and others.
With that, I hand over to contingencies, and Christian.
Christian Kullmann
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 three buckets. First,
[Technical difficulty].
Operator
Your passcode has been confirmed. Please wait while you are joined to the conference.
Christian Kullmann
And most this year he will talk about gross effect of roughly give or take €40 million euros, half of savings, and so here we talked about €100 million euros should be reached by end of next year. And the targeted full €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, Taylor made. Here we are striving to realize to create structural savings that means we will provide you with some updates, some details in first half of next year. But for sure you will see first savings in 2024 already. And the complete realization of the savings program, we will give to you in 2026. So, one tighter, cost saving measures will be extended. And one message we will stay very put here being keen on not to waste this kind of crisis in this respect.
Operator
The next question comes from Chetan Udeshi from JPMorgan, please go ahead.
Chetan Udeshi
Yes. Hi, thanks. I just wanted to confirm one thing that I think Maike, you said in your opening comments that you have a good visibility in, at least on Q1 in your nutrition and care business. Is that just because you see the current methionine prices staying into Q1? Or is 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. Now then the title of that division suggests that this should be probably the highest margin business is smart materials, but it actually is pretty low margin business right now you know, 10% 12% EBITDA margin. 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 some Atos, 20 if not higher margins in their specialty polymer businesses. So what is going on with Evonik smart materials business at the moment? Thank you.
Tim Lange
Thank you, Chetan. Two questions. The first one is, Smart Materials, Maike will answer, and on the margin side and what we're currently seeing in the business and the second one with visibility in metallian, prices staying into Q1, Christian will take over after that.
Maike Schuh
Okay. Chetan, good morning. Yes, why is smart material? So as the margin development of smart materials, yes, I mentioned before that what we see actually is that silica is really underperforming. So, 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 counts for the silanes. We are really operating in a very soft environment, very low networking capital, and our clients' base, maybe some more destocking in some segments.
Regarding catalyst, 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 all-in fit catalysts for olefin polymerization catalysts. And the new business we have put in the catalyst business, our ultraoxide business that was really, that suffered a bit in the last quarter, because of Chinese competitors that really flooded the market, the biodiesel market with a lot of crisis.
Last but not least, coating adhesive resins. They also face end markets strong price pressure and certainly in Europe. And so if you look into Q4, maybe one last sentence, we see some recovery, especially in the tire silica. But overall, the auto level now is slightly above prior year quarter. But we expected to move on a little bit more, but pretty much no big movement here.
Christian Kullmann
Okay. Hi, Chetan. I take your second question, as Tim has already announced. The visibility for our silane pricing for the first quarter is pretty good. Why is it, we're signing the contracts for the silane 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 next year. So in other words, further pricing increases are implemented for the fourth quarter and for the first quarter to come. And I guess that is the answer to your question.
So good visibility, plus, the further price increases we have implemented last - in this quarter, and fourth quarter, and we will do further in the first quarter of next year.
Chetan Udeshi
That's clear. Thank you.
Operator
The next question comes from Thomas Swoboda from Societe Generale. Please go ahead.
Thomas Swobod
Yes. Hello, everybody. I have two 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 REG, I happen to notice that REG reduced its stake by 3%, to now 53%. I'm just wondering if you have any insights on their plans regarding this stake they have in Evonik, you can share with us? Thank you.
Tim Lange
Come on. Thank you for two 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 that [indiscernible] I think everything else will be simple and straight. Maike, go ahead.
Maike Schuh
Yes, thank you. Good morning. Good morning, Tomas. 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 this. 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 conversion 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 networking capital. And we will have I mentioned that also in the as Heine asked, we will have a very strict discipline on investments.
And with that, I hand over to Christian.
Christian Kullmann
Thanks a lot, Maike. I guess it is fair to say that since dunky days, you're arguing, that is the market perception that there is a constant kind of overhang and placement risk by the REG Foundation. And ladies and gentlemen, do you know what? From last placement the last placement of REG Foundation was in January 2020. So it is, I guess fair to say that since then REG foundation heavily 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 it like this from what we have understand what I have learned. It seems to be that they have mostly sold these stakes to other long term investors. And by having said so, even they're saying it's fair assumption that now it seems that is the strategy of them to reduce their -- the main strategy of them 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 REG foundation is having in mind about Evonik.
