Chemicals Initiating Coverage 6 December 2018

Good value in a fundamentally sound Sector Chemicals sector Market cap in bn EUR 400

Germany’s chemical sector has traditionally a strong global standing. 350

Besides world market leaders like BASF and Linde plc, there are a 300 number of companies with strong positions in profitable market niches. After a muted year-to-date performance, we see good value 250 in a couple of shares. With this report, we are initiating coverage on 200 eight German chemicals. 150

Six clusters of chemical companies 100

In order to facilitate orientation in the sector, we introduce in this 50 overview a “typology” comprising six company clusters, which should 0 not only work well to categorize the German names but can also be Germany Western Europe applied to the European universe: Industrial gases (which includes the Industrial Gases Integrated / BASF SE Other Non-integrated Application-oriented Agrochemicals Logistics German Linde plc), agrochemicals (K+S and KWS Saat), application- driven companies (Symrise and Fuchs Petrolub), non-integrated chemicals (Covestro, Evonik, Lanxess and Wacker), which is the segment comprising most of the “traditional” business models, Target Last Up/ MC logistics (Brenntag) and of course BASF, which constitutes its own Name Rating Price Price Downside (EURm) investable segment, in our view. Brenntag Buy 53 41 30% 6.280 Evonik Buy 37 23 58% 10.886 In this report, we also discuss eight investment cases in detail. Fuchs Petrolub Buy 50 36 38% 5.043 KWS Saat Buy 353 290 22% 1.914 K+S AG Buy 24 17 45% 3.177 Performance and current valuation Lanxess Buy 68 49 38% 4.512 The sector faced a tough environment in 2018 and a number of shares Linde Hold 143 163 -13% 79.923 Symrise AG Hold 70 72 -2% 9.315 got hammered. Within our coverage, the shares of Lanxess, Evonik and

Brenntag dropped by more than 20% year-to-date and Fuchs Petrolub, PE (adj) PE (adj) P/BV P/BV Div. Yield KWS Saat and K+S by 10-20%. Only Linde plc held up well due to Name 2018e 2019e 2018e 2019e 2018e positive news flow around the merger with US-based Praxair Inc. Brenntag 13,8 12,7 1,93 1,76 3,0% Evonik 9,3 8,6 1,37 1,27 5,1% Besides general concerns about the state of the economy and global Fuchs Petrolub 18,1 18,1 3,46 3,14 2,6% trade, the poor sector sentiment was in our view due to the exposure KWS Saat 20,2 18,7 2,28 1,99 1,1% of some chemicals to the German auto sector, which saw a number or K+S AG 37,3 12,9 0,76 0,73 1,9% Lanxess 10,1 9,5 1,72 1,52 2,0% profit warnings. On top of that, a couple of German chemicals suffered Linde 30,2 25,9 1,85 1,83 1,7% from increased logistic costs in 2018. These resulted from the low Symrise AG 34,2 28,8 4,98 4,50 1,3% water levels of the Rhine and other rivers due to the exceptionally dry weather in Germany. As we will outline in more detail in this report, we think these risks are manageable for the sector.

Top Picks Our top picks in the sector are Evonik (Buy, TP EUR 37, not-integrated) and Fuchs Petrolub (Buy, TP EUR 50, application-driven). Evonik represents one of the most interesting transition stories in the sector at present and offers an attractive upside of more than 50% for investors who are willing to look through the cycle. Fuchs Petrolub is a high-quality play that enjoys high barriers to entry Analyst and reliably produces a three digit amount of free cash flow every year Dr. Knud Hinkel CFA +49 69 58997 419, [email protected] and RoCE after taxes close to 20%, with a low degree of cyclicality. Lately, the share price tanked due to a slight margin dip which we perceive as buying opportunity especially for mid to long term oriented investors.

Please refer to importantThis report disclosures is generated on for the Christopher last 5 Seedorfpages of this document Chemicals Initiating Coverage

German chemicals in the European sector context Germany traditionally has a strong standing in the Chemical sector: the eleven chemical companies included in our present target universe currently have a total market cap of EUR 194bn, which makes up for more than 50% of the Western European sector’s market capitalization of EUR 380bn (see Exhibit 4).

Six clusters In order to facilitate orientation in the sector, we outline six clusters in the following sections, in each of which the German names have a strong presence: Industrial gases, agrochemicals, application / knowledge-driven companies, BASF, not-integrated chemicals (which is the segment comprising most of the “traditional” business models) and logistics. Please note that this segmentation is in no way an official / scientific one but rests entirely upon our subjective perception:

Exhibit 1: Chemicals in Germany as part of the Western European sector

Market cap in bn EUR

400

350

300

250

200

150

100

50

0 Germany Western Europe Industrial Gases Integrated / BASF SE Other Non-integrated Application-oriented Agrochemicals Logistics

Source: Pareto

Industrial Gases The Industrial Gases cluster is nowadays a real heavyweight sub segment in the sector despite comprising only two companies, one of them being the German/American combination Linde plc, which emerged from the merger of Linde and Praxair finalized in October 2018. Main products are atmospheric gases like oxygen, hydrogen and various specialities. The European players Linde and Air Liquide have also expanded into the healthcare space in the last decades, supplying gases to patients with respiratory diseases. Industrial Gases represent a highly consolidated industry with only three companies (Air Products (US), Linde and Air Liquide) controlling 70-80% of the global market but often facing strong small challengers in a local environment. In general, it is an industry with high capex needs and fixed costs but low variable costs. Capital intensity varies with the distribution mode, though (on-site and cylinder vs bulk). Thus this industry is scale-sensitive, which comes on top of other barriers to entry like network effects and high transportation costs vs low product value. Ultimately, these characteristics have shaped today’s industry structure. Energy costs are significant but are usually passed through to the customer. Technology does not play such a prominent role for the business, as it does not for the entire sector.

6 Dec 2018 Pareto Securities Research 2(44) This report is generated for Christopher Seedorf Chemicals Initiating Coverage

Agrochemicals Agrochemicals represent a rather heterogeneous sector. In Europe, there are four specialized companies active in rather different areas. Vilmorin and the German KWS Saat are seed companies, in some crops competing against much larger chemical conglomerates like Bayer and BASF, which both have also a strong position in crop protection. In contrast, the Norwegian Yara produces nitrogen fertilizer while the German K+S is a basic commodity company, mining potash and salt in Germany, Canada and the USA. To some degree, it is fair to assume that crop prices are a common driver for all four companies. Crop prices are in general at low levels for already some time now but are assumed to rise in the long term. This results from secular trends like population growth and the diet change in the Emerging Markets which will result in rising demand that must be met with arable land that is more or less fixed. Two “hot” topics dominate discussions in the agrochemical space for some time now: First, gene- modified organism (GMO) play a huge role in the seed business outside Europe, and all large seed players have a respective franchise in that area (including KWS Saat). Second, there has been a wave of mega-mergers in the sector, as the German Bayer group has acquired Monsanto and ChemChina bought Swiss Syngenta. On top of that, there has been a merger between Dow Chemicals and Dupont in the USA. This consolidation wave will most likely not make life easier for the smaller seed companies like KWS Saat and Vilmorin which will struggle to keep pace with the technological progress due to relatively small R&D budgets.

Application-driven Under application-driven companies, we understand companies that have a strong, knowledge-based position in niche businesses positioned downstream in the value chain. We would put Novozymes (enzymes), Croda (surfactants for cosmetics, among others), Ems Chemie (high performance polymers), Fuchs Petrolub (high performance lubricants), Givaudan and Symrise (flavours & fragrances) into that bucket. These companies usually set their prices based on value considerations rather than raw material price levels, with the flavours & fragrances sub segment being a (mild) exception to that rule. They regularly enjoy high barriers to entry which in combination with rather low capex requirements usually leads to capital returns clearly above costs of capital. These companies are only to a minor extend plagued by cyclical fluctuations and they usually grow above GDP. As this is an attractive bundle for investors, the respective shares are almost never cheap.

BASF BASF represents a segment of its own right, in our view. It is one of the largest “traditional” chemical companies in the world. After an early move to Asia in 90ies, it now has a strong asset base in almost all important global markets. For its geographical expansion, BASF often relied upon joint ventures with strong local players like Sinopec (China), Gazprom (Russia) and Monsanto (USA, now part of the Bayer group). Though the chemical sector is technology-wise rather mature, we think BASF has a competitive edge through its unique integrated “Verbund” architecture, which covers entire chemical value chains (upstream, intermediate, downstream), in most of which BASF has globally a strong market position. The integration into the upstream business (crackers etc.) comes with some cyclicality and high capital intensity, though. At present, BASF runs six Verbund sites all over the world and the construction of the seventh site in the South Chinese province of Guangdong with a capex budget of USD 10bn has just been announced. Earlier, BASF was even integrated into the exploration and production of oil and gas, but merged respective activities into a JV with DEA in 2018, which will seek a public listing at some later point in time. This will further improve the risk profile of the BASF share, in our view. BASF’s present acquisition strategy is about moving further downstream in order to reduce earnings cyclicality, sometimes paying rather generous prices, we note. A good example for that is the recent acquisition of seed businesses from Bayer for EUR 6bn.

6 Dec 2018 Pareto Securities Research 3(44) This report is generated for Christopher Seedorf Chemicals Initiating Coverage

Not-integrated / “traditional” In contrast to BASF, the not-integrated, traditional chemicals do mostly not run upstream operations as crackers (Evonik being to some degree an exception to that rule), but try to evade raw material price fluctuations by employing positions in intermediate and downstream businesses in the “traditional” chemical space. Product pricing in that cluster is often capacity-driven, and earnings fluctuation are frequently invoked by supply side additions / constraints. The capital intensity of the segment is average to high, barriers to entry are modest, and production technology often does not play a very prominent role. As organic chemistry represents ~80-90% of the total sector, US competitors enjoy improved competitiveness due to lower oil and gas prices. All-in, if this company cluster earns a modest premium on cost of capital, it can already regarded as good result. In Germany, we perceive Covestro, Evonik, Lanxess and Wacker as names that fit the description above.

Logistics According to our typology, the smallest cluster in the sector is Logistics, comprising the German Brenntag and the Dutch IMCD. These sell literally thousands of chemical substances to various small end-users and offer value- added services such as formulation of recipes, bulk breaking, mixing, blending, technical support as well as quality checks as part of their laboratory services. The business is basically driven by IP growth and the volume development of the chemical industry. It is however not affected by stocking and destocking cycles typical for the chemical industry and not either susceptible to fluctuations of chemical prices. Therefore, many sell-side brokers and investors regard these names as part of the logistics sector.

6 Dec 2018 Pareto Securities Research 4(44) This report is generated for Christopher Seedorf Chemicals Initiating Coverage

Recent Performance

Exhibit 2: Sector performance year-to-date

Share price change Company YTD QTD 12M 6M 3M 1M 1W 1D BASF SE -30,2% -16,4% -32,1% -24,7% -18,2% -7,9% -1,8% -2,1% Linde plc 11,2% 3,2% 10,6% 7,5% 6,4% 4,8% 6,5% 2,1% Air Liquide SA 2,0% -5,4% 1,3% -0,6% 0,6% 1,4% 2,7% 0,2% K+S AG -20,0% -8,2% -15,7% -27,2% -12,6% -4,5% 10,5% 1,9% KWS SAAT SE -13,2% -12,8% -13,4% -10,5% -16,4% -4,9% 1,2% -0,2% Vilmorin & Cie SA -34,2% -3,3% -27,8% -4,6% -1,2% 8,6% -5,1% -3,5% Yara International ASA -5,7% -11,1% -4,0% 3,0% -6,6% -5,3% 1,4% 0,3% Fuchs Petrolub SE Pref -18,0% -24,6% -16,4% -20,6% -27,0% -14,6% -2,4% -2,1% Symrise AG 0,2% -8,7% 2,0% 1,3% -9,3% -3,9% 2,7% -0,3% Novozymes A/S Class B -12,3% -11,8% -8,3% -6,2% -10,8% -6,2% 0,0% 1,3% Croda International Plc 12,2% -4,6% 16,0% 4,5% -1,8% 2,7% 2,2% -0,4% EMS-CHEMIE HOLDING AG -16,8% -7,4% -16,8% -14,0% -10,6% -4,4% 0,2% -0,7% Givaudan SA 9,3% 2,0% 10,4% 10,3% 5,3% 1,7% 1,3% 1,0% Wacker Chemie AG -48,3% -22,6% -39,5% -36,6% -31,0% -8,0% 3,6% -4,4% LANXESS AG -25,6% -21,8% -22,0% -27,6% -25,9% -14,1% 0,0% -1,4%

Evonik Industries AG -25,5% -24,3% -27,0% -23,2% -26,0% -16,1% -3,1% -2,5% Covestro AG -43,5% -30,5% -42,9% -38,8% -33,1% -19,2% -2,6% -4,5% Akzo Nobel N.V. 1,3% -8,2% 1,8% -2,4% -7,6% -1,8% 2,5% -0,9% Royal DSM NV -3,2% -15,5% -2,4% -11,4% -13,3% -5,2% 0,4% 0,0% Clariant AG -26,9% -22,0% -26,2% -17,9% -16,2% -12,1% -1,6% -1,5% Arkema SA -18,1% -22,0% -19,6% -20,0% -21,2% -13,0% 0,5% -2,6% Johnson Matthey Plc -7,3% -20,0% -4,8% -24,6% -18,3% -7,1% -3,4% -3,5% Solvay SA -16,7% -16,4% -17,5% -16,5% -14,1% -6,2% 1,6% -2,0% Umicore -5,5% -22,6% -5,1% -25,1% -21,1% -13,8% 2,6% -4,3% Brenntag AG -23,0% -23,5% -23,6% -18,4% -22,5% -13,1% -0,4% -2,1% IMCD N.V. 13,2% -11,5% 10,9% 9,3% -10,3% -2,7% 1,5% 0,3% STOXX Europe 600 -7,9% -6,5% -7,5% -7,6% -5,6% -1,6% 0,3% -0,8% STOXX Europe 600 Optimised / Chemicals-10,0% -10,9% -10,6% -10,8% -9,5% -3,5% 1,9% -0,4% Euro STOXX 50 -9,0% -6,2% -10,8% -8,1% -5,1% -0,8% 0,7% -0,8% Germany DAX (TR) -12,2% -7,4% -13,2% -11,2% -7,2% -1,6% 0,2% -1,1% Germany MDAX -10,7% -10,0% -13,2% -12,2% -11,9% -4,4% 0,0% -1,6% Indicates Pareto coverage

Source: Pareto, Factset

2018 no good year The chemicals sector so far did not perform well in 2018. Especially German names faced a tough environment and also the two worst performers in the sector were German companies (Covestro and Wacker Chemie). Only two German chemicals exhibited positive share price performance (Linde plc and Symrise).

Increased logistics costs Increased logistic costs weighed on sentiment for the German names in 2018. These resulted from the low water levels of the Rhine and other rivers due to the exceptionally dry weather in Germany. Especially BASF, Covestro, Evonik, Lanxess but also K+S (the main mine of which is located at the Werra River) suffered from this.

Auto exposure another handicap Also the exposure of some German chemicals companies to the auto sector was a disadvantage in 2018. The auto sector did not either have a good year, as there were a couple of profit warnings (BMW, Daimler, Conti etc). According to our assessment, six out of eleven chemical sector constituents (CDAX) actually face tangible auto exposure (see below) while K+S, KWS, Brenntag and Symrise have virtually no exposure. Linde plc has hardly direct exposure but indirect one through its customers in chemicals, energy and steel. Please be aware that (1) the number for BASF is based on pro forma numbers for 2017 and includes the newly acquired agro assets, but excludes the recently deconsolidated oil & gas business and (2) the number for Evonik represents the midpoint of the company guidance.

6 Dec 2018 Pareto Securities Research 5(44) This report is generated for Christopher Seedorf Chemicals Initiating Coverage

Exhibit 3: Auto exposure of German chemicals in % of sales

Wacker Chemie 5%

Covestro 17,0%

Evonik 17,5%

BASF 17,7%

Lanxess 22,0%

Fuchs 45,0%

0,0% 10,0% 20,0% 30,0% 40,0% 50,0%

Source: Pareto, company reports

After discussing the matter with Pareto’s German auto research team, we understand that the main reasons for the recent weakness in the automotive sector were the OEM’s troubles to comply with the new worldwide harmonized light vehicles test procedure (WLTP) emission standard and the currently soft demand in China. These come on top of the well-known structural challenges the industry faces at present (switch to e-mobility, diesel, etc.).

