Elementis plc

All right, good morning, everyone, and welcome to the Elementus 2025 results presentation, and thank you for joining us. Great to see you. In terms of agenda, I'll begin with our highlights for the year, and Cath, our new CFO, will then run you through our financial performance. Then I'll take you through our strategic progress over the past year, and finally, to our outlook for 2026. And we'll then open for questions. It's been quite the year. Looking back 10 months into the job, I'm really proud of everything we've achieved together. We delivered strong profit growth and margin expansion despite soft demand environment. And that's clear proof of the quality and resilience of our business. From a strategic perspective, the sale of the Talc business and launching our Elevate Elementis strategy were more than milestones. They set the foundation for what this company can achieve when we focus and move forward as one team. And we're making solid progress across all of our strategic priorities, such as innovation sales up to a record of 16.4% and zero lost time accidents. So lots of positive momentum. You might remember a version of this slide from our last half-year result presentations. Our portfolio has fundamentally transformed over the past years. We've reshaped Elementis into a pure-play specialty chemicals business, focused on our two segments, personal care and coatings. Selling talc was a major step forward. in making this happen, and it was my first priority when I started as CEO. And with Chromium sold in 2023, we exited these commoditized, capital-intensive businesses, and it was absolutely the right decision. It allows us to focus on our core strengths and capabilities. As you all have seen this morning, I'm pleased to share that we've agreed to sell our pharmaceutical business to ABF. And this sale is in line with our strategy as well, further sharpens our focus. More of this on the next slide. In November, we added Alchemy to the portfolio, a fantastic bolt-on, right in our personal care sweet spot. It's a fast-growing, high-margin business that strengthens our position in skincare and cosmetics. So, this is the new Elementis. We're a company with a unique position, built on three real differentiators, Hectorite, Rheology, and Formulation Solutions. And we're really pleased with the shape of the portfolio and we're well positioned for growth. So, we announced today that we reached an agreement to sell our non-core pharmaceutical manufacturing business to ABF. Last year, the business made $35 million in revenue. Our pharmaceutical business was originally acquired as a part of Summit Reheis in 2017. It manufactures antacids and pharmaceutical excipients from our Ludwigshafen site in Germany. And while the business has performed well, it's clear that it no longer fits with our strategic focus. And because of that, the sale we announce today is the best outcome for both the pharma business and for Elementis. It's a straightforward, clean transaction. It will reduce our capital intensity, and on a pro forma basis, will deliver an uplift to 2025 group operating margins. We're working towards the completion in Q2. With the telc business sold, we accelerated the delivery of all of our 2026 financial targets by one full year, which is a fantastic result. And with Elevate Elementis, we shared our new targets. mid-single-digit revenue growth, operating margins of more than 23%, and three-year operating cash conversion to be above 90%. ROSI excluding goodwill of more than 30%. And our proven track record gives us the confidence that we can meet these targets and be among the top of our peer group. Moving to sustainability, next slide. Starting with safety, which is fundamental to how we operate. Last year, we achieved our first zero-loss time accident since 2019. That's a big milestone. On the environment, we continue to make good progress. The divestments of talc and chromium have significantly reduced our carbon footprint, which is now nearly 80% lower than 2019. And we continue the transition to a more sustainable and responsible business. For example, at our Hectorite mine, we moved to almost entirely renewable energy from a 0% base last year. Finally, on people, we've made a lot of changes in the organization with Fit for the Future, which was a big reorganization for us. And the engagement scores actually improved with voluntary attrition down by 40%. We're well below industry average now. But for me, even more importantly, I see it when I visit our sites, how pride the team is when I visit the Newberry, which is where we have our Hectorite site, or when I visit the new Porto team. And with that, I'm delighted to hand you over to Kath, our new CFO, to cover our financial performance.