Thomas Swobod
It is very helpful. Thank you.
Operator
The next question comes from Matthew Yates from Bank of America. Please go ahead.
Matthew Yates
Hey, good morning, everyone. 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 on the balance sheet for that business?
Second question, Maike, you give 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 help me understand particularly referencing slide six, with the structural cost reduction measures that you're looking at? Obviously, there's no numbers you're giving us today? 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? Thank you.
Tim Lange
Thank you, Matthew. First two questions, obviously go to Maike on the SAP remaining book value, Superabsorber 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
All right, then. Good morning, Matthew. And regarding Superabsorbants. So if you're looking for our balance sheets, we have classified Superabsorbants, as asset held for sale. And so we have on the one hand tied we have -- but I have to go to details now 262 million assets. And on the liability side, we show €191 million liabilities. And so if you take these numbers on the asset held for sale part, we ended up with a roughly €70 -- €71 million to be precise net asset value in our balance sheet.
And so this answer your first question. Then 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 accounts, especially for crosslinkers and coating 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 difficult environments. So we see a further margin pressure. We are reacting to that, so temporary shutdowns, we have short term work selected plans. 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 two clients that will count into this short term work and the temporary shutdown.
But basically, we also see some positives here. So the volumes in China are really slightly better year-over-year. The PU forms the all 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 for your last question, to Christian.
Christian Kullmann
Good morning, Matthew. Let's keep it like this. If we do start a program like Evonik Taylor Made, which is tackling, which is including the complete global administration 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, that 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 of Europe, of the analysts, and therefore, to inform you what we do have in mind and how we do strive to create a better future than presence is. And here it means to tackle a green-field approach and to create a complete brand new administration organization for Evonik Industries following the greenfield approach that is what we are aiming for. That is our goal, we want to make.
And 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 choosing 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.
Matthew Yates
Thank you.
Tim Lange
Okay, from what we understand, there's no further questions in the line.
Operator
One more, one more.
Tim Lange
Okay. So we have one more, Martin, please go ahead.
Unidentified Analyst
Good morning, and thanks for squeezing me in. If I may, three ones. One is a follow-up question. To mess this question about specialty additives. And I understand that you face 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 especially chemical products on the edge to become a commodity, 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 and care, the $20 million earnings gain in preparation for the maintenance shutdown in Singapore in Q4, the $20 million gain was booked in other operating income. Can you explain the counting please?
Tim Lange
Okay. Martin, as we know, your pretty specific questions. The second and the third one, Maike will take on the tax rate. And on the accounting on the $20 million, let's see if we have that or not. Otherwise, we will follow-up. And your first question on specialty additives, we’ll go to Christian, and Maike will start on the tax rate.
Maike Schuh
Martin, good morning. So 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's really true that we had some really phasing topics here. So we had some topics that related to other periods. So maybe, but giving you some more ideas is, we had really a lower earnings level. And, so all together we had we had so many specific effects other than the lower earning level in Germany, especially with the high tax countries that we yes, we show the lower parts here.
So then the next one is regarding nutrition and care. The nutrition and care, the $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 stocking not a destocking but a stocking in the networking capital, that we show it in a different line. So I think we have another effect there in the operating income that doesn't have anything to do with nutrition and care.
And then the last one goes to Christian
Christian Kullmann
Good morning, Martin, Good to hear you. I take the third question in respect of the future of our crosslinkers, and to keep it simple. We do strongly believe in the need and chance to create a Co2 emission free global economy, which means in other words, the only chance to get it done this -- it is not reflect ourselves, please believe me, and you know me. It is not reflective of 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 windmill would be able to work. Why is it? The rotor blades won't be able to stem 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 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.
Unidentified Analyst
Thank you.
Tim Lange
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 Road shows conference, the next.
Christian Kullmann
Take care.
Operator
Ladies and gentlemen, the conference is now concluded and you may disconnect your telephone. Thank you for joining and have a pleasant day. Goodbye.
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Evonik Industries AG (EVKIF) Q3 2023 Earnings Conference Call Transcript