Fuchs Petrolub SE
Q4 2021 Earnings Call Transcript

Published: 18 Mar 2022

[Operator:]

Dear ladies and gentlemen, welcome to the Analyst Conference Call of FUCHS PETROLUB SE. At our customer's request, this conference will be recorded. [Operator Instructions] May I now hand you over to Lutz Ackermann, who will start the meeting today. Please go ahead.

[Lutz Ackermann:]

Yes. Good afternoon, ladies and gentlemen. Lutz Ackermann, speaking. On behalf of FUCHS PETROLUB, I wish you a very warm welcome to today's conference call on the fiscal year 2021 figure. As always, all relevant documents have been uploaded at 7

[Dagmar Steinert:]

Yes. Thank you, Lutz, and a warm welcome from my side. Stefan Fuchs, as he has tight time schedule today, will dial in, in a couple of minutes. Therefore, I will start and run you through the figures. And then of course, Stefan Fuchs, will make some comments on other topics. Therefore, I would like to start with Chart number 5, our highlights for year '21. It was really a challenging environment in '21. It was like the second year in the crisis, and we completed it successfully. Compared with 2020, our sales increased significantly by 21% to €2.9 billion. We also exceeded the level of the precrisis year 2019 by 12%. Our EBIT improved by €50 million and came in at €363 million. With all that, we exceeded our original forecast of the year '21, and of course, also the results from the year 2019. Our sales growth '21 was driven by a surge from sales price increases. And it was a really challenging environment with all these price increases on the raw material side and of course, other inflationary cost increases. What we've seen as well is a strong net operating working capital build-up. And this is due to higher business volume and of course, this inflation in raw material prices. Overall, as already said, it was a successful year for us. And the Executive Board and Supervisory Board are therefore proposing a 4% higher dividend for the year '21. Now I would like to turn to Chart number 6, our sales development. There, you can see our quarterly sales development for 3 years, starting with '19, '20, '21. And of course, you see in the second quarter of the year 2020, the strong impact of COVID-19 and then the recovery of the economic environment. It started in the second half of 2020 and was continued in the first half of '21. In the second half of '21, we see more an increase in sales prices due to price increases to compensate for our raw material price increases. Looking at the next chart, number 7, our EBIT development. It's more, somehow looking at the year '19 or '20, a similar development. But what you see here on the earnings side, of course, as well is in the year '21, the impact of inflation, not only raw materials, but as well the impact of other cost inflation. Now I come to our next chart, Chart number 8, our group sales. As you can see, the strong year-on-year growth of 21% is based on organic growth of 20%. And that is driven largely by an expansion in business volume. In addition, of course, as already said, increases in sales prices to compensate for the price prices on the procurement side became increasingly significant in the second half of the year. Acquisitions and exchange rate effects played no role. And all regions contributed to the sales growth. I will come to the regions in a minute. Therefore, I would like to continue with our earnings summary for the full year '21. Our sales are up 21% and of course, we benefited from our increase in higher selling prices, and we managed to increase our gross profit only by 13%. That is due to this impact of higher raw material prices. Our gross profit margin of 33.6% is 2.3 percentage points down due to the strong increase in raw material prices. If you look at the other function costs, they increased as well. But this increase is mainly driven by higher freight costs and -- however, but they increased lower compared to the sales growth as well as to the gross profit. Our net equity companies, they provided €9 million EBIT or earnings. And overall, our EBIT came in by €363 million compared with €313 million in the year before. So our EBIT is up 16% year-on-year, and our EBIT margin is 12.6%. Our CapEx is significantly lower and it's now on the level of depreciation and amortization. Our net operating working capital increased quite a lot, and that reflects the higher business volume and of course, the price inflation. Therefore, our free cash flow before acquisitions came in by €90 million compared with 2020 with €238 million. Now I would like to come to Chart number 10 to get -- to give you a slightly