Thank you, Luke, and good morning, everybody. Before I begin, I'd just like to share some initial reflections of my first few months in Elementus. I've been here for four months now, and two months as the CFO, and I've been genuinely impressed and frankly relieved by what I've seen. I've had a really warm welcome, with lots of people taking time out of their busy schedules to help me on board. And it's clear, everyone is working with a real commitment to unlock the full potential of Elementus. I've had the opportunity to visit locations in the UK, Europe and USA, and I really enjoyed learning about the business. There's nothing quite like being in a manufacturing environment, seeing products being made and looking to see what we're talking about in meetings. And the real highlights for me have been hands-on in the Alchemy Lab and visiting the Hectorite mine. What has really stood out is the passion, dedication, commitment and pride of our people. They care deeply about the company, and rightly so. And I'm confident that we can continue to build on these strong foundations, demonstrating that we have opportunities to grow revenue and profit, and continue to generate strong cash and returns. When I look at the macro backdrop for 2025, we could be standing here looking at a very different set of results. And I'm definitely glad that I don't have to present that set. Despite the challenging market, we have made good progress in 2025 and the team have done a fantastic job. And it's in this context I'd like to cover the results for the prior year. Following the sale of Talc, the 2024 P&L and cash flow figures have been restated for continuing operations and used for comparison purposes. I wanted to show a brief overview of the metrics for 2025. Most of these we'll cover in the following slides, so we won't go into detail here, other than highlighting. Despite a small decline in group revenues, we delivered strong growth in adjusted operating profit and a 150 basis point improvement in margins. In combination with lower net finance costs and a lower number of shares following the buyback, adjusted earnings per share was up 14.2% to 13.7 cents. An outstanding performance considering the challenging operating environment that Luke referenced earlier. And as we turn to look at group revenue, you'll see that despite the backdrop, we delivered a resilient performance with overall revenue down 1% on a reported basis and 1.9% on a constant currency basis to $597.5 million. Bridging from 2024, we had favourable FX tailwind of approximately $5.2 million. Volumes were down $5.6 million due to the weak demand environment and coatings, resulting in a reduction of $14.1 million, and this was partially offset by volume growth and parcel care of $8.5 million. On pricing, we delivered $7.8 million across both businesses, a testament to the specialty nature of our portfolio. Of note, a combination of proactive pricing, procurement agility and supply chain optimisation actions helps us to fully offset the direct impact of tariffs in the year. And we believe the latest news on this topic, at least of Saturday 21st February, will continue to leave us in a neutral position. Turning lastly to MIX. This was down $13.7 million, primarily due to a combination of one-off sales and coatings of $3.4 million in 2024, not repeated in 2025. Along with the continued softness in industrial coatings and decorative end markets, AP Actives saw strong growth in lower-priced but margin-accretive products, as well as a consumer-driven shift from aerosol to roll-on formats in Matam. As we turned our eyes to adjusted operating profit, we delivered strong growth, which increased 4.6% to $126.7 million. Within this, we benefited from favourable FX of $1.9 million, lower volumes had an adverse impact of $1.9 million, and the net price impact after offsetting inflation was $10.5 million. These headwinds were mitigated by the ongoing delivery of our self-help initiatives, which led to $18 million of total cost savings in the year, and more to come on this shortly. As noted earlier, our strong profit performance helped drive higher margins, increasing 150 basis points to 21.2%. So let's take a look deeper into the reporting segments. starting with personal care. Revenue was up 2.4% to $224.5 million, with strong growth in skincare and cosmetics, offsetting a slight decline in AP actives. Looking at the regional performance, we saw higher revenues in EMEA and Americas, with Asia flat compared to last year. Adjusted operating profit was up strongly at $72.8 million, or 16.9%. And importantly, brings the absolute profitability of the personal care segment in line with the coaching segment. This improved profitability was driven by improved volumes and pricing alongside cost savings. The higher profits in turn helped to drive higher margin, which is up 410 basis points, to 32.4%, including the benefit of one-off volume and cost savings in H1, previously noted at the half year. And lastly on this slide, I wanted to highlight that our results in 2025 included the pro rata contribution from the recent acquisition of Alchemy. A small quantum for the year, given the late acquisition timing, but meaningful strategically. And now moving on to the coating segment. We delivered a resilient performance with revenue of $373 million compared to $386.4 million last year, with a decline in coatings partially offset by strong performance from our energy business. The year-on-year decline