Synthomer plc

Good morning and welcome to our 2025 full year results presentation. As usual, I'm here with Lili Leo, our CFO, and Faisal Taba, Head of Investor Relations, and together we look forward to answering your questions at the end. In terms of the agenda, I will provide an overview of our performance and the further strategic progress we made in 2025, despite an extended period of challenging market conditions. Lili will then walk through the 2025 numbers in more detail and update you on the balance sheet developments before I come back to present the actions we have been taking to deliver our strategy of focusing on differentiated specialty products for attractive end markets. Then at the end, we will discuss what we have seen in terms of trading since the start of 2026 and what we expect for the remainder of the year and beyond. I have five points. Starting with our performance in 2025, against the backdrop of a further year of lower-end market demand and the additional challenge presented by the global tariff changes introduced during the second quarter, we delivered gross and EBITDA margin improvement and an overall trading performance fully in line with our January 29 winter trading statement. In the face of volatile market conditions, we continue to rigorously prioritize what is within our control, delivering robust cash, earnings, and margin performance while continuing to focus, simplify, and strengthen the business in accordance with our strategy. Divisionally, we delivered a strong performance in our AS business, which continued to regain share and enhance margins through successful delivery of its reliability and performance improvement program and increasingly important new growth initiatives. In both CCS and HPPM, activity levels were generally lower, which resulted in negative operational leverage. However, we were able to partially offset the effect of this through additional self-help cost savings. At the same time, we continued to focus on managing our financial position. The group delivered positive free cash flow for the year, with the cash inflow in the second half as expected. And we were able to bring down our net debt year on year, reflecting our rigorous focus on profit and cash management. Point two, very important for all our stakeholders and our company. We have refinanced our bank facilities, extending the maturities from mid-2027 to Q1, 2029. Together with the reset of our covenants over the whole period, this gives us stability and the runway into 2029. We can now fully focus on our business, our customers, and execute our plans. Point three, we have had an encouraging start to 2026 trading. Q1 2026 trading was in line with our expectations and showed progress against Q1 2025, with clearly improving momentum through the quarter. And Q2 now started on a highly promising note. We expect a robust improvement in volumes and margins in the second quarter and potentially longer, depending on developments. As I will come back to, we are not changing our overall view for 2026 for now, but the risks are to the upside as we sit here today. Point four. This improving trading momentum has two drivers. The foundation is enduring progress from our strategies. Product and business rationalization have further simplified our structure and focused our innovation, manufacturing excellence and expert service on the most attractive products for our customers and our bottom line, supported by our disciplined approach to capital allocation. We have focused the business on end markets and customers where we believe the volume challenges of recent years were more cyclical than structural and they are beginning to improve. We have invested carefully in key growth products like our APO line and in our innovation strategy. We have also traded a number of commercial partnerships that leverage our capabilities without requiring capital investment. And our commercial strategy is now highly targeted on regions with the greatest opportunities for our business. Many of our key attributes and the strategic efforts we have made over the past three and a half years mean we are well positioned to deal with the profound disruption in the value chain since the start of the Iran conflict. And while the longer-term effects remain uncertain, the current volatility in the chemical sector has only served to reinforce the importance and benefits of our business model. Improving operating leverage from efficiency, cost reductions and capital discipline, our streamlined in-region for region manufacturing strategy global procurement excellence and above all, our increasing focus on specialty businesses where we have comprehensive relationships through differentiation and hence pricing power. It is these factors which we have focused on for the last three difficult years which are allowing us to capitalize on the trading momentum that we are seeing now. And my fifth point, we will stick to our strategy and maintain our discipline to ensure that we deliver the substantial further value creation available. We will continue the divestment program. William Blythe was divested in the first half of last year, our third divestment since 2022. And our half-year results, we announced we are broadening our divestment program in order to accelerate the leveraging and focus our portfolio further. We currently have our four formal divestment processes underway, and we will always keep the wider business portfolio under review for further opportunities. We continue to extensively review our operating and capital expenditures to identify additional savings opportunities and improve our efficiency. Overall, we achieved 30 million pounds of operating cost savings during the year through our various self-help plans, and we now expect to deliver a further 20 to 25 million pounds in incremental gross benefits in 2026. And we will maintain our ambition to make the business more specialty-focused, the key driver of the fact that our group gross margin has increased by a massive 500 basis points over the last four years to over 40% in the last quarter, demonstrating the substantial improvement in our operating leverage to increasing volumes. Gross margin will remain a focus in 2026 as it positions us very well for further volume recovery in our core markets. I come back in a moment to talk further about some of the actions we are taking in the current year, but let me now hand over to Lily to run through the numbers in more detail.

