Akzo Nobel Nv Ord New

Good morning and welcome to Axel Nobel's Investor Update for the first quarter of 2025. I'm Kenny Che, Head of Investor Relations. Today, our CEO, Greg Puglione, and CFO, Martin De Vries, will take you through our results. We'll refer to the presentation, which you can follow by webcast or download from our website at axelnobel.com. A replay of the webcast will also be made available following the event. There will be a Q&A session after the presentation. For additional information, please contact our Investor Relations team. Before we start, a reminder of our forward-looking statements, disclaimer on slide two. Please note this also applies to the conference call and answers to your questions. I will now hand over to Greg, who will start on slide three of the presentation. Thanks, Kenny.

Good morning to everyone on the call. In Q1, we delivered better than expected results despite softer markets with adjusted EBITDA, flat year-on-year at constant currencies. This performance was underpinned by positive pricing and strong cost reduction, demonstrating that our self-help measures are starting to deliver with more benefits to come. Organic sales were flat with 2% positive price mix offset by volumes down 2%, of which half was from the timing of an in-year commercial rebalancing in Turkey. We mitigated the impact of softer markets and cost inflation through our efficiency measures. OPEX was flat year-on-year despite wage and general cost inflation. Over 70% of the targeted 2,200 SG&A reductions we have planned are already effective, and not everyone who has left is off the payroll yet, so the full effect is still to come. Execution of the SG&A program is ahead of schedule, and recent collective labor agreement negotiations have been completed on target. Our industrial transformation plans also continue to gather pace, with restructuring in France underway, including stores and site closures. As the benefits of our actions flow through the P&L, we expect OPEX to be down year on year in Q2. Our adjusted leverage ratio came in at 2.8 times, reflecting seasonal working capital buildup and ongoing restructuring activities. We also successfully issued a €500 million 10-year bond at 4% in March, securing long-term funding at attractive terms ahead of market volatility. Let's now turn to slide four on volume development. Q1 reported volumes were down 2%, half of which, once again, was from the timing effect of an end-year rebalancing in Turkey. I mean, essentially, Our customers were using our products as a currency devaluation hedge in Turkey, and we adjusted our commercial terms to smoothen out the demand throughout the year in order to make our production more efficient. It's an in-year adjustment, so it's a timing issue more than anything. So excluding that, you're at 1% volume reduction in Q1. So overall, we held up well in softer markets, continuing to gain market share in powder and in marine and in protective. Let's start with decorative paints. In Europe, Middle East, and Africa, underlying demand remained stable. The modest decline in Q1 volumes was primarily due to what I mentioned in Turkey, to rebalance production volumes. And overall in Europe, the professional segment showed sequential improvement in the quarter, which is an encouraging sign. In Latin America, the market remained healthy. In Brazil, our volumes were temporarily impacted by the timing of our price increase ahead of more passive competitors. This is a cryptic way of saying that we took prices up and BSF, which was in the process of selling their business, did not. We expect that to normalize as the year progresses. In Southeast Asia, our Indian business outperformed in a temporary market low. Performance elsewhere in the region was mixed. In China, the year started better than expected, while we had anticipated a double-digit decline, actual performance was more favorable, with a solid sequential improvement versus prior quarter. This bodes well for the rest of the year. Turning to coatings, volumes were relatively more favorable than in DECO, even as demand in North America softened on increased macroeconomic uncertainties. In our powder business, Architectural and automotive experience weaker demand, while the industrial and consumer segment grew. Even in a softer demand environment, our leadership in powder enables us to continue to outperform the market and gain market share. Marine and protective delivered double-digit volume growth with continued momentum in marine new build, while protective accelerated. We have a clear pipeline of projects extending into 2027, And we expect growth rates to normalize over the year as we begin to lap strong prior year comps. In automotive and specialty, the slowdown in Q4 extended into Q1 for the automotive and vehicle refinish segments. Aerospace saw a strong start to the year, although trends in North America continue to be dictated by ongoing challenges at the main OEMs. In industrial coatings, good trends in packaging are momentarily distorted by volumes returning to appear after we stepped in during their supply outage last year. It was Sherwin had a fire. We stepped in to cover some of that volumes going back as planned. But overall, packaging is healthy. Coil was slightly down and wood was up. Looking ahead to Q2, we're closely monitoring trade dynamics, particularly for North America. Our DECO businesses are local for local and mostly driven by local consumer confidence and less by global trends. Our coding businesses are GDP-driven and generally more sensitive to macro events. Let's turn to slide five and talk about tariffs. We try to illustrate our business resilience by breaking down key trade flows to and from the U.S. Over the years, we deliberately localized both our procurement and production in the U.S. We also largely run China for China and use the rest of Asia instead as an export base. Finally, we've already reduced our reliance on China as a source of raw materials for global operations. As such, China and the U.S. at ExxonMobil are largely decoupled already. And globally, the vast majority of our business operates on a local-for-local basis, which significantly limits our direct exposure to tariffs. In the U.S., we import only 2% of finished goods sold in the U.S., and only 10% of the raw material is consumed in the U.S. Everything else is local. For this analysis, we're taking the existing 145% tariffs on China and 10% on everyone else by the U.S., and assuming the reciprocal measures against the U.S., essentially 125% from China and 10% by everybody else. Taking into account both the raw material and finished good flows from the U.S. to the rest of the world, this annualized P&L impact of tariffs is anticipated at 25 million euros, with finished goods to Canada and Mexico the largest contributors. The tariffs on imports to the U.S. and for both raw materials and finished goods are estimated at 10 million euros EBITDA. This is after short-term mitigation actions, which are largely already underway, but it's before any pricing actions to mitigate. So, you know, look, it's an indicative number just to give you a feel for the fact that these are not very material impacts at ExxonMobil, given the way we are organized. But once again, we have mitigation potential beyond what you're seeing on this page. What's less predictable and likely more impactful is the broader macro effect. You know, changes in trade flows, consumer confidence, and overall customer investments could start to influence demand patterns. And while our products don't travel much, our customers do. But taking into account, as an illustration, our revenues in China that are generated on coatings that are applied to products that our customers are exporting. So essentially, product that we sell in China that goes onto customer products that are exported, you're only talking about 50 million of sales. So once again, that aspect of things is manageable. The question mark is more the macro demand environment, which will impact everybody one way or another. So in short, we've de-risked our direct exposure through localization and procurement anticipation, and the immediate impact is manageable. The bigger watch out is how this uncertainty affects the broader economic environment. Moving to slide six and an update on our SG&A actions. As previously mentioned, our Q1 OPEX is flat year on year, despite last year's 8% wage increase across ExxonBel in addition to general inflation. This was achieved through streamlining actions. We continue to make progress on our SG&A reductions, actually really good progress, We've already reduced our number of employees by 1,600 out of the 2,200 that we're targeting, meaning that we have implemented over 70% of the planned headcount reduction. There's more to come, and we will deliver on our commitment of 2,200 FT reductions, and we plan to do that essentially by the middle of this year. The reduction in staffing is already delivering financial benefits, even though some of the department employees have not yet left the payroll. The drop in headcount has helped drive sequential decline in total base pay, which you see on the right side of the slide. And there's a further reduction of 600 rules, 600 rules already announced. which will more than offset the 2025 wage increase from recently completed collective labor agreement negotiations. These CLA negotiations concluded at less than half the 2024 increase, in line with current economic realities and in line with what we were targeting. This year is already mapped out, and we have no doubt that we will achieve our saving targets. Martin will now provide an update on our financials on slide 7.