was impacted by the benefit of high margin one-off sales in Q4 2024. The drop through from the lower revenue led to a lower adjusted operating profit of $70.4 million. However, the combination of higher pricing and our self-help actions supported the operating margins finishing the year at 18.9% compared to 20.3% in the year before. You will recall at H1 we highlighted some operational challenges at St Louis that were holding back our coating's performance. While there's still progress to be made, I wanted to share positive news that the de-bottlenecking programme at St Louis is progressing well and needing to improve performance which Luke will cover more fully later. Last year, we successfully completed the balance of our two-year $30 million cost savings programme by delivering $12 million via our Fit for the Future restructuring and supply chain initiatives. In addition to this, we announced in July a further $10 million in savings that we were aiming to deliver over the remainder of 2025 and 2026. These and NET have planned additional R&D spend, which will increase our total spend from 2% of revenue to 3% over the next two years. As we announced this morning, we have delivered $6 million of savings already, and we will deliver the balance of $4 million by the end of 2026. Our cost-saving programs have reduced complexity and improved operational efficiency. We will continue to proactively identify opportunities to streamline our cost base and capture further efficiencies as we deliver on our growth agenda and become a simpler and leaner company. Now taking a look at free cash flow. A key feature of this business is its strong cash flow generation. And I'm pleased to report that we generated good free cash flow of $41 million in 2025 compared to $51 million in the prior year. Looking at the key components, higher adjusted EBITDA was more than offset by the working capital outflow in the year, driven by higher receivables due to lower debt factoring and strategic inventory bills. We also had higher capex as we increased our investment to support adjacent market growth and capital investment in support of the St Louis Improvement Programme. As a result of these movements, our adjusted operating cash flow was $104.7 million compared to $123.2 million the prior year. As we move down the cash flow statement, it's worth calling out two items. Firstly, our cash taxes were lowered by $4.4 million, primarily due to an IRS refund received relating to a 2024 claim to utilise net operating losses for prior periods. And also, adjusting items were $6.7 million lower as the Fit for the Future programme finished during the year. Our balance sheet remains robust, and whilst leverage ticked up to 1.3 times, this was after acquiring Alchemy and returning cash to shareholders. Looking at the key movements from left to right, we started the year with a net debt balance of $157.2 million. Adding back the free cash flow of $41 million, as well as the proceeds from the tout sale of $52.5 million, we had an increase in cash available for distribution of $93.5 million. Of this amount, we returned $79.1 million to our first buyback programme and the 2024 final dividend and the 2025 interim dividend. The share buyback programme led to the purchase and cancellation of approximately 4% of our issued share capital. In October, we completed the disposal of the disused Eaglescliff site for a negative cash consideration of $11.1 million. I would like to specifically note the strategic divestment of both Talc and the Eaglescliff site have enabled us to significantly reduce our environmental liabilities and provisions. In November, we completed the acquisition of Alchemy for a total upfront consideration of $20.1 million. Taking off the FX of $11.4 million, we ended the year with a net debt balance of $185.4 million and a net debt to EBITDA ratio of 1.3 times. Our aim is to maximise return on invested capital while maintaining a strong balance sheet and strategic optionality. In relation to investments, our CAPEX programme will be focusing on investing in growth and productivity. We will also invest in R&D and have plans to increase total spend here from 2% to 3% of revenue. To complement these organic growth investments, and as we demonstrated for the acquisition of Alchemy, we will selectively pursue bolt-on acquisitions whilst maintaining a strong balance sheet. On dividends, our policy is for a payout ratio of around 30% of adjusted earnings. And as we announced this morning, the board has recommended a final dividend of 3 cents, taking the full year dividend for 2025 to 4.3 cents, up 7.5% from last year, and represents a 31% payout ratio. In considering future additional returns, we will assess several factors, including prevailing market conditions, existing progressive dividend policy, the investment requirements of the business, and our desire to maintain a leverage around one-time net debt to EBITDA over time, which we anticipate we will achieve on an organic basis in 2026. In light of the announcement of the pharmaceutical manufacturing business disposal, our expectation is to distribute the net proceeds to shareholders following completion. And we will provide a further update upon closing. And lastly, for your reference, we've included some technical guidance for 2026 on slide 19. So with that, I'll now hand over to Luke, who will take you through our strategic progress over the last 12 months and the outlook for the year. Thank you.