Our reading is that the effect from WLTP is more or less ephemeral in nature, while others might stay a bit longer. The weakness in China seems obviously to be addressed by granting tax advantages to car-buyers: A few weeks ago, rumours surfaced that governmental authorities consider plans to cut the purchase tax for passenger cars with an engine size of up to 1.6l from 10% to 5%. Back in October 2015, the Government already introduced that tax incentive and the light vehicle production soared by 21%. These kind of small cars account for c.70% of the Chinese auto market and clearly only a fraction of this segment is served by German OEM, which is the most important customer group within automotive for German chemicals, we assume. All in, our auto analysts are cautious with regard to Q4 2018, but expect positive volume growth in 2019e for the German OEM. So the automobile sector will have a very bad Q4 but volumes will most likely recover subsequently, which should also support the aforementioned names in the Chemicals space.

6 Dec 2018 Pareto Securities Research 6(44) This report is generated for Christopher Seedorf Chemicals Initiating Coverage

Sector valuation

Exhibit 4: Sector valuation based on consensus data

Source: Factset, Pareto

From the table above, we draw the following conclusions:

 The beta of the non-integrated, traditional chemicals and BASF is above 1, while the beta of the application-oriented chemicals is typically lower than 1. Also Brenntag and Linde are obviously perceived less risky than market average. Among the agrochemicals, the seeds companies are apparently supposed to be less risky in terms of beta than the fertilizer companies K+S and Yara.  Notwithstanding, even taking the higher risk into account, we think some of the “traditional”, not-integrated chemicals trade in deep value territory after the downturn in recent months, especially for investors who have the nerve to look through the cycle. This applies both for Lanxess and Evonik, we think. More details in the company section.  The quality names (i.e. mainly the “application-oriented” names) in the sector have hardly suffered in the recent market correction and still trade at elevated levels. Most interesting names in that group are in our view Fuchs Petrolub and Brenntag, which we will also elaborate on in the company section.

6 Dec 2018 Pareto Securities Research 7(44) This report is generated for Christopher Seedorf

Brenntag Initiating Coverage

Better than a normal distribution

Brenntag is the world’s largest chemical distributor with a global footprint and full-line product offering. We like the low risk profile of the distribution business model coupled with a moderate

valuation and above average growth opportunities resulting from Brenntag’s consolidation strategy. Thus, our rating is “Buy”. Target price (EUR) 53

Share price (EUR) 41

Investment Case Brenntag, the world’s largest chemical distributor, is in a good Forecast changes % 2018e 2019e 2020e position to benefit from two major industry trends: An increasing number of large chemical producers seek to source out the business Revenues NM NM NM EBITDA NM NM NM with small-sized customers. Secondly, the so far rather fragmented EBIT adj NM NM NM chemical distribution business sees a rising degree of consolidation, EPS reported NM NM NM which is to the benefit of the major players like Brenntag due to EPS adj NM NM NM tangible economies of scale from network effects. However, after Source: Pareto rather disappointing years with unusually low growth rates in 2015 and 2016, Brenntag lost a bit of reputation in many investors’ eyes. Ticker BNRGN.DE, BNR GR Not only has growth been unsatisfactory, but also margins steadily Sector Chemicals Shares fully diluted (m) 154,5 deteriorated. We believe that things have improved and will Market cap (EURm) 6.280 continue to so: (1) Brenntag’s North American business recovered as Net debt (EURm) 1.528 the activity of the oil & gas sector has notably improved and is more Minority interests (EURm) 14 resilient today as Brenntag has reduced its respective exposure. Enterprise value 18e (EURm) 7.822 (2) Efficiency measures in the EMEA region will help to enhance Free float (%) 88 margins. (3) The formerly (currency-related) loss-making unit in

Venezuela has eventually been shut down. (4) Finally, Brenntag regularly acquires small competitors at attractive prices. Especially Performance these kind of bolt-on acquisitions we like a lot, as they improve BNR’s global network, come with attractive price tags and limited EUR integration risk, and should prove benign for the overall competitive 58 landscape. On top of that, Brenntag believes it can regularly realize 55 around 15% of EBITDA as synergies from these transactions. 52

49

46

43 EURm 2016 2017 2018e 2019e 2020e Revenues 10.499 11.743 12.229 12.932 13.596 40 Dec-17 Feb-18 Apr-18 Jul-18 Sep-18 Nov-18 EBITDA 810 782 872 930 991 BNRGN.DE CDAX (Rebased) EBIT 650 619 717 768 824 EPS 2,33 2,34 2,94 3,19 3,46 Source: Factset EPS adj 2,33 2,58 2,95 3,19 3,46 DPS 1,05 1,10 1,20 1,30 1,35

EV/EBITDA 12,2 12,4 9,0 8,3 7,6 EV/EBIT 15,2 15,7 10,9 10,1 9,2 P/E adj 22,6 20,5 13,8 12,7 11,7 Analyst P/B 2,77 2,74 1,93 1,76 1,61 Dr. Knud Hinkel, CFA ROE (%) 12,9 12,2 14,6 14,4 14,3 +49 69 58997 419, [email protected] Div yield (%) 2,0 2,1 3,0 3,2 3,3 Net debt 1.682 1.572 1.528 1.428 1.270

Source: Pareto

Brenntag

Initiating Coverage

Please refer to important disclosures on the last 5 pages of this document This report is generated for Christopher Seedorf Brenntag Initiating Coverage

Company profile

Chemical distribution Brenntag (BNR) is the world’s leading chemical distributor with a company that went public in comprehensive geographic coverage and product portfolio. Besides general 2010 logistical services such as purchase, packing, labelling, filling, storage, transport, and inventory management, Brenntag offers value-added services such as formulation of recipes, bulk breaking, mixing, blending, technical support as well as quality checks as part of their laboratory services. By marketing and selling over 10,000 industrial and specialty chemicals that can be used in various end-markets, Brenntag can be regarded as a one-stop-shopping solution for (small) users of chemicals. The company operates 550 locations in 74 countries and thereby accesses approximately 185,000 customers. Brenntag’s extensive geographic coverage allows chemical producers to cover geographical white spots. The key KPI for Brenntag is gross profit rather than sales since the latter is influenced by price movements that can be passed through to customers to an almost full extent. With a capital employed to gross profit ratio of around 2x, Brenntag’s business model is not truly asset intense, in that regard differing from the traditional chemical sector. In 2004, Bain Capital acquired Brenntag and exited the investment two years later via a secondary buyout to BC partners. BC Partner initiated an IPO in 2010, and exited completely in 2012 but the spirit from that time is still around (“how can we grow the business?” and “shareholder matter”) to some extent, we believe.

Upcoming triggers and drivers The business is basically driven by IP growth and the volume development of the chemical industry. It is however not affected by stocking and destocking cycles typical for the chemical industry and not either susceptible to fluctuations of chemical prices. We therefore expect Brenntag to weather a potentially imminent cooldown of the overall economy better than many chemical producers. Ultimately, Brenntag will have to prove that in the next downturn.

Next scheduled reporting: March 6th 2019.

Risks to the investment case A key customer of Brenntag in North America is the oil & gas industry, the activity of which fluctuates with the oil price. The effect is to some extent mitigated by the effect from lower transportation costs, but in sum a lower oil price will be net negative for Brenntag. Furthermore, Brenntag faces price risk in some situations: A sharp price drop for slow-moving raw materials might lead to impairments on inventory.

Valuation and recommendation PE-based price target of We like the low risk profile of the distribution business model coupled with EUR 53 above average growth opportunities and a moderate valuation. Thus, our rating is “Buy”. A DCF framework indicates a fair value north of EUR 60. Notwithstanding, we think it is unrealistic to expect a price appreciation of more than 40% within a 12 months’ time-frame and therefore our (interim) price target is EUR 53, which is based on the historical PE multiple. The peer group perspective is not particularly helpful for Brenntag as there are only two comparable companies that trade at a wide margin to each other (see below). But applying the average of the two peers would yield a similar result. For details, please refer to the next page.

5 Dec 2018 Pareto Securities Research 9(44) This report is generated for Christopher Seedorf Brenntag Initiating Coverage

Exhibit 5: Peer group valuation

Company PE PE EV/EBIT EV/EBIT EV/EBITDA EV/EBITDA DIVYIELD EBITDA/GP Growth pa 2018e 2019e 2019e 2020e 2018e 2019e 2018e 2018e 2018-20

Univar, Inc. 12,4 10,4 10,1 8,1 8,0 7,3 0,0% 33,5% 16,7% IMCD N.V. 23,3 20,1 19,3 17,2 18,0 15,5 1,3% 38,0% 12,5%

Median 17,8 15,2 14,7 12,6 13,0 11,4 0,6% 35,8% 14,6%

Brenntag 13,8 12,7 10,2 9,3 9,1 8,4 3,0% 33,8% 15,3%

Source: Factset, Pareto

Exhibit 6: Historic NTM PE

PE EUR / Share 24 60

22 54 20 48 18 42 16

14 36

12 30

Jul.13 Jul.16 Jul.14 Jul.15 Jul.17 Jul.18

Apr.13 Okt.13 Apr.14 Okt.14 Apr.15 Okt.15 Apr.16 Okt.16 Apr.17 Okt.17 Apr.18 Okt.18

Jan.14 Jan.15 Jan.16 Jan.17 Jan.18 PE - NTM Average PE Price

Source: Factset, Pareto

5 Dec 2018 Pareto Securities Research 10(44) This report is generated for Christopher Seedorf Brenntag Initiating Coverage

PROFIT & LOSS (fiscal year) (EURm) 2013 2014 2015 2016 2017 2018e 2019e 2020e Revenues 9.770 10.016 10.346 10.499 11.743 12.229 12.932 13.596 EBITDA 415 456 807 810 782 872 930 991 Depreciation & amortisation 141 135 (146) (163) (163) (155) (162) (167) EBIT 559 595 666 650 619 717 768 824 Net interest (64) (87) (116) (114) (95) (76) (72) (69) Other financial items ------Profit before taxes 495 508 549 536 525 641 696 755 Taxes (156) (168) (181) (175) (163) (186) (202) (219) Minority interest 0 (0) (3) (1) (1) (1) (1) (1) Net profit 339 339 365 360 361 454 493 535 EPS reported 6,59 4,39 2,36 2,33 2,34 2,94 3,19 3,46 EPS adjusted 6,59 4,39 2,36 2,33 2,58 2,95 3,19 3,46 DPS 2,30 0,90 1,00 1,05 1,10 1,20 1,30 1,35

BALANCE SHEET (EURm) 2013 2014 2015 2016 2017 2018e 2019e 2020e Tangible non current assets 845 879 972 1.009 946 992 1.022 1.046 Other non-current assets 1.832 2.020 2.471 2.899 2.768 2.901 2.989 3.058 Other current assets 2.524 2.824 2.954 2.777 3.052 3.164 3.327 3.481 Cash & equivalents 427 492 579 602 518 518 518 518 Total assets 5.627 6.215 6.976 7.287 7.285 7.576 7.857 8.103 Total equity 2.094 2.357 2.691 2.959 2.986 3.271 3.580 3.915 Interest-bearing non-current debt 1.769 1.902 2.255 2.284 2.090 2.046 1.946 1.788 Interest-bearing current debt ------Other Debt 1.664 1.794 1.880 1.884 2.053 2.103 2.175 2.243 Total liabilites & equity 5.627 6.215 6.976 7.287 7.285 7.576 7.857 8.103

CASH FLOW (EURm) 2013 2014 2015 2016 2017 2018e 2019e 2020e Cash earnings 384 552 635 626 560 610 656 703 Change in working capital (26) (182) (41) (87) (156) (62) (91) (85) Cash flow from investments (134) (180) (625) (272) (242) (334) (280) (260) Cash flow from financing (116) (193) 112 (249) (224) (214) (286) (358) Net cash flow 80 65 87 23 (84) - - -

CAPITALIZATION & VALUATION (EURm) 2013 2014 2015 2016 2017 2018e 2019e 2020e Share price (EUR end) 44,9 46,5 48,3 52,8 52,8 40,7 40,7 40,7 Number of shares end period 155 155 155 155 155 155 155 155 Net interest bearing debt 1.342 1.410 1.676 1.682 1.572 1.528 1.428 1.270 Enterprise value 8.309 8.627 9.179 9.849 9.737 7.822 7.723 7.567 EV/Sales 0,9 0,9 0,9 0,9 0,8 0,6 0,6 0,6 EV/EBITDA 20,0 18,9 11,4 12,2 12,4 9,0 8,3 7,6 EV/EBIT 14,9 14,5 13,8 15,2 15,7 10,9 10,1 9,2 P/E reported 6,8 10,6 20,4 22,6 22,6 13,8 12,7 11,7 P/E adjusted 6,8 10,6 20,4 22,6 20,5 13,8 12,7 11,7 P/B 3,4 3,1 2,8 2,8 2,7 1,9 1,8 1,6

FINANCIAL ANALYSIS & CREDIT METRICS 2013 2014 2015 2016 2017 2018e 2019e 2020e ROE adjusted (%) 16,8 15,2 14,5 12,8 13,4 14,6 14,4 14,3 Dividend yield (%) 5,1 1,9 2,1 2,0 2,1 3,0 3,2 3,3 EBITDA margin (%) 4,2 4,6 7,8 7,7 6,7 7,1 7,2 7,3 EBIT margin (%) 5,7 5,9 6,4 6,2 5,3 5,9 5,9 6,1 NIBD/EBITDA 3,23 3,09 2,08 2,08 2,01 1,75 1,53 1,28 EBITDA/Net interest 6,51 5,24 6,95 7,08 8,83 11,49 12,87 14,39

5 Dec 2018 Pareto Securities Research 11(44) This report is generated for Christopher Seedorf

Evonik Initiating Coverage

Change finally feeding through?

Our rating for Evonik (EVK) is “Buy” and our price target is EUR 37. In our view, even small steps towards a more shareholder-oriented corporate culture initiated by the top management will lead to a

significantly improved share price performance, as investors’ expectations appear rather low after a long period of Target price (EUR) 37 Share price (EUR) 23 underperformance since listing of the share.