Thanks, Greg, and good morning, everybody. Organic sales were flat in the quarter. Reported revenue was down by 1%, mainly due to unfavorable foreign exchange rates. Our volumes were down 2%, mostly driven by softer performance in DECO, reflecting robust prior year comps, and the 1% impact from the rebalancing of Turkey, which Greg highlighted earlier in the call. At group level, price mix of positive 2% offset the volume decline, resulting in flat organic growth. Foreign exchange movements were a 1% headwind to revenue, mainly driven by the Turkish lira, Brazilian real and the Argentinian peso. The impact from foreign exchange rates became more unfavorable as we exited the quarter, which we anticipate will contribute to further FX translation headwinds in Q2. In terms of adjusted EBITDA, coatings delivered a solid quarter despite softer demand in North America. In DECO, lower volumes across all regions weighted on profit for the quarter. At group level, the adjusted EBITDA of €357 million resulted in an adjusted EBITDA margin of 13.7%. While flat at constant currency versus last year, our result was ahead of expectations. Operating working capital as a percentage of revenue was flat versus prior year at 18%. This reflects stable DIO, days inventory outstanding, and a smaller sequential build into the painting season compared to the prior year. That said, we remain focused on further improvements throughout the year and still expect to finish the fiscal year around 14.5% of revenue for working capital. As expected, seasonality in our Q1 trading period resulted in negative free cash flow of 183 million euro. The lower outflow from a smaller build in working capital was offset by higher cash out of 51 million euro from identified items. And I think it's also important to mention that we had a higher cash out from CAPEX of 30 million euro in the quarter versus last year. Return on investment was lower than prior year, largely due to lower trailing 12 months adjusted operating income and movements in our tax assets. Now moving to the outlook. While macroeconomic volatility continues to create an uncertain demand environment, our performance in Q1 bodes well for the rest of the year. We remain committed to our full year guidance of adjusted EBITDA above 1.55 billion euro at constant currency. We expect that the strengthening euro will increase our FX headwind in Q2, but this will be largely a translation effect. Our longstanding strategy of localized procurement and production has built agility and resilience into our business model, particularly against the first-order effects of the tariffs announced. That said, we acknowledge the lack of visibility on broader demand macro trends driven by tariff uncertainty. We will mitigate this by continuing to overdeliver on our efficiency measures. These actions are delivering tangible results and will support our bottom line. I'll now hand over to Kenny, who will close with information about upcoming events and the Q&A session.