Many thanks, Michael, and good morning all. As Michael already mentioned, 2025 was a challenging year for the industry and for Sinsoma. Against that backdrop, we performed well in delivering strategic steps and further enhancing our margins via self-help actions. In this section, I'll focus on our actual 25th result, including the cash flow, and also provide an update on our refinancing project. Starting with the financial summary, my first remark before any line details is that despite the revenue reduction of nearly 200 million pounds year-on-year, due to market conditions, our EBITDA dropped by 6.5 million pounds, thanks to our focused efforts and delivery on self-help actions. Group revenue for continuing business was 9.9% lower on constant currency at 1.74 billion pounds. Volume was down 7.2%, from lower end market demand following tariff changes and the ongoing competition from Asian companies in base chemical areas, a situation that seems the Iran war has changed significantly, as Michael alluded to already. Our EBITDA reduced by 4.5% on constant currency to 137 million pounds, which resulted into an EBITDA margin expansion of 40 bps, versus 2024 to 7.8%. This was supported by £30 million of cost-efficiency programs and reliability improvements, as well as low bonus accrual comparing to 2024. Continuing business underlying operating profit was £37.6 million for the year, a reduction of 21%. Underlying finance costs increased by 6.5%, with the higher coupon from new bonds partially offset by lower base rates. I come to refinancing and expected interest costs in a minute. We continue to guide the underlying group effective tax rate around 25%. For 2025, our ETR is significantly outside of this normal range due to a one-time adjustment on deferred tax assets in the US and UK, as well as geographical mix of profits and loss. These continued operations, being William Bly's business, contributed a EBITDA of £3.6 million, up to its divestment in May 2025. The total group, continued and discontinued, had underlying loss per share of £37.2 million. versus two and a half P loss from 2024. About half of the EPS that deterioration was due to the aforementioned deregulation of US and UK tax losses, which the company can access to in the future. Special items comprise mostly intangible amortization, impairment charge, and destruction and site closure costs in the period. As always, we have included the schedule for special items in the appendix. Our net debt of 575 million pounds was 22 million pounds lower than financial year 2024 and 63 million pounds lower than the half year of 2025, thanks to good cash management and our leverage was 4.7 times, well within the covenant. Now turning to each of the divisions, In CCS, revenue was 699 million pounds, down 11.6% in constant currency from 2024. Volume was down 6.8%, reflecting tariff-induced demand uncertainty, and comparing to a relatively strong prior period, which included a reasonable coating season. But the biggest driver was lower oil and gas drilling activity, which resulted in smaller orders, from our oil field service customers in the high margin energy solution segment. We have seen some improvement in construction business in Europe, which was particularly challenged in 2024. But this was not enough to offset the muted activities elsewhere, particularly in the US. The energy solution slowdown was also reflected in the price mix reduction of 4.8% for the period. As a result, EBITDA reduced to 64 billion pounds, or down 25% in constant currency, with an EBITDA margin of 9.2%. This reflects the negative operating leverage and the mixed effect of a strong prior year energy solutions result. In response, we have taken decisive steps on cost reduction. CCS bears substantial share of overall cost base, the total saving delivered in year, was 13 million pounds, with further benefit expected in 2026. The turnaround of our D6 solutions division continued with pace. The EBITDA increased by 39.5% in constant currency versus 2024, raising EBITDA margin by 350 bps to 11.6%. A reminder that in 2023, The margin of this business was around 5%. So in two years, we more than doubled the EBITDA and EBITDA margin. Revenue was 1.5% lower in constant currency. Inline was 1.2% volume reduction. This was partly driven by the shutdown and site reliability issue in a third-party managed site that we have talked about previously, although this is now improving. Our overall improved reliability and cost competitiveness have enabled AS to regain resilience in the period of market volatility, with business delivering around 11 million operational efficiency and cost savings in 2025. Again, more to come