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.

Thank you, Michael. Very kind of you saying that. It has been a real pleasure for me to work with you and the rest of the team. Together, we delivered a lot in the last four years. I have no doubt the stronger Simpsons will be able to capitalize on the huge opportunity in front of it. Now, with that, Michael, Faisal, and myself are here, happy to take your questions.

If you would like to ask a question, please press star 1 on your telephone keypad. We'll take our first questions from Sebastian Bray from Barenburg. The line is open. Please go ahead.

Hello. Good morning, Michael and Lili, and thank you for taking my questions. I'd have two, please. The first is on the situation in nitrile latex, because it looks like shortages at Asian peers are going to lead to a situation of fly-up margins. Can you talk about why EBITDA in this business couldn't double or treble temporarily based upon this? My second question is, sorry, to go back there, I think there was an interruption from incoming calls. Sorry about that. So the first question is, given the shortages of Asian peers for nitrile, and the fact that spot prices have shot up, why couldn't EBITDA in that area double or treble this year? And would it potentially be a good opportunity to exit the business at a stage of fly-up margins where the valuation is likely to do better? My second question is on April trading. There have been mixed messages from sector peers about whether this has improved or has continued to improve or stepped down on the volume sense. Can you give any commentary around this? Maybe I might squeeze a third one in. The info from receivables factoring in 25 and its effect on net debt. Am I right in saying that the 75 to 80 million is effectively added back to the net debt on a covenant basis for 26 because it's been repaid? Thank you.

Thank you, Chair Sebastian. I think I take the first one. Let me take the third one. I think your assumptions on NBR could be actually quite right. We have enough raw materials. Other people are struggling. We know this. Like you mentioned, we do not have any shortages on NBR production. We had at the very beginning, but then we are covered. So I would say it's a very positive situation we are having right now. Could margins double or triple? Why not? Let's see. It's definitely looking very good right now after this business was breakeven or slightly positive. So I think we are for now in a very good position. It also clearly shows that we do have a leading position and we have critical mass. I think the whole Malaysian chain, as we will call it, our customers and ourselves, is in a much, much better position than before. I even think this is going to last longer, because I think a lot of the end market consumers, they will think about such events, and probably they will, I mentioned a little bit in my speech, they will probably think about a more balanced approach of their supply situation. So I think this is even a lasting benefit. But in this Sebastian, it looks very good. What do we do with the business in the future? I think this we are always evaluating. It is a base chemical business, as we always mentioned. It sits in HPPM division. So I think here I don't want to go further, but as always, when the business improves the performance, it is more interesting for potentially better owners. Your second question on April, and I'm here, I don't know, maybe more optimistic than than what you have said about the sector, but we do indeed see very strong margins and volumes pretty much across the whole portfolio, meaning on the specialty side, but also on the base side, it's predominantly against, of course, Asian suppliers, but in this world you have so many interlinked supply chains. So even in high-end specialty chemicals delivered in Europe or in the U.S., you might have an intermediary from Asia in there, And so far, as I mentioned, I think really we have a really world-class procurement which works extremely aligned with the three divisions. I think we can capitalize on this quite nicely. So I think the problem is that we don't have visibility enough in H2 because we don't know how this conflict ends, how the world shapes out. But if you ask specifically about April, it does look very good in terms of margins and in terms of volumes and in terms of all three divisions.

Very good. I take over on the third question, Sebastian. Yeah, the question about receivables financing. Look, what we said is, you know, we expect free cash flow neutral for this year after adjusting for the $50 million one-time KOK receivables purchasing. That was done in December 2025. So that's what we said.

So when I look at the free cash flow statement for 26, there is effectively a 50 million outflow for repayment of receivable financing. Is that right?

That's correct. I mean, everything being equal, that would be correct. It's a KLK.

We kind of neutralized it back to neutral free cash flow, and we neutralized the 50 million KLK.

But just to clarify, the free cash flow leaving aside the KOK, imagine KOK was not happening and the receivables were not being repaid. The free cash flow would be zero, break-even? Okay, understood. That's helpful. And, Lili, all the best for your time at Umicore. I look forward to seeing you there as well.

Thank you so much, Sebastian.