Thank you, Martin. Before we start the Q&A session, I would like to draw your attention to the upcoming events shown on slide 10. Our AGM will be held later this week on April 25th. The ex-dividend date of our 2024 final dividend is on April 29th, and the record date is April 30th, followed by payment on May 7th. Finally, we will update the market on our second quarter results on July 22nd. This concludes the formal presentation and we would be happy to address your questions. Please state your name and company when asking a question and limit the number of questions to two per person so that others can participate. Operator, please start the Q&A session.

Thank you. As a reminder, to ask a question, please press star one on your telephone keypad. First question comes from Thomas Rigglesworth at Morgan Stanley. Please go ahead.

Morning, everybody. Thanks for the presentation. My two questions. The first is really on net pricing. On the pricing side of net pricing, is the 2% that we've seen in 1Q, is that a full contribution? Or is the exit rate suggesting that there might be more pricing to come through the course of the year? And then on the costs, the raw side, you said low single digits, I think, at the full year results. Is that picture changing for you, given the lower oil price? How do you think that will play out from a net pricing perspective on a four-year basis at this point? And my second question is around the Southeast Asian Strategic Review. We've seen some deals being pulled because of market uncertainty, obviously not necessarily in the same geography as your strategic review. Any Is there any changes there, or is there potential for delay or any risks associated with any potential transaction? Thank you.

Thanks, Thomas. Taking it one by one, net pricing, we have price increases planned for beyond Q1, so later in the year. If you... If you think to how the pricing increases happen in our various businesses, in Europe, for example, in DECO, you've got to notify the price increases. It leads to a discussion, and that discussion leads to an implementation timing, which rarely happens before the end of Q1. So there's more pricing to come from that perspective, and in other businesses, we have We review our prices more than once in a year, so we plan to continue increasing pricing throughout the year, and therefore Q1 is not the end of that story. The raw material basket, as you said, oil prices are down. About half our basket is correlated to oil prices. Raw materials are complicated these days, though, because the world is deglobalizing to a certain extent. So you're at risk of having parts of the world like Asia where you'll have overcapacity and dropping prices and parts of the world like potentially Europe or the U.S. where there might be a different effect. So overall, we do think that the raw material market environment will be uh will be more beneficial to us than for the full year than originally planned but it's uh it's too early to put a number on things and uh we're pretty much locked in for the q2 raw material prices already in part of q3 so if uh if there isn't a positive effect that effect will happen later in the year so like the second part of q3 into q4 essentially And then South Asia, we have ongoing discussions. It's been, I think, well covered in the Indian press. And these are dynamic discussions. And our focus is on finding the best outcome for ExxonMobil and for our business locally. And we don't have anything to report on this at this point. But discussions are continuing. Did I answer your questions, Thomas?

Yeah.

Thank you very much for helpful. Thanks.

Thank you. Our next question is from Laurent Fava at BNP Paribas. Please go ahead.