in 2026. Finally, health and protection and performance materials division. Revenue was down 16.5% in constant currency, reflecting a 10.4% volume reduction and possibly lower raw material price. Within health and protection, NDR volume fell by 17.3%. Beginning of the year, we saw muted customer demand reflecting some pre-buying in 2024 in the supply chain prior to the change of US PPE tariffs in January 2025. Volume began to improve in Q4, 2025. Margin per ton in HMP benefited from mixed effect as demand for our higher margin reusable product was more robust than disposables in the year. But this continued to be lower than the pre-COVID levels. The Iran war has a positive effect on the margin. We received further income from US technology partner, where we support their efforts in building a new US MBR plant, including for a new package built and delivered in the period. The performance material side of the division reflects volatile market conditions for these businesses, especially the monomers business. Process optimization and cost efficiency initiatives has driven performance improvements. We continue to focus on our efforts on enhancing capacity utilization and efficiency within the division. EBITDA was 24 million pounds with a margin of 5.2%. In the year, we disposed William Blight and ended operations at our Ningbo site in China with further development programs progressing as Michael already mentioned. Now to cash flow. We deliver positive free cash flow as targeted in 2025, even after adjusting for the one-time KOK receivables purchasing. Closing net debt of 575 million pounds, reduction of 22 million pounds from 2024. Now, our expectation for 2026 at this stage is also for the mutual free cash flow once the 50 million receivable purchasing unwind is accounted for. Now, in reality, this was already completed by early March. Our net working capital excluding receivable financing was broadly flat in 2025. And we had an inflow of 77 million pounds from higher utilization of receivable financing facility and a 50 million receivable purchasing agreement. We expect the Euro seasonal working capital outflow in H1 2026 which is likely to be slightly higher than before, given the Iran conflict effect on raw material costs, but also the euro's seasonal inflow in H2 2026, supported by further structural inventory reduction programs. CapEx remains disciplined, with full year spend of 86 million pounds, in line with prior year, and our CapEx to depreciation ratio remains below one time. In 2026, we have further focus on our capital spending program and expect to spend around 15 million less than prior year. A figure that still include a few carefully selected growth projects. Full-year cash tax was neutral and vanishes from prior year refunds in H1 2025. And pension costs in excess of P&L are significantly lower than last year as guided. Now the deferred UK deficit reduction payment was made in 2024. Regarding our co-debt facilities, the remaining 150 million euros double amount of 2025 bond was repaid in July 2025. We refinanced our RCF and UCAT facilities, extended the maturity of both facilities to the end of February 2029. Security and guarantee package is provided by certain group companies. Coming to covenant and liquidity with the refinance, we gain further covenant support in line with micro uncertainty, and we agree to provide quarterly covenant testing on leverage and a minimum liquidity covenant. Our liquidity remains healthy for the group. I'm expecting the P&L interest cost to be around $70 million in 2026, reflecting the refinancing deal. Cash interest costs lower by mid-single-digit millions. Net debt to EBITDA was 4.7 times at the year end on the covenant definition basis, which mainly adjusts for IFRS 16, and is therefore about 0.4 to 0.5 times higher than using the headline net debt to EBITDA figures. Now, let me reiterate that our key priority is to reduce our leverage towards one to two-time medium-term target level. Through a combination of increased EBITDA, continued cash generation focus, supplemented with proceeds from divestment, the Board has confirmed that dividends will remain suspended until our leverage is below 2.5 times. Now, in summary, in 2025, We made strategic, operational, and financial progress against the backdrop of challenging and uncertain macro environment. We'll continue to focus on our self-help actions, capitalize on the current market conditions since the Iran war, and balancing this with selective investment guided by our strategy. Let me stop here and hand back to Michael to update Iran's strategic initiatives and outlook. After Michael's remark, we'll come back to take questions.