Investment Case Forecast changes Since listing in 2013, the EVK share has massively underperformed % 2018e 2019e 2020e the overall market. The main reason for that was the downturn of Revenues NM NM NM the methionine market (an essential amino acid for the animal feed EBITDA NM NM NM industry), representing a heavy weight within EVK’s portfolio back EBIT adj NM NM NM then. At today’s current low price levels, we suppose there is more EPS reported NM NM NM up- than downside risk from methionine for EVK, though. EPS adj NM NM NM

Besides animal nutrition, Evonik´s portfolio comprises another 21 Source: Pareto largely unrelated business units. Most of them enjoy good market Ticker EVKN.DE, EVK GY positions and embody strong technological know-how. Sector Chemicals Notwithstanding, as barriers to entry in the traditional chemical Shares fully diluted (m) 466,0 industry are in general not unsurmountable and capacity / demand Market cap (EURm) 10.886 constellations can change within a relatively short time frame, we Net debt (EURm) 2.858 strongly believe that EVK’s set-up calls for an active portfolio Minority interests (EURm) 105 management. While this approach was clearly not the first priority Enterprise value 18e (EURm) 13.849 Free float (%) 36 so far for EVK, times are seemingly changing under CEO Mr Kullmann, who is in the office since 2017. Our (interim) price target of EUR 37 is based on the modest assumption that EVK’s valuation will revert to the mean valuation of Performance 13.9 x NTM earnings sooner or later. The current valuation of ~10 x 12months forward earnings clearly indicates not only cyclical EUR concerns but also low investors’ expectations after a long-lasting 32 underperformance. In our view, it however represents an attractive entry point into one of the most interesting transition stories in the 30 sector at present for investors who have the stomach to look through the cycle. 27

25 EURm 2016 2017 2018e 2019e 2020e Revenues 12.732 14.383 15.000 15.641 16.310 22 Dec-17 Feb-18 Apr-18 Jul-18 Sep-18 Nov-18 EBITDA 2.045 2.096 2.488 2.680 2.806 EVKN.DE CDAX (Rebased) EBIT 1.298 1.225 1.648 1.823 1.939 EPS 1,81 1,53 2,28 2,57 2,64 Source: Factset EPS adj 1,99 1,92 2,50 2,72 2,80 DPS 1,15 1,15 1,19 1,22 1,26

EV/EBITDA 6,1 8,5 5,6 5,2 4,8 EV/EBIT 9,6 14,6 8,4 7,6 7,0

P/E adj 14,3 16,3 9,3 8,6 8,4 Analyst P/B 1,73 1,97 1,37 1,27 1,18 Dr. Knud Hinkel, CFA ROE (%) 11,1 9,5 13,8 14,5 13,8 +49 69 58997 419, [email protected] Div yield (%) 4,1 3,7 5,1 5,2 5,4 Net debt (888) 3.139 2.858 2.900 2.458

Source: Pareto

Evonik Initiating Coverage

Please refer to important disclosures on the last 5 pages of this document This report is generated for Christopher Seedorf Evonik Initiating Coverage

Company profile

Specialty chemical company Evonik is one of the world’s largest producers of specialty chemicals. Building on listed since 2013 a history that goes back over 150 years, the EVK Group currently operates in more than 100 countries worldwide. EVK develops, manufactures, and distributes a fairly diversified portfolio of specialty chemicals products. The company is among the top three producers in many of its markets. EVK runs three largely independent segments (Nutrition & Care, Resource Efficiency and Performance Materials), steered by a management holding. End markets are dominated by food and animal feed, automotive and mechanical engineering as well as consumer and personal care products. The Nutrition & Care and Resource Efficiency segments both qualify as “stars”. The two segments target end markets that basically offer above-average growth rates. In contrast, the Performance Materials segment constitutes the “cash cow” within EVK’s portfolio. It is characterized by processes that make intensive use of energy and raw materials. Cost efficiency is therefore the most important parameter for the segment. EVK’s strategic goal for this segment is to contribute earnings to finance the growth of the group. Majority shareholder RAG Evonik’s current set-up was not planned from scratch but was assembled in a foundation number of sequential transactions, most of which had their underlying impulse from the consolidation of the German energy sector rather than industrial logic. The present majority shareholder is the RAG foundation, the purpose of which is the funding of liabilities that remained after winding down RAG AG coal mining activities. The foundation’s board of trustees is deep-rooted in German politics and it is fair to assume RAG will manage his participation with a focus not only on its financial interests but also with an open ear for the interests of workers and voters. Notwithstanding, the new chairman of the RAG AG recently expressed his dissatisfaction with the share price performance and clarified he supports the novel strategic approach of the management.

Upcoming triggers and drivers Sizeable disposal expected for It will be important to see EVK really selling the sizeable MMA business at a Q1 2019 reasonable price. The closing is expected to be in Q1 2019. We think EVK might collect more than EUR 2bn for the asset (~1.1x sales). Other than that, we think many investors are not sure how EVK’s portfolio will perform in a serious economic cooldown. Our hypothesis is that the performance of individual segments will be driven mainly by the respective capacity / demand constellation rather than the overall macro environment, which still have significance for EVK like for any other industrial company, though

Next scheduled reporting: March 5th 2019.

Risks to the investment case The most important risk in the “traditional” chemical industry besides a global recession is basically the build-up of new capacity by existing competitors and new players. This is exactly what happened in the methionine market in the last couple of years and might also occur in other value chains of EVK, as barriers to entry are generally not very high in the sector. Other than that, the shareholding of RAG might be perceived as a share overhang by some investors. Third, Evonik is not fully immune against paying “strategic” prices for certain assets, especially if they fit into Evonik’s dedicated growth areas. But we think EVK’s remaining financial firepower is limited for the time being. After EVK will have disposed the methacrylate business, this topic might come back on the agenda, though.

5 Dec 2018 Pareto Securities Research 13(44) This report is generated for Christopher Seedorf Evonik Initiating Coverage

Valuation and recommendation PE-based price target of The DCF model framework indicates a fair value above 40 EUR. However, with EUR 37 view to the lower valuation levels of EVK’s peer group and the overall market, we think it is fairly unrealistic to expect the Evonik to make up for an upside of more than 50% within a 12 months’ time frame. We therefore rely on EVK’s historical valuation of 13.9 x NTM earnings to derive a new (interim) price target of EUR 37, which is well underpinned by the fact that EVK is trading at a sizeable discount to its closest peer group of European specialty companies (see below).

Exhibit 7: Peer group valuation

EPS EBITDA growth Company PE PE EV/EBITDA EV/EBITDA EV/EBIT EV/EBIT DIVYIELD margin pa 2019e 2020e 2019e 2020e 2019e 2020e 2018e 2018e 2017-20

Covestro AG 6,9 7,0 4,3 4,2 5,8 5,7 5,0% 22,9% -11,2% Arkema SA 8,9 8,4 5,1 4,7 7,4 6,8 3,0% 17,0% 11,3% BASF SE 9,8 9,1 7,5 6,9 10,7 9,8 5,0% 16,1% 1,9%

Median - cyclical chemicals 8,9 8,4 5,1 4,7 7,4 6,8 5,0% 17,0% 1,9%

Clariant AG 13,1 11,6 8,0 6,6 11,0 9,1 2,7% 15,1% 26,8% Royal DSM NV 15,5 14,2 8,5 7,8 12,3 11,1 2,9% 19,2% -18,5% Akzo Nobel N.V. 25,0 20,0 12,5 11,2 15,1 13,4 3,2% 11,1% 3,8% Wacker Chemie AG 14,1 12,6 6,3 5,9 13,3 11,8 4,1% 20,7% 9,8% LANXESS AG 11,0 10,0 5,9 5,4 9,8 8,7 2,0% 14,2% 73,3%

Median - specialty chemicals 14,1 12,6 8,0 6,6 12,3 11,1 2,9% 15,1% 9,8%

Evonik Industries AG 9,1 8,9 6,2 5,8 9,2 8,4 5,1% 16,6% 19,9%

Source: Factset, Pareto

Exhibit 8: Historic NTM PE

PE EUR / Share 19 40

17 36

15 32

13 28

11 24

9 20

Jul.13 Jul.14 Jul.15 Jul.16 Jul.17 Jul.18

Apr.13 Okt.13 Apr.14 Okt.14 Apr.15 Okt.15 Apr.16 Okt.16 Apr.17 Okt.17 Apr.18 Okt.18

Jan.14 Jan.15 Jan.16 Jan.17 Jan.18 PE - NTM Average PE Price

Source: Factset, Pareto

5 Dec 2018 Pareto Securities Research 14(44) This report is generated for Christopher Seedorf Evonik Initiating Coverage

PROFIT & LOSS (fiscal year) (EURm) 2013 2014 2015 2016 2017 2018e 2019e 2020e Revenues 12.838 12.917 13.507 12.732 14.383 15.000 15.641 16.310 EBITDA 1.651 1.702 2.428 2.045 2.096 2.488 2.680 2.806 Depreciation & amortisation (630) (656) (764) (747) (871) (840) (857) (867) EBIT 1.080 1.060 1.664 1.298 1.225 1.648 1.823 1.939 Net interest (244) (218) (223) (174) (202) (191) (182) (184) Other financial items ------Profit before taxes 836 842 1.441 1.124 1.023 1.457 1.640 1.755 Taxes (220) (252) (422) (362) (292) (379) (426) (509) Minority interest 41 (13) (11) (14) (17) (17) (17) (17) Net profit 2.054 586 991 844 714 1.061 1.197 1.229 EPS reported 4,41 1,26 2,13 1,81 1,53 2,28 2,57 2,64 EPS adjusted 4,96 1,53 2,18 1,99 1,92 2,50 2,72 2,80 DPS 1,00 1,00 1,15 1,15 1,15 1,19 1,22 1,26

BALANCE SHEET (EURm) 2013 2014 2015 2016 2017 2018e 2019e 2020e Tangible non current assets 4.801 5.515 5.808 6.041 6.495 6.636 6.719 6.828 Other non-current assets 3.905 3.632 3.649 3.842 6.598 6.617 7.130 7.144 Other current assets 5.674 5.617 5.180 5.139 5.843 6.007 6.177 6.354 Cash & equivalents 1.518 921 2.368 4.623 1.004 1.285 1.243 1.685 Total assets 15.898 15.685 17.005 19.645 19.940 20.544 21.268 22.011 Total equity 6.847 6.522 7.576 7.750 7.519 8.061 8.720 9.396 Interest-bearing non-current debt 1.660 1.135 1.706 3.735 4.143 4.143 4.143 4.143 Interest-bearing current debt ------Other Debt 4.060 4.075 4.374 4.308 4.461 4.523 4.588 4.655 Total liabilites & equity 15.898 15.685 17.005 19.645 19.940 20.544 21.268 22.011

CASH FLOW (EURm) 2013 2014 2015 2016 2017 2018e 2019e 2020e Cash earnings 888 1.324 2.085 1.400 1.787 1.918 2.071 2.113 Change in working capital 195 (258) (114) 358 (236) (101) (105) (110) Cash flow from investments 381 (576) (660) (883) (5.181) (1.000) (1.452) (991) Cash flow from financing (626) (1.155) 133 1.384 23 (536) (555) (571) Net cash flow 838 (665) 1.444 2.259 (3.607) 281 (42) 442

CAPITALIZATION & VALUATION (EURm) 2013 2014 2015 2016 2017 2018e 2019e 2020e Share price (EUR end) 29,6 27,1 30,6 28,4 31,4 23,4 23,4 23,4 Number of shares end period 466 466 466 466 466 466 466 466 Net interest bearing debt 142 214 (662) (888) 3.139 2.858 2.900 2.458 Enterprise value 14.028 12.949 13.688 12.429 17.845 13.849 13.908 13.483 EV/Sales 1,1 1,0 1,0 1,0 1,2 0,9 0,9 0,8 EV/EBITDA 8,5 7,6 5,6 6,1 8,5 5,6 5,2 4,8 EV/EBIT 13,0 12,2 8,2 9,6 14,6 8,4 7,6 7,0 P/E reported 6,7 21,6 14,4 15,7 20,5 10,3 9,1 8,9 P/E adjusted 6,0 17,8 14,0 14,3 16,3 9,3 8,6 8,4 P/B 2,0 2,0 1,9 1,7 2,0 1,4 1,3 1,2

FINANCIAL ANALYSIS & CREDIT METRICS 2013 2014 2015 2016 2017 2018e 2019e 2020e ROE adjusted (%) 33,8 10,7 14,4 12,1 11,7 15,0 15,1 14,4 Dividend yield (%) 3,4 3,7 3,8 4,1 3,7 5,1 5,2 5,4 EBITDA margin (%) 12,9 13,2 18,0 16,1 14,6 16,6 17,1 17,2 EBIT margin (%) 8,4 8,2 12,3 10,2 8,5 11,0 11,7 11,9 NIBD/EBITDA 0,09 0,13 (0,27) (0,43) 1,50 1,15 1,08 0,88 EBITDA/Net interest 8,27 8,63 11,05 12,44 11,67 13,82 15,24 15,85

5 Dec 2018 Pareto Securities Research 15(44) This report is generated for Christopher Seedorf

Fuchs Petrolub Initiating Coverage

This is a buying opportunity

Fuchs is a niche player in the field of high performance lubricants and in our view the classical example of a “hidden champion” that has grown from “Mittelstand” to a globally recognized group.

Lately, the company experienced a slight margin dip which we perceive as buying opportunity especially for mid- to long-term Target price (EUR) 50 Share price (EUR) 36 oriented investors.

Investment Case Forecast changes Fuchs represents a quality play in the chemical sector that enjoys % 2018e 2019e 2020e high barriers to entry (customer proximity, brand reputation, and Revenues NM NM NM EBITDA NM NM NM application know-how). It reliably produces a three digit amount of EBIT adj NM NM NM free cash flow every year with a low degree of cyclicality and RoCE EPS reported NM NM NM close to 20% (after taxes). EPS adj NM NM NM

Lately, the stock price experienced a hit as the company faced (mild) Source: Pareto margin pressure. First, Fuchs is affected by the current downturn of the automobile industry, especially the German OEM. As a matter of Ticker FPEG_P.DE, FPE3 GY Sector Chemicals fact, 45% of Fuchs’ revenues are related to the automotive industry, Shares fully diluted (m) 139,0 partly to the production process, partly to the end product. Market cap (EURm) 5.043 Secondly, an increase in depreciation expenses weighed a bit on Net debt (EURm) -223 margins as Fuchs has embarked on an expansion strategy, building Minority interests (EURm) 2 facilities in growth regions like China but also Americas. Enterprise value 18e (EURm) 4.822 Free float (%) 70 With respect to the automotive sector, the main reasons of the recent weakness seem to be the OEM’s troubles to comply with the new WLTP emission standard and the current soft demand in China. Our reading is that the effect from WLTP is more or less ephemeral Performance in nature and the weakness in China will most likely be addressed by granting tax advantages to car-buyers. As regards Fuchs’ expansion EUR plans, we think there is nothing wrong if a company earning a 51 decent spread on its costs of capital aggressively pursues growth 48 opportunities. 45

42

39 EURm 2016 2017 2018e 2019e 2020e Revenues 2.267 2.473 2.572 2.698 2.826 36 Dec-17 Feb-18 Apr-18 Jul-18 Sep-18 Nov-18 EBITDA 399 415 421 456 491 FPEG_P.DE CDAX (Rebased) EBIT 371 373 385 397 429 EPS 1,86 1,93 2,00 2,01 2,18 Source: Factset EPS adj 1,86 1,93 2,00 2,01 2,18 DPS 0,89 0,91 0,94 0,95 1,03

EV/EBITDA 13,5 14,4 11,5 10,4 9,4 EV/EBIT 14,6 16,1 12,5 11,9 10,8 P/E adj 21,4 23,0 18,1 18,1 16,7 Analyst P/B 4,60 4,71 3,46 3,14 2,84 Dr. Knud Hinkel, CFA ROE (%) 22,8 21,4 20,1 18,2 17,9 +49 69 58997 419, [email protected] Div yield (%) 2,2 2,1 2,6 2,6 2,8 Net debt (146) (160) (223) (304) (422)

Source: Pareto

Fuchs Petrolub

Initiating Coverage

Please refer to important disclosures on the last 5 pages of this document This report is generated for Christopher Seedorf Fuchs Petrolub Initiating Coverage

Company profile

Family controlled niche Fuchs’ business is the development, manufacture, distribution and sale of lubricant supplier lubricants and related specialties. Core categories are automotive lubricants (40% of revenues), industrial lubricants, metal-working fluids, and lubricants for special applications. In contrast to the vertically integrated mineral oil companies that mainly concentrate on generic lubricants, Fuchs focuses on more complex niche applications. The offer covers over 10,000 products for a broad range of applications and industries, as for example mining, steel production, agriculture, the automobile industry, transport, mechanical engineering, the consumer sector and many more. Fuchs strategic core focus is customer proximity: ~45% employees are in sales and marketing. 75% of revenues are generated via direct sales. While the recipe of the final lubricant is often complex, the production process is simply about blending base oil and several additives, which does neither require a lot of fixed assets nor a large production workforce (~30% of total staff). Fuchs has been founded in 1931 by Rudolf Fuchs and since then headed by only two other CEOs, son and grandson of the founder. The Fuchs family today still holds 53.5 % of ordinary shares which make up for 50% of total shares. Maintaining the independence of Fuchs Petrolub is the declared objective of the family. Fuchs is in our view the classical example of a “hidden champion” that has grown from a typical “Mittelständler” to a globally recognized group.

