Victrex plc

Good day, ladies and gentlemen, and welcome to the Victrex third quarter interim management statement. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session through the phone lines, and instructions will follow at that time. I would like to remind all participants that this call is being recorded. I will now hand over to the CEO of Victrex, Jakob Sigurdsson, to open the presentation. Please go ahead.

Thank you. So good morning, everyone, and welcome to Victrex's third quarter Entry Management Statement Call. This covers the period from the 1st of April through the 30th of June, 2024. Joined on the call by Ian Melling, our CFO, and Andrew Hansen, our Director of IR. I will start with a summary of the key messages and the key outcomes, and Ian will then cover the financial detail. And towards the end, we'll open up the call towards questions and answers. So turning to the headlines, I'm pleased to say that despite the mis-sentiment within Chemcos and some end markets right now, we delivered growth in both volume and revenue during the third quarter versus the third quarter of 2023 with 20% volume growth over this comparable period. This marks the first period since the fourth quarter of 2022, when we've seen quarterly volume and revenue growth compared to the prior year period. What this shows is that we're seeing continuing momentum from the early signs of recovery we saw in the second quarter, although the picture remains a bit mixed by N sector. On a sequential basis, compared to the second quarter of 2024, volumes are flat. The puts and takes for Q3 versus Q2 mainly relate to growth in VAR and electronics quarter-on-quarter, being offset by automotive, where the restocking benefit we saw in the first half did not continue into the third quarter. So we're still expecting to see growth on a full-year basis in auto, but not the double-digit levels seen in the first half. You know, for the first nine months in auto, we're up mid to high 70%. single digits, and we're expecting to finish the year in also around the mid-single digits or so. Medical remains a headwind for us, with the industry destocking and inventory unwind amongst major medical device customers continuing to be a headwind. This means medical is tracking lower than our expectations for the second half so far, even if we see some more encouraging signs on the sustainable solution side. I should point out, though, that we are not losing market share in medical to other peak players. Our business is much more diversified than it was a few years ago, and the underlying number of procedures in the various applications are growing. So what you're looking at here is purely an effect of destocking that is prevalent with a number of medical device companies right now. It's worth reminding everyone about the context of Q3, both this year and last year, and how these periods have flipped in terms of the sales mix. Q3 last year was the lowest quarter for value-added resellers since the COVID period. On the flip side, medical was very strong in Q3 last year, with medical revenue contribution being north of 20% for the group in its entirety. That picture has reversed this year with Q3 this year seeing medical revenue below 20% of the overall group revenues and VAR much stronger year on year and also compared to Q2. Ian will explain in a bit more detail and give more context to this and how it relates to the average selling price. I'll come back to these points in our outlook once Ian has given us the financial details. And the outlook is largely unchanged, except for the continuing headwinds in medical. For now, I'll hand it over to Ian, who will cover the financial details.

