Ladies and gentlemen, thank you for standing-by. Welcome to the Covestro Investor Conference Call on the Q3 2020 Results. The company is represented by Markus Steilemann, CEO; Thomas Toepfer, CFO; and Ronald Köhler, Investor Relations. During the presentation all participants will be in a listen-only mode. The presentation will be followed by a question-and-answer session. [Operator Instructions] I would now like to turn over the conference to Ronald Köhler. Please go ahead, sir. Ronald Köhler: Thank you. Yes. Good afternoon and welcome from my side for our third quarter conference call. And for your information as usual we have posted our Q3 quarterly statement and our conference call presentation at our IR website. And in that presentation, you would find all the Safe Habor Statement, which I assume you have read. And with that, I would like to pass it over to Markus.

Good afternoon and good morning to our listeners from U.S. I'd like to begin with our Q3 highlights on Page 2. Current times continue to be marked by the global coronavirus pandemic and its consequences in all areas of our life. After the drastic impact on the demand for product in Q2, however, demand recovered dynamically joined a course of the third quarter. As a result, our core volumes came in 3% above previous year. We achieved and EBITDA of EUR456 million, which was above market expectations and up to 7% year-on-year. Supported by higher earnings, we achieved a strong free operating cash flow of EUR361 million, 49% above previous year. As pre-released, we've raised our earnings guidance for the full year, reflecting a more dynamic recovery and the improved earnings levels. Lastly and certainly a strategic highlight of Q3 on September 30, we announced the acquisition of the Resins & Functional Materials business from DSM. Meanwhile, the EUR447 million capital increase to finance part of the acquisition price has been successfully completed. On Page 3, I would like to highlight some volume development by region, and as a concession to the exceptional time, also by industry in detailed numbers. The growth of global call volumes in Q3 was based on a broad demand recovery across industries and geographies. While our call volumes were significantly below previous year during the second quarter, they were already above previous year during the third quarter, reflecting a V-shaped recovery. Demand from the furniture and wood processing industry increased by 6% year-over-year, driven by Asia-Pacific. Most of this growth was attributed to our polyurethane raw material for soft foams used in mattresses and upholstery. Demand appears to benefit from consumers who improved their homes during the lockdown weeks or instead of spending money for travel. Global volumes to customers from the construction industry finished a quarter 7% above previous year. Polycarbonates realized double-digit volume growth driven by demand for resins used in pandemic related protective year. Our raw materials for polyurethane based installation also contributed to this growth. Off our key industries, only demand from the automotive and transportation industry was still below previous year at minus 5%. However on a much higher level than a quarter earlier. While our call volumes were still down year-on-year Europe and the North America, automotive volumes in China increased by a double-digit rate. Volumes sold into the electric, electronics and appliance industry globally increased by 6% supported by growth in all three regions. Demand seems to benefit from consumers who further established their home offices with new IP equipment. The positive highlights among the remaining diverse industries was an attractive volume growth in global medical equipment of 7%, driven by polycarbonates. Looking at customer industries by region, we have recorded growth in all key industries in Asia-Pacific with double-digit growth rates in construction and furniture. Also in Europe, Middle East, Latin America, all industries were back to year-on-year growth with the exception of double-digit volume decline in automotive. Our European business seemed to have profited from market share wins. Hence, we assume that the underlying demand recovery may have been slightly lower. Volume development in Germany was particularly weak as some smaller negative sectors added up. The polycarbonate sheet divestment led to shift from sales in Germany to sales outside of Germany and the availability of some USM products was constraint. Call volumes in North America remained below previous year. Double-digit growth in furniture could not compensate single-digit declines in construction and automotive volumes. With this, I now hand over to Thomas for the full set of financials.

Yes. Thank you, Markus, and also good afternoon, and good morning from my side to everybody on the call. Let's go to Page 4 and the sales which shows you a year-on-year sales decline of 12.7% for Q3, and the call volume growth despite by Markus led to a positive volume effect on sales of 1%, and that is a EUR29 million that you see in the bridge driven by polyurethane and polycarbonate whilst our coatings and teasers and specialty segment contributed negatively. Lower selling prices led to sales decline of 9% year-on-year that is a EUR285 million that you've seen the bridge, and this development was mainly due to the increased competitive pressure and from polyurethane and polycarbonates this year versus prior year. Sequentially, prices remained largely unchanged. Exchange rates affected our sales by negative 3.3% year-on-year, driven by the weakness of the U.S. dollar and the Chinese renminbi against the euro. And portfolio changes decreased our sales by 1.4% or EUR43 million in Q3, EUR15 million of this value was related to the divested European sheets as system houses in polyurethane and EUR28 million were related to the divested European sheets business in our polycarbonate segments. So with that, let's turn to Page 5 where you have the EBITDA bridge and we generated an EBITDA of EUR456 million in Q3, which was up 7.3% year-on-year and above our and also the capital market expectations. So this outperformance was largely driven by cost saving measures. Now, if you look at the bridge, you can see that, despite call volume growth and the positive volume effects in sales, the volume effects in EBITDA was negative EUR41 million, because system proportions of customer industries led to an overall unfavorable product mix, and this resulted in inventively high negative volume leveraged driven by the CAS segment. Our contribution margin will remained virtually unchanged compared to prior years and the effects from lower selling prices as commended before were largely compensated by lower feedstock prices. So, what we call the pricing delta is virtually zero, and EUR6 million you can see in the bridge, as is clearly stated. The currency effects on EBITDA was slightly negative, and the largest positive contributor to the EBITDA growth was the line other items with a positive EUR90 million. The key factor here was a much lower cost base driven by cost saving measures, initiated by management in response to the coronavirus pandemic, lower provisions for short-term bonuses also contributed positively versus prior year because the provisions for the 2020 bonus currently stand at zero. Now for comments on the operational performance for our three segments, I'd like to hand it back to Markus for the moment.