Thank you, Kat. For those less familiar with Elevate Elementus, this is our new strategy. We present that in July. The plan is simple. We have three strategic priorities. First, top-line growth, and this is about focusing on what we do best in the areas that make Elementus unique without the distractions of talc and chromium. Our objective is to grow revenue by mid-single-digit over the medium term. And in the next slides, I'll share a view of our growth opportunities and our progress in 2025. The second priority is about service delivery. Our ambition is to be best in class and the first choice for our customers. We've made some great progress, and I will show that later. Third, simplification and agility. We're building a simpler and leaner Elementus that empowers colleagues, makes us more agile, and allows us to execute at pace. Delivering against these three priorities is what will drive value creation and will help us deliver the new medium-term targets. So looking at our first priority. For us to grow and unlock our full potential, it is important to focus on what makes Elementus unique and what will allow us to win. We call these our winning differentiators, and let me briefly touch upon them. Hectorite, this is a very special asset. It's a white mineral that comes from our mine with long-term reserves. It has really unique properties because of its chemical composition and its platelet structure. We don't just sell Hectorite. We modify it, add value to it, for example, by making pre-formulated gels for cosmetics. And our customers love its efficiency. You only need a tiny amount to get a big effect. It's natural, and it delivers a kind of premium skin feel that consumers are looking for. Rheology. This is the science of flow. It's what's needed to stabilize ingredients in a paint can. It's also what makes sunscreen spread evenly on the skin. And here, Elementus is the global leader. Formulation solutions, this is our expertise built up over the years of our customers' formulations. It's how our people work together with our customers to improve the performance of a paint or a skincare product day in, day out. And our colleagues in the labs have worked at Oxenobel or Estee Lauder. They talk our customers' language, and that's a huge benefit. Now, we operate in big, attractive markets, as you can see here. Our focus, though, is to target these niche areas where our winning differentiators set us apart. And we work together with our customers to improve their products. For example, in skincare, we're replacing synthetic additives by Hectride, giving it a more premium texture. And in industrial coatings, we help the transition from solvent-borne to high-performance water-based formulas. I'm not going to go into the detail of all of these here. But the point is, we are using our expertise and our unique portfolio to help our customers make better and more sustainable products. So lots to go for in our current markets. And outside of our existing markets, there's a large new adjacent space for us that we're tapping into as well. We're using the same model, and we have entered areas that we're going to scale. One example is Hectorite for geothermal energy. And here, because the wells are extremely deep, you're facing ultra high temperatures at which Hectride is stable. We're using our formulation knowledge and existing customer relationships to grow with this market. We had our first sales in 2025 and have a number of field trials planned for this year in the US and Germany. So lots of exciting opportunities and potential for growth. So we're focusing on the right areas, building on our winning differentiators, But what levers are we pulling to now bring in this growth? First, we're investing more in R&D, 50% more. For example, in application knowledge to support customers. And we're building a Hectorite center of excellence. We're already seeing the benefits. Last year, innovation sales reached a record of 16.4%. That has doubled in the last five years. We launched 19 new products, of which we sent more than 1,500 samples to our customers. Some of the innovation highlights from last year are on the right-hand box. We launched DIOLUX, our patent-pending non-metal-based active, and this is looking quite promising. Several large customers are testing, and we expect the first sales in the second half of this year. We also launched a number of new Hectorite products, Bento and Ultimate, also patent pending. It's a highly active Hectorite technology that delivers exceptional skin feel, mostly for lipstick and mascara. And in coatings, we launched Fixitrol 5050W for metallic pigment orientation and waterborne automotive coatings. So lots of excitement around innovation. And next, we're covering more customers directly, also local and regional accounts. We want to understand firsthand about their needs. And we've made good progress last year. We now service about 67% of our customers directly. We're also building a local for local footprint, and this reduces cost and increases reliability. More and more customers are demanding local supply, particularly in China. So this is how we're going to look at growing organically. To complement our organic growth, we're looking at bolt-on acquisitions, but in a very disciplined way, and only when it fits our strategy, which does not depend on M&A. But the acquisition of Alchemy is a great example. In November last year, we announced the acquisition of Alchemy right in our personal care sweet spot. And Alchemy develops innovative rheology modifiers for personal care, They're fully natural and can fully replace synthetic raw materials and cosmetics. And the business has done really well in recent years, delivering double-digit revenue growth and operating margins in line with our personal care business. And we're bringing on a team with incredible expertise in this market. We're already working together on new products, including with Hectorite. Quite a nice synergy. The point is, with Elementus behind it, Alchemy can scale faster, leveraging our global sales network as well as our application capabilities. It's a great example of how bolt-ons can strengthen our core and accelerate growth. To make the most of this growth agenda, we need to be the best supplier to our customers. An important measure is on-time in full. And in July, we shared our targets to deliver a 20% uplift over the medium term. And the police has shared that we're now already halfway, and we'll stay focused on this. Second, we talked about St. Louis in July, one of our largest sites, and we had been dealing with some backlogs there. We had a big opportunity, 30%, by unlocking capacity. I've made some leadership changes there, brought some experienced people back, and we're seeing the results, a 20%. improvement since the first half of 2025. That puts us two-thirds of the way there. At the end of the day, all of this comes down to customer focus and mindset, whether you work in sales, R&D, or in the plant. And with some of the changes we've made, we have a new top-notch customer service center in Porto. We've seen a 50% reduction in customer response times. We've also received external recognition that you can see on the screen, which is a great acknowledgement for the team. We're building a simpler, leaner Elementus. And to us, this means driving agility, faster execution, and responsiveness, so we can scale and deliver more value to our customers. And we've made good progress. We streamlined our organization and leadership team. We've eliminated the stranded costs related to talc. And some of these things were low-hanging fruit, like reducing office spaces that we didn't really need. And some things took more coordinated effort, like qualifying 50 new suppliers that led to quite significant procurement savings. Looking ahead of 2026, we're not done here. There'll be more procurement savings to come. We're making our supply chain more efficient. And we'll continue to move towards a local-for-local model. This is a continuous journey. All right, on to our last slide, Outlook. While we remain mindful of the recent geopolitical uncertainty, we're confident in another year of progress. We're seeing great momentum and excitement building in the business. And I'm pleased that we've made a solid start to 2026 and our priorities for the year are clear. Deliver organic growth through R&D and customer intimacy. Achieve best-in-class customer service levels. And lastly, drive operational efficiency and continue to deliver cost savings. And the team and I are fully focused on delivering this plan. Thank you very much. And with that, let's move to Q&A, please. If everybody could please say their name, speak to the microphone, so that folks on the call know who you are. Thank you.