Thank you, Jakob, and good morning, everyone. As Jakob noted, it was pleasing to see year-on-year volume and revenue growth in what we all know has been a tough period for Victrex and wider chemicals. Covering the financial detail, Q3 group volume was up 20% to 979 tonnes versus Q3 last year of 818 tonnes. Q3 group revenue was up 2% at £74 million compared to Q3 2023 of £72.2 million. The delta between volume and revenue growth is reflective of medical remaining soft, but also the sales mix. that has been more influenced by the proportion of business from value-added resellers. On pricing, Q3 average selling prices were £76 per kilogram. The change year-on-year is primarily driven by sales mix and the year-on-year movements in medical and VARs, as Jakob has noted. Remember, medical had a strong performance last year, including a record full year, and VAR in Q3 last year was its lowest quarter since 2020. Currency is a small adverse impact on ASP, and it's worth noting that underlying pricing remains robust across end markets. If we look sequentially at volume and revenue, Q3 group volume of 979 tons was flat compared to Q2 2024. This reflects that auto was down on a sequential basis as some of the restock effect for auto in the first half starts to unwind. We did, however, see some sequential progress in VAR and electronics. Q3 group revenue was down 5% compared to Q2 2024, and this reflects a similar theme, i.e. sales mix as medical remains softer and the proportion of business from the likes of VAR increased. Quick word on end markets in Q3. Aerospace continues to show a solid performance on a year-to-date basis. Also, I have already covered the sequential impact, but we saw a solid year-on-year performance here too, which was the same with electronics. Energy and industrial saw single-digit growth on a year-on-year basis, although industrial has been offset by some good growth in energy. Medical, as Jacob noted, this has been and remains a challenge for us. Remember, medical's high margins have a notable drop-through in the P&L. We've seen several peers and those who supply the medical device industry commenting on the destocking effect in this industry, and performance is tracking lower than our expectations so far in the second half, with no improvement on the first half at this stage. We are well placed for when this destocking cycle ends, though, and remain focused on delivering the broader range of opportunities across medical in the years ahead. Finally, year-to-date group revenue of 213.3 million pounds is 9% lower than the prior year, reflecting the softer first half and lower medical revenues. Year-to-date group volume is down 2% at 2,716 tons, but with favorable comparative to come in our fourth quarter, we continue to see the opportunity of low to mid single-digit volume growth for the year as a whole. I'd like to finish with a word on cash and then currency. Victrex continues to have a robust balance sheet with cash generation set to improve, driven by trading conditions, lower capital expenditure and progress on inventory unwind. Remember that we have continued to invest through some of the toughest times seen in the chemical industry. And that investment cycle is now coming to an end. That gives us well-invested assets to underpin our future growth. Net debt on the 30th of June 2024 was 39.6 million pounds. including cash of £22.7 million. This means net debt was some £10 million lower at the end of Q3 than the end of the first half, and this was after payments of our interim dividend on 28 June. This means free cash flow improved in Q3 to over £20 million in the quarter. We're focused on continually improving our cash flow position, which can support returns to shareholders over the coming periods. Our forward guidance on full-year capital expenditure and inventory is unchanged. We anticipate capital expenditure will be lower in the second half compared to the first, meaning full-year capital expenditure of around £35 million. Inventory is tracking to reduce in line with our guidance. One other final point worth flagging quickly is on currency. As we note in our outlook statement, currency has become slightly adverse for us in the second half as sterling has strengthened, primarily against some unhedged currencies including the Japanese yen. Thank you, and I'll now hand back to Jakob.

Thank you, Ian. So moving towards the outlook and the guidance, we are seeing continuing momentum in cement markets. Ian flagged that value-added resellers was an area we're seeing an improvement in, and this is usually a very good parameter for recovery. even if the shape of the recovery this time around compared to previous recessions is a little bit different in shape. VAR and electronics, our end market, we do feel more encouraged by as we look towards the rest of the year. But we will need to see continuing signs of improvement first. Aerospace, we remain encouraged by the evolution there, and we seem to be on a good track record to get to pre-COVID levels as it relates to our sales. into this sector. In automotive, we've covered that we're on track for growth on a four-year basis. As I said before, we are growing mid to high single digits for the first nine months, and we would expect to end the year in the mid-single digits as it relates to growth. Energy and industrial, we indicated in our announcement that industrial is seeing a slower recovery, and this is probably the sector that is most sensitive to the high cost of capital these days. But we are seeing better signs of recovery on the energy side, and that's sort of starting to show improvement month by month. Overall, we do remain focused on our goal of delivering a better second half here. But medical performance is tracking lower than our expectations for the second half year at this stage, and run rates have not improved on those in the first half. On volumes, our guidance is unchanged, and we continue to expect low to mid single-digit volume growth for the full year. But HEDRID means they do remain, as I said, destocking in medical primarily. And also remember that we have signaled previously about lower asset utilization and the recovery of fixed costs in our P&L. And there's no change to that specific guidance here. In summary, we still have the opportunity of a slightly better PPT performance in the second half of 2024 versus the second half of 2023. But unless medical run rates improve for the remainder of the year, it will be challenging to deliver this now. A brief word on FY25 at this early stage. Overall, some of the recent signs in several end markets make growth prospects much more encouraging as we move towards FY25. We are focused on good profit growth in FY25, but clearly we will guide on that in greater detail in December at our FY24 full-year earnings call. For the medium to long-term, there's strong confidence in our medium to long-term prospects. We have a diversified core business, increasing commercialization in our mega-programs. well-invested assets, and we're coming off a big capex cycle in the past three years to more normalized levels, as indicated in Ian's comments. You've got enhanced capability in our global team and the opportunity for substantial cash flow improvement as we run my inventories on top of the reduction in capital expenditures. We continue to invest through some of the toughest time in the chemical industry, and with a recovery in the core businesses from increasing milestone delivery and commercialization in the mega programs, the opportunity for improvement is clear over the coming years. That essentially concludes the formal session today, and we'll now hand it over to Q&A.