Upcoming triggers and drivers Lots of room to grow, At the moment, Fuchs enjoys highly profitable growth in Asia Pacific and the organically and via Americas, basically driven by rising performance requirements and tightening acquisitions environmental, workers’ health and safety standards. As Fuchs has only minor market shares in these regions, there is still a lot of room for growth. German OEMs regaining momentum in 2019 especially in China would be helpful for Fuchs and the share. Moreover, Fuchs has acted as industry consolidator in the past and bought small competitors at attractive prices. As management is rather picky as regards prices and business areas it buys into, there has not been a deal since a couple of years. A potential downturn might enrichen the number of deal opportunities, we assume.

Next scheduled reporting: March 19th 2019.

Risks to the investment case The high exposure to the automobile industry is clearly a risk, especially in times of disruptive changes. Second, Fuchs is almost debt free and earns a three digit amount of free cash flow per year. This bears the risk that capital discipline as regards capex, working capital and acquisitions might not be of foremost priority in the next years.

Valuation and recommendation Not ultra-cheap but Based on a DCF framework, we derive a fair value of EUR 50 for the more liquid reasonably priced preference share and EUR 46 for the ordinary share (based on the empirically observable discount of ~10% in the past), which translates into ~20% upside to present price levels.

Notwithstanding, with a PE of around 20 times 2018 earnings, the Fuchs preference share is clearly not in the ultra-cheap territory. We would however argue that it trades significantly below other high quality names in the European chemical space and therefore has catch-up potential. It also trades below the historical average of 22x forward earnings (see below).

5 Dec 2018 Pareto Securities Research 17(44) This report is generated for Christopher Seedorf Fuchs Petrolub Initiating Coverage

Exhibit 9: Peer group valuation

Company PE PE EV/EBIT EV/EBIT EV/Sales EV/Sales DIVYIELD EBIT/Sales Growth pa 2018e 2019e 2019e 2020e 2018e 2019e 2018e 2019e 2018-20

Symrise AG 34,1 29,7 22,0 19,3 3,4 3,2 1,3% 14,4% 12,3% Croda International Plc 25,6 23,6 17,7 16,5 4,8 4,5 1,8% 25,7% 7,2% Novozymes A/S Class B 29,1 27,0 21,9 20,6 6,6 6,2 1,6% 28,4% 6,4% Givaudan SA 29,5 26,0 22,8 20,7 4,6 4,1 2,5% 18,2% 11,7% EMS-CHEMIE HOLDING AG 25,0 24,3 19,3 18,6 5,3 5,2 3,6% 26,8% 2,8%

Median 29,1 26,0 21,9 19,3 4,8 4,5 1,8% 25,7% 7,2%

Fuchs Petrolub SE Pref 20,3 20,2 13,2 12,0 2,0 1,9 2,3% 14,4% 6,6% relativ 69,9% 77,9% 60,5% 62,0% 41,7% 41,7% 128,2%

Source: Factset, Pareto

Exhibit 10: Historic NTM PE

60 30,0

50 25,0

40 20,0

30 15,0

20 10,0

10 5,0

0 0,0 04.12.2015 04.05.2016 04.10.2016 04.03.2017 04.08.2017 04.01.2018 04.06.2018 04.11.2018

Price Price to Earnings - NTM (Mean) Average PE

Source: Factset, Pareto

5 Dec 2018 Pareto Securities Research 18(44) This report is generated for Christopher Seedorf Fuchs Petrolub Initiating Coverage

PROFIT & LOSS (fiscal year) (EURm) 2013 2014 2015 2016 2017 2018e 2019e 2020e Revenues 1.832 1.866 2.079 2.267 2.473 2.572 2.698 2.826 EBITDA 327 328 363 399 415 421 456 491 Depreciation & amortisation (28) (35) (39) (47) (59) (59) (69) (74) EBIT 312 313 342 371 373 385 397 429 Net interest (2) (3) (4) (2) (2) (0) 1 1 Other financial items ------Profit before taxes 311 310 339 369 371 385 398 431 Taxes (92) (90) (102) (109) (102) (106) (117) (127) Minority interest (1) (0) (0) (1) (1) (1) (1) (1) Net profit 218 220 236 259 268 278 279 303 EPS reported 1,54 1,58 1,70 1,86 1,93 2,00 2,01 2,18 EPS adjusted 1,54 1,58 1,70 1,86 1,93 2,00 2,01 2,18 DPS 0,70 0,77 0,82 0,89 0,91 0,94 0,95 1,03

BALANCE SHEET (EURm) 2013 2014 2015 2016 2017 2018e 2019e 2020e Tangible non current assets 285 312 365 427 471 529 564 586 Other non-current assets 152 170 323 355 324 334 340 344 Other current assets 551 591 684 735 795 825 862 901 Cash & equivalents 175 202 119 159 161 224 305 423 Total assets 1.162 1.276 1.490 1.676 1.751 1.912 2.072 2.254 Total equity 854 916 1.070 1.205 1.307 1.460 1.610 1.783 Interest-bearing non-current debt 8 16 18 13 1 1 1 1 Interest-bearing current debt ------Other Debt 285 308 369 423 417 425 435 445 Total liabilites & equity 1.162 1.276 1.490 1.676 1.751 1.912 2.072 2.254

CASH FLOW (EURm) 2013 2014 2015 2016 2017 2018e 2019e 2020e Cash earnings 206 284 352 330 298 341 350 377 Change in working capital 9 (29) (71) (30) (56) (22) (28) (28) Cash flow from investments (65) (67) (219) (136) (102) (130) (110) (100) Cash flow from financing (114) (167) (153) (121) (134) (126) (131) (131) Net cash flow 32 27 (83) 40 2 63 81 118

CAPITALIZATION & VALUATION (EURm) 2013 2014 2015 2016 2017 2018e 2019e 2020e Share price (EUR end) 35,5 33,3 43,5 39,9 44,3 36,3 36,3 36,3 Number of shares end period 142 139 139 139 139 139 139 139 Net interest bearing debt (167) (186) (101) (146) (160) (223) (304) (422) Enterprise value 4.876 4.443 5.946 5.398 5.992 4.822 4.741 4.625 EV/Sales 2,7 2,4 2,9 2,4 2,4 1,9 1,8 1,6 EV/EBITDA 14,9 13,6 16,4 13,5 14,4 11,5 10,4 9,4 EV/EBIT 15,6 14,2 17,4 14,6 16,1 12,5 11,9 10,8 P/E reported 23,1 21,1 25,6 21,4 23,0 18,1 18,1 16,7 P/E adjusted 23,1 21,1 25,6 21,4 23,0 18,1 18,1 16,7 P/B 5,9 5,1 5,7 4,6 4,7 3,5 3,1 2,8

FINANCIAL ANALYSIS & CREDIT METRICS 2013 2014 2015 2016 2017 2018e 2019e 2020e ROE adjusted (%) 26,7 24,8 23,7 22,8 21,3 20,1 18,2 17,8 Dividend yield (%) 2,0 2,3 1,9 2,2 2,1 2,6 2,6 2,8 EBITDA margin (%) 17,9 17,6 17,5 17,6 16,8 16,4 16,9 17,4 EBIT margin (%) 17,1 16,8 16,5 16,4 15,1 15,0 14,7 15,2 NIBD/EBITDA (0,51) (0,57) (0,28) (0,37) (0,39) (0,53) (0,67) (0,86) EBITDA/Net interest ------

5 Dec 2018 Pareto Securities Research 19(44) This report is generated for Christopher Seedorf

KWS Saat Initiating Coverage

Low correlation with the cycle

KWS Saat is one of the few remaining independent seed companies, and in business for more than 160 years. The key appeal of the KWS share lies in the low risk profile and the low

correlation of KWS’ business with the overall economy. Our rating is “Buy” with a price target of EUR 353. Target price (EUR) 353

Share price (EUR) 290

Investment Case Besides offering exposure to well-known, long-term growth trends Forecast changes % 2019e 2020e 2021e (population growth and changing diet patterns at the backdrop of constrained resources), the key appeal of the KWS share lies in an Revenues NM NM NM EBITDA NM NM NM overall low risk level: Barriers to entry are high, the correlation of EBIT adj NM NM NM crop prices with general economic cycles and the stock market is EPS reported NM NM NM low, the customer base is fragmented and served by a subscription- EPS adj NM NM NM like business model. Moreover, the race for consolidation in the Source: Pareto industry (Bayer - Monsanto, Syngenta - ChemChina, Dow - Dupont) in our view effectively constitutes a kind of put option for the Ticker KWSG.DE, KWS GY current majority shareholders, limiting to some extend the Sector Chemicals Shares fully diluted (m) 6,6 downside of the KWS share. On the other hand, it is clear that after Market cap (EURm) 1.914 the liberalization of the European sugar market, the sugar beet Net debt (EURm) 14 acreage in Europe and elsewhere will develop more volatile in the Minority interests (EURm) 3 future, which might affect KWS’ by far largest segment sugar beet. Enterprise value 19e (EURm) 1.931 Other risks include the R&D budget, which is significantly smaller in Free float (%) 31 absolute terms than these of the much larger competitors. Last but not least, it seems that KWS is prepared to pay full prices for attractive assets and has already changed its legal form in order to Performance facilitate such a move.

EUR 360

342

324

306

288 EURm 2017 2018 2019e 2020e 2021e Revenues 1.075 1.068 1.089 1.122 1.156 270 Dec-17 Feb-18 Apr-18 Jul-18 Sep-18 Nov-18 EBITDA 181 183 175 183 190 KWSG.DE CDAX (Rebased) EBIT 156 146 148 156 164 EPS 14,77 15,08 15,49 16,38 17,37 Source: Factset EPS adj 14,77 15,08 15,49 16,38 17,37 DPS 3,20 3,20 3,29 3,48 3,69

EV/EBITDA 12,8 11,2 11,1 10,3 9,7 EV/EBIT 14,9 14,0 13,1 12,1 11,2 P/E adj 23,3 20,2 18,7 17,7 16,7 Analyst P/B 2,72 2,28 1,99 1,83 1,68 Dr. Knud Hinkel, CFA ROE (%) 12,2 11,6 11,1 10,8 10,5 +49 69 58997 419, [email protected] Div yield (%) 0,9 1,1 1,1 1,2 1,3 Net debt 49 37 14 (32) (82)

Source: Pareto

KWS Saat

Initiating Coverage

Please refer to important disclosures on the last 5 pages of this document This report is generated for Christopher Seedorf KWS Saat Initiating Coverage

Company profile

Independent seed company KWS’ business is to develop, produce and distribute high quality seeds for with focus on sugar beet farmers. Its core competence is to breed new high yielding plant varieties, which are adapted to the conditions of the specific location of their customers. Although these are mainly located in moderate climatic zones in Europe, North and South America, varieties for subtropical regions play an increasing role within the company’s portfolio since the successful entry in the Brazilian market in 2012. KWS has around 5,100 employees and is active in more than 70 countries, a large part of which work in R&D as the company spent almost 19% of sales for that in 2017/8. Formerly specialized on sugar beet breeding, KWS today oversees a broad portfolio of agricultural crops including corn, sugar beet and cereals (rye, wheat and barley). Furthermore, it also offers oil plants like rapeseed, sunflower and soybean. Notwithstanding, the sugarbeet segment still contributes >70% of group earnings. An important topic in the agriculture sector is the ongoing race for consolidation. Dupont & DowChemical, ChemChina & Syngenta and Bayer & Monsanto have joined forces, but the owners of KWS have decided to stay independent.

Upcoming triggers and drivers

Key role of crop prices In general, the long-term demand for high yielding seeds is driven by population growth and changing diet patterns in the Emerging Markets, while resources are limited. Short-term, demand is correlated with crop prices, as farmers tend to buy quality material as “insurance policy” for the next harvest. For KWS, one should thus follow closely the sugar price.

M&A in 2019? Other than that, it will be important to see whether KWS can gain more traction in corn by the scheduled roll-out in South America. The probability of M&A activities in 2019 has increased with the change of the legal form into a KGaA, which makes capital increases easier without jeopardizing the control of the family.

Next scheduled reporting: February, the 26th 2019.

Risks to the investment case Sugar price, R&D capacity, A long-term depressed sugar price would be clearly negative. The huge future overpaying R&D budgets of the much larger competitors (Bayer etc.) might pose a challenge for KWS at some point in time: The seeds business is high tech today, and larger competitors might have it easier to spread respective technology investments over a larger product portfolio. Last but not least, KWS seems prepared to pay full prices for attractive assets. The CEO Mr Duenbostel disclosed that KWS has made an offer in 2018 to buy Bayer’s vegetable seed business for up to 17 x EBITDA, far above KWS’ valuation.

Valuation and recommendation DCF-based price target of On the grounds of our DCF model, we value the share at EUR 353. Thus, our EUR 353 recommendation is “Buy”. The long term average forward P/E of the KWS share is around 17.5x, but is now above this level since 2014, so that is of not much concern to us. For details, please refer to the next page.

5 Dec 2018 Pareto Securities Research 21(44) This report is generated for Christopher Seedorf KWS Saat Initiating Coverage

Exhibit 11: DCF

Phase I Phase II Phase III EUR m 2019e 2020e 2021e 2022e 2023e 2024e 2025e 2026e 2027e 2028e

Revenues 1,089 1,122 1,156 1,200 1,247 1,294 1,341 1,388 1,433 1,479 growth rate 2.0% 3.0% 3.0% 3.9% 3.9% 3.8% 3.6% 3.5% 3.3% 3.2% EBIT (excl. JV) 124 128 131 137 141 145 150 154 159 163 EBIT margin 11.4% 11.4% 11.4% 11.4% 11.3% 11.2% 11.2% 11.1% 11.1% 11.0% Tax -34.5 -35.4 -36.4 -38.1 -39.1 -40.4 -41.6 -42.9 -44.0 -45.2 Tax rate 27.8% 27.8% 27.8% 27.8% 27.8% 27.8% 27.8% 27.8% 27.8% 27.8% Depr. & Amort. 50.3 55.7 58.8 61.9 64.9 64.5 65.4 66.8 68.7 70.4 % of sales 4.6% 5.0% 5.1% 5.2% 5.2% 5.0% 4.9% 4.8% 4.8% 4.8% Capex -100.0 -84.1 -86.7 -90.0 -93.6 -90.6 -87.2 -83.3 -78.8 -73.9 % of sales 9.2% 7.5% 7.5% 7.5% 7.5% 7.0% 6.5% 6.0% 5.5% 5.0% Change in WC & P -8.3 -12.5 -13.2 -17.4 -18.3 -18.9 -19.6 -20.3 -21.0 -21.6 % of sales 0.8% 1.1% 1.1% 1.4% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% Free Cash Flow 31.7 51.2 53.7 53.5 54.9 60.0 66.8 74.7 83.3 92.3 2,878.1 growth rate nm 61.5% 4.8% -0.5% 2.7% 9.3% 11.4% 11.8% 11.5% 10.8% 3.0% Present Value FCF 30.6 46.5 45.8 42.9 41.4 42.6 44.6 46.9 49.3 51.3 1,600.2

PV Phase I 207 Risk free rate 3.50% Targ. equity ratio 75% PV Phase II 235 Premium Equity 5.00% Beta 0.80 PV Phase III 1,600 Premium Debt 0.25% WACC 6.30%

Enterprise value 2,042 Sensitivity Growth in phase III - Net Debt 37 2.0% 2.5% 3.0% 3.5% 4.0% - Pension Provisions 114 5.67% 342 379 431 506 625 - Minorities & Peripherals 3 5.99% 317 347 388 445 531 + AgReliant* 447 WACC 6.30% 296 321 354 398 462 6.62% 277 298 325 361 410 Equity value 2,335 6.93% 261 279 302 331 370 Number of shares 6.6 Value per share (€) 354 Current Price (€) 301 Upside 17.7%

Source: Factset, Pareto

Exhibit 12: Historic PE

400 25,0

350 20,0 300

250 15,0

200

10,0 150

100 5,0 50

0 0,0 2014 2015 2016 2017 2018 Price Price to Earnings - NTM (Mean) Average PE

Source: Factset, Pareto

5 Dec 2018 Pareto Securities Research 22(44) This report is generated for Christopher Seedorf KWS Saat Initiating Coverage