overview about our region, EMEA. In EMEA, our sales were up 18% year-on-year. That was mainly driven by organic growth. Compared with 2019, we achieved an 8% increase. We have seen negative currency effect of Eastern European countries, but they are slightly overcompensated by positive effects mostly from South Africa and the U.K. The EBIT of the region EMEA was significantly impacted by increase in raw material prices and a considerable increase in transport and labor costs. Therefore, the EBIT for the region EMEA is €166 million, which is €2 million below previous year. If you look at Asia Pacific, and there, we can see that our sales, that's Chart number 11, our sales are up 22% year-on-year and as well mainly driven by the organic growth in China. Compared to 2019, sales were up 19%. In addition to China, all other countries recorded organic increases in sales revenues, except Malaysia, but that was COVID-19 related. The strong Chinese renminbi and Australian dollar more than offset negative translation effects resulting from weakness in the rest of the region's currencies. The EBIT of the region was €122 million as well as the sales, 22% above previous year. Coming to the next chart, number 12, North and South America. There we see as well an increase in sales by 22% year-on-year, and this is volume driven, and we see a strong organic growth in North America, but we have also seen an uptick in South America. Compared with 2019, sales are up 13%. Of course, the region continues to benefit from our acquisition of Nye and PolySi in the last year and Nye, as well, increased profitability. We've seen negative currency effects from the weak U.S. dollar and, of course, of the South American currencies. We have a strong increase in earnings. Our EBIT of the region is €60 million in the year '21 compared with €42 million in the year 2020. But the year 2020 in the region, North and South America, was quite a very weak performance and a very weak year. Now I would like to draw your attention to the next chart to our net liquidity. As we've been able to exceed our forecast in terms of sales and EBIT, we missed it in our free cash flow before acquisitions. And on this Chart number 13, you can see the development of our net liquidity starting with December 2020. We get a cash in from our earnings after tax with our depreciation and CapEx. As we put our CapEx down on depreciation level, we have no more or less, no impact. But then with a cash outflow of €152 million, you can see that we significantly increased our net operating working capital. And this is mainly based on an increase of inventories, which reflects the massive price increases. In addition to that, we have another cash outflow of other changes of minus €18 million, and this is due to the tax payments and the tax effect. In the year 2020, we had less tax payments. And in the year '21, we had to pay taxes from -- regarding the year 2020 as well as advanced payments for the year '21. In total, the difference or -- it was an amount of €34 million above 2020. On the next chart, net operating working capital. You can see the development of our net operating working capital, as already mentioned, is significantly up. And we are reporting 22.6% of sales. It's not the highest number. You can see in 2018, it was even higher. But of course, compared with 2020, it's a steep increase. And that is based on the -- not only on the increase of business volume but as well on the price inflation. On the next chart, number 15, you just see some numbers of our strong solid balance sheet, and that reflects as well in the time line, our strong cash flow generation. In the first row, you can see that we -- as we increased our business volume, of course, we increased the number of total assets. But looking at our equity, we report an equity ratio of 76% compared with 75% the year before, and that's a very strong number. We are -- we have a net liquidity position, even if it's below last year, we reduced our CapEx back to depreciation -- amortization levels, in 2016, we already started our CapEx program and our free cash flow before acquisitions. Of course, in the years 2016 to 2020, has an impact of this CapEx program. And in the year '21, yes, it looks quite low with €90 million, but I already commented on the strong net operating working capital increase. Coming to the next chart, number 16, there, you can just see what I already mentioned. We proposed a higher dividend by 4% for the year '21, and that is 20 consecutive years with dividend increases. With that, I would like to hand over to Stefan, who's going to take over for the outlook and some other remarks.