Thank you, Jakob. And if you are dialed into the call and would like to ask a question, please signal by pressing star 1 on your phone keypad to raise your hand and join the queue. If you are listening to the call on your device loudspeaker and are called upon to ask your question, please pick up your handset and ensure your device is unmuted. Again, that is, start one to ask your question, and your first question comes from the line of Raya Katoka from Bank of America. Please go ahead.

Hi, good morning. This is Raya Katoka from Bank of America. I've got two questions, please. My first one is on your internal expectations for profit growth. So at the first half result in mid-May, if I read the release, it was mentioned that the PBC for the second half could be slightly better year on year if the run rates continued and medical improved. Today, mid-July, you mentioned that it will be challenging to grow second half PBC at the run rates. So what has the third quarter PBT done on a year on year basis? And is it fair to say that your internal expectation for profit growth is worse compared to May? And that leads to my second question, which is on the budgeting and the forecasting process. And can you speak about the level of visibility that you have with the medical customers, which strikes like it would be longer than a month and a half given you directly supply to the medical OEMs? So has the level of destocking worsened sequentially into the third quarter in medical or were you maybe just over optimistic in May with the second half profit outlook?

Thank you, Ria. I'll make a start maybe on the profit, and then Jakob can add thoughts on our visibility with the medical customers, which is limited as it is across all our business, and we have relatively short lead times for our products, but I will let Jakob comment on that after I speak a little bit about the profit. In terms of our expectations for profit, I think we were pretty clear that we could see a growth H2 on H2 if medical improved. And the thing that's different from the end of the first half is that medical hasn't picked up. We had reasons to think we might see a pickup in medical given the strength of the end markets, but that destocking has persisted. And we don't see, you know, sat here now, we don't see the order book that we would need to see going into Q4 to support that, hence the change in position. I think consistency is there. What's changed is the recovery on medical and it not coming through as early as we thought it might. Jakob, do you want to comment?

Yeah, I think on the lead time side, we offer a relatively high service level here, and so the lead times are pretty short, and therefore the visibility towards orders is actually not that long. I think the general sentiment in the industry is that this has been a very sharp inventory correction. I think what's unusual this time around is that whilst you know, imagery corrections and adjustments and working capital adjustments, you know, have taken place in the medical device industry, you know, many times in the past, it's been highly unusual to see it so universally happening across the industry. And that clearly magnifies the impact on anyone that is serving them. You know, the sentiment that the OMTEC, you know, just early in June with the larger CDMOs, you know, whether it's Tacoma, Georgia, Paragon, Marl, Spitz, Arch, and others, you know, was fairly subdued, and I think they've seen a significant reduction in their revenues, and also be mindful of the fact that we don't, in most of these cases, supply directly to medical device companies. We do supply to what could be considered tier ones, sort of mainly. So I think the consensus there is reaching from an anticipated revenue recovery, sorry, you know, anywhere in the timeframe from the beginning of the fourth calendar quarter into the first calendar quarter of 2025. And that should then lead to upstream demand, you know, a little bit ahead of that. But that's, you know, as good as it gets in terms of visibility. in the industry. But it will also be quite interesting to see, you know, what level of working capital is going to be portrayed in the accounts of some of the large medical device companies as they come out with their half-year results towards the end of July. So I think that hopefully gives you enough color on the situation as it is right now, Rieke.