PROFIT & LOSS (fiscal year) (EURm) 2014 2015 2016 2017 2018 2019e 2020e 2021e Revenues 923 986 1.037 1.075 1.068 1.089 1.122 1.156 EBITDA 160 159 161 181 183 175 183 190 Depreciation & amortisation (41) (46) (48) (49) (50) (50) (56) (59) EBIT 139 137 139 156 146 148 156 164 Net interest (13) (7) (12) (8) (8) (6) (6) (5) Other financial items ------Profit before taxes 126 130 128 148 138 142 150 159 Taxes (45) (46) (42) (51) (38) (39) (42) (44) Minority interest (3) (1) - (0) (0) (0) (0) (0) Net profit 77 83 85 97 100 102 108 115 EPS reported 11,69 12,53 12,92 14,77 15,08 15,49 16,38 17,37 EPS adjusted 11,69 12,53 12,92 14,77 15,08 15,49 16,38 17,37 DPS 3,00 3,00 3,00 3,20 3,20 3,29 3,48 3,69

BALANCE SHEET (EURm) 2014 2015 2016 2017 2018 2019e 2020e 2021e Tangible non current assets 284 352 379 389 402 445 470 495 Other non-current assets 203 241 245 251 241 247 251 254 Other current assets 556 636 649 664 682 692 707 722 Cash & equivalents 122 108 164 191 193 216 262 312 Total assets 1.165 1.337 1.437 1.495 1.518 1.600 1.689 1.784 Total equity 638 739 768 837 882 963 1.050 1.141 Interest-bearing non-current debt 154 214 252 240 230 230 230 230 Interest-bearing current debt ------Other Debt 284 282 290 306 292 293 296 298 Total liabilites & equity 1.165 1.337 1.437 1.495 1.518 1.600 1.689 1.784

CASH FLOW (EURm) 2014 2015 2016 2017 2018 2019e 2020e 2021e Cash earnings 71 56 106 144 129 153 164 174 Change in working capital (10) (7) 23 (6) 8 (8) (12) (13) Cash flow from investments (66) (118) (92) (65) (69) (100) (84) (87) Cash flow from financing 2 40 18 (32) (31) (21) (22) (23) Net cash flow (80) (14) 56 27 1 23 46 51

CAPITALIZATION & VALUATION (EURm) 2014 2015 2016 2017 2018 2019e 2020e 2021e Share price (EUR end) 257,5 298,5 297,8 344,5 304,0 290,0 290,0 290,0 Number of shares end period 7 7 7 7 7 7 7 7 Net interest bearing debt 32 106 88 49 37 14 (32) (82) Enterprise value 1.739 2.084 2.056 2.324 2.047 1.931 1.886 1.835 EV/Sales 1,9 2,1 2,0 2,2 1,9 1,8 1,7 1,6 EV/EBITDA 10,9 13,1 12,8 12,8 11,2 11,1 10,3 9,7 EV/EBIT 12,6 15,2 14,8 14,9 14,0 13,1 12,1 11,2 P/E reported 22,0 23,8 23,0 23,3 20,2 18,7 17,7 16,7 P/E adjusted 22,0 23,8 23,0 23,3 20,2 18,7 17,7 16,7 P/B 2,7 2,7 2,6 2,7 2,3 2,0 1,8 1,7

FINANCIAL ANALYSIS & CREDIT METRICS 2014 2015 2016 2017 2018 2019e 2020e 2021e ROE adjusted (%) 11,8 12,0 11,3 12,1 11,6 11,1 10,7 10,5 Dividend yield (%) 1,2 1,0 1,0 0,9 1,1 1,1 1,2 1,3 EBITDA margin (%) 17,3 16,2 15,5 16,8 17,1 16,0 16,3 16,4 EBIT margin (%) 15,0 13,9 13,4 14,6 13,7 13,6 13,9 14,2 NIBD/EBITDA 0,20 0,66 0,55 0,27 0,20 0,08 (0,17) (0,43) EBITDA/Net interest 12,52 22,56 13,78 21,80 22,81 29,58 32,34 36,47

5 Dec 2018 Pareto Securities Research 23(44) This report is generated for Christopher Seedorf

K+S AG Initiating Coverage

Profiting from rising MOP prices

K+S AG is a significantly indebted high cost producer of potash that competes with low cost names in Canada, Russia and Belarus. Our buy case is solely based on the recent potash price appreciation, of

which the company should be one of key beneficiaries. Notwithstanding, K+S is clearly a high risk, high reward play and as Target price (EUR) 24 Share price (EUR) 17 such rather untypical for the Chemical sector in Germany.

Investment Case Forecast changes Recent quarterly numbers published in November marked another % 2018e 2019e 2020e low point for K+S: The potash (MOP) production in Germany Revenues NM NM NM EBITDA NM NM NM continues to suffer from the well-known disposal limitations resulting EBIT adj NM NM NM from the weather-related low water levels of the Werra. Additionally, EPS reported NM NM NM K+S lowered the outlook for Salt due to increased logistics cost. EPS adj NM NM NM

Despite these production issues, we consider the company a “Buy” Source: Pareto for investors with adequate risk appetite as the potash price is on the rise at the moment: The spot rate for Brazilian granular potash has Ticker SDFGN.DE, SDF GY Sector Chemicals appreciated from just below USD 300 USD per ton at the beginning of Shares fully diluted (m) 191,4 2018 to USD 370 now. On top of that, the Belarusian Potash Company Market cap (EURm) 3.177 has agreed with buyer consortiums in China and India on a potash Net debt (EURm) 3.005 price of USD 290 per ton already in September, which represents an Minority interests (EURm) 2 increase of 26% over the price in the second half of 2017. K+S Enterprise value 18e (EURm) 6.183 produces currently around 8 mt potash per year at costs of above Free float (%) 100 EUR 200 per ton and as such is highly sensitive to price movements of the commodity, which fluctuated between EUR 200 and more than EUR 700 per ton in the last ten years. Performance Our price target of EUR 24 per share relies on a DCF and a sum-of-the- parts (SOTP) framework, which in our view provides sufficient EUR “margin of safety” to buy into an equity story which is clearly riskier than sector average. 24

22

19

17 EURm 2016 2017 2018e 2019e 2020e Revenues 3.457 3.627 3.982 4.135 4.393 14 Dec-17 Feb-18 Apr-18 Jul-18 Sep-18 Nov-18 EBITDA 519 577 612 842 1.020 SDFGn.de CDAX (Rebased) EBIT 291 327 232 465 626 EPS 0,91 0,96 0,44 1,29 1,89 Source: Factset EPS adj 0,68 0,76 0,44 1,29 1,89 DPS 0,30 0,32 0,31 0,51 0,85

EV/EBITDA 13,0 11,8 10,1 7,5 6,2 EV/EBIT 23,2 20,8 26,6 13,5 10,1 P/E adj 33,2 27,4 37,3 12,9 8,8 Analyst P/B 0,95 0,96 0,76 0,73 0,69 Dr. Knud Hinkel, CFA ROE (%) 3,9 4,2 2,0 5,8 8,0 +49 69 58997 419, [email protected] Div yield (%) 1,3 1,5 1,9 3,1 5,1 Net debt 2.400 2.839 3.005 3.101 3.132

Source: Pareto

K+S AG

Initiating Coverage

Please refer to important disclosures on the last 5 pages of this document This report is generated for Christopher Seedorf K+S AG Initiating Coverage

Company profile

High cost potash production The K+S AG, headquartered in Kassel, Germany, is one of the world’s largest in Germany, starting lower producer of potash and related specialities as well as salt products. The potash cost production in Canada business unit runs five mines in Germany with a current capacity of c. 6 m tons. Besides, K+S has developed the Bethune mine in Canada, which adds long term production capacity of 2.9 million tonnes and has started production in the second quarter of 2017. Most of the products are used as plant nutrients in agriculture, either as standard potash or fertilizer specialities. Furthermore, K+S provides high-purity potassium and magnesium salts for several industrial applications. K+S’ potash production capacity in Germany belongs to the upper end of the industry-wide cost curve, as production costs are high in Germany, partly due to high environmental costs, partly because of the nature of the deposits. Thus, K+S’ results (and share price) are highly sensitive to both price changes for potash, changing environmental regulation and related (opportunity) costs.

Salt as 2nd pillar The Salt business unit offers its clients consumer products like table salt, water softening salt and dishwater salt. It also provides salt for a number of industrial applications. The most volatile subdivision in the segment due to the unpredictability of weather conditions is de-icing salt, which is sold to winter road maintenance services, public and private road authorities, road maintenance depots and commercial bulk customers. The product range in this segment is rounded off by packed material for end users. K+S runs an annual production capacity of about 32 million tonnes in its Salt business unit.

Upcoming triggers and drivers Prices, volumes and costs The most important drivers in the potash segment are the potash price and most important like for any production costs, while the most important swing factor for volumes in the salt commodity play segment is the (winter) weather due to the de-icing sub segment, so that will be an important factor to watch in Q4. Besides, important factors to watch are capacity additions by competitors that exert influence on the industry-wide cost curve, the development of environmental regulation in Germany and the further ramp-up of Bethune in Canada.

Next scheduled reporting: March 14th 2019.

Risks to the investment case As high cost producer, the company is highly geared to fluctuations of the potash price. Other (substantial) sources of risk involve K+S’ strong exposure to the USD, weather-related demand fluctuations for de-icing salt, the development of mining costs and environmental regulation in Germany.

Valuation and recommendation SOTP-based price target We base our price target of EUR 24 on a SOTP calculation, as multiples are no valid metric for comparing mining companies with different reserve lifetimes. For the SOTP, we value the Salt business using the multiple of peer Compass Mineral (15x 2019e EV/EBIT) and the recently erected Bethune mine in Canada at building costs of EUR 3.1bn. We furthermore employ constant mark-ups for the MOP based specialties and industrial applications in order to calculate a stand-alone value for the potash operations in Germany. In total, we arrive at a fair value of around EUR 24 per share (please refer to the next page for details).

5 Dec 2018 Pareto Securities Research 25(44) This report is generated for Christopher Seedorf K+S AG Initiating Coverage

Exhibit 13: SOTP

Division EBIT 2019e Peer EV/ EBIT x EV (m EUR)

Salt 218 Compass Minerals 15.0 3,272 Other -29 15.0 -435

Bethune @ replacement costs 3,100

- Net Debt -2,839 - Pension Provisions -166 - Minorities & Peripherals -2 - Paid-out dividends for last FY -61 - Mining provisions -1,000

Subtotal 1,869

Market Cap K+S @ current share price of EUR 18.1 3,468

Implicit valuation of P&M Germany 1,599

Source: Factset, Pareto

At current MOP spot prices, we value the German mining operations at EUR 2.8bn, which results in a fair value of EUR 24 per share.

Exhibit 14: Value of German mining operations and resulting fair value per share

Underlying scenario MOP MOP price in Stand-alone Resulting Resulting Up-/ Downside Price USD/t value German market cap share price in to current P&M assets (m EUR) EUR share price (m EUR)

Current spot price 330 2,797 4,666 24.4 35%

Equalling K+S' cash costs 230 -1,090 779 4.1 -78%

Implied by current valuation 292 1,599 3,468 18.1 0%

Source: Factset, Pareto

5 Dec 2018 Pareto Securities Research 26(44) This report is generated for Christopher Seedorf K+S AG Initiating Coverage

PROFIT & LOSS (fiscal year) (EURm) 2013 2014 2015 2016 2017 2018e 2019e 2020e Revenues 3.950 3.822 4.176 3.457 3.627 3.982 4.135 4.393 EBITDA 907 896 1.058 519 577 612 842 1.020 Depreciation & amortisation (282) (235) (342) (228) (249) (380) (377) (394) EBIT 625 661 716 291 327 232 465 626 Net interest (76) (126) (34) (52) (26) (116) (127) (130) Other financial items ------Profit before taxes 549 535 682 239 301 117 338 496 Taxes (133) (153) (187) (65) (116) (32) (91) (134) Minority interest (1) (1) (0) (0) - - - - Net profit 413 381 495 174 185 85 246 362 EPS reported 2,16 1,99 2,59 0,91 0,96 0,44 1,29 1,89 EPS adjusted 2,27 1,92 2,83 0,68 0,76 0,44 1,29 1,89 DPS 0,25 0,90 1,15 0,30 0,32 0,31 0,51 0,85

BALANCE SHEET (EURm) 2013 2014 2015 2016 2017 2018e 2019e 2020e Tangible non current assets 2.933 4.113 5.055 6.456 6.693 6.820 7.049 7.263 Other non-current assets 957 1.036 1.089 1.118 1.001 1.006 1.015 1.023 Other current assets 2.603 2.337 2.012 1.937 1.879 1.951 2.008 2.098 Cash & equivalents 1.005 370 119 135 183 183 183 183 Total assets 7.498 7.855 8.274 9.646 9.754 9.959 10.253 10.566 Total equity 3.397 3.975 4.296 4.552 4.161 4.185 4.372 4.635 Interest-bearing non-current debt 2.255 1.551 1.544 2.535 3.022 3.187 3.283 3.314 Interest-bearing current debt ------Other Debt 1.744 2.167 2.268 2.372 2.406 2.420 2.432 2.451 Total liabilites & equity 7.498 7.855 8.274 9.646 9.754 9.959 10.253 10.566

CASH FLOW (EURm) 2013 2014 2015 2016 2017 2018e 2019e 2020e Cash earnings 606 715 750 361 401 465 624 756 Change in working capital 150 (8) (81) 85 (94) (57) (45) (72) Cash flow from investments (709) (1.010) (1.304) (1.202) (664) (512) (615) (616) Cash flow from financing 720 (752) (180) 771 411 (61) (60) (99) Net cash flow 660 (635) (252) 16 41 (166) (96) (31)

CAPITALIZATION & VALUATION (EURm) 2013 2014 2015 2016 2017 2018e 2019e 2020e Share price (EUR end) 22,4 22,9 23,6 22,7 20,8 16,6 16,6 16,6 Number of shares end period 191 191 191 191 191 191 191 191 Net interest bearing debt 1.250 1.181 1.425 2.400 2.839 3.005 3.101 3.132 Enterprise value 5.537 5.572 5.947 6.744 6.813 6.183 6.279 6.310 EV/Sales 1,4 1,5 1,4 2,0 1,9 1,6 1,5 1,4 EV/EBITDA 6,1 6,2 5,6 13,0 11,8 10,1 7,5 6,2 EV/EBIT 8,9 8,4 8,3 23,2 20,8 26,6 13,5 10,1 P/E reported 10,4 11,5 9,1 24,9 21,5 37,3 12,9 8,8 P/E adjusted 9,9 12,0 8,4 33,2 27,4 37,3 12,9 8,8 P/B 1,3 1,1 1,1 1,0 1,0 0,8 0,7 0,7

FINANCIAL ANALYSIS & CREDIT METRICS 2013 2014 2015 2016 2017 2018e 2019e 2020e ROE adjusted (%) 12,8 10,0 13,1 3,0 3,3 2,0 5,8 8,0 Dividend yield (%) 1,1 3,9 4,9 1,3 1,5 1,9 3,1 5,1 EBITDA margin (%) 23,0 23,4 25,3 15,0 15,9 15,4 20,4 23,2 EBIT margin (%) 15,8 17,3 17,1 8,4 9,0 5,8 11,2 14,3 NIBD/EBITDA 1,38 1,32 1,35 4,62 4,92 4,91 3,68 3,07 EBITDA/Net interest 11,89 7,11 31,38 10,00 21,84 5,29 6,63 7,84

5 Dec 2018 Pareto Securities Research 27(44) This report is generated for Christopher Seedorf

Lanxess Initiating Coverage

A private equity-like investment at a public equity price

Lanxess (LXS) is a mid-sized chemical company that was spun-off by the Bayer group in 2005. We think the share offers the chance to buy into a compelling transition story at a reasonable price. The Target price (EUR) 68 main reason for our confidence lies in the way the portfolio of Share price (EUR) 49 different business lines is managed and less in a bullish view on certain products or markets. Our rating is “Buy” with a price target of EUR 68. Forecast changes