Hello, Vanessa Jefferies from Jefferies. Just wondering if you could speak first about how the first quarter has started, given weather in the US and improving beauty markets, and how you think about seasonality for the year, given coatings is normally stronger in the first half, but we're probably not going to see much improvement soon.

Hi, Vanessa Jefferies from Jefferies. Thank you for that question. We had a solid start of the year, which is encouraging after Q4 was relatively soft, so Solid start in coatings as well, which particularly was softer in Q4. And the seasonality is expected to be quite typical, 52-48 balance. So, yeah, encouraging start.

And then just on your new growth areas, great that you were able to execute on Alchemy. But how do you think about the mix between achieving that growth from Bolton M&A and not diluting margins, given I can't imagine there's much out there making the margins you are?

Yeah. Absolutely. Look, this is an organic-led strategy. So we're really focusing on organic growth, which there are great opportunities in our existing segments, as we say, personal care and coatings, as well as these new areas that we talked about. It really is organic-led. Look, we work with many, many companies out there, such as Alchemy. We knew that for a long time this company existed. Those could be nice new arrows to our bow, but again, it's really organic lead. You're right, our margins are in a nice spot. We're driving them up further, and it's difficult to find companies that are actually accretive to our margins. Alchemy was one of those, by the way, so we're very happy to use them to grow faster.

And then just on pharma, I know that you didn't give profit, but based on past commentary, I would guess that that's making probably 10% margins. So it seems like you sold out a multiple similar to your own group multiple, which is interesting. I think it's your undervaluation, but what else is left in the group do you think that is making similar margins and could be sold?

I think you're absolutely spot on in terms of your analysis around the margins and what we did there with pharma. So for us, this was a really good step from a and a CapEx perspective, but also from a strategic perspective, most importantly. Pharma is really an activity that is a really great piece of business, but it doesn't fit with us. Looking at the rest of the portfolio now, we're really pleased with the portfolio we have. We don't have any other business in this kind of margin area. So, yeah, right now it's about growth, really. That's what we're focused on. We're pleased with the portfolio. Thank you.

Thank you.