But, you know, Sebastian, last year we also said neutral, and at the end it was much better. So I think there are always opportunities. Thank you, Sebastian. You stick with me and send to me.

Thank you. We are now taking our next questions from Harry Phillips from Ilhan. Your line is open. Please go ahead.

Good morning, everyone. Three from myself, please. Just on the cost savings in the current, I'm assuming that the sort of comments around Texas are part of it but is there a sort of easy breakdown of how the cost savings will appear across the three businesses the second question is just on sort of raw material put throughs and what that does to the revenue line and I'm guessing if you want to put through just dilute margins in the short term just reflecting that sort of simple math and then lastly probably one you won't want to answer but I'll ask nonetheless is just in terms of hand divestments the horrible sort of timetable you might have in your thinking around that I appreciate obviously you can't entirely control it but given we've got this additional visibility around the refi into 29 and the sort of market conditions that are currently prevailing it sort of seems that activity in that process might quick enough further still.

Yes, Charlize, do you do the cost?

Yeah, I'll take the first, maybe partly second, and we'll talk about the last. So, hey, Harry, cost savings is coming from three divisions and also central functions. Michael mentioned procurement is part of, you know, that's also part of, key part of the cost savings and self-help actions. You know, we always say, you know, CCS bears more of the cost base in the group, so we expect more from CCS. But the other two divisions are also contributing significantly together with the functions. On the raw material price impact on revenue and margin, you know, mathematically, you would say if we simply just pass on the raw material price increase added to revenue, of course, that would dilute the growth margin. However, we are having good commercial teams. We have long-term customer relationships. On the up, we're passing on, but we're probably passing on proportion to the value creation in the situation. So I'm expecting us to be able to mitigate that and The opposite side, when material price comes down, we may manage to hold on to the margin. Michael.

Yeah, on the revenue side, clearly raw materials are massively up, sometimes two times, three times up. So obviously our revenues go up. And as Lily pointed out, or we all pointed out before, I think there is room for margin improvement in such a situation. On the way up, as you can see it right now, and maybe there's even the bigger opportunity on the way down, when the raw materials are going down we see a certain stabilization of raw materials they went steeply up after end of February we see now a certain stabilization and let's see how this whole develops over the time but right now it's a it's a reasonably I think if you're bold and fast at the beginning it's a reasonably comfortable position to be in right now your third question on the divestments We announced a broadened program in August of last year, and I think if you look into the whole market situation, everybody takes 12 to 18 months until you have a divestment done. It's just the market conditions right now, maybe to change a bit, because I think the chemical sector generally is increasing over the last three, four months. We have four processes running. I think one of them we can hopefully conclude rather sooner than later. We have two processes, I would say, in the next few months, and we have one process that will go into H2. Again, as always, it needs two to tango. We are not making bad deals in our company. I always say there are two things that are relevant to make a deal. One is the valuation, the money you get, and the other one is the SPA, the terms and conditions that do not bring you in a critical situation two or three years down the road. I think that's the schedule. There are active projects, and you will hear from us, hopefully, in the near future.

Lovely. Thank you very much indeed.

Thank you, Harry. Thank you. We are now moved to our next questions from Stephanie Vincent from Bank of America. Your line is open. Please go ahead.

Hi. Thank you so much for taking my questions. I just had a couple questions on the new revolver as well as the UK Export Finance Facility. Just wanting to know, I guess, who the new issuer is. You did say that it was a subsidiary of , so like the issuer of the bonds. I just wanted to know what the changes were there. And also, if you are willing to disclose this or able to disclose this, what your view is on the new guarantor coverage under the 2029 notes that remain in place. And then my next question is just a little bit of housekeeping on the cash flow. I know that you did give a good overview, but just wanted to know just your broader view on cash taxes in 2025. So we have... I'll start with UKEF.

I think UKEF is really, was extremely helpful in this complex refinancing project that we went through over the last few months. And yeah, I just think it's a very... We had a very good cooperation there, a lot of support from UKEF, and I think that is an excellent institution to promote the purpose of UKEF, which is really manufacturing and exporting from the UK. We are very grateful to UKEF.