Looking at our polyurethane segment on Chart number 6. Call volume grew by 4.3% in Q3. Double-digit growth rate in TDI was strongest followed by single-digit growth in MDI and polyurethane around previous year's level. Largest contributor to growth were applications and the furniture industry. Polyurethane EBITDA strongly increased both sequentially and year-on-year. Compared to Q3 last year, the increase was mainly driven by two factors. Firstly, the significantly lower cost levels, driven by our cost savings measures, and secondly, higher volumes. As a result, our EBITDA margin increased nicely. Lower selling prices mainly in MDI and polyurethane were compensated by lower raw material prices. Hence, the year-on-year effect from the pricing delta was neutral. Especially towards the end of the third quarter and into the first quarter, we noticed innovated industry margin levels in TDI globally. Simultaneously, we have been selling practically all available material to our customers working hard to fulfill customer orders. According to our analysis, these first and foremost reflect dynamic recovery and good underlying demand. However, it also suggests constraint industry availability. Including our reported force majority incidents in North America and Europe, TDI industry supply currently appears to be low nameplate capacity level. Continuing on Page 7. In polycarbonates, call volumes grew by 3.6% compared to prior year. All key industries except automotive and transportation contributed to this growth. After call volume declines in the mid-double digit area and auto in the second quarter demand recovery also in this industry led to decline rates in the third quarter that were only mid-single digits. Regionally, we recorded different speeds of recoveries, while volumes in China through double digit, NAFTA volumes were still down double digits. Sequentially EBITDA grew strongly and our double digit margin further improved to 18.5%. Compared to prior year, the EBITDA increase was mainly the result of two factors. Firstly, a significantly lower cost level driven by our cost savings measures and secondly, upon the pricing delta due to lower feed stock prices. Moving on costs on Chart 8. Cost call volumes declined by 6.9% year-on-year, affected by continued demand weakness from the automotive industry and for coating launches. CAS posted a strong sequential rebound in EBITDA driven by more normalized sales volumes and lower costs. Compared to prior year, EBITDA increased by 10.8% to EUR99 million, mainly due to the negative volume leverage resulting from lower call volumes. Cost saving measures could only partly compensate a negative pricing delta. For the further comments and the financials, I hand back to Thomas.

