#PolskaChemiaTalks 3: David Schmidt (Qemetica) o historycznym przejęciu przez polską firmę w USA

Thank you. Glad to be here. All right.

Yeah, I think the way I describe our strategy simply is it's growth in an environmentally sustainable manner. That's simple, but there are a lot of subparts of that strategy. Probably easiest to start first with the environmental sustainability. And that's really, you look at our goals: we want to reduce CO2 emissions 45% by 2029. We want to be climate neutral by 2040. Very specific, very targeted goals. We obviously have clear plans in place how to hit the CO2 emission reduction by '29, climate neutrality by 2040. That's going to take some technology, some innovation. But we do think that is attainable. So it's about fulfilling the environmental sustainability goals. Then when you look at the growth part of that equation, there are far more subtopics. I think first one is really setting up the business for growth, and that's what we call business unit autonomy. Our operating model is quite a bit different from a number of companies. The way we do it is we say if we take great people, put them in charge of a business, give them all the tools that they need to run that business, you can actually attain great results. And it's a little bit different. We have a very small central organization that's by design, giving the businesses the tools that they need to succeed in their particular business rather than trying to control that centrally. So that's number one. Number two, it's really about innovation. If you aren't innovating, you're a me-too company always trying to play catch-up. You can't get ahead, and you really have to innovate. Our goal is 10 new patents by 2026, but it's working with a lot of startups, looking at a number of areas. And it's not just looking at new places; it's also looking within our existing businesses. We're developing low-emission soda, low-emission silicates. These are things that we need to do to continue to stay competitive. And then the last part, as you highlighted, is really international expansion via acquisition. You look at where we are. We want to grow in other parts of the world. The Americas are a pretty big target for us, for obvious reasons. But that's really what it was about: getting us to different parts of the world to get some balance in our portfolio.

I think, you know, if you look at it, number one, the biggest one of the biggest goals is this entire energy transition that we're going through. We're trying to phase out coal by 2033. We've inherited some businesses that have a high dependence on coal. We need to move that out. We need to make that transition, and we have very specific plans in place of how to make that happen by 2033. But then, as I mentioned earlier, the innovation goals. In order to hit those goals, you have to be investing in R&D. It doesn't just happen otherwise. If you look at our acquisition in the US, we got a very strong R&D department that came along with that acquisition that gets us R&D into another market that we weren't in yet. And you know, we're number two precipitated silica player in the US, number three in Europe. So there is obviously some good innovation going on there. We want to continue to do that. Third big challenge is probably integration of these acquisitions. If you want to grow via acquisition, you have to have a very solid plan of how to get those companies, how to get those businesses in and operate the way that you do. And as I said, our operating model is a little different than most. So it's really about getting those businesses in, getting great people involved, pointing them in the right direction, giving them all the tools that they need, and then letting them run. And as long as they're doing well, my goal is to stay out of their way.

I can tell there are places where that happens, but a lot of times in a lot of places they are actually one and the same: innovation. And it really does improve your cost competitiveness as well. So there are many of our projects that are environmentally driven but that also have very good paybacks on them for that reason. And so those are the ones that you really dive in first, and that's how you keep getting progress year on year. And as long as you keep down that path and innovation continues to happen, there's a motivation. Correct. Correct. And that's really the path we have to drive down as Qemetica and as an industry.

It is. But, you know, I think the way that you innovate the most is when your back is against the wall. And so that fosters innovation and that really gets you going and doing some things differently, what you have to do. And that's really what we're seeing. That's how we're seeing it, and we have that happen every day in our business.

In terms of income, I'll hold back on that because we've just gotten the keys to the facilities about three months ago. So we do have all kinds of plans and a lot of efforts in place to really drive profitability in that business. But one quick point out is what we bought was actually more than just the US. The largest precipitated silica facility that we bought is in Lake Charles, Louisiana. But we also bought a very good-sized facility in Delfzijl in the Netherlands as well. And then there's a small finishing plant up in Ohio. And then, as I said, there's actually a staff including a pretty sizable R&D team in Monroeville, Pennsylvania. So we bought more than just one. And if you look at it in totality, the other one is still in Europe. That's how we're number three precipitated silica player in Europe, because the Netherlands site is a bit smaller than the US site but still brings us a good presence. And that's really one of the biggest drivers. If you go back to what we talked about on strategy, this one really hit every single place in our strategy. It gave us integration in the silicas value chain. We're already in soda, we're in silicates. So completing downstream into precipitated silica is a natural evolution of our product portfolio. It fits in so well. There are so many synergies between other parts of our business. It has the innovation, the R&D team that helps drive us. Is it a big addition? Absolutely. From a revenue topline standpoint, it added billions to our top line. Bottom line profitability, we're still figuring out exactly where we can get it to, but we are very excited and we have a great team in place throughout that business. We've put a couple people from Qemetica in. We've brought in a few from the outside, but what we inherited was a very good team, a strong team that really can drive it forward to the future. As I said, we just got to point them in a slightly different direction. The PPG operating model was very different from the Qemetica one. We believe that we get these people, give them all the tools that they need, point them in the right direction, they will drive that business to new highs, which is fantastic. And as we said, this was our first big acquisition in the US. I think this was the largest acquisition of a US business by a Polish company. That's a big deal. We like that. But this is the first. And are we looking at the next ones? Absolutely. I obviously can't comment on what those are, but we are looking at the next acquisitions in the US and putting them in our pipeline of deals to look at.