[Stefan Fuchs:]

Hello to all of you. Stefan Fuchs. I am now on Slide number 17, where you see our outlook. We have made that outlook prior to the Russia and Ukraine conflict. And therefore, I think there is a high uncertainty behind that, but I am not able to quantify it, and I'm sure we will happy later, an in-depth discussion on that. But our initial forecast suggested sales cost from -- starting from €2.9 billion in 2021 to a range between €3 billion and €3.3 billion. This is mainly organic growth, but also some influence by price increases. We have an EBIT range of €360 million to €390 million. You see the FDA on the prior year level. And Dagmar mentioned the €150 million NOWC increase through -- mainly due to inflation the year 2021 should not be repeated to the full extent. And therefore, we have forecasted prior to the Russia crisis, free cash flow before acquisitions of €220 million. If you go to Slide number 18, you can see the raw material price tendency in the last couple of weeks. I think the red curve, you know better than myself. So this is the code oil increase. We have seen chunks -- significant chunks directly after the war started. It went down again to a more normal level. And as you all know, our base oil prices have a much slower development. And therefore, we have now got increase announcements of around 10% in the Americas and Asia and just above 5% in Europe. But I ensure there's probably more to come. I would now like to go back, and sorry for that and also sorry for my delay, I would like to go to Slide number 4. On Slide number 4, you have a summary of the Ukrainian and Russian business of FUCHS. I think we have been very successful in the last couple of years. I must say I'm absolutely shocked from what I see, the television and we fully condemn the war. And we also placed the sanctions because I think it's the only way to get Mr. Putin back to a more rational thinking. I feel extremely sorry about our Ukrainian colleagues. I had a Teams call with them on Wednesday. They're all alive. They're all so far in good condition. Most of the men have to fight in more. We have now evacuated some of their families. So they have arrived in our Polish subsidiary in -- and we try to get more people out. We have 55 employees in the Ukraine. It's for us a trading company. They normally buy their finished products in Poland, in Belgium, in Germany and in the U.K. The office and warehouse is a little bit in the West, but all our application engineers and salespeople are spread all over the country. In 2021, we had sales of €20 million. The business, more or less, came to a standstill on the 24th of February also. They have shipped out products last week to the agricultural companies there from myself and from the company, we have a clear message to up to yourself before you think about making money. But I must say, watching the people there, they're extremely placed and motivated. So we have to see how that continues to develop in the next couple of weeks and months. In Russia, I must say, I also had a conference call yesterday with our leadership team and the -- on the team session. It seems also terrible for them. Many of them are married to Ukrainians or have links into the population, and they also don't like the war. Obviously, they're all afraid to say something. In Russia, we have 122 employees. We have an office rented in Moscow, and we have a plant in Kaluga. We did €67 million in sales in 2021. And we have made a bold step this week. We stopped all deliveries from -- products and finished goods also on raw materials from any FUCHS subsidiary around the world into either FUCHS Russia or the country of Russia. Since Russia, you know for oil, but the petrochemical industry is not there. So they have to import a lot from a raw material standpoint. So we have more or less with for their business model. We don't do any exports from Russia. It's -- in most of the countries worldwide, local for local. But we continue our plan and our operation on a very limited basis. I reissued yesterday; we do not intend to shut down. We do not intend to sell. We already got offers -- unsolicited offers from people wanting to buy the plant -- they're hopefully for the long term. But for the time being, we have cut all supplies. It's a really sad story, but I think this is all we can do and we revisited positioning on a daily basis. Now when we go back to Page number 2. We all know that Dr. Kurt Bock stepped down or he announced a step down in October from our Supervisory Board once the shareholder assembly on May 3 is over. He continues to lead our Supervisory Board meetings. We had one yesterday and we are doing one in December. So on that side, it's business as usual, but he made his decision. And I think we catered for our future in a very good manner. So Dr. Christoph Loos, who is in the Supervisory Board since about 2 years. He will be elected to be the Chairman. That agreement was made within the participants once the shareholders assembly is over. And for the new candidate, we have Dr. Markus Steilemann, and if you go to Page number 3. I can go a little bit into the detail with regard to Dr. Markus Steilemann. He's exactly the person we were looking for. He has a chemical background, which was important to us. So he started chemistry in Aachen. He also has a business studies diploma. He's rather young, and he's an active CEO. So he's the CEO of COVESTRO. And FUCHS is his first mandate, and he's really looking forward to it and we are very, very happy to have him. Dr. Loos, as you know, is the CEO of HILTI. At the end of this year, he will step down being the CEO, and he will move in what they call the -- which is a little bit more than the German Supervisory Board, but also a very young fellow from a very successful company. We admire HILTI for their marketing, for their IT capabilities and also for the succession planning in the -- in regard to HR. So we are happy to have him as the Supervisory Board Chairman. We are very glad that Dr. Steilemann and all others will continue, so my sister is the Deputy Chairwoman. Ingeborg Neumann. I think she's a really outstanding Chairwoman of our Audit Committee. And we have got two employee representatives on our plant in Mannheim, Mr. Lehfeldt and from Kaiserslautern, Mr. Stahlschmidt. That's all Dagmar and I had for the time being. And now we really look forward to go into a discussion with you. Thanks a lot.