Thank you very much, Lilly. I would like to begin this section by reiterating the key elements of the strategy which have and will continue to guide how we are transforming the business. All five pillars and three enablers provide executable actions for us. The period since we launched the strategy in late 2022 has not been the easiest environment to demonstrate progress, but our actions are showing a positive effect on the quality of our portfolio. I mentioned our significant and continuous gross margin improvement, and together with all the work we have done on the operating and overhead costs, they have increased the operation leverage in the business substantially, resulting in a drop-through rate from revenue down to EBITDA of 30% or more. As market conditions change, we will stick to the core tenets of these plans, which have served us well. This slide will also be familiar illustrating the direction of our strategic evolution in creating a more specialty, more geographically balanced, and a more streamlined Syntomer. Now, let me briefly take you through each of the three divisions to highlight the key actions we took in support of our strategy. CCS is our most specialty-weighted division, and as Lilly has described, it experienced a challenging demand environment in 2025, mainly in energy solutions and construction. We continued to further align the activities of the division with its strategic end markets during the year. That meant continuing to improve the geographical balance of CCS with strategic key account management for our top global customers and targeted marketing to new customers in North America, the Middle East and Asia, including China. I meant strengthening the division's position in high-growth subsegments, including adapting our product portfolios for market areas where we see growth opportunities, such as battery technology and solutions that support data center construction. In line with our focus on value selling and optimizing our product mix, we launched a new CRM system, which I believe to be best in class, and introduced new pricing strategies. As part of our ongoing portfolio improvements, our innovation process is becoming more end-market focused to enable us to get products to market quicker. We made selective investments in our manufacturing capability in the US to increase its flexibility and enable the localization of products previously only made and imported from Europe. And we enhanced our coatings capacity in the Middle East to support long-term growth opportunities in the regions. In response to market conditions, CCS stepped up a range of efficiency measures during the year. This included a cost reduction program to mitigate the slowdown in end market demand. We accelerated and reprioritized a number of asset optimization projects and other cost and capacity management activities during the year, including temporarily idling excess capacity, reducing shift patterns, and undertaking a broader review of operating costs, including headcount. The division is also implementing a number of inventory management measures to enhance cash flow. We expect our 2026 performance to benefit from these projects, in addition to the significant market-driven volume and margin opportunities we witnessed since February 2026. Turning now to adhesive solutions, the division has continued to build on the dedicated performance improvement program launched in 2023, which has transformed the adhesive resin business acquired by Sintema in 2022. The program has enabled improvements in reliability for customers and achieved £35 million in cumulative benefits to date by reducing costs and improving end-to-end operations from supplier network improvement to production site efficiency and delivery logistics. The program continues to find further opportunities expanded again to target a total of at least £40 million in cumulative benefits by the end of 2026. As Vivi has already touched upon, the success of the program is now clearly evident in the division's EBDA margins, which have more than doubled to 11.6% last year versus 5.4% on launch in 2023. Our reliability efforts are now primarily focused on the Longview, Texas facility shared with Eastman. Following the upgrade to increase the specialty APO capacity, this represents a key growth opportunity for 2026 and the years ahead. We will also continue to pursue further opportunities to reduce working capital intensity and optimize our supplier network for key raw materials. At the same time, we continue to regain market share through greater reliability, competitiveness, and strong customer centricity. We are increasingly leveraging our global production network and multi-year relationships with blue-chip customers to grow our specialty exposure, which accounts now for 60% of division revenue. In the first half, we announced a novel whole-chain value chain partnership and supply agreement with Henkels. The year also saw the successful launch of Klima-branded products, which deliver at least a 20% cradle-to-gate reduction in certified product carbon footprint. In the more volatile and competitive European-based chemical product areas, we remain focused on enhancing cost competitiveness and reliability and leveraging partnerships and volumes. Finally, turning to HPPM, much of HPPM division has base chemicals characteristics. So our differentiated steering approach focuses on improving cost efficiency across the value chains by enhancing our overall value proposition to customers through selective investment in process and product innovation. Our health and protection business continues to focus on opportunities to leverage our position as a global market leader in NBR manufacturing with significant technology and manufacturing expertise. We also continue to support our U.S. partner with further technology licensing and manufacturing expertise as it developed onshore U.S. capacity for nitrile latex and glass manufacture. We are exploring other potential partnership opportunities for