Indeed, and also I would comment on the rest of the lenders in the lending group. We have had good constructive discussions with them in the last weeks and months, We have put a very detailed and good disclosure in the RMS already, and I think Faisal is in the finance section. Isn't it there? So we're putting, you know, the structure, the covenant, et cetera, et cetera, et cetera, and the changes there. So it is a subsidiary within Sinsmo PLC this time around. that was taking the new financing package. And as I said, cash tax for this year won't be neutral or won't be positive, but we are expecting probably high single-digit cash tax outflow this year.

Okay. Okay. And also just in – if I can throw in another question just about Some of the news articles that we've seen in the UK press, et cetera. I know you've gotten the UKEP facilities, but just any sort of additional support that you could see from European government, you know, directly or indirectly to your business, things like anti-dumping that have had an impact or could have an impact this year or next year?

That's a good question. As you know, the European Union in particular is not always as fast as you would like them to be, but we are part of several of those, I almost call it projects, and within the next few months we should get some news. I think the European Commission in the meantime realized that something has to be done, and I don't want to be as blunt as Sir Jim Ratcliffe said, But it is a big problem. The energy, the regulation, the disadvantages what we have against Asian, in particular Chinese supplies is substantial. And I see movement in Brussels. I see movement. So we are actively, sometimes we are front runners, sometimes we are joining a team, but I do expect positive news in several of our businesses within the next few months coming from Brussels. And this would of course sometimes totally change the economics of of a business. But as always, we try to live without those things. We take them if they happen, but we always position our business that we don't need it. But it would fundamentally change some of our businesses. Of course, the most challenged ones, there could be, yeah, severe positive impact if this goes through in the next three, four, five months.

Okay. No, that's very helpful. Thank you.

Thank you. We'll take our next questions from Kevin Focatti from Deutsche Bank. The line is open. Please go ahead.

Oh, great. Thanks very much. Good morning, all. Just two if I could do. One, I guess, is on the trading side. I guess, are you seeing anything? I appreciate it. It's difficult. Visibility is low. But, I guess, given the momentum you've seen, are you sort of seeing anything to make you feel there's other sort of competitive advantages you offer or rather than just a kind of short-term pull forward that you might be experiencing. I know some companies have talked about the latter. So just anything you might be seeing to sort of give you confidence that, you know, there's some sustainability around this and perhaps it is playing to that kind of structural advantage you offer. And I guess sort of secondly, just if we sort of come back to your free cash flow guidance, obviously kind of the implication is it's sort of positive before the fact of repurchasing. If we sort of think about the bridge to kind of unchanged expectations for this year, now the kind of higher interest costs or the, I'd appreciate sort of cash interest costs to be lower than P&L, CapEx, you know, will be a bit lower than 2025, but nevertheless still remain substantial. And there's risks, I guess, in terms of working capital in a high raw material price environment. Are there any sort of factors we should be thinking about to kind of support that kind of free cash flow outlook that we haven't sort of thought about, appreciate there's going to be kind of restructuring costs, et cetera, perhaps this year? but anything you would sort of focus our attention on to fill in the gaps.

Thank you, Kevin. Lily will take the second question, but I start with the top of every cash flow is EBITDA, and I think here we have a good potential, and that's what it all starts. Lily will comment further about networking capital and CapEx. On your trading question, I really do believe that we have a competitive advantage in the current situation. We work now for three and a half years on reducing cost, on increasing margin. I mentioned it's 500 bps up over the last four years. It's very substantial. We have our regional footprint, which not all competitors have. So we can really produce 90% plus in the region for the region. And as I have mentioned, we have now a world-class procurement aligned with the divisions. I think these four factors In addition, I believe we reacted really on the opportunity on 28th of February, we acted bold and fast. And I believe this gives us our strategic positioning, as I mentioned, footprints, businesses we are in, end markets we are serving, competitors we are having. I think we do have a competitive advantage, even against some European or American peers. Definitely against Asian peers. who simply struggle to procure feedstock. It's particularly problematic, as I would see it, in Taiwan, in Japan, and in Korea, which are big, big intermediates and raw materials suppliers of end products. But it's also in China. I was a little bit surprised that China is struggling as much as it is struggling. But it probably has to do that China is lacking certain intermediates And that's why we have several competitors in China on the fourth measure, and that is obviously for us a pretty interesting situation.