% 2018e 2019e 2020e

Revenues NM NM NM Investment Case EBITDA NM NM NM EBIT adj NM NM NM The periphery of the formerly rubber-focused Lanxess has become EPS reported NM NM NM the „New Lanxess“ after the sale of the rubber business (“Arlanxeo”) EPS adj NM NM NM to Saudi Aramco. For the remaining portfolio, the LXS management Source: Pareto under leadership of Mr. Zachert has decided for a flexible management approach. The existing BUs shall be further developed Ticker LXSG.DE, LXS GY into “market leaders”. In case this is not possible, a disposal might Sector Chemicals become an option. Also, LXS may try to buy / reinforce businesses Shares fully diluted (m) 91,5 Market cap (EURm) 4.512 with the desired properties, as with the additive producer Net debt (EURm) 2.164 Chemtura. Importantly, these strategic adjustments are not bought Minority interests (EURm) 1.216 by dumping unwanted BU and paying high prices for target fields of Enterprise value 18e (EURm) 7.892 business. In fact, LXS paid almost the same multiple for Chemtura as Free float (%) 74 it received for Arlanxeo, which is a good result for shareholders, taking into account the significantly better properties of the additives business. Also, Mr. Zachert and his team seem to put strong emphasis on capex discipline. Performance

The present strategy (a large number of almost unrelated businesses EUR in one industry, the aim to enhance existing market positions, an 75 overall active portfolio management with a knack for good deals, an 69 eye for evolving developments in adjacent markets) exhibits similarities with a private equity fund or a holding company with a 63 long investment horizon, specializing on chemical investments. 57

51 EURm 2016 2017 2018e 2019e 2020e Revenues 7.699 9.664 7.134 7.433 7.710 45 Dec-17 Feb-18 Apr-18 Jul-18 Sep-18 Nov-18 EBITDA 945 1.072 966 1.052 1.104 LXSG.DE CDAX (Rebased) EBIT 464 434 566 716 749 EPS 2,10 0,95 4,51 4,79 5,01 Source: Factset EPS adj 2,48 2,95 4,89 5,21 5,44 DPS 0,70 0,80 0,96 1,08 1,21

EV/EBITDA 7,6 8,9 8,2 6,1 5,6 EV/EBIT 15,5 21,9 14,0 9,0 8,3 P/E adj 25,1 22,5 10,1 9,5 9,1 Analyst P/B 2,24 2,65 1,72 1,52 1,35 Dr. Knud Hinkel, CFA ROE (%) 7,9 3,6 16,8 15,6 14,5 +49 69 58997 419, [email protected] Div yield (%) 1,1 1,2 2,0 2,2 2,5 Net debt 327 2.330 2.164 1.932 1.695

Source: Pareto

Lanxess

Initiating Coverage

Please refer to important disclosures on the last 5 pages of this document This report is generated for Christopher Seedorf Lanxess Initiating Coverage

Company profile

Chemical company spun-off Lanxess is a mid-sized chemical company that runs 52 production sites in 17 by Bayer in 2005 countries. It was spun-off by the Bayer group in 2005. After an extensive restructuring, Lanxess today commands an asset base that doesn’t represent an integrated “Verbund”, the production concept pursued and popularized by BASF. Instead, it consists of several loosely coupled business units in different value chains that tend to be more downstream / intermediate than upstream.

The former CFO Mr. Zachert took over the office as CEO in 2014. His first major step was to cut down the significance of the formerly dominating rubber business (“Arlanxeo”) and to sell the business to Saudi Aramco in two steps for a total consideration of EUR 2.6bn. The first 50% changed hands on April 1st, 2016, and the closing of second step is expected at the end of 2018.

Another milestone on the way to “New Lanxess” has been the acquisition of US- based Chemtura. The company realized revenues of EUR 1.5bn and EBITDA of EUR 255m in 2016 and its main businesses are lubricant additives and flame retardants.

Upcoming triggers and drivers The key driver for the share price performance in the coming months / years will be the resilience of the business in a potential downturn. Lanxess aspires ~16% EBITDA margin by 2021 with a volatility of only 2-3% percentage points around the midpoint. Clearly, Lanxess is not yet there but in much better shape than with the rubber business still on its balance sheet. We expect a strong outperformance of the share in case Lanxess holds up comparatively well in a recessionary scenario.

Next scheduled reporting: March 14th 2019.

Risks to the investment case Besides a broad economic downturn, new capacity or a new competitor entering a business field covered by LXS is another risk since barriers to entry are not unsurmountable in most areas. Lastly, we think some investors would sell the share in case the CEO was lured away to another company as Mr Zachert is considered a substantial asset for the company.

Valuation and recommendation PE-based price target of We like Lanxess’ profile and therefore our recommendation is “Buy”. At a PE EUR 68 multiple of ~12x 2019 earnings, the share is clearly in value territory, especially for investors who have the stomach to look through the next potential downturn, which in our view will affect LXS not as harsh as some investors apparently believe. Actually, LXS trades PE-wise close to its 5y low. As the company in the meantime has significantly improved its risk profile by the disposal of Arlanxeo, we interpret current valuation as somewhat inconsistent in a historic context and as an indication that Mr Market’s risk appetite is really low at the moment. Although a DCF framework indicates a fair value above EUR 75, we think it is unrealistic to expect a price appreciation of c. 40% within a 12 months’ time- frame and therefore apply a peer group valuation to derive an (interim) price target EUR 68 (=14.2/11.7 x EUR 56). For details, please refer to the next page.

5 Dec 2018 Pareto Securities Research 29(44) This report is generated for Christopher Seedorf Lanxess Initiating Coverage

Exhibit 15: Peer group valuation

EPS EBITDA growth Company PE PE EV/EBITDA EV/EBITDA EV/EBIT EV/EBIT DIVYIELD margin pa 2019e 2020e 2019e 2020e 2019e 2020e 2019e 2018e 2017-20

Akzo Nobel N.V. 25,0 20,0 12,1 10,9 14,7 13,1 2,5% 11,1% 3,8% Arkema SA 8,9 8,4 4,9 4,5 7,1 6,5 3,2% 17,0% 11,3% BASF SE 9,8 9,1 6,9 6,4 9,9 9,0 5,2% 16,1% 1,9% Clariant AG 13,1 11,6 7,3 6,0 10,1 8,4 3,0% 15,1% 26,8% Royal DSM NV 15,5 14,2 8,3 7,6 12,0 10,8 3,0% 19,2% -18,5%

Median - peers 13,1 11,6 7,3 6,4 10,1 9,0 3,0% 16,1% 3,8%

LANXESS AG 10,3 9,8 6,1 5,6 9,4 8,5 2,2% 14,2% 32,3%

Source: Factset, Pareto

Exhibit 16: Historic NTM PE

PE EUR / Share 30 80

70 25 60

20 50 40

15 30

20 10 10

5 0 Dez. Dez. Dez. Dez. Dez. Dez. Dez. Dez. Dez. Dez. 08 09 10 11 12 13 14 15 16 17 PE - NTM Average PE Price

Source: Factset, Pareto

5 Dec 2018 Pareto Securities Research 30(44) This report is generated for Christopher Seedorf Lanxess Initiating Coverage

PROFIT & LOSS (fiscal year) (EURm) 2013 2014 2015 2016 2017 2018e 2019e 2020e Revenues 8.300 8.006 7.902 7.699 9.664 7.134 7.433 7.710 EBITDA 624 644 833 945 1.072 966 1.052 1.104 Depreciation & amortisation (717) (426) (418) (481) (638) (400) (375) (384) EBIT (93) 220 415 464 434 566 716 749 Net interest (146) (140) (127) (125) (109) (95) (94) (93) Other financial items ------Profit before taxes (239) 80 288 339 325 471 622 656 Taxes 71 (36) (121) (144) (201) (148) (184) (198) Minority interest 9 3 (2) (3) (37) (90) - - Net profit (159) 47 165 192 87 413 438 458 EPS reported (1,91) 0,51 1,80 2,10 0,95 4,51 4,79 5,01 EPS adjusted 1,29 1,92 1,86 2,48 2,95 4,89 5,21 5,44 DPS 0,50 0,50 0,60 0,70 0,80 0,96 1,08 1,21

BALANCE SHEET (EURm) 2013 2014 2015 2016 2017 2018e 2019e 2020e Tangible non current assets 2.903 3.333 3.447 3.519 4.059 2.377 2.437 2.503 Other non-current assets 398 327 304 543 1.841 1.608 3.426 3.438 Other current assets 3.083 3.172 3.102 3.330 3.951 5.684 2.750 2.817 Cash & equivalents 427 418 366 2.485 545 711 943 1.180 Total assets 6.811 7.250 7.219 9.877 10.396 10.380 9.556 9.938 Total equity 1.900 2.161 2.323 3.728 3.413 3.842 2.993 3.352 Interest-bearing non-current debt 2.317 1.880 1.701 2.812 2.875 2.875 2.875 2.875 Interest-bearing current debt ------Other Debt 1.651 1.919 1.980 2.088 2.618 2.173 2.198 2.221 Total liabilites & equity 6.811 7.250 7.219 9.877 10.396 10.380 9.556 9.938

CASH FLOW (EURm) 2013 2014 2015 2016 2017 2018e 2019e 2020e Cash earnings 396 718 618 791 1.649 (34) 813 842 Change in working capital 245 79 74 (102) (320) 828 (47) (43) Cash flow from investments (632) (595) (389) (820) (2.393) (555) (446) (463) Cash flow from financing (343) (268) (333) 2.173 (67) (73) (88) (99) Net cash flow 41 (9) (52) 2.119 (1.940) 166 232 237

CAPITALIZATION & VALUATION (EURm) 2013 2014 2015 2016 2017 2018e 2019e 2020e Share price (EUR end) 48,5 38,5 42,7 62,4 66,3 49,3 49,3 49,3 Number of shares end period 83 92 92 92 92 92 92 92 Net interest bearing debt 1.890 1.462 1.335 327 2.330 2.164 1.932 1.695 Enterprise value 5.928 4.984 5.254 7.209 9.523 7.892 6.460 6.223 EV/Sales 0,7 0,6 0,7 0,9 1,0 1,1 0,9 0,8 EV/EBITDA 9,5 7,7 6,3 7,6 8,9 8,2 6,1 5,6 EV/EBIT - 22,7 12,7 15,5 21,9 14,0 9,0 8,3 P/E reported - 74,9 23,7 29,7 69,7 10,9 10,3 9,8 P/E adjusted 37,4 20,0 23,0 25,1 22,5 10,1 9,5 9,1 P/B 2,1 1,6 1,7 2,2 2,7 1,7 1,5 1,4

FINANCIAL ANALYSIS & CREDIT METRICS 2013 2014 2015 2016 2017 2018e 2019e 2020e ROE adjusted (%) 5,1 8,7 7,6 7,5 7,6 12,3 13,9 15,7 Dividend yield (%) 1,0 1,3 1,4 1,1 1,2 2,0 2,2 2,5 EBITDA margin (%) 7,5 8,0 10,5 12,3 11,1 13,5 14,2 14,3 EBIT margin (%) - 2,7 5,3 6,0 4,5 7,9 9,6 9,7 NIBD/EBITDA 3,03 2,27 1,60 0,35 2,17 2,24 1,84 1,53 EBITDA/Net interest 5,03 5,77 6,97 7,96 11,83 10,68 11,70 12,38

5 Dec 2018 Pareto Securities Research 31(44) This report is generated for Christopher Seedorf

Linde Initiating Coverage

Priced for perfection already?

Even after a number of sizeable disposals, Linde plc - combining the former Linde AG and the US-based Praxair - is the undisputed market leader in the fundamentally attractive technical gases industry. We spot a number of potential triggers in the coming months, but the valuation looks already stretched to us. Thus, our Target price (EUR) 126 Share price (EUR) 144 rating is “neutral” and our price target EUR 126.

Investment Case Forecast changes % 2018e 2019e 2020e Linde plc offers stability through a broad geographical exposure, rental fees in cylinder, take-or-pay and pass-through clauses in the Revenues NM NM NM EBITDA NM NM NM on-site business and the non-cyclical character of the healthcare EBIT adj NM NM NM business. The gases industry is highly consolidated, protected by EPS reported NM NM NM significant barriers to entry and proved disciplined in the recent EPS adj NM NM NM past. It offers satisfactory returns on capital and in the past was Source: Pareto rather good at exploring new gas application, allowing gas companies to re-invest returns at attractive rates. On top of that, Ticker LINI.de, LIN GR Linde’s as well as industry-wide growth rates have picked up in 2018 Sector Industrials Shares fully diluted (m) 552,5 (~5% vs. 2-3% in the last couple of years), in-line with our perception Market cap (USDm) 90.313 that industrial gases is a late cyclical industry. Net debt (USDm) 7.026 We spot three triggers for the share price that could materialize Minority interests (USDm) 5.835 around the next reporting date: First, the new leadership will lay out Enterprise value 18e (USDm) 103.173 Free float (%) 94 their vision for the future (growth, synergies, profitability etc.). On top of that, we could well imagine that Linde plc will announce a sizeable increase of cash returns to shareholders (buybacks, dividends) as Linde plc appears a bit overcapitalized with view to the Performance defensiveness of the business model. Lastly, we could imagine that the new management will address the issue of the underperforming EUR 150 Linde healthcare unit more rigorously than under the Linde AG. On the other hand, the current valuation seems to already discount a 142 lot of these positives. Thus, our rating is “neutral” and our price 134 target is EUR 126.

126

118 USDm 2016 2017 2018e 2019e 2020e Revenues - 28.204 27.475 29.064 31.053 110 Dec-17 Feb-18 Apr-18 Jul-18 Sep-18 Nov-18 EBITDA - 7.207 7.861 8.567 9.412 LINI.de CDAX (Rebased) EBIT - 2.151 2.845 3.573 4.250 EPS 1,92 2,87 3,83 4,73 Source: Factset EPS adj 4,52 5,41 6,32 7,17 DPS - 2,79 2,70 3,16 3,59

EV/EBITDA - 13,9 13,1 11,8 10,4 EV/EBIT - 46,6 36,3 28,2 23,0 P/E adj 34,4 30,2 25,9 22,8 Analyst P/B 1,73 1,85 1,83 1,80 Dr. Knud Hinkel, CFA ROE (%) - 4,3 3,2 4,3 5,2 +49 69 58997 419, [email protected] Div yield (%) - 1,8 1,7 1,9 2,2 Net debt - 8.653 7.026 4.341 1.414

Source: Pareto

Linde

Initiating Coverage

Please refer to important disclosures on the last 5 pages of this document This report is generated for Christopher Seedorf Linde Initiating Coverage

Company profile

An undisputed market leader Linde plc was formed for the business combination of the Linde AG and Praxair, which received final approval on October 22nd, 2018. It offers a wide range of compressed and liquefied gases and serves a broad variety of industries, like the energy sector, steel production, chemical processing and electronics. The group also “inherited” a healthcare business from the Linde AG, which provides medical gases and related services for the treatment of respiratory disorders, which is currently wrestling with repercussions of numerous competitive bidding rounds in the acquired US sub-segment. Moreover, Linde brought an engineering unit into the combination, which offers service for gas-related facilities with Linde Gases being a major customer, but also active in the field of constructing and servicing olefin and gas treatment plants. In order to receive clearance, the combined group had to dispose sizeable parts of the business. Main steps were the disposal of large parts of Linde’s industrial US business generating revenues of EUR 1.5bn and EBITDA of EUR 350m in 2017 to Messer and CVC for EUR 3.0bn and Praxair’s European business generating revenues of EUR 1.3bn to Taiyo Nippon Sanso for EUR 5bn. Linde’s headquarter is in Dublin, the share is listed in New York and Frankfurt. The management board is undeniably dominated by former PX executives, which occupy 4 out of 7 positions, among them CEO and CFO.

Upcoming triggers and drivers Higher cash returns and fixing We spot three triggers that could materialize around the next reporting Linde healthcare scheduled for the February 2019: First, the new leadership will lay out their vision for the future (growth, synergies, profitability etc.). On top of that, we expect Linde plc to announce a sizeable increase of cash returns to shareholders (buybacks, dividends) as Linde plc appears a bit overcapitalized for the defensiveness of business model with net debt / EBITDA of around 1x, in our view. Lastly, we could imagine that the former Praxair officers will address the underperforming Linde healthcare unit more rigorously than under the roof of the former Linde AG, by either fixing or selling the business.