this business globally that require little or no capital investment. In 2025, we established a partnership with Neste and PCS to manufacture bio-based nitrile latexes for the glove industry. We also continue to develop new products that aid usability, weight reduction, and high performance for customers in this market. In performance materials, we signed a partnership with Lumos Technology to license SintraMers proprietary acrylic acid esters technology, which will now reach a broader market through the Lumos platform. We also undertook further product rationalization and consolidated an old manufacturing site in China during the year. And in advancing the strategic transformation of the portfolio, we completed the divestment of William Blyth, a non-core inorganic chemistry business. This transaction further reduces the complexity of our site portfolio and enables greater focus of capital, time, and other resources. During the year, we broadened the scope of our non-core divestment portfolio to accelerate the group's deleveraging and simplify the business portfolio further. Turning now to 2026 trading and outlook. Overall trading in the first quarter of 2026 was in line with our expectations and ahead of prior year, with much improved CCS and stable AS performances offsetting a slower start in parts of the HPPM division. Encouragingly, all businesses had improving momentum through the quarter. But since the start of the Iran conflict, we have experienced substantial changes in our operating and commercial environment, both up and downstream. As I mentioned at the start, our focus over the last years on improving on speed and agility, a streamlined in-region, for-region manufacturing footprint, and stronger procurement capabilities mean we are well positioned to significantly capitalize on the market opportunities available. We are passing through the significant increases in raw material costs and to a lesser degree in energy in substantial pricing adjustments, while volumes in many areas are increasing due to disruption to the global manufacturing and distribution networks of competitors, particularly those based in Asia. With little backward integration, we have always had to be agile in our sourcing strategies, and our global procurement and supply chains have now reached a level which I call market leading. As a result, we are expecting robustly positive period on period volume and margin development in the second quarter of the year, and potentially thereafter, based on our latest trading data. Clearly, the geopolitical and market context remains highly volatile, and the potential impact of prolonged disruption on end market demand is uncertain. We are therefore making no changes to our 2026 outlook at this stage. Overall, we expect to make year-on-year progress driven primarily by our self-help actions. Specifically, we anticipate that full-year contributions from our cost reduction programs and product investments made in AS and CCS during 2025, ongoing margin progress in our specialty businesses, Health and protection volume and margin improvements will partially offset by wage inflations and normalization of bonus accrual in the year. At the same time, the longer the trading conditions experienced in Q2 persist, the greater the upside risks to our expectations. So in summary, we continue to stick to our strategy to transform this business to our specialty. Now more than ever, this is the right strategy for our portfolios. Through the last four years of subdued sector demand, coupled with the additional debt from the Eastman Adhesives acquisition, our balance sheet has been one of our biggest challenges. Alongside making the portfolio more focused and resilient, our broadened divestment program will help to reduce our leverage. Meanwhile, we continue to work positively with our finance providers to ensure the runway to deliver our plans. Most importantly, we have begun to see some evidence that underlying specialty end market demand is improving. Our increased operating leverage to volumes in these markets is in the end the key driver of our earnings ambitions and hence the value creation opportunity in this company. In the broader context, as negative as the Iran conflict is for this world in general, it does represent a positive catalyst for us with our increased margins, reduced cost base, regional production footprint and best-in-class procurement. It will take 6 to 12 months after a potential end to the conflict until global supply chains are back to normal and it is interesting to see that many customers are re-evaluating their global networks, especially their Asian supply exposure. Anyway, we continue to be bold and fast, execute our strategy capture the opportunity and mitigate all the related challenges. In summary, we have made the progress by sticking to our strategy and we will remain focused on delivering it with the same focus and operational discipline going forward because there is scope for substantial value creation. Now, just before we take your questions, you will have seen we have made another announcement this morning. Lilly has accepted the role of CFO at Umicore in Brussels, Belgium. We have been fortunate in being able to bring on board Ian Torrance, most recently interim CFO and then CEO of Wood Group, as her interim replacement while we take the time to identify Lilly's permanent successor. I have very much enjoyed working with Lilly since she joined Sintermeer in summer 2022. She has made a significant contribution, particularly in helping to steer the business through a very challenging period for the chemical sector. I thank Lili for all the hard and successful work, her professionalism and her friendship to me and the team. On behalf of the board, executive committee and all of Sintemer, I wish Lili every success in her new role. I also look forward to working with Ian, who is a seasoned CFO with strong capital market experience, which will be very relevant at what remains a critical period for Sintemer.