Yeah, that's helpful. I've got one more question based on that and some of your comments that Peak hasn't lost market share in medical. What gives you the confidence and clarity that customers who are arguably under a lot more pressure because of the high rates environment in the US, for example, aren't trading down to cheaper materials? Because if I look at the medical division volumes for Victrex, um the average level has been about 190 tons compared to your peak volumes in 2022 that was six percent ahead of the average um and then if i look at var where we clearly saw the huge restock and the d stock your average volumes were 1.6 compared to peak volumes that were 30 ahead of this so i guess what i'm trying to say is from looking at your numbers in a spreadsheet the peak medical volumes don't seem like they went through that level of restock, of destock and restock as VAR did. So what gives you, yeah, the confidence that it's not just a destock and maybe a market share story or consumers trading down to cheaper materials, if that makes sense.

Yeah, so there's a couple of points here. The first one relates specifically to the volume question. And our medical business is split into implantable and non-implantable. And non-implantable is much larger in volume but lower in value than the implantable piece. So that skews the volume picture to the effect that you've identified. And then the second part of your question was related to what gives us the confidence in the fact that we're not losing market share. And there, you know, it's clearly the conversations with our customers. You know, all of them are ordering, but they're ordering at a much reduced rate to what they were doing last year as an example. And they're ascribing it to the well sort of detailed inventory reductions with the medical device companies. And I do also, and I would like to refer to the sentiment in the industry as well, and the fact that actually a number of our peers have also commented on medical destocking being a source of reduction in their medical volumes in recent times as well. But I do think this is a well-documented phenomena. Number one, you see it in the account of the medical device companies through our conversations with customers. We know that we're not losing share, but they are simply receiving orders at a much reduced rate to what they were experiencing last year. And I think that's a pretty and a rather solid underpinning for us to state that we're not losing markets here to other people as well.

And it wouldn't be a straightforward process to shift to a lower cost material in medical. You know, there are significant regulatory hurdles to changing materials in any medical device. And that's a multi-year process and not something you can do, you know, quickly in response to, you know, a margin issue, for example. So peak would be a very small portion of any of these medical devices. big medical device companies cost and would offer them a pretty limited opportunity, I would suggest, relative to the challenge of changing materials for any given device, whether that be changing from one peak supplier to another or even harder, changing from peak to an entirely different material.

Okay, that's really helpful. Thank you. Thank you, Rebecca.

Your next question comes from the line of Alex Stewart from Barclays. Please go ahead.

Hi there. Morning. Thanks for taking my question. You're running an annualized volume of 3,900, 4,000 tons or so. A lot of your strategy and your medium-term expectations are predicated on a recovery in those volumes and improved mix away from VAR towards some of the other industrial businesses and, of course, improvement in medical, including the rundown of inventory. But what's your contingency plan if we don't see a recovery in volumes, if we get sub-thousand ton quarters now for two years or so? What can you do on cost? What can you do on cash flow to hedge yourself or to mitigate the impact of that? Because It's actually looking like an increasingly plausible scenario that the industry doesn't recover in the way that it was expected. So very interested to hear what your internal plans are for that. Thanks.

Yeah, thanks for the question, Alex. It's a pretty pessimistic picture you paint, but happy to have a go at talking about it. I think on cash flow, you know, our cash flow is robust. You know, we've just seen a 20 million pound cash flow quarter. So cash flow is robust. And how is it robust? Well, we're bringing CapEx down, as we've said, versus history, versus last couple of years. And that's starting to take effect now. We're also reducing our inventory levels with a target of getting down to 100 million pounds by the end of next year, FY25. And we're on track to do that. So inventory reduction is there. We are hamstrung a little bit this year by asset utilization as we bring that inventory down. That situation should improve a bit next year, and even at lower volumes should be an improvement in the following years as well as we get to a more steady state on manufacturing. There are choices we can make around the plants, but at the moment, having the capacity we have is important for our customers. It's important for the customer's you know, that we have, you know, tied up in the mega programs in terms of security of supply and being able to provide the, um, volumes that they, uh, will require in the future. So, so that capacity is important to us, but we do have, you know, there are always choices we can make. Uh, we have a factory coming on stream in China now, which will, um, start to improve as, as that business grows somewhere. And we hope to get the first, um, you know, commercial sales out of that plant and get it up and running fully by the end of this year, such that, you know, that is starting to contribute more significantly next year and become less of a headwind from a profit point of view. So with inventory coming down, CapEx coming down, you know, bear in mind, we've still been a cash generative company through all of this. I'm pretty confident that cash flows can bounce back. And, you know, we've got the flexibility to do what we need to do to respond to increasing demand. But if we need to, we can take further actions in response to reduced demand as well.

