Pensions can be an important issue in chemical companies, especially European chemical companies like Axo.

Axo has legacy defined benefit pensions, and these are very distinct from defined contribution.

Defined benefit represents a liability and a promise, and so we deal with them as debt likes in the bridge.

We've been supplied information about the Dutch pension plan, which is in surplus, the UK pension plan, which is in surplus, and this is probably as a result of the high interest rates that lots of companies are experiencing at time of recording.

We also have other plans and we're not really sure what these are.

From the reporting, it appears to be a mishmash of other plans, which includes some UK and other European plans.

Now, if we assume that they're defined benefit and they behave like other plans, these are in deficit, and so these would represent a liability, like a debt like in the bridge.

The buyer would be acutely aware that they would have to plug this deficit at some point, however, it would be tax deductible.

We also have things like medical plans, and these tend to be unfunded, so there is no fund.

They represent pure deficit.

What's important is that we don't aggregate the entire pension pot.

If we do that, we'll be convinced the whole thing is in surplus and we won't recognize that the surplus and deficit are indifferent places because the surplus cannot be clawed back.

Typically, we would ignore it from a valuation point of view, but any deficit would be something we're acutely aware of, and so we've included the total in here to show the pitfalls of relying on the total.

For valuation purpose, we could hard code these zeros and it would be fine.

I've created a min, and what we're doing here is we're creating a zero or the deficit.

We could then times that by minus one, so we get a nice positive figure, which would be more compatible with our bridge.

We then need to recognize that this would be the payment and that that would be tax deductible, so we need the MTR.

We go to the model and we find the MTR.

This analysis is being done in a year's time, so we'll grab the year's time MTR.

Now what I need to do is a final modification where I attach a tax break.

I'll need to add that as it's a negative tax rate and then remember to lock it. Otherwise, when I copy it to the right, it will get lost, and what I should find is that the deficits shrink on a valuation purpose, and that's because we'll get a tax break when we pay them as a prospective Buyer.

We can now complete things by going to fetch the net debt.

We've got that in the metrics. The CV is being built at the end of 2023, so we'll want the net debt from that year.

We'll then grab the pension liability, which we've built up here.

We just need to grab a total.

We could have done that up there, but now I'll grab a sum.

We can now create the equity By crossing the bridge, we have the total EV theoretically of the company.

We can now minus the net debt and minus the pension liability to get to the equity we've been supplied with the diluted shares outstanding, so we can go down to a single share and now we can compare our valuation against the current valuation.

At time of analysis on a percentage basis, you can see that we are predicting that they should really be worth $58, whereas the current share price is 62, and so perhaps some of our forecasts are lower than what investors are thinking about.

The final piece of analysis we can do is almost like an LTM ratio.

We can say, what's the EV, which we've got up here divided by the 2023 total ebitda, which we can find in the income statement or at the bottom of it.

We find that we've got 9.8 and we can compare this against rivals such as the aforementioned PPG, which I think at the time when this was happening was trading above 10 times, and so again, it's a useful comparison tool that brings us to the end of this model.

Hopefully it's been helpful.

Keep in mind the overall messages.

What's particularly distinct about a chemical model is number one, a focus on segments as they can be very diverse and so good segmental forecasting skills are useful.

Then a feeling for what is important for chemicals being operating leverage scale is important, and input volatility such as oil and gas and other inputs such as titanium dioxide for this company.

Finally, hopefully Bridges has been an important learning for you and that you're now better equipped to do much more detailed analysis of revenue and profitability.