Great. Thanks very much, Kevin Fogarty from Deutsche Numis. If I could kick off firstly on innovation. So you called out several examples of progress, I guess, in new rheology markets. It feels like you're making sort of more progress there perhaps rather than the current ones. It's obviously sort of quite a different sale in terms of new markets rather than the current. I just wondered if you could sort of talk a little bit about that process. So I guess culturally, how is that different in terms of what you're trying to do there relative to what Elementus has done in the past? You're at 16% in terms of innovation sales. Just thoughts on the 20% target you've got out there? And just secondly, if we can think about personal care, Just if you could frame the benefits from cost savings, perhaps during the year, any thoughts on personal care Asia and dynamics there during the year would be quite useful, and just sort of confidence on retaining the margin, which is clearly at a significantly higher level than in the past.

Yeah. Thank you, Kevin, for those questions. Perhaps I can take the first couple, and then Kathy can help me on the third, if you don't mind. Thank you. So in terms of the new markets, so indeed, look, we have a large market in personal care and co-op where we have great opportunities for growth. We talked in July, for example, about replacing some of the synthetic additives in sun care. That's our existing market, huge opportunities. And if I look at our growth going forward, probably the largest piece of growth is actually going to come from those existing markets. We have exciting opportunities in new markets, for sure, as well, where, frankly, we've started to look into only relatively recently. Some of these opportunities we will actually be able to address and bring in with our current sales force, application knowledge, et cetera. I gave a little example of geothermal. So geothermal drilling is actually happening a lot with our existing customer base already, the Schlemmer phase of this world. So we have the access to customers. We have the knowledge of deep water drilling through our oil and gas business. So that's an opportunity that we'll bring in with our existing setup. Other opportunities, for example, we've identified a new opportunity for Hectorite to remove PFAS out of wastewater. That's really interesting, but we're not going to build a whole sales force and application knowledge for wastewater removal. So there we might work with a partner. So I think for these new opportunities, very large, some of them we'll bring in with our existing knowledge. Some we'll build. Some knowledge we'll build, for example, in the construction markets. And some we'll just have to partner up with other people. So that's the way I look at that, but a lot of innovation coming from existing markets. The second question was around innovation and about our path towards the 20%. Absolutely key indeed, because if you think about everything we do in innovation, innovation sales typically generate 5% to 10% higher margins than the rest of our sales. So it's really important. It also helps us to in our relationship with our customers and our relevance to our customers. So we've made great steps last year, 200 basis points up to 16.4%. We foresee to further progress that with all of the activities that are ongoing. Towards, indeed, our medium-term target of 20%, but we'll make some good progress and the investment in R&D, which sometimes is also simply about bringing that application knowledge in, is going to help. Your first question was around personal care, particularly personal care Asia. You know, for us, personal care in Asia is still a relatively smaller business compared to the European and the U.S. personal care business. We had some movements in personal care in the first half last year. Korea, color cosmetic market is a big one for us, and there was some order timing for which H1 was relatively softer. We had a better second half of the year. So we continue to see good momentum. What I would say is in the fourth quarter we did see in antiperspirants some softness particularly from some format changes in Latin America, as I think Cath referred to, so aerosols moving to roll-ons. That's for the antiperspirant business. But in general, we see good momentum. We're very happy with the margins. As I said, Alchemy is accretive there, or is actually in line with our personal care margins. I don't know, Cath, if you want to add anything on the margin point that Kevin was asking about.

So I think last year, you know, we made good progress with the Fit for the Future finalisation and the start of the new cost savings. Personal care specifically also benefited from the closure of the Middletown site. So that is directly related to personal care. But from the other perspective, a lot of it ends up being in allocations because we've got joint plants and back office which ends up being allocated.

Right. That's helpful. Thank you. Thanks. Thank you, Kevin. Yeah.

Thank you.

Thank you. Hi, Angelina Glasova from JP Morgan, and thank you for the presentation. I have two questions. First, I wanted to ask about the mid-term targets on margins for 23%. You have already talked us through some drivers for growth that you see in the mid-term. How should we think about Elementus bridging the gap in operating margins from current level to target of 23% plus? Do you see any particular drivers as more important relative to others? And then there is also clearly a difference in margin profiles between the two divisions. So how do you see that developing? And is there anything maybe for the coatings business where you see those actions that could help lift the margins? And then secondly, looking at 2026, are there any particular items in terms of cash flow generation that development that we should be mindful of? Thank you.