[Lutz Ackermann:]

Yes, maybe -- maybe one last remark from my side. Before we open the Q&A I -- again the Capital Markets Day, which we have on 28th of June this year, and we will present three topics there. The first topic is on our long-term financial targets. We will concretize that they're a little bit and bring more details. The second topic is on new business opportunities, which we will present to you, including everything which relates also to e-mobility strategy that we have. And the third topic will be on how we see sustainability at FUCHS. So I think that will be a great day, and we're also looking forward to hopefully meet you in person to that point in time. And having said that, I would like to hand over to the operator to open the Q&A session.

[Operator:]

[Operator Instructions] The first question is from Martin Roediger, Kepler Cheuvreux.

[Martin Roediger:]

I have three questions. That the first one. Your net earnings are up by 15% in the full year 2021 but the dividend proposal signals a 4% increase in dividend. Why do you lower your payout ratio? I can also continue with the other question, but I think it's better I ask them one by one.

[Dagmar Steinert:]

Yes. No, I take the question. Thank you for that, Martin. Well, last year, we had quite a decrease or a difficult year. And you know our stable dividend policy. Stable, which means we pay at least the absolute amount of dividends we paid the last year and it's always our intention to increase the dividend. And we don't look at the payout ratio. And I mean, we increased our dividend for the year '21 by 4%. And looking into the future or out of the window, we all don't know what's happening in the near future regarding Russia, Ukraine, direct, indirect impact. And yes, I think it's -- our dividend is fine.

[Martin Roediger:]

Second question is on your regional earnings split. When it comes to the so-called holding and consolidation line, the EBIT was €6 million in Q4, which is a quite high number compared to history. I understand this is due to a license income from subsidiaries. So is that -- this figure, a sustainable figure or a onetime effect? And is that related to the Pentosin business or to any third-party business?

[Dagmar Steinert:]

No, it's not a licensed impact. Of course, in the last month or closing, if you do the closing accounting, you have one or the other release of a provision. And there, we see one or the other impact. And then, of course, it's a question of intercompany profit elimination and there sometimes is just a swing. So there is no, let me say, a significant one-off figure in there.

[Martin Roediger:]

It's a one-off?

[Dagmar Steinert:]

No. It's -- I mean, regarding intercompany elimination, that always, of course, depends not only on the volume of intercompany sales, but as well on the underlying margins. And therefore, there is no burn from that in the fourth quarter.

[Martin Roediger:]

The third question, I understood on the full year basis that you -- that the 20% organic sales growth. I understood you that it's more than half or the majority of that -- the 20% organic growth was volumes and less than half was pricing. Is that the right understanding? Or what would you say on a full year basis was more or less the split between volumes and pricing?

[Dagmar Steinert:]

No, it's correct. The 21% growth in sales is dominated by volume.

[Operator:]

The next question is from Markus Mayer, Baader Bank.

[Markus Mayer:]

I have two questions as well. The first one is also on the volume effect. In the fourth quarter, I see that the sales volume, in particular, in North and South America is up stronger than in the other regions, up 17% organically. And here, my question is, is this because in the fourth quarter overall, I think that organic growth mainly came from the price side. But in the Americas region, was there also a volume effect, in particular, I'm asking this, as I ask myself if you gain market share due to the Lubrizol fire, the grease plant? That's my first question.

[Stefan Fuchs:]

I would say that it was mainly a base effect because in the year 2020, the Americas were hit the most with regard to COVID and the longest. And therefore, it was a base effect we had at the end of the day, a very good development in Mexico in May and in South America. And it is not -- you can't relate it to the fire. Obviously, the business, I think, is gone from the petrol and many companies took over parts of the business, but you won't recognize it in our overall numbers.

[Markus Mayer:]

Okay. Understood. My second question is again on this Russian green thematic and what -- I understood correctly that you're not sourcing from Russia. But have you an idea how this looks like for competitors operating in Western Europe? I guess, several of the smaller independent competitors are sourcing from Russia and therefore, my guess, difficulties. Can you shed some more of your market insights there?

[Stefan Fuchs:]

With regard to Russia, what they have, they have got the regular -- base oils who are not so difficult to be replaced. And the whole question about Russia and the Ukraine for me is the secondary impact on our customers. For example, if you hear about cables from LEONI, which won't come from the Ukraine for some time, if you hear about palladium outlook, Russia should -- will have another impact on the chip industry. So it's rather the question how our customers see the impact and whether we get the secondary impact, which might be higher than the direct impact from our operations over there.

[Markus Mayer:]

Okay. Understood.