Yes, thank you. Let's turn to the cash flow on Chart 9. So as you can see, our nine month free operating cash flow remains positive and relatively stable compared to prior year. And that is despite a drop in our EBITDA of EUR0.5 billion. So, we consider this quite a positive achievement. And this strong cash flow performance was supported by a highlight that is not shown in the nine months table and that is a free operating cash flow of EUR361 million in Q3 alone, which is up 48.6% year-on-year. So this increase was driven by higher earnings, lower CapEx and positive effects from trade working capital. So, in this context, our working capital to sales ratio was 19.5% and whereas total working capital had a negative cash impact in the first nine months, our inventories were lower due to the strong demand for our products coupled with constraint availability. Now for the full year 2020, we assume that our working capital to sales ratio will come out somewhat above the usual corridor of 15% to 17%, which we're indicating, because the lower 12-month sales numbers will coincide with a strong year end sinners. As you can see in the table, the nine month CapEx came in at EUR463 million and that is fully on track towards our full year guidance of around EUR700 million. Nine months income tax paid amounted to EUR115 million whereas while the income taxes in the P&L account amounted to only EUR38 million, and the difference is mainly the consequence of pure savings. Now in the last line item in the table, you can see that the positive swing of more than EUR300 million. If you compare this year's nine months to previous year, the difference is mainly driven by significantly lower cash out for bonus payments. So, as I already explained in our last quarterly update calls about EUR14 million were paid out for 2019 bonuses in Q2 of 2020 compared to about EUR350 million which were paid out in Q2 last year for the 2018 bonus and that difference is reflected in that line items. So, please note in that context that this positive cash effects will reverse once normalized company performance will again lead to normal bonus levels. So with that, let's turn to Page 10. And I think we can really say that we maintain a strong balance sheet and also a strong liquidity position. The total net debt-to-EBITDA ratio of 2.9 times at the end of Q3 remains on par with the end of Q2. And we also maintain a rather stable equity ratio of 41%. Pension provisions only increase slightly if you compare it with the end of last year. And after intermediate increase during the first half of 2020 the discount rates in Germany are back to the levels of year in 2019. And the discount rates in the U.S. even slightly decrease. Overall, we are committed to a capital structure and financial ratios that support a solid investment grade rating also in the future. And it's also financing structure in connection with the announced our M acquisitions underscore this commitment. So on July 30, the AGM approved the proposed dividend of EUR1.20 per share, and as a consequence, EUR219 million were paid out to shareholders in early August. And presently our balance sheet includes liquidity of around EUR1.8 billion in cash, cash equivalents and current financial assets. Part of this amount is intended to fund the price of the announced an acquisition. Let's move to Chart 11. In the context of historical EBITDA development, our expected 2020 EBITDA is set to approach trough levels. So building the year-on-year bridge between actual 2019 and expected 2020 EBITDA, we now assume the following key variables as you can see in the box on the right hand side. The adjusted pricing developments to around negative EUR100 million based on our current margin expectation. We do assume a negative volume impact of around EUR500 million corresponding to a negative single digit call volume growth. And our assumptions in regards of other EBITDA effects in the so called other slide is a positive contribution of EUR200 million. And this includes a slightly negative effect from currencies at today's rate. So taking it all together, we currently expect a full year EBITDA of around EUR1.2 billion. And in this context, I'd like to remind you that the rounding our lingo means a variation of plus or minus 10%. Now also, in order to support your modeling work, we have also provided on this chart a volume and timefree sensitivities for the full year EBITDA. So this leads to the remaining items of our full year guidance on Chart 12 as explained, and you can see this in the first line item, we assume call volumes in 2020 below 2019. We adjusted the free operating cash flow guidance and we now expect a number between zero and positive EUR300 million. Our growth feed is expected to be a positive mid-single digit number. And apart from the slightly less negative financial results, which now is expected at minus EUR155 million versus EUR120 million negative before all other guidance items remain unchanged. So for your benefits, please note that the expected number of spending shares has changed and we have provided you with the numbers for Q4 and the full year for your earnings per share estimates. And with that, I would like to hand it back to Markus for the summary.

Thank you, Thomas. Let me summarize the highlights of the past quarter on Page 13. We recorded a broad based sequential volume recovery across industries and geographies after the drastic impact on our call volumes by the coronavirus pandemic in the second quarter of this year. That's what earnings were above market expectations at the time of pre-release due to better than expected cost management and pricing delta We responded quickly and effectively to the pandemic by implementing a broad based set of measures, including cost saving measures. These measures and the savings from our long-term perspective program demonstrated the full financial impact in the third quarter, as a lowered costs level strongly supported earnings. We raised our full year earnings guidance on the back on the pandemic recovery. After several months of intense preparation, we announced the acquisition of IFM from VSM to build a leading sustainable coating residence player. We thank you for listening and now happy to take your questions.

[Operator Instruction] And the first question comes from Charlie Webb from Morgan Stanley. Over to you.

Just two for me. First one I know maybe perhaps little bit early to say a lot can change between now and 2021, but as we start to kind of tough the eyes on 2021, perhaps you can just help us understand some of the larger bridge items we should be considering, if we were just assume the current environment persists. And then also just maybe helping us understand the market-to-market volumes pricing and current spreads clearly had picked up through the end of the year, as well as how we should think about the temporary savings that you delivered in 2020 that might reverse. Likewise, you talked about the bonus accrual and how we should maybe think about that year-on-year, if we have any more normal year into 2021. I think that'd be very helpful. And then just secondly, on kind of outages, little bit of outages motive from yourself and peers were supposed to just been announced across a number of sites across a number of regions. Can you help us understand what's driving this increase in outage rates? And how should we think about the impacts to for you guys from a volume perspective in Q4 from that? And that'd be very helpful.