Thank you, Angelina. I'll kick off with the first question and then, if you don't mind, to complement and go on to the second question. So in terms of the margin development, look, we made a nice step in the right direction. Actually, selling the pharma business is going to help us, like Vanessa just said, a little bit more. Look, this is really about growth. And as we just discussed, we're growing in areas that are actually margin accretive. Hectride, we're actually looking to selling more hectride and growing that double digit. So that's going to help the mix. That's going to help on margin development. Obviously, we're taking some more costs out this year, but there is a limit to that at a certain point. We're really – the big reorganizations are behind us. We have fit for the future behind us. So this is about high margin growth. Obviously, we continue to look at how we can do things more efficiently. We'll always think about how we can do things at a lower cost than having Kath come in with a fresh pair of eyes a couple of months ago. It's also really helped in that respect. But it is about growth and about high margin growth, and that's the way we're going to really get to that 23% plus level. Kath, anything to add, or do you want to go to the second point?

Well, I think it's also related to the profile. So personal care has got higher margins and higher growth, and therefore that would naturally generate some accretive margin. Yes, good point. With respect to cash flow and net debt, so page 19 had some technical guidance where flagging capex will be between 4% to 5% in 2026. We will also expect a small working capital outflow in the year I referenced in in my script that we still had some factoring. At the end of 2025, we will not be factoring in 2026, and so that will naturally unwind, and then with the sales increase that we're expecting, we will need to fund that I think from just big picture, we are expecting to be circa one times leverage on an organic basis by the end of 2026. And when I say organic, I'm ignoring the sale of the farmer business, because as we said, we expect to get the net proceeds back.

Hi, this is Madhumanti Sanyal from Kaisha Bank. So I want to know if there is, if you think there is a strong synergy between the coatings and the personal care business. If Coatings continues to show lower than expected performance, would you consider a sale of the Coatings business without affecting the performance of the personal care business?

Thank you for that question. Look, Coatings and personal care are different markets, right? So our customers in Coatings are Sherwin-Williams and PPG and Oxenobel, and in personal care you talk to L'Oreal and Estee Lauder. So, the markets are different, but in terms of how we operate at Elementus, there's a lot of synergies. Most of our manufacturing plants are actually multi-purpose and multi-market plants. So they serve as both markets, so both coatings and personal care. Our plant in Livingston in Scotland in the UK is about half-half personal care coatings. In that respect, there's a lot of synergies. Also, if you look at the products that we manufacture and the knowledge that we have in our laboratories, we talked about rheology, we talked about hectride, all of that, ends up in both coatings and personal care. So the product knowledge, the manufacturing footprint synergy, these businesses are intertwined. So no. But I would add to that as well is that we're actually quite pleased with the performance of coatings. If you look back at coatings where we were seven, eight years ago, the margins of the coatings business were in a bad year, 10%-ish points around that. In a good year, it was 14%, 15%. Right now, in a low-demand environment, we're at 18.9%. So we're actually quite pleased with the coatings performance, and we're excited about the opportunities ahead.

I've got some questions from Sebastian Bray at Barenberg. Has there been any change in the energy business that led to the strong performance, as you've highlighted, despite the oil price decline? Second question, what are management's thoughts on additional buyback after receiving proceeds? from the sale of the farmer business? And thirdly, are there any signs of a recovery in hectare sales in personal care? Did these grow in 2025? And if not, why this was the case?

Thank you, Sebastian, for those questions. Shall I take one and three and you do two? Sounds good. All right, let's do it. So energy business. We're actually very pleased with the performance of the energy business. And it is a relatively small business, give or take $40 million, but it did very, very well last year. One thing that Sebastian might remember, we closed our Charleston site in the U.S., back in 2019 or early 2020, and that was at the time a purely energy-focused business, or plant, I should say. We moved the manufacturing of those products to St. Louis, so that helped us in terms of margins. That's one thing that helped us. I would also say that by doing so, we really transformed the energy business, which, if I look, when I joined Elementus 14 years ago, was a much larger business. But now we really focus this business one on manufacturing only from St. Louis, focus on Hectorite. Why on Hectorite? Because we really have a unique winning differentiators with Hectorite because it works very well for deep water drilling. So if you go very deep, you have to drill at temperatures of 250, 280 degrees Celsius and Hectorite is stable at those temperatures. We refocused the team. We have a smaller portfolio. And actually looking at last year, we've had a lot of success indeed in difficult conditions for drilling, such as deep water. We talked about the geothermal energy opportunity. So that's what we're doing here. Smaller business, relatively small team. Close the plan down to two costs out and focus on the areas that make Elementus unique. And we'll continue to do that, actually. The third question was around personal care and Hectorite. Yes, we have grown. Obviously, last year, with the markets being a little bit soft, also the personal care growth was low single digits, also in Hectorite. But if I look at... Personal care, again, I'm turning the clock back 14, 15 years ago when I joined. This was a $30 or so million business. We actually reported it at a certain point under oil and gas. You wouldn't believe that. But that was a purely HEC tribe business, and we understood where else we could sell HEC tribe in personal care in adjacent areas. So looking at the last 5, 10, 14 years, Hectorite in personal care has grown really, really nicely. Last year was relatively lower growth, but still growth. But looking at the opportunities ahead in personal care as well, replacing synthetics, which continues to be a very, very exciting opportunity, entering skin care, which is $20 million or so business for us now. We're going to scale that. Lots of exciting opportunities.