Yes, good morning. I understand you don't want to give a guidance, a specific guidance for Q2, but I was wondering if you could talk about the big businesses in terms of volumes and what you're seeing and if there was any sign of pre-buy ahead of all the tariff activity. That's question one. And second question, if I can press you on India. You've told us before that you would be disappointed if you didn't announce a deal before the end of Q2. I was wondering if this statement is still valid. Thank you.

Thanks, Laurent. Indeed, our timing is still to be able to come to a conclusion in Q2, so that hasn't changed. Once again, discussions are active. They're dynamic. The world is an uncertain place, but this is largely an India for India business, and India is a healthy economy with really good prospects. So I don't see that our plans should change in any way. Pre-buying, there's no signs of pre-buying linked to tariffs. There's actually no change in our volume patterns to date. Earlier today, I looked at our volumes in April, and it's in line with last year. So there hasn't been visible signs of pre-buying. of the market correcting volumes for tariffs, either by accelerating purchases or by decreasing the level of spend. But there's a little bit of nervousness in the market. And otherwise, the stuff that is driving our performance, I'd refer back to slide three, is it? where we talk about the segments, and what's been soft to date is vehicle refinish and automotive. Automotive is not very significant for us, but vehicle refinish is. It's a high-margin business, and that's been soft since the summer of last year in the U.S. and in Europe. um and uh and otherwise there's been some uh fairly pleasant surprises like deco china which started picking up but but Pluses, minuses, as you saw, our volumes are essentially flat in coatings, and they're slightly down in deco, but not by much. And once again, we're not seeing a change to those trading patterns in Q2 at this point, but we're only talking like three weeks in. So we do wish for a more stable macroeconomic environment, but we'll focus on what's within our control. Locon, any follow-up on this?

No, that's very clear. Thank you.

Our next question is from Christian Feitz at Kepler Chevro. Please go ahead.

Yes, good morning, everyone. Two questions, please. Thanks for flagging the potential tariff impacts in your presentation. If I look at another effect of Trump politics, Europe possibly having to put some money into its own hands and reinventing slash rebuilding itself. Would you see your activities benefiting from this, being well aware that it's hard to put a number and timeline on this? And then second, coming back to M&A, but this time more globally, Could you possibly give us any update on your M&A missions with BASF's coding activities being on the block? I'm not asking this for the first time, but time is progressing and BASF has flagged the communication during Q2. Thanks very much.

Let me start with the question on Europe. I would say it's too early to tell. But if you take a step back, structurally, the investments which are deployed in Europe, like in infrastructure in Germany or in defense, of course, structurally is a plus for us. But I would say this is still too early to tell how this will pan out. And for sure, this is not something which we see coming through for this year. Then on your question on other M&A, I mean, for now, let's be clear that we are focusing on executing our agenda for 2025. and our agenda is very much focused on the efficiency measures we are taking as a company with our SG&A program and our initial efficiency programs, but also with the portfolio review, which we do in South Asia. So just to reconfirm that that is our focus right now.

Okay, thanks very much.

The next question comes from Tony Jones at Redburn. Please go ahead.

Everybody, good morning. I've got two questions left. Greg, you called out the uncertainty on indirect tariffs or the indirect impact from tariffs. Do you have a plan or any thoughts about what you can do if we do head into some sort of prolonged recession? And then my second question, something we've not really talked about for a while, but can you update us on the raw material SKU reduction program and potential for gains, cost gains and working capital?

Thank you. Thanks, Tony. I'll start with the second one, the raw material SK reduction. As you're highlighting something that we've been talking about for a few years, which is to simplify and rationalize our raw material baskets so that we have more industrial agility. And we've made really good progress on that. This is actually what's enabling the closures that we're making because we You can't really close plants and shift the volume elsewhere if you haven't rationalized the raw material basket. So as much as we haven't reported on specific numbers and metrics, the five plus closures that we were planning to announce this year is a good indication of the fact that this is progressing according to plan. And then the indirect impact of the tariffs, if any, you know, essentially if there's a prolonged recession, as you said, we're already engaged in an efficiency drive, which is tackling our cost base. And I think it's really a case of amplifying some of those measures if we have to. That is already a muscle that's getting a lot of exercise at AXA these days. We're well positioned to double down if we have to. Tony, did I answer your questions? Thank you. Yes, that's very helpful. Thanks very much. Thanks.