[Stefan Fuchs:]

And what I would like to add also is -- all the people look at Russia and the Ukraine, but we also face another significant part. Number one, the world with regard to material flows was not yet established. And that's another hit to the material flows that is happening to Ukraine and Russia, but the other big impact also is the new COVID outbreak in China. And with the lockdown in some double-digit million cities means also there, we see a number of manufacturing plants shutting down at the moment. And that's also something which will have an impact on the world economy.

[Operator:]

The next question is from vesting line is Sebastian Bray from Berenberg.

[Sebastian Bray:]

I'll ask them one by one. The first is on the guidance as it stands, not incorporating Russia and Ukraine. Is there a chance that there is an offsetting impact from the weakening of the euro versus U.S. dollar here because I look at this and I think, the one of the consequences of what's happened seems to be the flight safety and appreciation of U.S. dollar? Could you just let us know what your assumed EUR/USD rate is for the year 2022?

[Dagmar Steinert:]

I have to look it up. Give me 1 second. Please ask your second question. I'll give it you in a minute.

[Sebastian Bray:]

Of course. My second question is on price. And I believe it builds on what Martin was alluding to earlier. We've got 21% increase year-on-year in sales driven by volume. My understanding was that FUCHS put through three rounds of price increases in 2021. And yet implicitly, the group-wide price only seems to have gone up by a mid-single-digit percentage over that period. Can you give us an idea of how much room to the upside there is to the €3 billion to €3.3 billion sales number that has been guided for 2022 if it turns out to be necessary to put through further price increases? And if I were to say, well, even if I annualize the impacts from the price increases in 2021, it looks like you basically get to the -- you get quite close to the guide of 5% or so 2022 price increases. What I'm basically asking is, is implicit in the FUCHS guidance no further price increases for the year 2022?

[Stefan Fuchs:]

In our initial guidance, which is prior to the Russia, Ukraine war, definitely, we had a top line -- budgeted and an impact from the full year effect of the price increases. To be careful when we say we made three price increases. As you know, we live in the -- of hits world. Some countries made five price increases; others made two. It always depends also on the currency rate. So the RMB appreciated in China compared to the euro. So their need for price increases was not as big as in Western Europe. So each country does it on their own perspective, more or less. You have seen our percentage margin deteriorating. We have, at the end of the year, had a good trip on the raw material pricing. We are now out again for pricing increases mainly for general inflation, freight cost and personnel expense increases. However, what we expect now coming from the Russia crisis, we believe there is more increases necessary and our entire organization is on a higher -- with regard to canceling prices -- customers that go out again.

[Sebastian Bray:]

That's understood. Sorry, please go ahead, Dagmar. Apologies.

[Dagmar Steinert:]

No, I just wanted to give you the answer for our part exchange rate in U.S. dollars. It's 1 point it's close to 1.6. As today, it is 1 point -- close to 1.11. So there's quite an exchange rate effect, yes.

[Sebastian Bray:]

That's understood. And if I may come to the topic again of electric vehicles, I suspect even Lutz as earlier words, we'll hear more about this at the Capital Markets Day. But am I right in broadly saying that FUCHS grew in the automotive area within Europe in line with its end markets? Or in other words, electric vehicles were not a substantial headwind to the company in the year 2021?

[Stefan Fuchs:]

We do not anticipate to this entire development to be a major headwind for us. Obviously, when you look on the car registration numbers. It's still not a huge deal also the percentage goes up from the car registrations, but it's mainly -- at least in Germany, it's mainly hybrid cars, but the impact is not there. But we have also the service fluids and on other applications made some inroads on the e-mobility market. We do not see that with a major concern for us. There's equally, if not more opportunities at such.

[Sebastian Bray:]

Understood. Dagmar, apologies for being a bit specific on the FX. The answer is appreciated.

[Operator:]

The next question is from Lars Vom-Cleff, Deutsche Bank.

[Lars Vom-Cleff:]

Just a quick follow-up, if I may. If I'm thinking about your EBIT margin or possible EBIT margins for the running fiscal year and the quarterly development, and if I take into account that you tend to show a certain time lag when it comes to passing on your input price inflation, is it fair to assume then that the margins in -- during the first half of '22 should be significantly lower than hopefully in the second part of 2022?

[Stefan Fuchs:]

I can't give you an answer because I don't know -- normally prior to Ukraine and Russia, I would have said you are right. But now, I really can't answer that question.