Well, Charlie first and foremost. Thanks for your question. This is Marcus speaking. So I would give it a try on the first question maybe then Thomas is answering the second part or I will do that let's see. So the largest bridge items, I mean, you were referring to price developments, which is always super difficult for CECL. Let me start on the cost items maybe first. And on the cost items stays, two large building blocks. Let's say given the short term very strongly and swiftly implemented cost savings for this year, we would expect that there could be a rebound effect of up to EUR200 million, 40 years, 2021 coming just from the so-called operational costs where we have driven down, which we have driven down significantly during the course of this year, in which we're a major contributor also to the results in Q3 as you have seen. On top of that, under let's say more normalized conditions you could expect lets say the bonus in the order of magnitude of roughly EUR200 million higher compared to this year where there will be no bonus payment at all at least as we would let’s say consider the current guidance as the basis for the bonus calculation for this year. Then looking at this year's volume development and potential that we would see for next year given that we have no significant impact on the demand side, you could assume that, we have a strong volume growth year-over-year potentially happening. To give you an order of magnitude, one percentage point volume growth would translate into roughly EUR50 million, just to give you some idea. And from a pricing delta, there could be a positive pricing delta but this that you might acknowledge still unclear, but that could be on a mark-to-market basis represent a EUR400 million, let's say, uptake compared to this year's, let's say, full year number. So on the second half, with regards to second question with regards to the outages, we currently still have a four measures and therefore also outages in our plants. Three of them are related to our Baytown operations and here are driven by an outage on one of our, let's say, central suppliers for key raw materials. And this context, all of those outages in the U.S. are, let's say, not standalone significant, but the sum of the parts is significant in particular, if you add on then an outage of one of our German operations and here, particularly on TDI so if you take all four outages together, those would lead to a low to mid double-digit EBITDA effect in Q4 only. However, they are somewhat reflected in our guidance for the full year.

That's helpful. And is it just purely on the outages? Is it just purely lack of raw materials and there isn't any kind of operational issues from under investment that you need to kind of catch up on? Just to be clear, is it purely raw material procurement, is that the limiting factor?

In U.S. definitely clear 100% on raw material supply issue. As I said, outside battery element supplier and there we have simply an outage in our supply of carbon monoxide. And, if we go for the operations in Germany, that was just the failure, which was not related to any, let's say, type of underinvestment. As you know, we keep our maintenance budget at I would say very reasonable high levels to exactly make sure what at all plans running at highest possible reliability. But unfortunately, sometimes there's things called bad luck and that wasn't this case simply the fact that we had to technical failure.

Next is Thomas Swoboda from Société Générale. The floor is yours.

I have two questions, please. Both are kinds of related to costs. Current cost continue to like behind on the recovery. My very top down simple question would be, what does need to happen for cost to return to growth and improve profitability? And related to that, the volume leverage in Q3 seems to have been hampered by cost. Does that mean that in case or at a time points, when cost starts to perform a little bit better again, the volume leverage could exceed the EUR50 million runway two percentage points of call volume growth? These are my two questions.

Yes, thanks, Thomas. This is Marcus speaking and looking over to Thomas, he will do the second question hopefully. So and I will do the first part of the question. Well, we quickly see that cash was improving in third quarter compared to the previous quarters, in particular the second quarter. And we can also see if you look at the margin profile that we have provided on Slide 8 of the investor relations presentations that the cost margins were back in the 20s. So, what you see it's really on the EBITDA development is a volume effects. And that volume effects was from my perspective only returned back to normal, once we see either a significant recovery here in particular, in the automotive industry, because that is exactly where the key, let's say setback in volumes is coming from and at the same time and cost is doing that on a constant basis. They are developing, also the product portfolio, but it will not let's say short-term to lead to significant recovery of sales. But nonetheless be reassured it is a very and highly specialized business with above average margins and save the margins. And that is also clearly demonstrated once the volumes have recovered slightly from Q2 to Q3 that we're back in the 20s in terms of EBITDA margins. And that journey will continue whenever either on the one hand automotive is recovering, or on the other hand, we continue to deliver on our very strong pipelines of newly developed products and bringing into the market. Thomas?

And to answer your second question, I mean, you're right, if you look at the volume levels for the first nine months of this year, the number is higher, and then the EUR16 million growth is about a EUR70 million, and that is also driven by the higher volume levels of cost. Nevertheless, looking forward, we do think that the EUR50 million that we're giving you is probably the best estimate, if you take a blended growth rate for the entire source.

If I just can follow-up on this. I mean, on the previous calls, we were also discussing that there might be some destocking in the outer related value chain. So, I'm just wondering, is part of the underperformance of costs driven by the still ongoing destocking? Or do you think destocking in the outer value chain already ended?

Well, I mean, it's quite difficult to scientifically exactly measure what is the level of stock because as we're not delivering directly to the OEMs but into the value chain. And therefore, it's not so transparent to us, I think what is definitely clear is that we are facing a low stock level in the automotive industry. So, at least I would not expect this to deteriorate further. And therefore we do think that we are at or approaching more or less a low point. So, I think for 2021, I don't consider this a negative.

The next questioner is Alexandra Lawrence from Jefferies, over to you.