Yeah, Kevin, on your second question – sorry, have you finished?

Yeah, no, that's great. Thanks. Yeah, yeah.

All right, thank you. On your second question about free cash flow, look, two things on the focus side I would draw your attention to, one of which we talk about, which is, you know, CapEx, we're expecting – 2026 capex to be around 15 million lower than what we have spent in 2025. And second factor I also alluded to is inventory reduction, right? And that structural reduction we have done in the past and we continue to look at it now. Offsetting that is raw material price movement or raw material price going up at the moment. We also said we expect EBITDA to grow from 2025 level, and Michael also mentioned from an outlook perspective, we probably see upside risk on EBITDA this year versus what we said before. So, you know, those factors together, coming back to my previous point, adjusting out for the unwind of KLK's receivable purchasing, we're expecting for the free cash flow neutral, but you have to add it back. that amount when it comes to net debt forecast for the end of 2026.

Just to add to that, just for complete clarity on the receivables factoring point, it's almost best to think of the net debt at the year end of 575 as being 625 as the starting point once you adjust for the receivables factoring and then build your sort of free cash flow assumptions from there.

I'll just add one more point because it's important. our covenant levels are reset as part of the refinance package throughout the 10 year and that is consistent with how we look at a business both from a cash flow perspective and also business plan perspective. Clearly we've done that.

Okay, so given the kind of refi and the covenant, presumably kind of factoring is off the table now for 2026 or not?

We always say the receiver purchasing that we've done December 2025 with KLK, that's a one-time transaction.

Yeah. To be clear, we do retain our 200 million committed factoring facility going forward, and we do anticipate continuing to use that as required.

Sure, sure. But I guess sort of the kind of one-off nature that you did in 2025, that should be a kind of non-repeat. Exactly. Exactly. The $50 million is a one-off. Perfect. Okay, thanks very much. I'll turn it over.

Thanks a lot. Thank you. Thank you. And now let's take our next question from James Caffey from Barclays. Your line is open. Please go ahead.

Hi there. Thank you for taking my question. I just wanted to understand... a little bit better on the liquidity test, which you referenced in terms of the new covenants, which are governed by the RCF and UK facilities. Can you expand on what the liquidity tests are there?

So it's quite customary in this situation. There is a monthly liquidity test. So it's, you know, there's a minimum liquidity test that we test monthly throughout the refi period. And again, I go back to the point, we have been through this carefully with our very detailed cash flow forecast, and we see very healthy liquidity headroom throughout the period.

I thought the requirements are actually even more favorable than before. I think that's important to mention.

Thank you. And just to make sure I've understood, on the sort of phasing for free cash flow for this year, so we should expect a sort of more pronounced free cash flow outflow in page one on account of the movement in raw material prices, I guess. And did you say that you had already repaid the $50 million temporary receivables facility already, or that was expected to sort of materialize over the course of the year? I don't know if I called that correctly.

Yeah, we said, you know, that was unwind already early part of March this year. So that's the second part of your question. And, yes, we are expecting, you know, the normal sort of seasonality when it comes to working capital this year. So you would expect us to see – you would expect to see free cash flow, difference between H1 and H2 as we always do.

We also have opportunities on networking capital savings, especially on inventories in some areas, and that is offsetting partially the increased raw materials.

Thank you. Thank you. Our next question comes from Angelina Glesova from J.P. Morgan. Please go ahead.

Good morning, and thank you for taking my questions. I think I just have one follow-up left at this point, which is on audiobooks and current trends. So, obviously, it's difficult to quantify the extent of the potential upside from the Middle East situations. But if you look between the segments of Symptomer, and we've already had a bit of a detailed discussion on nitro latex, but if you look at coatings and construction solutions and adhesive solutions, Where would you say do you see more upside and more momentum in your audiobooks, at least as of April so far?