[Operator:]

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

[Matthew Yates:]

Maybe just a strategic question around M&A. You said the balance sheet remains incredibly strong and gives you a lot of optionality. Is there any reason to think that as the world begins to somewhat normalize, for the most part, that now you can travel more due diligence, have negotiations outside of Europe that you might have opportunities over the coming year or so to step up the M&A activity?

[Stefan Fuchs:]

We are constantly looking for targets based on our strategic outline. I would not say that COVID hindered us. We continue to pursue different companies. I'm sure we will be able to use one or the other smaller type but I don't see a larger M&A project coming this year. So this just because of availability, it's not that we don't want it. But the question is really, there are no targets out at the moment.

[Matthew Yates:]

Understood. And I don't want to conclude you're planning to talk about at the Capital Markets Day, but can I get a conceptual question around your margin targets. In an environment where you do have raw material inflation and significant price increases to pass that through, is the intention to also recover the margin? Or do we anticipate just a mechanical dilution from that, then we need to think about revising that midterm margin target, just to reflect that?

[Stefan Fuchs:]

That's the $3 million question. And we normally -- for us, the percentage margin is very important. And over the last 20, 30 years, what we have seen is that after a period of raw material price increases, they always came down again. Now we see since 24 months or, let's say, 18 months and upward, and therefore, I can't answer the questions. We have captured the absolute amount more or less by year-end. We were now back on a route to go back to polish the percentage margin. But I can't really predict what's going to happen now. It was then again, as you know, from our track record, we always run behind a couple of months. And therefore, I can't predict where we go this way – number 1 priority.

[Operator:]

There are no further questions at this time. [Operator Instructions] The next question is from Michael Schaefer, ODDO BHF.

[Michael Schaefer:]

Well, two, if I may. The first one, coming back to your underlying raw material inflation assumption. So we talked a lot about the Ukrainian and Russian effect. Maybe you can shed some more light on what do you think the impact is on the European refinery availability here because it looks like it doesn't -- it's basically also what you show on Slide 18, there's some losing correlation between crude on the one hand and base on the others? So this would be 1a, if you like. And related to this one, you said that you have been pretty much covered with the raw mat inflation, right? Could you shed some more light on how you see additive pricing evolving -- additive costs into '22? Should we expect another inflationary scenario there as well? Or is this primarily related to base chemicals, so the second-round effects here? So those are my first question.

[Stefan Fuchs:]

If you look on Page number 18, this is a prime example, what difference is between pricing on crude and base oil because crude jumps up and down base oil is more flat development. So you see this peak in the red line is more speculation. Base oils will go up because the refinery margins are not there where the refiners want them to be. And then I think you have to expect that the entire value chain goes up because on the additive page, you have certain base oils in. So I personally assume that all three components go up. The single chemicals, anything packages and [indiscernible].

[Michael Schaefer:]

Okay. The second question is probably more to Dagmar. On trade payables in 2021, I recognize there's a decline even compared to in 2020 despite all the inflationary scenario. So is the kind of pressure from your suppliers basically on that end? And how should we think about this evolving into '22?

[Dagmar Steinert:]

Well, if you look at the trade payables, there, we have -- hold on -- it was an increase compared to 2020. Of course, they went up due to the price increases as well. So -- but not as much -- not in line with our trade receivables. They increased more.

[Michael Schaefer:]

Okay. Then I may have -- on this one. Okay, we'll do this afterwards on the call.

[Operator:]

Next question is from Andrew Stott, UBS.

[Andrew Stott:]

A couple of questions. Firstly, I just wonder if you could just talk a bit more broadly around what you're seeing. Thank you for the comments, by the way, on Russia, Ukraine and the comments you made on China, all very useful. I just wonder if you could talk around the regions, what order books look like --

[Operator:]

Yes. Just a moment we lost the line of Andrew.

[Lutz Ackermann:]

Maybe we can go ahead with the next one. Maybe we can let Andrew ask a question later.

[Operator:]

Andrew should be able to ask his question now.

[Andrew Stott:]

Okay. Can you hear me now?

[Operator:]

Yes.

[Andrew Stott:]

Okay. I don't know what happened there. Sorry. Yes. So I don't know how much you heard the first question, just basically on order books momentum, what you're seeing around the regions.