So, two questions. First, in Asia. How long can you sustain the current cadence of growth before you need to invest in more capacity? And if auto demand normalized, in line with your other markets, how much of the detail wins that has been for margins across all of your segments?

Can you repeat the second question? We didn't get it?

If automotive demand had catch up if the volume recovery in automotive had kept up with the rest of your business lines, how much would have been the impact on margins? How much is the mix effect to drive in Q3?

Let me elaborate on the first one. This Markus speaking. And thanks, Alexander for his great questions. So I think it is important that new capacity is not a matter of just saying, ''Hey, we need new capacity, let's build another world scale.'' But what we're constantly doing, and we have alluded to that also in previous calls that we have mixed, let’s strategy of so called smart CapEx, where we actually build additional smaller units within existing plants at low costs from a specific perspective that means perform. And that is actually part of our existing capital expended plans this year, as well as also for the coming years. On top of that, there's always topics that we call the bottlenecking that means we going into the plans, and enlarging specific parts of the plans, which then increase also at low CapEx, existing capacity and that is also what we are continuing. The only thing which we have scaled down a little bit on is, let's say the next big work and investments. And so from that perspective, I think we can continue in particular next year, but also the year to come after next year to grow also in Asia-Pacific, also in particular, in the profitable segments, for example, coatings adhesives, but also polycarbonates. And please also do not forget that there is now an opportunity to grow with the recently announced acquisition of DSM, RFM. By for example, using the joint asset basis, in a much more effective and efficient way, then would have been possible if the two companies would have continued to operate separately. So there is significant opportunities for us also, to continue to grow profitably. And at the same time, not investing into world scale also in Asia-Pacific. So that's for the first part of your questions.

So let me take a second part. And just to avoid any disappointment, I think I cannot give you any exact specific number on specifically the automotive industry what has happened, what would it have been if the growth rate had been on par with the other industries, but maybe just a little bit of comment and rounded and order of magnitude. So I think first of all, the automotive industry for us is 17% of our exposure. It's not huge, but it is profitable for us because with caters into the automotive industry is the specialty grade from PCS. And secondly, very much CAS has an automotive exposure. And the order of magnitude, I think you can see when you look at the negative volume leverage in our EBITDA bridge because you see that there was a negative 41 million despite our call volumes growing by 3% and that is too large extensive and by mixed effects, admittedly across industries and also across our internal segments, but the key driver of this is of course that the automotive industry was not as par with the other industry growth and therefore I think the order of magnitude can be seen from this effect, which is at first sight counterintuitive.

Now, we're coming to the next questioner it is Sebastian Bray from Bear Berg.

I would have two piece. The first is on pricing in the CAS segment. How exactly is pricing setting this segment? And have there been any competitor capacity additions recently that would have partitioned the pressure? By how is it sets? How often are contracts renewed? My second question is on polycarbonate capacity additions. How much polycarbonate capacity has in your view come to the market this year? And always, is it still realistic to be talking about 8% to 10% capacity additions over the next year? Thank you.

Sebastian, this is Markus speaking, thanks for your questions. So pricing in CAS, how exciting said there are the new capacities. We have had seen capacity on some of the larger products in our coatings adhesives specialties area, nonetheless, we have not seen any significant impact on the price developments for the entire portfolio. And also as holds true in recent months also, during the pandemic, customers were not asking or contracts were not reduced with the aim of reducing prices, it was all about that we could deliver. It was all about the high specialized character of the products. And this is actually applying broadly for the entire product mix of the entire CAS business units. On your second part of the question, I think Thomas will get.

Yes, Let me take the second part. So I think for the PCS expansion, I think currently we're assuming roughly 11% capacity increase on an industry view for 2020. And we don't think that there will be major chances for lower number then this just because all the capacities essentially have already started to produce. So I think this is something that is in the market already. If you look into 2021, our assessment, and this was probably somewhere between a science and an art is that it could be a capacity addition of some 8% lower than the number that had originally been announced by our competitors, because we do think that there will be some delays or shift into some other years. Now the question is will this have and this will be a higher number than the potential increase in demand. Nevertheless, we do think that the pricing effect of the pricing downside is rather limited because if you even look at our after September margin, it is very close to the absolute low bottom that we've ever seen in the last decade. And therefore the low cost producers are operating while the high cost producers are reducing the output because they don't want to lose cash with every time that they produce. And therefore, despite those assumed 8% capacity additions, we do think that the downside on the margin going forward is benefits in limited.

Our next question comes from Georgina Iwamoto from Goldman Sachs.

And my first one is on capital allocation. I'm kind of a follow-up on the one you got on the CapEx outlook. I was hoping you might be able to confirm a bit more numerically where you see CapEx for the next few years? It sounded like, it could be flattish versus this year, given were just looking at kind of de-bottlenecking and smart CapEx expansions. And then, if you could just remind us generally on your capital allocation policy, so how are you thinking about M&A, just maybe reiterating your commitment and more M&A after the acquisition?