Risks to the investment case We believe that investors who expect lots of synergies beyond the envisaged USD 1.1bn - 1.2bn might be disappointed as there is clearly less overlap between the cylinder and bulk networks formerly owned by Linde and Praxair after the sizeable disposals in Europe and the US. Secondly, with these transactions Linde plc has strengthened local challengers outside the narrow oligopoly of the Big 3, of which especially Messer has proved painful in the past.

Valuation and recommendation EUR 126 is our preliminary The price target for Linde plc is EUR 126. As there are no consolidated numbers price target other than a few “fragments” on FY 2017 available and the company has not yet provided guidance, our valuation should be understood as first rough indication. Our considerations are as follows: We expect consolidated (w/o disposals) EBIT in 2019 to amount to ~USD 5.5bn. Applying a peer multiple of 16x EBIT results in an EV of USD 88bn. From that, we deduct net debt (already accounting for disposals worth USD 8bn) and pension provisions. Minorities of USD 5.8bn include the 3.3bn earmarked for the 8% Linde AG shareholders that did not tender their shares. We already included the present value of the expected synergies in our model - we estimate the retention rate of the annual USD 1.1bn to be 50% and the tax rate to be 28% in order to arrive at USD 6.6bn. All in, we arrive at a ~13% discount to the current valuation.

5 Dec 2018 Pareto Securities Research 33(44) This report is generated for Christopher Seedorf Linde Initiating Coverage

Exhibit 17: Valuation (all numbers in USD until stated otherwise)

Median Item EBIT 2019e Peer EV (USD m) EV/ EBIT x

Group 5.485 AI, APD 16,0 87.760

- Net Debt -7.026 - Pension Provisions -2.380 - Minorities & Peripherals -5.835 + Estimated present value future synergies 6.600

Subtotal (USD) 79.119

USD / EUR 1,14

Subtotal (EUR) 69.427

Number of shares (m) 553

Value per share (EUR) 126

Present share price (EUR) 144

Discount / Premium -12,7%

Source: Factset, Pareto

Exhibit 18: Peer group valuation

EBITDA Company PE PE EV/EBITDA EV/EBITDA EV/EBIT EV/EBIT DIVYIELD margin 2019e 2020e 2019e 2020e 2019e 2020e 2018e 2018e

Air Liquide SA 18,7 17,1 10,6 9,8 15,6 14,3 2,6% 25,4% Air Products and Chemicals, Inc. 20,0 17,6 11,1 10,4 16,7 15,2 2,5% 34,5%

Median - Peers 19,4 17,3 10,9 10,1 16,1 14,7 2,6% 29,9%

Linde plc 25,5 22,4 11,7 10,4 18,3 15,9 1,7% 28,6% relative to peers 131,5% 129,4% 107,7% 102,5% 113,5% 108,2% 65,7% 95,7%

Source: Factset, Pareto

5 Dec 2018 Pareto Securities Research 34(44) This report is generated for Christopher Seedorf Linde Initiating Coverage

PROFIT & LOSS (fiscal year) (USDm) 2013 2014 2015 2016 2017 2018e 2019e 2020e Revenues - - - - 28.204 27.475 29.064 31.053 EBITDA - - - - 7.207 7.861 8.567 9.412 Depreciation & amortisation - - - - (5.110) (5.070) (5.048) (5.216) EBIT - - - - 2.151 2.845 3.573 4.250 Net interest - - - - (384) (351) (339) (319) Other financial items ------Profit before taxes - - - - 1.767 2.494 3.234 3.932 Taxes (500) (706) (915) (1.112) Minority interest - - - - (205) (205) (205) (205) Net profit - - - - 1.062 1.583 2.114 2.614 EPS reported 1,92 2,87 3,83 4,73 EPS adjusted 4,52 5,41 6,32 7,17 DPS - - - - 2,79 2,70 3,16 3,59

BALANCE SHEET (USDm) 2013 2014 2015 2016 2017 2018e 2019e 2020e Tangible non current assets - - - - 31.129 29.387 27.823 26.239 Other non-current assets - - - - 44.571 44.094 43.667 43.233 Other current assets - - - - 10.435 10.267 10.633 11.090 Cash & equivalents - - - - 10.301 11.928 14.613 17.540 Total assets - - - - 96.436 95.676 96.736 98.103 Total equity - - - - 55.242 54.590 55.415 56.489 Interest-bearing non-current debt - - - - 18.954 18.954 18.954 18.954 Interest-bearing current debt ------Other Debt - - - - 19.860 19.753 19.987 20.280 Total liabilites & equity - - - - 96.436 95.676 96.736 98.103

CASH FLOW (USDm) 2013 2014 2015 2016 2017 2018e 2019e 2020e Cash earnings (2.330) 6.859 7.367 8.035 Change in working capital - - - - 2.330 60 (131) (164) Cash flow from investments - - - - - (2.851) (3.057) (3.198) Cash flow from financing - - - - - (2.441) (1.494) (1.745) Net cash flow - - - - - 1.627 2.685 2.927

CAPITALIZATION & VALUATION (USDm) 2013 2014 2015 2016 2017 2018e 2019e 2020e Share price (USD end) 130,3 132,3 104,4 117,1 155,6 163,5 163,5 163,5 Number of shares end period - - - - 553 553 553 553 Net interest bearing debt - - - - 8.653 7.026 4.341 1.414 Enterprise value - - - - 100.232 103.173 100.693 97.971 EV/Sales - - - - 3,6 3,8 3,5 3,2 EV/EBITDA - - - - 13,9 13,1 11,8 10,4 EV/EBIT - - - - 46,6 36,3 28,2 23,0 P/E reported 80,9 57,0 42,7 34,5 P/E adjusted 34,4 30,2 25,9 22,8 P/B 1,7 1,9 1,8 1,8

FINANCIAL ANALYSIS & CREDIT METRICS 2013 2014 2015 2016 2017 2018e 2019e 2020e ROE adjusted (%) - - - - 9,0 5,4 6,3 7,1 Dividend yield (%) - - - - 1,8 1,7 1,9 2,2 EBITDA margin (%) - - - - 25,6 28,6 29,5 30,3 EBIT margin (%) - - - - 7,6 10,4 12,3 13,7 NIBD/EBITDA - - - - 1,20 0,89 0,51 0,15 EBITDA/Net interest - - - - 18,77 22,42 25,30 29,52

5 Dec 2018 Pareto Securities Research 35(44) This report is generated for Christopher Seedorf

Symrise AG Initiating Coverage

Great company, premium valuation

Symrise is a well-positioned flavours & fragrances company, enjoying good defensive qualities in combination with above average growth rates. Though we like the stock from a fundamental point of view, we think that the share does not offer compelling upside at current price levels. Target price (EUR) 70

Share price (EUR) 72

Investment Case Forecast changes Although the business models share many underlying drivers, the % 2018e 2019e 2020e flavours & fragrances (F&F) company Symrise offers better growth Revenues NM NM NM rates than many iconic fast moving consumer goods companies like EBITDA NM NM NM for instance Coca Cola, P&C etc. We consider Symrise the most agile EBIT adj NM NM NM company among its F&F peers, which has enriched the traditional EPS reported NM NM NM EPS adj NM NM NM F&F business model by expanding into new adjacent business areas like pet food, cosmetic ingredients etc, by concentrating on products Source: Pareto with additional benefits and by pioneering a kind of backward integration. Additionally, we think Symrise has still good potential to Ticker SY1G.DE, SY1 GY Sector Chemicals capture market share from other F&F companies. As a result, Shares fully diluted (m) 129,8 Symrise enjoys in our view the most promising growth prospects in Market cap (EURm) 9.315 the industry. Symrise’s weak spot is capital efficiency, which is below Net debt (EURm) 1.295 the levels of other application-driven, non-cyclical chemicals like Minority interests (EURm) 62 EMS, Fuchs Petrolub etc. This is because Symrise has been rather Enterprise value 18e (EURm) 10.673 Free float (%) 83 acquisitive in past years, at times not shying away from paying full prices. Recently, Symrise’s margin has come under (mild) pressure from raw materials, ramp-ups, acquisitions and currencies (mostly Turkey, Performance Argentina), but we think Symrise is in a good position to live up to their aspiration to restore the 20-22% EBITDA margin in the mid- EUR term. We remain however at the side-lines for the time being as the 80 valuation is rich and investors’ expectations are high, which does not 76 allow even for minor disappointments. 72

68

64 EURm 2016 2017 2018e 2019e 2020e Revenues 2.903 2.996 3.149 3.334 3.530 60 Dec-17 Feb-18 Apr-18 Jul-18 Sep-18 Nov-18 EBITDA 607 630 630 706 747 SY1G.DE CDAX (Rebased) EBIT 405 432 433 509 551 EPS 1,95 2,08 2,10 2,49 2,72 Source: Factset EPS adj 2,05 2,08 2,10 2,49 2,72 DPS 0,85 0,88 0,94 1,12 1,22

EV/EBITDA 14,9 17,1 16,9 15,0 14,0 EV/EBIT 22,3 24,9 24,6 20,7 19,0 P/E adj 28,2 34,4 34,2 28,8 26,4 Analyst P/B 4,49 5,43 4,98 4,50 4,09 Dr. Knud Hinkel, CFA ROE (%) 15,6 16,0 15,2 16,4 16,2 +49 69 58997 419, [email protected] Div yield (%) 1,5 1,2 1,3 1,6 1,7 Net debt 1.448 1.398 1.295 1.172 1.057

Source: Pareto

Symrise AG Initiating Coverage

Please refer to important disclosures on the last 5 pages of this document This report is generated for Christopher Seedorf Symrise AG Initiating Coverage

Company profile

Flavours and Fragrances Symrise develops, produces and sells fragrances and flavours, cosmetic active company going public in ingredients and raw materials as well as functional ingredients and solutions 2006. that modify the sensory characteristics and nutritional composition of various products in a desired way. The product portfolio comprises almost 30,000 products that are based on 10,000 mostly natural raw materials like vanilla, citrus fruits, onions, fish, meat, blossoms and plant materials. Customers include manufacturers of perfumes, cosmetics and foods, the pharmaceutical industry and producers of nutritional supplements, pet food and baby food. Flavours, fragrances and active ingredients are central elements of consumer end products and play a key role in consumers’ purchasing decisions. Symrise was founded by the merger between Haarmann & Reimer (formerly owned by Bayer) and Dragoco in 2003 and is stock-listed since the IPO in 2006.

Upcoming triggers and drivers

Investor event in January 2019 General drivers for the industry are the need of Symrise’s customers to differentiate from each other, the fragmentation of consumer preferences especially with regard to food and beverages, increasing regulation keeping down smaller competitors and consumers’ rising inclination for natural ingredients, which often come with limited availability and high price volatility. Symrise will have to struggle in order to meet the full year guidance of 20% EBITDA margin at the end of FY 2018. Also markets will watch closely whether margins will actually recover in 2019 as guided by Symrise. With view to the coming investor event in January in Florida, Symrise has already begun to manage expectations, saying that one should expect continuity rather than revolutionary strategic shifts. Next scheduled reporting: March 12th 2019.

Risks to the investment case High expectations… Though we in general have confidence in Symrise’s ability to pass through raw material price increases, we believe that this could at times be an issue for the industry, especially as many of their customers are much bigger. Furthermore, we think that dis-synergies could arise from Symrise’s growing organisational complexity after various significant acquisitions in the recent years. While we consider SYM’s growth profile to be clearly outstanding for the industry, capital returns are not as high as they could be for such a knowledge-driven, capital light business model. Lastly, investors might be disappointed if at some point in time SYM’s growth rates converged to market average as expectations are high.

Valuation and recommendation DCF-based price target of On the grounds of a DCF framework, our price target is EUR 70 and our EUR 70, more expensive than recommendation is “Hold”. any chemical or consumer staple company As regards multiples, we think that the large stock-quoted, cyclical German chemicals like BASF, Evonik, Lanxess and Wacker do not qualify well as peer group for Symrise that enjoys an exceptionally low risk profile and better growth opportunities. Therefore, we think that the pan-European peer group depicted below fits better for that purpose. We also think that the well-known large consumer staples are an interesting benchmark to look at because of the similarities in underlying drivers.

It turns out that the Symrise share is more expensive than any relevant peer. We interpret the numbers above as support for our thesis that the Symrise share is more or less fully valued at present levels.

For details, please refer to the next page.

5 Dec 2018 Pareto Securities Research 37(44) This report is generated for Christopher Seedorf Symrise AG Initiating Coverage

Exhibit 19: DCF

Phase I Phase II Phase III EUR m 2018e 2019e 2020e 2021e 2022e 2023e 2024e 2025e 2026e 2027e

Revenues 3.149,0 3.333,8 3.529,7 3.737,2 3.957,2 4.171,0 4.376,4 4.570,8 4.751,9 4.917,3 growth rate 5,1% 5,9% 5,9% 5,9% 5,9% 5,4% 4,9% 4,4% 4,0% 3,5% EBIT 433,3 509,4 550,7 593,1 637,0 662,2 685,2 705,7 723,2 737,6 EBIT margin 13,8% 15,3% 15,6% 15,9% 16,1% 15,9% 15,7% 15,4% 15,2% 15,0% Tax -121,3 -145,2 -159,7 -172,0 -184,7 -192,0 -198,7 -204,6 -209,7 -213,9 Tax rate 28% 29% 29% 29% 29% 29% 29% 29% 29% 29% Depr. & Amort. 197,2 196,2 196,7 198,4 201,5 185,6 180,7 181,4 184,8 187,3 % of sales 6,3% 5,9% 5,6% 5,3% 5,1% 4,5% 4,1% 4,0% 3,9% 3,8% Capex -188,9 -200,0 -211,8 -224,2 -237,4 -208,6 -196,9 -194,3 -196,0 -196,7 % of sales 6,0% 6,0% 6,0% 6,0% 6,0% 5,0% 4,5% 4,3% 4,1% 4,0% Change in WC & P -52,7 -63,7 -67,5 -71,5 -75,8 -79,9 -83,8 -87,6 -91,0 -94,2 % of sales 1,7% 1,9% 1,9% 1,9% 1,9% 1,9% 1,9% 1,9% 1,9% 1,9% Free Cash Flow 267,5 296,7 308,4 323,8 340,4 367,3 386,5 400,6 411,2 420,1 14.456,5 growth rate nm 10,9% 3,9% 5,0% 5,1% 7,9% 5,2% 3,7% 2,6% 2,2% 3,0% Present Value FCF 266,4 278,8 273,3 270,8 268,6 273,4 271,4 265,4 257,1 247,8 8.525,8

PV Phase I 1.358 Risk free rate 3,50% Targ. equity ratio 65% PV Phase II 1.315 Premium Equity 5,00% Beta 0,80 PV Phase III 8.526 Premium Debt 1,00% WACC 5,99%

Enterprise value 11.199 Sensitivity Growth in phase III - Net Debt 1.398 2,0% 2,5% 3,0% 3,5% 4,0% - Pension Provisions 523 5,39% 65,4 76,2 91,5 114,8 154,9 - Minorities & Peripherals 57 5,69% 58,8 67,6 79,6 97,1 125,0 - Paid-out dividends for last FY 113 WACC 5,99% 53,2 60,5 70,2 83,7 104,1 No. Shares at year end 6,29% 48,4 54,5 62,4 73,2 88,6 Equity value 9.107 6,59% 44,2 49,4 56,0 64,7 76,7 Number of shares 129,8 Value per share (€) 70,2 Current Price (€) 70,0 Upside 0,3%

Source: equinet Research

Source: Factset, Pareto

Exhibit 20: Peer group valuation

Company PE PE EV/EBIT EV/EBIT EV/Sales EV/Sales DIVYIELD 2018e 2019e 2018e 2019e 2018e 2019e 2018e

Fuchs Petrolub SE Pref 19,0 18,2 13,6 12,6 2,0 1,9 2,5% Croda International Plc 24,6 22,7 18,8 17,1 4,7 4,4 1,9% Novozymes A/S Class B 27,7 25,7 22,2 20,9 6,3 5,9 1,6% Givaudan SA 28,9 25,5 25,7 22,3 4,5 4,1 2,5% EMS-CHEMIE HOLDING AG 24,7 24,0 19,5 19,0 5,2 5,1 3,6% International Flavors & Fragrances Inc. 22,2 20,9 26,5 19,1 4,7 3,5 2,0%