Again, where we go geographically in the future really depends upon the opportunities. We can't make things come to market. But what I can tell you is when things come to the market, do we take a look at them? Absolutely. We've got deals coming into us all the time. Why? Because people know that we want to grow. They know that we have an aggressive growth strategy. And by having that very small central organization that helps us to be very nimble and move quickly on deals, that's one of the advantages that we have. So there's always deals coming in. We're looking at a number of them globally, different places, and we're evaluating which ones make the most sense for us and align with our strategy and where we think we can have the biggest impact.

So I'd say number one, as an American living in Europe, it's probably the most asked question that I've had in the last probably eight months, or since the election about six months ago. So it's one that I get asked all the time, and absolutely you're correct. Every day you wake up, you read the news, and man, we've got something new to deal with today. That's the reality that we have to have. But I think connecting what happens in a US government administration that changes every four years, I don't think you really should be changing your business strategy based upon that. Now, you can change how you make decisions and how you adapt to those different policies and the changes that are happening every day, but you shouldn't be changing your strategy because your strategy needs to be built on underlying fundamentals. If you really take a step back and say, okay, pre this administration, the previous one, and then his first term, what they're really trying to drive is to reestablish a growing middle class in the US. And what is one key part of that? Getting manufacturing going again. And I think that's what they're trying to drive. And you know what? That fits with our strategy. That's something we definitely want to be a part of, growing manufacturing capacity and capability. That's right in our wheelhouse. And so that's why we continue to look at opportunities and we will continue to look at opportunities in the US because it fits that underlying growth mentality that you see in the US from a long-term level.

No, I wouldn't call it an escape. Because look, do we want to have geographical diversity in our portfolio? Absolutely. But it doesn't mean we're fleeing Europe. Europe has a part to play in our future as well. We're a Polish company. We were founded here so many years ago. We will continue to be a Polish company. Correct. Yes. It was founded as CIECH, you know. So the PPG acquisition of the precipitated business, we did it because it hit a number of parts of our strategy. It fit in so well with what we wanted to do and we see a big upside. But as I said, it came with a pretty good-sized plant in the Netherlands as well, which when I go look at that plant, it is exceptionally well-run. It has great market opportunities. It is driven towards growth. So Europe absolutely has a part to play. We continue to look at acquisition opportunities in Europe as well. We aren't just looking outside Europe. Why? Because again, Europe will be competitive. Is Europe in a rough spot right now? Yes. They absolutely are. But as I said, when your back is against the wall, it forces you to innovate. And we are innovating in our existing plants and we'll look at opportunities for innovation in acquisition targets in Europe as well.

Probably not. At least not in the near term in the current environment. There's too much capacity out there today. Not never ever, but near-term I don't see it. Longer term, if things change in Europe, if the political landscape changes in Europe where they get both sides of the equation in terms of CO2 cost but some protections on the import side, then I think yes, you will see that return. But that's really what needs to happen so Europe can be great again. We want to be part of that. We can even say let's make Europe great again, maybe we just keep our mind on the chemical industry and our competitiveness here. That's really difficult. From one side, have all the regulations and goals here in Europe, but secondly, still thinking about the needs and wants and everything that is in front of us like innovations, R&D, that we have to do to compete with other regions and other companies. So you said that's a really good point: not never ever, but when something will change in Europe, there is an opportunity to have a really good opportunity to invest here in Europe.

So look, cheap energy, that we know everyone says. Europe has high energy costs. That probably won't change near term. The geological dynamics are just not there for that. But look, I'm not a politician. I'm a businessman. And I can tell you in terms of what I want from business, I want an equal playing field. You put us on an equal playing field, we can win. And that's really what we need. Right now Europe is not on an equal playing field. There are too many very cheap imports coming in. And compared to our cost, when you look at the energy costs, when you look at the CO2 costs that are here in Europe, that's why we're at a competitive disadvantage. And now, like I said, it's forcing us to innovate. And we will continue to do so. And we will continue to do whatever we can to drive growth where we can. But without being on a level playing field, it's probably not going to be driving new investment growth in Europe until you get to that point.

Okay, thank you so much. Appreciate it. Thank you.