So I think with respect to the question on share buybacks, so as we said this morning, following the sale of the pharma manufacturing business, upon closing we expect to distribute those funds to shareholders. We also have the target of net debt to EBITDA of about one times. We expect to be there by the end of 2026, so that will give you a signal of what we're expecting in this year. And then as we look forward, we'll consider... continue to take into consideration where we are on leverage and expectations.

Thank you. Sorry, I've got to pretend to be Anil now. Anil Shenoy from Barclays has sent two questions as well. We didn't see any guidance on 2026, so are you happy with where the consensus is at for adjusted EBIT and if so, could you help to bridge the gap between 2025 EBIT to 2026 consensus EBIT? What are you assuming in terms of growth and what are you assuming in terms of savings? Thank you.

Shall I do the first part and then you the second? Okay. All right. Thank you, Anil, for those questions. Look, we had a solid start of the year, like we just mentioned, so we're quite happy with that and therefore comfortable with the consensus. in terms of the bridge EBIT 25, 26?

I mean, Cathy, you want to... Yes, so as I mentioned, we expect the incremental 4 million in savings to come through. We do expect volume growth, so we'll get some natural leverage and some margin accretion continue to drop through, and that's how we're moving from 2025 to 2026, so steady as she goes with the additional cost savings. Thanks.

Just some last questions from Tata and from Udeshi from JP Morgan. Are you expecting Q1 sales to be up compared to last year? And secondly, we didn't see volume growth this year. What are your expectations for volume growth for 26?

Yeah, so thank you Chetan for those questions. I think for Q1, as I said, we made a solid start. I think the most important is that if you look at where we, the exit rate of Q4 last year was relatively softer. So we're happy to see good progression after that. For the full year, again, back to the previous questions from Anil, we're comfortable with where consensus is. We are looking at a typical balance between H1, H2, which I think also can help Chetan in terms of his modeling. Anything to add, Cath?

I mean, I would hate to be the dour CFO, but I would just note the geopolitical situation since the weekend. So, you know, we have an expectation, and we hope we all deliver that, but some things are out of our hands. Good. But we will maintain our focus on our strategic targets.

Yeah. Yeah, we're two months in. It's early days. Yeah.

Good point. So, just on that, how much is gas prices and energy prices affected you?

Not so much anymore, actually. When we owned Telk, I had the Dutch gas price on my phone. I was tracking it every half an hour, and I didn't get a lot of sleep. Luckily, we don't have that business anymore, and we are in specialty chemicals. So if you look at how we generate our margins, it's about adding value to our customers' formulations rather than trying to squeeze out the scent on our costs. So very much a different situation than where we were a year ago. Good question. Thank you. And we'll continue to monitor. Perhaps one of the things to add, we continue to monitor the situation. The situation Kath mentioned, obviously, that the recent occurrence in the Middle East. And if our input costs go up, we typically look to price to compensate for that input cost increase. Definitely. Thank you. Good question. Yeah. No more questions? Hey, Vanessa, yes.

Sorry, can we just get the mic to you, please?

Sorry, just to clarify what you just said, you're happy with the concerns to sales and EBIT, but you've lost the pharma business, which is 35 million sales and 3.5 million EBIT, right? Yes.

So that's on a pre-adjustment for pharma, but we suggest that people wait until it actually closes before adjusting numbers.

Okay, cool.

Thank you so much.

Thank you.