Belysse Group N.V.

Good morning, ladies and gentlemen. Welcome to the conference call of Belize Group and V regarding the H1 2024 results. As a reminder, all participants will be in listen-only mode. After the presentation, there will be a questions and answer session for analysts covering the Belize share. Today we have with us James Newling, Chief Executive Officer, André Ruggis, Chief Financial Officer, and Ruben Patius, Group Director of Sustainability and Strategic Projects. Gentlemen, the floor is yours.

Thank you, Lynn. James Newling speaking. Good morning to everybody and welcome to our first half, the Belize Group's first half results call. If you have not already done so, you can download the press release and presentation from this investor relations section on Belize.com. I need to start with bringing your attention to the disclaimer on slide two. I will not read it out, but please do make sure you have read it. So now I will talk about the financial summary in the first half of 2024. Then Andy Rogist, CFO of Belize Group, will take us through the financial review. And finally, Ruben Pateas, Group Director of Sustainability and Strategic Projects, will give a quick update on our Beyond program. I will then do a conclusion. As Lynn stated earlier, we will end this call with a Q&A session with the analysts following our stock. So let's turn to slide four for the first half financial summary. From a financial standpoint, we saw a first half 2024 consolidated revenue, a total of 144.7 million euros, which represents an organic decrease of 7.0% year on year. Revenue of our US business declined by 6.2% year on year, while our European business faced a decline of 7.8% year on year. In terms of profitability, the first half 2024 adjusted EBITDA was 21.5 million, which represents a significant increase of 75.1% year-on-year. The net debt at the end of the period was 139.2 million, including a 25.3 million euro impact from IFRS 16 lease liabilities which brings us to a reduced leverage of 3.2. Andy will now go more in depth to the financials.

Thank you, James, and good morning to everybody dialing in. First, let's have a closer look at our revenues for the second quarter of 2024. So moving to the slide six. So we saw in the second quarter of 2024, a consolidated revenue of 74.5 million euros compared to the 79 million euros that we realized in the second quarter of 2023. This is representing a 5.7% year over year decreased. In the US, our revenue decreased to a minor extent by 1.9% to 42.7 billion euros compared to the decrease compared, of course, to last year. The volumes of our US division improved compared to the first quarter of this year, 2024. And this was mainly led by the higher sales in the education, corporate and residential segments where we are active in. In Europe, our revenue decreased by 10.4% versus last year to approximately 32 million euros. The decrease in revenue can be explained by lower volumes, primarily in our residential business line. We are now moving into these next slides, which will cover the first six months or the first semester, starting with the group revenue. So on the first six months, we saw consolidated revenue of 144.7 million euros. This is representing a decrease of 7% year over year and is fully organic. In the US, our Bentley Mills division revenue decreased by 6.2% to approximately 76 million euros. The decrease reflects the lower volumes compared to the first year, year half of 2023. In Europe, revenue decreased by 7.8% versus last year to 68.8 million euros. The volumes in the first half of 24 were below the volumes in the same period last year due to the continued market softness in the residential business, as well as a strategic shift into more profitable product offering in this segment. In the more project-driven commercial business line, volumes in the first six months were comparable to the ones we had in the first six months of 2023. So let's now turn to the slide eight to talk about the group adjusted EBITDA. So Belize Group consolidated adjusted EBITDA for the first half of 24 increased to 21.5 million euros. This is representing a significant increase of 75% versus the first semester last year. And the 21 and a half million euros of adjusted EBITDA represents an adjusted EBITDA margin of 14.8%, where we had 7.9% margin in the first half of 2023. Our US business realized an adjusted EBITDA of 14.4 million euros in H1 2024. This is 3.6% higher than the first year half of 2023. The adjusted WDA and the WDA margin improved as a result of higher unitary margins as well as fixed cost savings that more than offset the negative impact of the lower volumes. Europe EBITDA, adjusted EBITDA was just above 7 million, so 7.1 million euros in H1 2024. Both our adjusted EBITDA and adjusted EBITDA margin have recovered significantly compared to the first six months of 2023, which was still at a lower comparative base. But as a result, the result was driven of the first year half 24 was driven by the lower raw material costs where we talked about already on previous occasions and the higher margin for the portfolio as well. And not to forget on fixed costs saving measures we have been implementing since second year half in 2023. So we can move on to cashflow. So we ended the first year, half year, with a cash balance of 29 million euros compared to a cash balance of 35.8 million euros at the end of 2023. The negative cash flow for over the six months was mainly the debt repayments, the interest payments, the arrangements fee. all linked to our previous and our current financing with a total of 15.1 million euros, as well as capital expenditures of 5.2 million euros, change in other working capital of 4.1 million euros, and a 3-day working capital change of 2.9 million euros. This offsetting more than offsetting the realized adjusted EBITDA of 21.5 million euros. This brings us to the chart on our leverage. So net debt at the end of the period was 139.2 million euros. This includes 25.3 million euros of IFRS 16 lease liabilities. And this is also 6.1 million euros lower than the reported value at the end of last year. Given the strong improvement of our adjusted EBITDA and further reduction of our debt, our leverage is now reduced to 3.2 times, where it was 4.5 times at the end of 2023, and it was 5.5 times at the end of first year of 2023. Our total available liquidity, this is also including Our available headroom under the RCF is 41 million euros at the end of June, 2024. So this concludes my part, and I will now hand over the floor to Ruben, Ruben Pateus, who is our Group Director of Sustainability and Strategic Projects for an update on the BEYOND program.