Yes. I mean, on this one, so this year, we're shooting for the EUR700 million, and I would expect a slight increase maybe for 2021. But if I say slight, it will be slight, not significant. And then there might be a smaller step-up into 2022. But again, this will be a gradual move. So, I think relative to the overall numbers, this is a very moderate step-up at best. Secondly, I think in terms of capital allocation our priorities are unchanged. And we've always said that a dividend is a key priority for us. CapEx in order to make sure that we grow. However, our key focus is of course, not growth for the sake of growth, but to really invest into those areas which could generates the best value for our investors, and that is also the same view that we take with respect to un-organic growth, where we have said, this has always been on our agenda because we do think it can be value accretive. If we provides targets for us, we have February would take at least a little breath for the time of the de-leveraging phase and the integration phase, and we would not look into any significant acquisitions in that timeline, and that is still our commitment. But, if you take a medium to long-term view, of course, we do think that, it would aid could be also an option in addition to the organic growth options that we will look into.

And then just kind of following-up on that. I mean, it seems to me that, during your kind of introductory speech, you talked about 2020 being a trough year, and we've seen demand starting to recover quite strongly in the third quarter. And then we're looking at CapEx flattish, maybe slightly higher in the coming years and limited M&A. So is it fair to say, we're looking at low capital intensity and higher cash generation for Covestro going forward? And if that's the case, can you just remind me, what kind of a leverage level you'd be comfortable returning cash to shareholders?

Yes. So, for first of all, I think yes to all the observations that you made. Yes, we're looking into, -- I think, let me give you a little bit the bigger picture. When Covestro came to life in 2015, we had capacities that were underutilized and therefore growth in itself was an important driver of profitability, because unutilized plans if you are a cost leader is simply not a sensible thing to do. So I think in that sense, growing our output was simply very sensible, and I think 2020 has proven that, because we were able to maintain our production more or less full speed while others had to shut down at least culture that output, and that has proven to be a sensible strategy, especially if you look at PCS, for example, where prices are still at a very, very low level. Now I think every speak, we do have now a very good utilization of our asset and our focus in terms of growth, therefore naturally is shifting into more, not growth for the sake of growth, as I said, but growing, especially into those areas, which will generate the highest value for the investors. And, yes I think that that is maybe the focus or slightly shifted focus that we will take in the future leverage. I think our assessment is unchanged. We're talking about 1.5 to max 2 times across the cycle to maintain a solid investment grade rating, which is of utmost important to us. And therefore, immediately I would say cash returns to the shareholders are not in the cards. But of course, if the situation changes, then this is also for us a viable option.

And next up is Daniel Chung from Redburn, over to you.

Just three questions for me. To follow-up on the tightness in polyurethanes. Do you have any visibility on how this tightness may last in the next through the quarters? And then second question is quickly on the price war that delta. So with the indication that for four years and the minus 100 million in private key hole is around polyurethanes. How would you split back into the divisions?

Daniel, this is Markus speaking. On your first question a few are tightness, it is very difficult to say, it is heavily depends on the competitors whether they solve their problems and here particular in TDI. And as you know and have witnessed over the past couple of years, given the market size compared to plant size in the TDI markets, that one plant is representing a significant amount of the world's capacity. So one plant can make the difference between a totally oversupply and a totally under supplied market and with that also can lead to significant price movements in very, very short time. And that is further accelerated or amplified by the fact that it is very hard to store TDI and therefore puts TDI on stock for more than a couple of weeks. And in this context, there is more or less impossible to clearly say okay, it was developed like this is very developed like that. Currently, we are due to the overall industry situation including ourselves in a short supply situation, but that could potentially change. But when this will be and to what extent this will be really for me impossible to focus at on MDI. We have a slightly different story. On MDI, again market size compared to plant size, it is not that impactful in one plant is actually not in service or maybe two or three plants are not in service for a short period of time for example due to unplanned shutdowns. Secondly, there is some opportunities as we have a broader product range in MDI it is not as broad as in polycarbonates or CAS, but broader than TDI, roughly one on a different grades compared to roughly 10 different grades in TDI. That means also here we have different outlets that means also lower quality MDI that means less reactive, and therefore, let's say a longer sword maybe can be sold in the market. So, as a little bit more buffer plus the market is structurally more gearing towards a balanced market, I would say and that will also continue if demand is developing more or less mid to long term as we predicted exactly in that direction of a balanced market. So overall, I would say for MDI, despite some shorter movements, I would say that we are approaching once again, a more balanced situation also with regard to the development into the next quarter.