I think, like I said, it's pretty broad-based. We touched a lot upon MBR. I think that's a particularly positive situation. We see it as well in CCS division. We see it in AS division, where you have a lot of Asian competitors, especially in China on the hydrocarbon side. So there we have clear advantages. And yeah, it's definitely double-digit volume gains. As I mentioned, the margins are. So it's pretty broad-based through all the divisions. There are a few businesses that are much less affected positively, like maybe our Accurate Monomers business. Even there, there is a certain upside, but this will benefit less from the situation. But the major areas of our business, MBR, CCS division broadly, especially construction, coatings looks very good right now. Construction better. I mentioned energy solution, higher oil price, always higher drilling activity, good for us. I mentioned AS division. So generally, it's a pretty broad-based situation. But I also would like to mention, Angelina, it's not only the the iran situation i really believe that the strategic strategic points and i mentioned the four elements of cost margin regional footprint procurement but we have worked on over three four years i think this is coming into a coming very nicely into play so it's not only a blip now of iran and three months later it goes back to normal i would say i really see this to a certain extent I call it sometimes is an operational benefit right now because we do have manufacturing, we do have feedstock, while others might have less. But I believe there's also this kind of psychological advantage that customers are rethinking how do they procure in 2027. And I can give you some life examples of large customers. the discussion with them about the 2027 contract is different than it was before. And before was eagerness to save every cent you can save and take everything from China. And the tone of those discussions have significantly changed. So I believe that, and nobody knows, but I believe that this could be a sustainable advantage for us. Of course, what goes against it at one point, if this conflict drags on and on, that we have a demand destruction via inflation. I think that's a bit of the balance that we can see. But I believe really, as I said, operational advantage, then kind of psychological advantage should give us a nice, I mentioned nine months operational, and then a further maybe 12 months on the structure of how customers procure their inputs.

This is great. Thank you very much for the cover, Michael. And really, congratulations and best of luck in your new role.

Thank you.

Thank you. Our next question comes from Sanjay Bhagwani from Siri. Your line is open. Please go ahead.

Hi. Thank you very much for taking my question and then very comprehensive presentation in the details. I just have two questions left. My first one is on the disposals. I think you already alluded to there are four active processes right now. Are you able to help us with some sort of sizing or the magnitude of this, the business being intended to dispose? So some sort of like scale, like sales, what sort of sales this business have or the EBITDA? That's my first question, and I'll just follow up with the next one after this.

Thank you. I didn't understand at the beginning you are from Citibank, right?

Yes, that's right.

Okay, thank you. On your divestment question, the magnitude, I think we sometimes talk about 150 to 200 million pounds. Again, depending, you know, there's a wide range of what happens. but this could be a range that we would be looking at. EPTA levels are reasonably low, so you don't need to deduct too much, because that's the reason why we are trying to sell those businesses. There might be one business that has a little bit of different structure, which is a more profitable business, but a smaller business where you would get higher values, but three out of the four processes are traditionally low ebpa businesses reasonably big volumes so you have to deal with the stranded costs i think if you take some 150 to 200 million for all together it's probably not a bad first first shot thank you that's 150 to 200 gbp of sales is that correct no proceeds proceeds proceeds okay it would be of sales like when we announced the strategy in 2022 We said that we have ready for divestment non-core about a little bit more than one-third of our business. And about a bit more than half of this is done, and the other half in terms of revenue is still to come. But as I said, they are predominantly not very profitable businesses.

Thank you. That's very helpful. And sorry to come back on the net debt and the cash flow guidance again. So I think Faisal already clarified that starting point here is 625 for the net debt. Now, if I have to think of first half, I do understand that there is an upside risk to the EBITDA, and S1 is said to be seemingly higher EBITDA as well. And whereas working capital could be a negative headwind. CapEx are lower, as you alluded to it. So if you have to put it all together, on the H1, let's say, if you have to think of this 621, 625 as a reference point for the net debt, how do you see this evolving for H1 and then for the full year?

I would expect full year to be consistent or better than the adjusted year-end 2025 number. And I would expect normal seasonality to apply here, that H1 net debt will be higher than year-end.

Higher than 625, is that correct?

Thank you. Probably worth also saying in relation to the seasonality of the net debt, a couple of points under the new transaction, the new refinancing, the next covenant test for us is The first quarterly test in September this year, we don't have a June testing date under the new arrangement. That's effectively been waived. And the quarterly testing has been very, very carefully sculpted to reflect the cash flow profile of the business, which has been analysed in a huge amount of detail as part of this refinancing by the banks and by ourselves, so that it's it's sculpted to match our expected cash flow profiles over the course of a year.