Coca-Cola Company 23,4 22,0 23,5 21,8 7,5 7,2 3,2% Procter & Gamble Company 21,7 20,8 17,6 17,9 3,8 3,9 3,1% Nestle S.A. 21,7 19,9 18,4 17,2 3,1 3,0 3,0% Unilever PLC 20,6 19,1 16,6 16,2 3,0 3,1 3,2%

Median - non-cycl. chemicals 24,6 23,3 20,9 19,0 4,7 4,2 2,2%

Median - consumer staples 21,7 20,4 18,0 17,6 3,4 3,5 3,1%

Symrise AG 33,3 28,1 25,2 21,2 3,5 3,2 1,3% relativ to non-cycl. chemicals 135,2% 120,3% 120,8% 111,2% 73,7% 76,4% 60,0% relativ to cunsumer staples 153,8% 137,9% 139,9% 120,4% 100,9% 93,2% 43,5%

Source: Factset, Pareto

5 Dec 2018 Pareto Securities Research 38(44) This report is generated for Christopher Seedorf Symrise AG Initiating Coverage

PROFIT & LOSS (fiscal year) (EURm) 2013 2014 2015 2016 2017 2018e 2019e 2020e Revenues 1.832 2.123 2.604 2.903 2.996 3.149 3.334 3.530 EBITDA 373 465 572 607 630 630 706 747 Depreciation & amortisation (90) (156) (177) (202) (199) (197) (196) (197) EBIT 283 308 395 405 432 433 509 551 Net interest (37) (48) (44) (46) (56) (54) (52) (52) Other financial items ------Profit before taxes 246 260 351 359 375 379 457 499 Taxes (73) (73) (99) (98) (100) (101) (128) (140) Minority interest - (2) (6) (9) (5) (6) (6) (6) Net profit 172 185 247 253 270 272 323 353 EPS reported 1,46 1,48 1,90 1,95 2,08 2,10 2,49 2,72 EPS adjusted 1,46 1,64 1,90 2,05 2,08 2,10 2,49 2,72 DPS 0,70 0,75 0,80 0,85 0,88 0,94 1,12 1,22

BALANCE SHEET (EURm) 2013 2014 2015 2016 2017 2018e 2019e 2020e Tangible non current assets 440 640 690 857 902 896 898 909 Other non-current assets 827 2.055 2.021 2.137 1.998 2.011 2.028 2.049 Other current assets 808 1.106 1.194 1.457 1.546 1.613 1.694 1.779 Cash & equivalents 135 199 278 302 230 333 456 571 Total assets 2.210 4.000 4.184 4.753 4.675 4.853 5.076 5.308 Total equity 951 1.432 1.588 1.732 1.769 1.933 2.140 2.353 Interest-bearing non-current debt 548 1.365 1.409 1.750 1.628 1.628 1.628 1.628 Interest-bearing current debt ------Other Debt 379 729 742 748 754 768 785 803 Total liabilites & equity 2.210 4.000 4.184 4.753 4.675 4.853 5.076 5.308

CASH FLOW (EURm) 2013 2014 2015 2016 2017 2018e 2019e 2020e Cash earnings 275 496 441 535 475 475 525 556 Change in working capital (22) (153) (66) (196) (78) (53) (64) (68) Cash flow from investments (58) (477) (151) (311) (219) (205) (216) (228) Cash flow from financing (83) 195 (115) 2 (219) (114) (123) (145) Net cash flow 18 64 79 23 (72) 103 123 115

CAPITALIZATION & VALUATION (EURm) 2013 2014 2015 2016 2017 2018e 2019e 2020e Share price (EUR end) 33,5 50,1 61,3 57,8 71,6 71,8 71,8 71,8 Number of shares end period 118 125 130 130 130 130 130 130 Net interest bearing debt 413 1.166 1.131 1.448 1.398 1.295 1.172 1.057 Enterprise value 4.371 7.466 9.112 9.015 10.752 10.673 10.556 10.447 EV/Sales 2,4 3,5 3,5 3,1 3,6 3,4 3,2 3,0 EV/EBITDA 11,7 16,1 15,9 14,9 17,1 16,9 15,0 14,0 EV/EBIT 15,4 24,2 23,1 22,3 24,9 24,6 20,7 19,0 P/E reported 23,0 34,0 32,3 29,7 34,4 34,2 28,8 26,4 P/E adjusted 23,0 30,5 32,3 28,2 34,4 34,2 28,8 26,4 P/B 4,2 4,4 5,1 4,5 5,4 5,0 4,5 4,1

FINANCIAL ANALYSIS & CREDIT METRICS 2013 2014 2015 2016 2017 2018e 2019e 2020e ROE adjusted (%) 18,8 17,3 16,3 16,0 15,4 14,7 15,9 15,7 Dividend yield (%) 2,1 1,5 1,3 1,5 1,2 1,3 1,6 1,7 EBITDA margin (%) 20,4 21,9 22,0 20,9 21,0 20,0 21,2 21,2 EBIT margin (%) 15,4 14,5 15,2 13,9 14,4 13,8 15,3 15,6 NIBD/EBITDA 1,11 2,51 1,98 2,39 2,22 2,05 1,66 1,41 EBITDA/Net interest 10,01 9,60 12,91 13,21 11,22 11,58 13,54 14,34

5 Dec 2018 Pareto Securities Research 39(44) This report is generated for Christopher Seedorf Chemicals Initiating Coverage

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6 Dec 2018 Pareto Securities Research 40(44) This report is generated for Christopher Seedorf Chemicals Initiating Coverage

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6 Dec 2018 Pareto Securities Research 41(44) This report is generated for Christopher Seedorf Chemicals Initiating Coverage

Appendix A

Disclosure requirements pursuant to the Norwegian Securities Trading Regulations section 3-10 (2) and section 3-11 (1), letters a-b

The below list shows companies where Pareto Securities AS - together with affiliated companies and/or persons – own a portion of the shares exceeding 5 % of the total share capital in any company where a recommendation has been produced or distributed by Pareto Securities AS.

C o mpanies No. of shares Holdings in % C o mpanies No. of shares Holdings in % Helgeland Sparebank 1.988.203 9,53% SpareBank 1 Østfold Akershus 1.129.560 9,12% Pareto Bank ASA 10.839.382 18,49% Sparebanken Vest 4.506.060 7,63%

Pareto Securities AS or its affiliates own as determined in accordance with Section 13(d) of the US Exchange Act, 1 % or moreof the equity securities of :

C o mpanies No. of shares Holdings in % C o mpanies No. of shares Holdings in % Helgeland Sparebank 1.988.203 9,53% SpareBank 1 SM N 1.879.292 1,45% NHST M edia Group AS 21.475 1,85% SpareBank 1 Østfold Akershus 1.129.560 9,12% Pareto Bank ASA 10.839.382 18,49% Sparebanken M øre 311.739 3,15% Selvaag Bolig ASA 2.179.147 2,32% Sparebanken Sør 460.589 2,94% SpareBank 1 BV 1.549.440 2,46% Sparebanken Vest 4.506.060 7,63% SpareBank 1 Nord-Norge 1.129.459 1,12%

Pareto Securities AS may hold financial instruments in companies where a recommendation has been produced or distributed by Pareto Securities AS in connection with rendering investment services, including Market Making.

Please find below an overview of material interests in shares held by employees in Pareto Securities AS, in companies where arecommendation has been produced or distributed by Pareto Securities AS. "By material interest" means holdings exceeding a value of NOK 50 000.

A nalyst T o tal A nalyst T o tal A nalyst T o tal C o mpany ho ldings* ho ldings C o mpany ho ldings* ho ldings C o mpany ho ldings* ho ldings AF Gruppen 0 1.675 Golden Ocean Group 0 1.824 Prosafe 0 5.984 Aker 0 514 Grieg Seafood 0 770 Protector Forsikring 0 14.285 Aker BP 0 860 Helgeland Sparebank 0 1.700 REC Silicon 0 159.908 Aker Solutions 0 2.085 Höegh LNG 0 8.703 SalM ar 0 130 AKVA Group 0 1.500 Ice Group AS 0 55.500 Sandnes Sparebank 0 18.032 Archer 0 73.520 Jæren Sparebank 0 500 Scatec Solar 0 35.635 Atea 0 450 Komplett Bank 0 99.357 Seadrill 0 6.615 Austevoll Seafood 0 5.780 Kongsberg Gruppen 0 4.010 Selvaag Bolig 0 10.000 Avance Gas 0 34.201 Lerøy Seafood 0 33.795 SpareBank 1 BV 0 10.000 Axactor 0 21.647 M arine Harvest 0 1.864 SpareBank 1 Nord-Norge 0 30.000 Bonheur 0 44.509 M onobank 0 1.355.000 SpareBank 1 SM N 0 16.590 Borr Drilling 0 4.415 NEXT Biometrics 0 1.730 SpareBank 1 SR-Bank 0 39.187 BW LPG 0 5.569 Nordic Semiconductor 0 6.000 SpareBank 1 Østlandet 0 2.891 DNB 0 35.822 Norsk Hydro 0 112.501 Sparebanken M øre 0 6.550 DNO 0 24.392 Northern Drilling 0 2.099 Sparebanken Sør 0 43.280 DOF 0 138.498 Norwegian Air Shuttle 0 3.172 Sparebanken Øst 0 3.000 Entra 0 14.362 Norwegian Property 0 150.000 Storebrand 0 5.005 Equinor 0 10.266 Ocean Yield 0 31.967 Subsea 7 0 7.351 Europris 0 14.510 Odfjell Drilling 0 8.731 Telenor 0 2.272 Faroe Petroleum 9.600 9.600 Orkla 0 23.746 TGS-NOPEC 0 2.000 Flex LNG 0 13.352 Panoro Energy 0 5.670 XXL 0 7.270 Frontline 0 13.943 Pareto Bank 0 963.509 Yara International 0 19.079 Gjensidige Forsikring 0 8.547 Petroleum Geo-Services 0 57.884 Zenterio 0 78.865

This overview is updated monthly (last updated 21.11.2018).

*Analyst holdings ref ers to posit ions held by the Paret o Securit ies AS analyst covering the company.

6 Dec 2018 Pareto Securities Research 42(44) This report is generated for Christopher Seedorf Chemicals Initiating Coverage

Appendix B

Disclosure requirements pursuant to the Norwegian Securities Trading Regulation § 3-11, letters e-f, ref the Securities Trading Act Section 3-10

Overview over issuers of financial instruments where Pareto Securities AS have prepared or distributed investment recommendation, where Pareto Securities AS have been lead manager/co-lead manager or have rendered publicly known not immaterial investment banking services over the previous 12 months:

Africa Energy Float el Okea AS

Akva Group Fort um Pandion Energy Arnarlax Genel Energy Pareto Bank

Atlantic Sapphire AS Gfinity Plc Petro Matad Limited Avida Holding AB Gulf Keystone Petroleum Petrotal LLC

Bank Norwegian Hert ha BSC GmbH Pioneer Public Propert ies Finland Oy Borealis Finance Hunter Group Point Resources AS

Borr Drilling Limited Idavang A/S Quant AB Brado AB Inst abank Sakthi Global Auto Holdings

Camanchaca Komplett Bank Sand Hill Petroleum DNO ASA McDermott International SAS

DOF ASA MMA Offshore Scatec Solar Echo Energy Monobank ASA Scorpio Tankers

Eco At lant ic Oil and Gas Nemaska Lit hium Shamaran Eidesvik Offshore Northern Drilling Siccar Point Energy

Eland Oil & Gas Northmill Group AB SL Bidco Embarcadero Marit ime II LLC Norwegian Air Shuttle SpareBank1 Buskerud-Vest f old

Faroe Petroleum Ocean Yield Sparebanken Vest FFS Bidco Odf jell Union Martime Limited

Filo Mining Corp Odfjell Drilling Zwipe AS

Flex LNG

This overview is updated monthly (this overview is for the period 31.10 .2017 – 31.10 .2018).

Appendix C Disclosure requirements pursuant to the Norwegian Securities Trading Regulation § 3-11 (4)

Distribution of recommendations Recommendation % distribution

Buy 76% Hold 20%

Sell 4%

Distribution of recommendations (transactions*) Recommendation % distribution

Buy 100% Hold 0%

Sell 0%

* Companies under coverage with which Pareto Securities Group has on-going or completed public investment banking services in the previous 12 months

This overview is updated monthly (last updated 21.11.2018).

6 Dec 2018 Pareto Securities Research 43(44) This report is generated for Christopher Seedorf Chemicals Initiating Coverage

Appendix D

This section applies to research reports prepared by Pareto Securities AB.

Disclosure of positions in financial instruments The beneficial holding of the Pareto Group is 1 % or more of the total share capital of the following companies included in P areto Securities AB’s research coverage universe: None

The Pareto Group has material holdings of other financial instruments than shares issued by the following companies included in Pareto Securities AB’s research coverage universe: None

Disclosure of assignments and mandates Overview over issuers of financial instruments where Pareto Securities AB has prepared or distributed investment recommendation, where Pareto Securities AB has been lead manager or co -lead manager or has rendered publicly known not immaterial investment banking services over the previous twelve months:

Aspire Green Landscaping Holding Powercell Sedana M edical Cibus Nordic Real Estate Lehto Group M agnolia Bostad ShaM aran Petroleum

Climeon Organoclick Scibase Vostok New Ventures

Members of the Pareto Group provide market making or other liquidity providing services to the following companies included in Pareto Securities AB’s research coverage universe:

Africa Oil Cavotec Isofol M edical ShaM aran Petroleum BlackPearl Resources Inc Cibus Nordic Real Estate Saltängen Property Invest Tethys Oil

Byggmästare Anders J Ahlström Delarka Holding SciBase Holding Vostok Emerging Finance

Byggpartner i Dalarna International Petroleum Corporation Sedana M edical

Members of the Pareto Group have entered into agreements concerning the inclusion of the company in question in Pareto Securities AB’s research coverage universe with the following companies: None This overview is updated monthly (last updated 14.09.2018).

Appendix E

Disclosure requirements pursuant to the Norwegian Securities Trading Regulation § 3-11, letter d, ref the Securities Trading Act Section 3-10

Designated Sponsor Pareto Securities acts as a designated sponsor for the following companies, including the provision of bid and ask offers. Therefore, we regularly possess shares of the company in our proprietary trading books. Pareto Securities receives a commission from the company for the provision of the designated sponsor services.

2G Energy * Freenet M LP * Siemens Healthineers AG

Aixtron * Gesco * M OBOTIX AG SM T Scharf AG * Baywa GFT Technologies * M TU Aero Engines Surteco Group *

Biotest * Gigaset * OVB Holding AG Syzygy AG * Brenntag Heidelberg Pharma * Procredit Holding * TAKKT AG

CORESTATE Capital Holding S.A. Hypoport AG PSI SOFTWARE AG * Vapiano Daldrup & Soehne * Intershop Communications AG PWO * va-Q-tec *

Demire Logwin * RIB Software * Viscom * Epigenomics AG* M anz AG * S&T AG * windeln.de

Euromicron AG * M AX Automation SE * Schaltbau Holding AG Eyemaxx Real Estate M erkur Bank SCOUT24

* The designated sponsor services include a contractually agreed provision of research services.

Appendix F

Disclosure requirements pursuant to the Norwegian Securities Trading Regulation § 3-11, letter g, ref the Securities Trading Act Section 3-10

Sponsored Research Pareto Securities has entered into an agreement with these companies about the preparation of research reports and – in return - receives compensation.

Adler M odemaerkte Hypoport AG OHB SE Vapiano

Baywa Intershop Communications AG OVB Holding AG BB Biotech M erkur Bank Schaltbau Holding AG

Eyemaxx Real Estate M OBOTIX AG Siegfried Holding AG

This overview is updated monthly (last updated 05.12.2018).

6 Dec 2018 Pareto Securities Research 44(44) This report is generated for Christopher Seedorf