On your second question, I think, I'm not sure that totally correctly, let me try and answer nevertheless. And then please ask again, if it's not meeting at all, what you were shooting for. So, in terms of the pricing delta, we said for the full year, we are expecting a value of negative 100 million. If you build the bridge between 2019 and 2020. You have seen that for the first nine months of this year, it was negative roughly speaking 260 so that as a delta in Q4, we are expecting a positive pricing delta of roughly EUR150 million. And that is mainly and that goes back to what Markus just said those EUR150 million will mainly stem from our PR segment where we are seeing very constructive pricing in both in MDI and TDI. So I hope that was your question.

Your next question comes from Thomas Wrigglesworth from Citi. Over to you.

First question, if I may, is where the order book is on autos? I mean, accessing 3Q now that you've got probably most of October and November data under your belt, how does got longevity in your view? And also EBITDA? Thank you.

Yes, Thomas, this is Markus speaking. Thanks for your question. If we look at your order book and I think Thomas has also indicated that during his speech, we saw that the continued sequential improvement of demand but also of our availability, despite all the hiccups that we had to foreclosure, let's say is also continuing to October. So what we have seen in the third quarter is pretty good reflection about what we have seen in the first couple of weeks in October. And we also see and I think you particularly asked about the automotive for development, even though the automotive segment was lagging behind in terms of the developments, we have seen, still that you have a very low level of positive developments in the automotive industry. And also debt development has continued to appear in October, and at least as of today is also continuing with regard to order books adjusted for seasonal effects in the next couple of weeks, as far as we can see that given our order books normally give us a picture of other couple of weeks. So six weeks on average, sometimes a little bit longer, sometimes a little bit shorter. However, it needs and just as a reminder as the delivery bottlenecks that we talked about earlier, and here particularly in PCS, and particularly given the situation of fourth measure PCS in the United States. So mixed picture trend is continuing to be positive still on a very low level overall and unfortunately meeting supply constraints here in particularly U.S. in polycarbonate.

Just follow-up on that’s, we've talked about demand strength and clearly Asia-Paxton very strong volumes. It looks like pricing across those your products, but also your inputs is routing very dramatically in China over the last couple of weeks. I know that's quite short-term. But we think, we now are in a phase of actions going to restocking in China do you think is that we're starting to witness into your end? Is that something you've taken into consideration into your guidance? Thank you.

Once again, Thomas mentioned it also earlier. This is a science or art questions and our question. From all eyes I witnessed from all conversations I also asked given the very limited opportunities to have a first-hand picture by traveling there. And when you get a first-hand impression from all the talks that I had was respected people, with customers, with our own sales staff on the ground. I would not say that we see restocking or not really seeing restocking effects in China, it is real demand. And it's really a strong uptake across the board in all industries. And one of the key reasons for that is the travel restrictions and travel ban redirects massive flow of money to other areas. One is local traveling, second topic is luxury goods, and third topic is every other let’s say mean how you can spend money that is for example, automotive, that is for example, electronics, and that is for example, also in China here there refurbishing activities. So all in all, we see redirections of spending hours from for example, traditional travel expenses. And Chinese were traveling quite heavily now to what other segments and we are benefiting from that. And overall the Chinese government is putting significant efforts into strengthening local consumption. And that's also I think, the first wave of what we are seeing here.

The next question comes from Christian Faitz from Kepler Cheuvreux.

On this topic, as you mentioned, one of the buses demand drivers your stock model was fleet refurbishing their homes with new sofas and mattresses stapled collars, etc. Are in your few people buying just another set of sofa next year again? So how sustainable do you really think this trend is for next year and beyond? And then second question slash suggestion in your Q1 and Q2 presentations, you showed very helpful charts of sequential volume growth and selected countries and regions. You don't show this in today's presentation. Page 3 is quite helpful but doesn't show these sequential moves. Would you be able to preview describe how’s sequential volume transfer your key regions also going into Q4? Thank you.

Yes, Christiana, this is Markus speaking. And I believe there is a clear trend towards a search so far. No, I just put this talk aside, please immediately forget about that. I think there's a stronger trends that we're currently seeing. And that is a societal trend that people are focusing more back towards home, that they're focusing more back towards their direct let’s say environment that vicinities. In this context, I would say that we see a clear trend. And I would believe that this trend will also last longer than one or two quarters maybe last longer than one or two years. And that's why also from today's perspective would say that there were not disruptive change with regards to people refurbishing and refurnishing their homes, but that there’s will be more trend that will company ask for a couple of quarters, maybe even a couple of years, and we're there for extend. And that's why I would not say that the current trend is short lift. And however, that's just a personal observation that I have. And from that perspective, I would not see that, this short-term trend would go away. But again, let's see. And for the second part, I would like to hand over to Thomas.