Thank you for that. So I suppose that's a great answer on cash flow. But your P&L is optimized for, well, was optimized for production rate of about 4.2%. That's probably moved higher with the fixed cost loading from China. So I'm actually talking more about the asset utilization penalty, which you pay now and you pay during the pandemic, where you've got demand rates below optimized production rates. Is there something you can do to your fixed cost base, in other words, on the P&L side, if you find that we're going into a long period of low volumes?

If you're, and it's a really good question, Alex, and clearly we think through this in our regular strategic planning reviews. So if there is an Armageddon scenario, which by the way, we're not anticipating based on where things are heading. I think we've seen sort of certain sectors that have been quite perturbed, if you wish, from the re-equilibrium by the various reasons. You know, whether it's the atrocities in Ukraine or COVID in recent times, inventory correction in medical and things like that. I think most of these markets are stabilizing and the underlying macroeconomic drivers that are sort of the tailwind in everything we do are still there. Now, if there were to be an Armageddon scenario, then there is an optionality for looking at our different manufacturing trains in a modular fashion, whether that be on the polymer side, where we effectively got four trains that could be considered independent of one another, or whether it's on the monomer side. where we've got three trains, if you will, that could be considered somewhat independent of another. Plus that, you know, we have built a bit more flexibility, you know, into our supporting infrastructure, particularly in the aftermath of COVID, to be better able to deal with the swings that one could see in the external environment. But also being mindful of the fact that given the role that we play with many of our customers, quite often being the single source, having assurance of security of supply is a big part of our value proposition. So we always have to balance the approach to situations like that and make sure that we don't take capacity out out of two early states and in any way jeopardize our ability to be the reliable supplier that we've earned the reputation of being. But in Armageddon scenarios, I think the modularity of both our monomer presence and our polymer presence associated with the flexibility in the infrastructure gives us opportunities to adjust, if you wish, the fixed cost base of the business. You know, were we in the need of doing that?

That's interesting. Thank you.

Thanks, Alex.

Your next question comes from the line of Kevin Fogarty from Deutsche Numis. Please go ahead.

Hi, morning all, and thanks for taking my questions. If I could have two, please. One, just in terms of the infantry unwind, just obviously sort of good performance during the quarter. I just wondered sort of how exposed that infantry unwind is for the remainder of the year, how much of that is dependent on a medical recovery here, i.e., could that be kind of slower than you anticipate? as those medical volumes sort of, if they don't come through in Q4. I just, secondly, I just wondered if you could help us on exit rates in terms of volumes for the quarter, particularly our medical, that'd be useful if there was any further visibility on those exit rates, that'd be great.

Yeah, maybe I'll take the first part of that. Kevin, thank you for the question. So in terms of inventory unwind, we're making good progress on that. As you saw, overall volumes were pretty robust in the quarter driven by VARs. Our inventory is much more related to volumes than it is to medical specifically. Medical tends to be relatively low volumes, so an important but a smaller part of our inventory. I would say our inventory online for this year is broadly on track, irrespective of the medical outcome.

And I think as it relates to the exit rate. Sorry, did that answer the first question coming before?

Yeah, yeah, that was good. That's helpful. Yeah, yeah. It's kind of as expected, but that's useful.

Thanks. Right. So more or less, you know, we're expecting a similar run rate, you know, as we head into the fourth quarter, as we saw in the third quarter. There will be slight sort of puts and takes on that. I think, you know, we signal that auto will be a bit weaker in the fourth quarter than it has been nine months to date, but still ending up mid single digits, you know, for the year. uh i think you know we'll be seeing stronger contributions from electronics than we've seen in the first nine months we'll see uh stronger contributions from eni and particularly from the energy side of eni we're expecting bars to be showing continued strength in the fourth quarter as well even if they will not be quite as strong as they were in the in the third quarter so overall you know from a volume perspective We're targeting just around 1,000 tons again in the fourth quarter as it relates to volumes.