[Stefan Fuchs:]

We have got actually very high order books. In the United States, very high order books. Unfortunately, we can't ship all the orders because we still see significant raw material shortages. Maybe the most in the States. Also in Europe, we face shortages, so we can't supply it to the full extent. In China, is more balanced. But I would say the order books, especially in North America, were full offer, but also in Europe, we could sell more if you within all the raw materials.

[Andrew Stott:]

Okay. That's clear. The follow-up question I had was on your energy and CO2 side of things. You seem to do a pretty amazing job last year looking at your report and accounts. You've seen a 20% reduction in your CO2 emissions. You've also seen an absolute reduction in your energy consumption despite the fact your sales are up 21%. Can you talk me to what you've done in the last 12 months? And then what -- can you talk as well about the energy bill? And to what extent, if any, you'll be impacted by energy prices?

[Stefan Fuchs:]

It's a good question and then this will be one of the key topics in the Capital Market Day in the summer, also with regard to e-mobility, in order to give you more insight. Our energy costs are just below 1% of sales. So we are not very energy intensive. If you look at the CO2 bill of lubricant, most happens prior of our date, so the raw material generation or after our date in the usage. We are impacted now by trade and by raw material costs, but we have made a lot of efforts in our plants with regard to energy savings, LED lights, solar panels and insulation mainly.

[Andrew Stott:]

And how much of your energy is now renewable, please?

[Dagmar Steinert:]

In Europe, everything. And we switch wherever we are able to do so to green power all over the world.

[Andrew Stott:]

Okay. Super.

[Stefan Fuchs:]

I have to say sorry for that, but I must leave you now. It's really important time. So I have that 1

[Operator:]

Do you still want to go on with the Q&A session, the rest of you?

[Lutz Ackermann:]

We may answer the questions. We can continue.

[Operator:]

The next question is from Martin Roediger, Kepler Cheuvreux.

[Martin Roediger:]

Just two follow-up questions. You mentioned you run your Russia business at a very low level, but you certainly continue to pay your 122 employees. So is it right to say that this business will be loss-making going forward? And is it right that this topic is not part of your guidance?

[Dagmar Steinert:]

Well, of course, our guidance is not included by Russian or Ukraine conflict, but we don't expect now Russia to make a loss. I mean, yes, the business is significantly going down and -- but we already have some people in Russia on like short-term working and so on. And they are still doing the local business. So I wouldn't -- we will have an impact, of course, not only on sales as well on our earnings from that conflict. But today, we can't say in which extent.

[Martin Roediger:]

And the second question, your plant in Kaluga is, I think, quite sizable. Can you quantify the amount of assets there? I just want to know what could be the write-offs in case the Russian government will nationalize your plant?

[Dagmar Steinert:]

We don't expect to -- that, that happens because we are still continuing our local business. We comply with all the sanctions. And therefore, we don't see that. But overall, if you would have to write off all the assets and everything in Russia, what I absolutely not expect there, we would talk about around €25 million.

[Operator:]

The next question is from Markus Mayer, Baader Bank.

[Markus Mayer:]

Yes. Only one question, maybe not anymore that relevant in this Russian, Ukraine war. But nevertheless, I wanted to ask how the first quarter has started volume-wise and also from the different kind of end market segments in the regions, that would be helpful?

[Dagmar Steinert:]

Yes. Well, if you compare it with the first quarter '21, of course, it's much weaker as we had very strong first quarter in '21. And on the other hand, the start of the year, we don't see at least not in January, February, an impact of the crisis, Ukraine and Russia. And as Stefan mentioned before, our order books are full. And so the -- and the impact of, again, increasing raw material prices is not seen in the beginning of the year.

[Markus Mayer:]

Okay. I see. Maybe a follow-on question on this. So looks like that in the fourth quarter, there was also kind of maybe not destocking, but at least not restocking as base prices came down as such. Maybe customers, in particular, in Asia might have thought that also lubricant prices go down. Do you see now in Asia, certain restocking tendencies?

[Dagmar Steinert:]

No. We haven't any signs of that.

[Operator:]

We haven't received any further questions. I hand back to you.

[Lutz Ackermann:]

Yes. So if there are any -- no further questions, we'll come to the end, but maybe one last chance, if there is one?

[Operator:]

[Operator Instructions]

[Dagmar Steinert:]

So if there are no further questions, I think we call it today. And thank you very much. Thank you very much for your interest, your questions. And yes, so goodbye, and enjoy your weekend.

[Operator:]

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