Yes. On the second one, good to hear that you like the chart. I think the disadvantages was quite busy with seven day and moving averages, and I think it was quite confusing sometimes. But let me talk a little bit about the sequential development. So I think first of all, if you take it by month, while July was even still a slightly negative number in terms of our volumes, August and September were both clearly above previous years. So, it's sequentially pointing into the right direction, and that is also true for all regions. So I think what we have always said is in the sequence as they moved into the recession, they're coming out of it. And so, over the course of Q3, you've also seen a real opportunity for ourselves and positive development by region within the quarter. So September, for example, for NAFTA was already better than the quarter average or if you take July, and we take this as a positive sign because I think sequentially it's pointing into the right direction.

And the next question comes from Geoff Haire from UBS.

Just a very simple one, first of all the EUR90 million other I just if you could break down what that consists off in terms of straight off between temporary cost savings and the effect of the lack of short-term bonuses? And then just on looking at the outlook statement you've made for this year. My numbers might be wrong on this, but if we take current spreads on a sense, a small amount of volume growth, EBITDA on Q4 could be somewhere in the region of EUR600 million. I'm just wondering, what the differences between what you're guiding for at the moment and what that spot EBITDA could be if spread continue to remain where they are, if you could just sort of break it out that, that would be helpful.

Yes. So, let me start with the first one. I think, we're struggling a little bit to break down the EUR19 million. So, I think in very simple terms, it is exactly the portion of the EUR300 million that we have said, we would extended as short-term savings that falls into Q3, and we're expecting a slightly lower number in Q4 in a year-on-year comparison, also because we had some exceptional positive in Q4 of last year, like insurance reimbursement, but also book gains on the disposals that we did. So, the numbers that you will see as we indicated will be much lower, but the EUR90 million simply is a broad mixture of all the contingencies that we made. So no travel, essentially no hiring, you've seen that our FTE numbers further decrease in Q3, the restrictions on training, no external consultants and so on. So, it also contains the solidarity pack that we concluded with our employees. It does contain all kinds of savings in our funds for maintenance areas simply because we're spending less CapEx that also brings with it less OpEx it's really, really a broad mix of measures that is this line item. And then to your second question, I think, I'm struggling a little bit to come to the EUR600 million. Again, I think our broad guidance will be that we do see a, if you take it year-on-year, a slightly negative effects from the volume developments, but a positive from pricing, but the order of magnitude that we see as well EUR150 million. And therefore, and that will then translate in the EUR400 million mark-to-market that we will see for 2021, if you could continue that level into the next year. But I think the 600 clearly is not a number that we would feel comfortable with.

The next question comes from Isha Sharma from MainFirst.

The first one is how similar or different is the outer situation at TDI and MDI to what we've already seen in 2017 for the market and then -- specifically. And given that, is it fair to say that you're exercising some caution when it comes to your price delta guidance for 2020, but also for '21? The CEO of Dell, for example, mentioned that the isocyanates feistiness seems to be or might continue also in Q1 2021? Thank you.

Isha, this is Markus speaking. Thank your question. While comparing two situations that are based on unplanned outages in the entire industry, let's say amongst several years for me is a real challenge, I have to say, because the root cause for these outages might significantly differ, the magnitude of outages might significantly differ, and they're unplanned. And that by nature makes forecasting possible. And in addition, I would feel really uncomfortable to say that those outages would continue to last significantly into the next quarter. Because we are doing actually the utmost to bring our plants back on track and back on stream. Because our aim is to supply customers based on their needs and to supply the demand. And also make sure that in particular MDI and TDI markets continue to grow. And from that perspective, I would have really a hard time to compare the outage situation in 2017, which has led to significant fly up margins to unprecedented also profitability and results. And from that perspective, would also not see how this was exactly compared to today. Once again, we have a TDI situation in the United States based on a supplier issue with the key raw material that is also affecting PCS and MDI. And we hope that we get out of this situation as quickly and as soon as possible. And at the same time, we have a technically based failure in one of our parts in the TDI plant in Germany, but we also hope that we get out of the situation as soon as possible and plant can start delivering. And I cannot talk or say anything due to lack of insights about how the competitive situation is looking like in this context. So yes, frankly speaking, a long answer, maybe not even an answer, but just let's say an assessment of the situation. I hope that we're back on stream as quickly as possible that we overcome this very unfortunate situation that we are in right now. And we can deliver to our customers as soon as possible. So that's my best answer. On TDI, as you might imagine once we are back on stream, we have a downside risk given that we still have a low overall industrialization, and also based on the high volatility of the prices, and therefore our respective, let's say overall nameplate capacity is still much larger than the currently underlying demand. MDI once again to reiterate that here the situation is different, because I believe that we are continue to move too much balanced situation in the market. And that will continue also in 2021.

Gentlemen there are no further questions. Ronald Köhler: Good. Thank you very much for all your questions. And obviously now with that being the last question that's making it possible to close on time. So yes, and speak to you later as the next conference call or in between. See you, bye.