Ruben. Thank you, Andy. If we go to slide 12 for an update on our sustainability pillar, we see that the total CO2 emission per square meter produced has been reduced by 13% compared to our baseline, which was set at 2018. We have implemented several existing and new energy efficiency initiatives, and they have delivered impact through both lower gas and lower electricity consumption. However, part of these efficiency gains are offset by smaller production runs, especially in residential, which is a conscious choice because those smaller production runs allow a reduction of inventory. In addition, we had a negative factor in the first half of this year, which was the lower solar energy production due to weather conditions in Belgium, which resulted in higher use of so-called grey electricity from the grid. Moving on to slide 13 for the results of our lean program. This lean program has delivered €0.7 million savings in the first half of 2024, which exceeds our plan by 15%. If we measure from the starting point of the BEYOND program in January 2022, Our lean program has delivered 6.8 million euros in cumulative savings against a target of 5.4 million euros. And as a reminder, the overall target is to deliver 8 million euros of cumulative savings by the end of 2025. More than 30 different initiatives this year have so far contributed to these results, with a key focus being on quality, material efficiency, energy efficiency, and labor efficiency. With this, I would like to give the floor back to James for closing comments.

Thank you, Ruben, for that update. We'll now go to slide 14 for the conclusion of this presentation. So our first half results this year in terms of consolidated revenue was 144.7 million with an adjusted EBITDA of 21.5 million euro, which brings us an adjusted EBITDA margin of 14.8%. The consolidated group revenue for the first half year reflects our continued lower market demand in the European residential business, as well as softer projected demand in the US in the first quarter. Despite the overall softness in the market, the adjusted EBITDA in first half 24 has significantly improved as a result of improved profitability in both regions. Our leverage increased to 3.2 compared with 4.5 at the end of 2023, and our total available liquidity remains strong. I'll now pass back to Lynn for Q&A.

Thank you. We will now begin our question and answer session for analysts covering the released share. If you have a question, please raise your hand by pushing the button on your screen. If you are dialing in via your phone, please press star nine to raise your hand. Once your name has been announced, you can ask your question. I don't think there are any questions. I don't see any coming in. So we have no further questions.

Okay, thank you very much. Thank you for everyone who's attended the call. As a reminder, we will publish our trading update concerning our quarter three. We have a question from Wimposter, just as we were about to, yes.

Mr. Hoster, you can now ask your question. We don't hear it, just a minute. Can you ask the question again? You are on mute.

Can you maybe type your question?

Because we are not hearing the question. Mr. Hoster, can you ask your question via the chat, maybe? Because we are not hearing anything.

I have a couple of questions, if I may.