Great. Any kind of thoughts on where medical sort of exit rates are at the moment, just going into the quarter?

I think, Kevin, as we look at medical, I think what we've said right now is based on what we currently see, we don't see an improvement over the trend in the first half. So that's where we are on medical at the moment.

Great. Okay, that's helpful. Thanks a lot. Thank you.

Thank you, Kevin.

And before we move on to the next questions, just a quick reminder, if you would like to join the queue, please press star 1 on your phone keypad now. And your next question comes from the line of Chetan Udeshi from JP Morgan. Please go ahead.

Yeah, hi, thanks. Morning. Maybe I'll start with the first question on pricing. Is there a way you can reassure us that the underlying pricing is actually resilient? Because when we look at the reported pricing that's down 14% year-on-year, it's down 5% sequentially. I mean, how do we get that reassurance that the underlying pricing is actually not deteriorating within that number? Is there something you can add? to give us that confidence. The second question, Jakob, you mentioned you expect the same sort of volumes in Q4 like in Q3. But if I look at your history, I mean, typically your volumes are down 5% to 10% versus Q3 in a normal seasonality point of view. So, what is driving that optimism that we don't see that this time? Is that the order book you have at the moment or is that just an expectation that recovery that you saw maybe in the last two quarters sort of continues or is that actually something that you see in your books for the current quarter? And the last question, given Ian you talked about the medical not improving yet, What is the PBT we should have in mind if that doesn't improve at all in the current quarter? Thank you.

So I can start with the second question in our first chat. And I think, yeah, historically, in going back many years, you are right that Q4 is usually stronger than Q3. I should point out, though, that Q4 last year, as an example, was 3% up in volumes versus Q3. So it's not a law of nature that the fourth quarter is lower than the third quarter. I think what is fueling this outlook or underpinning this outlook, though, to be specific on this situation, is the fact that we are seeing signs of recovery in electronics. We expect it to be second-half weighted, and these are starting to come through, point number one. Point number two is that we would be expecting increased run rates as well in ENI, particularly on the energy side. And I think, you know, we're seeing, you know, the correlation between a recovery in VARS, as you've seen in the first nine months, if you wish, translating into what has historically been correlated with a recovery in ENI. And that's starting to show up in the run rates. And in fact, you know, there is also a correlation between recovery in VARS and then recovery in electronics, particularly in the semi-point aspects of electronics. So I think these would be the key sort of underpinning factors in our outlook and guidance for the fourth quarter. And on questions one and three, I think those were sort of specifically for VNL playing in here on those. Yeah.

Thank you, Jakob. So on pricing, Chetan, let me try and give you a little bit more color and see if that helps. So if you're looking at the year-over-year impact, Q3 over Q3, and I would encourage people not to read too much into quarter-on-quarter pricing in our business. Most of our customers have annual pricing contracts. So it's not like we're changing price with individual customers on a month-to-month basis. And what you really see quarter-to-quarter is impacts of shifts in the mix. It is a bit of a perfect storm in terms of year-over-year Q3, with last year a strong medical Q3 and the weakest quarter in VARs since 2020 and COVID, whereas this year we had a pretty strong quarter in VARs and a pretty weak quarter in medical, to be honest. So it is a bit of a perfect storm in terms of the year-over-year effect. Just to give you a bit of an idea of the quantum, in terms of the roughly £12 shift in ASP year over year in Q3. I'm putting three quarters of that down to mix. So nine of the £12 down to mix between the SBUs. So that's the lower medical and higher VARs, but also higher VARs and lower other industrial SBUs as a proportion of the total. And of the remainder, FX is a bigger impact than like-for-like price. So FX is adverse year over year, probably of the order of £2 on the ASP, with the remainder due to the net movements in price. And there are some ups and some downs in there. But overall, like-for-like price is robust year over year. And I would point out that even despite the pretty horrible mix this quarter, we are well ahead of our average ASP for FY22. So I think the price that we took primarily last year is, to a large extent, sticking. In terms of profits, Chetan, it wouldn't surprise you to hear me say that we're not going to give a specific profit forecast. We did say that getting to a better H2 on H2 would require a medical recovery in the second half. And we've said that we don't see that recovery coming at the moment. So you can read into that. What I would say is the second half definitely looks stronger than the first half. So you know where our first half PBT was as well. So I think, you know, it's between those two numbers.