Thank you, Dasai, and all the best for you.

Thank you. Thank you. There are no more questions from the conference call. I'd like to hand back to the room for webcast questions. Please go ahead.

Thank you. So we – quite a few webcast questions. several of which we've answered in detail, but I'll try and wrap up a few others that are still slightly outstanding together a little bit. Assuming the war ends in the next few weeks, how long do you think the tight markets in Europe could last before Asian imports return? And could you comment on whether you see any demand areas where the environment has cyclically improved?

Yeah, I think, like I said, I believe if the conflict ends, from that moment it could take nine months until everything is kind of back to normal, whatever normal is. A lot of ships are on the totally wrong place in this world right now. The supply chains are truly disrupted. It is not just a little delay of matters. So I believe, and it's interesting that Jim Fittling from Dow said, He's also kind of hinted at like nine months. I think this is really not a bad assumption. So the advantage, as I called it, the operational advantage, I believe, is nine months. This is not a matter of one or two months to come back. If I look at cyclical improvements now, leave alone the Iran situation, I think coatings after many years now or several years of no coating season, we do see a coating season right now. I do see the U.S. improving. I do see the MBR business improving except for the Iran situation. I do see construction improving. I think there are quite a few sectors which is, again, there are two aspects. One is the market one, the cyclicality that comes to an end and is favorable. So these are the markets I would mention. And on the other side is the Iran situation. So I think coatings, construction, NBR are probably good examples where the cyclicality would work finally in our favor.

I think in addition, our energy solutions business, if you recall, that has been through a significant downturn, but we believe that's temporary. It will come back, and that's a high-margin business for us.

And there is a close link between oil price and drilling. And yeah, the more drilling, the better for us.

So then, thank you. And then several questions along the same themes. The designation of the unrestricted subsidiaries under the bond effectively means that those move outside of the bond guarantee to some degree in favor of the RCF and UCASI. What businesses do those subsidiaries tie back to, so that somebody can say, and is there any way of sizing those?

Sure. Look, the NSOP is currently most of USA operations, and that's carefully selected to give us the strategic optionality for the business, and that's part of the security package. It's all permitted in the indenture for 2029. If you want to look at the size of that operation, if you go back to our 2024 annual report, the segmental analysis on geography, and indeed our to-be-published annual report today, the numbers are quite similar. The revenue is around sort of 25%. I think I said around 40%.

And I think if you take this a bit in a holistic view, I think this refinancing deal, which was a complex one, but we have concluded it now. I think at the end of the day, this is beneficial for all stakeholders because it gives us stability. It gives us runway into 2029 to focus on the divestments, to focus on the business, to focus on the customers. And at the end, that means that our trading is better, it means that our balance sheet gets better, and at the end, that is good for everybody. What is important is also what Lily said, that this whole transaction is fully in line with the permissions in the bonds in venture. So, yeah, I think these are important statements.

Very good. One other query. Can you say anything about the Any further information on the margin on the extended bank facilities?

Yeah, look, I think we have put in a number in the trading statement. I think we say about P&L cost this year around, or interest cost this year around $17 billion. I also mentioned the cash interest cost around single digit millions lower. But it's a comprehensive deal, I would say.

I think it's a good deal for us. And if you look at cash interest, it probably takes three, four million more for this year and seven, eight million more for next year.

Very good. And then I think the last question basically is... Do you have any comments on how you intend to address the bonds in 2029 following today's transaction?

Yeah, I'll just go back to start with to reiterate what Michael just said. The deal we have completed today is a very good deal. It gives us the stability, the runway to execute our divestment and also transform the business into a higher margin speciality businesses. give us liquidity, give us the relaxed covenant and much needed maturity, much extended maturity. 29 refi, you know, look, we always do our refi, you know, 12, 18 months ahead of maturity. We'll do that again this time around. And with the transformed business, with us being able to deliver the balance sheet, we truly believe, you know, we'll be in a good position to do the refi when it comes.

Very good. I think we've covered the key areas on the webcast as well.

Thank you. Thank you very much.

Have a good day.