The first one would be on... Yeah, the costs outlook for the remainder of the year with regards to raw materials, wage inflation, transport costs, but also things like electricity contracts, etc. Are there any big swings to be expected? And then the second question, yeah, if that's the case, and that's what you're planning on pricing, and also a link to that, the general level of competition in the market. Given the REIT volumes, is there increased pricing pressure noticeable? If you can comment on that as well, that would be interesting.

Yes, thank you, Wim, for this question. Look, I'll tackle the cost outlook and maybe Andy will add something to that. I'll start with, you know, one of our most important raw material costs is polyamide. And what we've seen over the last couple of months is a slight decrease in polyamide. Our outlook remains cautious on that in terms of what we've seen as a major supplier of polyamide in the European market. Niobe has just announced that they will close their doors. So that takes some capacity out of the market, although they were not an important overall player in the market. They've historically been important for us. We have shifted a lot of our purchases to other suppliers over the last two years, and we observe from their figures that they had a volume decrease last year of close to 60%. Nonetheless, any time any supplier exits the market, that can mean a change, which ties a little bit into the transportation question. At the moment on Palaeama, we see very similar prices across Europe and Asia. We see Asian prices a little bit higher and the differences related to transportation that we see because of incidents like the Red Sea, the pirates in the Red Sea and the Baltimore incident has created a global imbalance in containers. And this means that shipping costs coming out of Asia have become much more important than what they were previously. roughly speaking, for a 20-foot container, they've grown to about $8,000 a square foot compared with, say, $2,000 a square foot at the beginning of the year. So I would say whilst polyamide prices have come down versus a year and a year before that too, we do remain cautious in our outlook because of that. On polyamide, Other factors like electricity and gas, we have seen in the last couple of months a rise in gas prices again. We are hedged to a certain level. We don't expect an important impact on our results as a result of that. But there are future years to think of. And it's a very bitter taste in our mouths, the memory of where gas prices were a couple of years ago when they were north of 300 euros. And now we sit closer to the range of 40. But I think... Historically, gas prices were sitting around 10. So we continually observe the gas prices. Like I said, there has been a lift recently, but nothing that overly concerns us. Electricity prices tend to follow gas prices. As such, our hedging remains that we feel we're at a comfortable level to control it. Wage inflation, we have – and there I was speaking very much of Europe, by the way, and the reason I focused my comments on Europe is we see more consistency in the U.S. outlook and market, and as Andy's mentioned during the call, we see more of a softness in Europe and the residential business in particular, and hence we – focus more when we talk about cost outlook. Our thoughts are a little bit more around Europe. With respect to wage inflation, we don't see anything particularly new. We follow the market rates, whether it be U.S. or Europe. There were some significant wage inflations last year, but not so much this year. And, you know, in Belgium in particular, there was some quite heavy wage inflation. demands placed on us by the Belgian government last year, that seems to have come to a more normal outlook. In terms of pricing, you spoke about what do we plan in pricing. I think an important point to look at in pricing is I can't speak for what the competitors do. That's a market. I can say what we have observed in our pricing is that we've seen a relatively stable pricing. If that holds or not, I don't know. Yes, there is weaker demand in the market, in the European market in particular. But pricing across Europe, across the U.S., across both our markets, contract and residential has remained relatively stable. I don't hold the crystal ball to say it will definitely remain like that, but so far it's been a good story, and that's played in very importantly into the, I think, quite good results that we've presented for our first half. And that's...

That's very clear. Maybe then one follow-up. Do you have a CapEx budget guidance for the full year?

I will let Andy comment a bit more on that.

Our CapEx budget for your guidance is in line with the amounts we have been investing over the past years. So no significant deviations expected to what we have been investing in.

And then on the taxes, can you offer us a tax guidance going forward, noting that there is maybe some DTA, tax asset variations or whatever. Can you offer us a tax guidance for modeling purposes? Sure.

Tax guidance is, well, the amount we have been publishing on the first year half. Again, we should give good guidance on the full year. The majority of our taxes are linked to the better results we are achieving in the U.S. rather than the ones we have in Europe.

Okay, that's very good. That was all for me. Thank you and apologies for the technical disturbances.

No problem. Thank you for your questions.

Thank you.

So thank you all for your attendance. And we are now closing the call.