That's clear. Thank you.

Thank you, Chetan.

Your next question comes from the line of Aaron Ceccarelli from Barenburg. Please go ahead.

Hello. Hi. Good morning. My first question is on volumes. I'd like to understand a little bit the cadence of the different months. Is it possible to understand how June was in particular compared to May? My second question would be on medicals. Besides the stocking, I understand that titanium is making a little bit of a comeback as a cheaper alternative. But I would like to know your view here in terms of market share trends and try to understand besides titanium and peak what other materials you see in the market at the moment. My final question would be on China. I would like to understand how much of your China capacity would be directed to medical. And when we look at 2025 in terms of exceptional items, is there anything that we should be aware of at the moment? Thank you.

So if I start with the first one, sort of on June versus May, June volumes were slightly below May volumes, a few percentage points. So there was a slight softness in June versus May. So not a big difference. July is starting reasonably well. But I think, you know, July is usually a month that we don't read much into. You know, it can be good, it can be bad. It depends a little bit on what our largest customers are doing in terms of summer shutdowns and the like. And if they go for extended summer shutdowns, then clearly that can have an impact. And that impact can fall either in July or August. So we don't read much into the demand in the early stages of July. But it is looking like a comfortable order book for the moment, I should say. Titanium versus peak, I'll probably leave that to Ian sort of broadly to address that. You asked also about the share of the acid utilization or the capacity of the Chinese plant that's directed towards medical. And the answer to that is simple. We're not going to be making medical grade products in the Chinese plant. The Chinese plant is sort of destined to three main markets, the base load targeted towards value-added resellers. Then we are seeing a significant amount of opportunities associated with our partners in e-mobility and wire coatings. And the third sort of target market is electronics. So these are the sectors that sort of form the underpinnings of the business case for the Chinese plant. Ian, if you want to add color on peak and titanium.

Yeah, yeah, I'll try. Thank you, Aaron. So in terms of titanium replacing peak, I think historically we have seen over the last several years some resurgence of titanium and spinal indications i'm not sure it's as much a cost driver as you said as newer technologies in titanium with with porous and expandable cages in particular um becoming more popular particularly in the us we have seen that trend in our spine business over the last several years if anything that trend was you know has been starting to to plateau a little bit um In terms of, we have such broad indications now for PEAK across other uses in medical that it's hard to say it's one thing or another. I mean, I don't think there's any push towards titanium in some of the applications, such as some of the applications we have in cardio. I don't think metals would ever be a suitable replacement for PEAK in some of those indications. So the breadth of our portfolio now means we are more diversified and more protected in a way against any one given competitor material, if you like. I think we're also pretty confident that the travel of direction in a lot of other areas where you're going from metals to wall speak, whether that's titanium, whether that's stainless steel, potentially in some of the trauma applications, And as we move forward and look towards NEES in the future, then that'll be cobalt chrome. I think the direction of travel in most of those areas is still broadly away from metal, not towards it. So I think I don't see a big push in terms of peak replacement and not really for cost at all. And I think your other question, Aaron, was exceptional items in FY25. So we'll say more on this in December. But what I would say looking forward at this early stage is we plan to go live with our new ERP system in the early part of the next financial year. So there could be a small tail of that in the first part of next year, but significantly less than this year. And beyond that, nothing else at this point.

Thank you very much.

Thanks, Aaron.

And there are no further questions on the conference line. I will now hand back over to management for closing remarks.

So thank you all for joining the call today. And we now look forward to seeing you at the full year results in December. Take care and enjoy the Euros.

Please wait. The conference will begin shortly.