Our next question is from Georgina Fraser at Goldman Sachs. Please go ahead.

Hi, good morning, everyone. Thank you for taking my questions. I've got two left. The first is, Greg, could you talk about how the organisation is responding to the cost restructuring and industrial efficiency measures that you're putting through And it seems like there's some quite quick activity going on the headcount reduction side. And so just like to hear a bit more about how the organization is feeling about it. And then the second question is, we've highlighted several times on this call the risk to demand given the macro backdrop. Why has Axel maintained its expectations for flat to low single digit volume growth this year given that? and given that you came in with weaker volumes in Q1, and that you have also said on this call that marine and protective, which was very strong, should be normalizing over the course of the year. We'd love to hear your thoughts on that. Thank you.

Thank you. The efficiency measures, the cost reduction, look, this is not the first time we do this at EXO, but I think it's probably the fastest measure If you think back, we announced SG&E measures, I think it was like on the 24th of September, and we're already north of 70% done on those measures. So I think what you have to do when you start cutting, you have to do it fairly and you have to do it quickly. And I think we've been doing both. So I spend a lot of time communicating and going around the business and talking to people and actually also engaging with our social partners. And everybody understands why we're doing this. We're not tackling things that people were not aware of. You know, that functional heaviness that we had is not a surprise for anybody. So it's painful for people individually, and we make sure that we support them and we treat everybody fairly, but it's well understood by the organization and seen as... as needed and positive for XO. So as long as we move swiftly, I think that that is not going to break our momentum in any way. And if anything, it reminds everybody in the company that we are serious about our performance targets and that we will push hard to achieve them. Martin, you want to take the demand question?

Yeah, Georgina, I mean, maybe a few remarks. First of all, on Q1, I'd like still to reiterate that we came in very much in line and, in fact, a little bit better from first our expectations, our internal expectations on volumes, because underlying it's a minus 1% if you take into account the whole phasing throughout the year of our Turkish business. Going forward, yes, there is uncertainty, as we have indicated, demand uncertainty. But it's very hard to tell at this moment. So we are sticking to our guns, and that is very much focused on the efficiency measures we are taking. And we take it from there. So at this moment, no reason to deviate from our plans. And if there would be some volume softness, we need to make sure that we cover that and double down, as Greg earlier said, on other measures.

Okay, thank you very much. And just thinking about the comparable waste that you have into the coming quarters, could you talk about How that fares for China, given you said that you're seeing an inflection there. And then anything that you might want to add on some of the other end markets, like how are we trending into the second quarter? I think you did answer in response to Laurent's question earlier, but a bit more specifics would be really helpful for us trying to figure out this 2Q. Thank you.

Yeah, so if you refer to China and we made comments on China Deco, then we've seen China developing, in fact, better than expected in the first quarter. And we'll see how that trend will evolve in Q2 and beyond Q2. But overall, again, the trends which we saw in Q1 bodes well for how we see that going forward. But let's wait and see how that evolves.

What's fascinating about China, and I think it almost surprised us to some extent when we looked into it, is that even on the coating side, on the deco side, it's clearly it's local for local. It's about local consumption. On the coding side, we knew we weren't exporting our products from China, but when we assessed how much of our codings went on products that our customers themselves were exporting, we found that even on the coding side, we're really driven by domestic consumption. And if you look at what's happening in the world right now, clearly China feels under fire, assailed to some extent. But the signs is that they're countering by stimulating domestic consumption and the domestic economy. And that directly correlates, I'm sorry, to ExxonMobil performance. So if you look at our comps for this rest of the year, our comps in China and DECO were pretty soft. In codings, the business was doing well last year, and therefore these are healthier comps. But in DECO, they were rather easy comps for the rest of the year. or at least from the middle of Q2 onwards. Then the rest of the world, marine protective, once again, in marine there's backlogs at customers, shipyards are full for the next few years, pretty much whatever happens. So those volumes are locked in. Protective, there's some infrastructure spent in different countries, and that helps on the protective side. Vehicle refinish is soft and doesn't show any signs of picking up for the time being. Automotive is going to be depressed, I would think, for the rest of the year. Powder is the mixture of a bunch of N segments, and powder is, as a market, I think, will be Probably be down for the year, but Axo, once again, is gaining market share based on technology differentiation and service differentiation, too, to be clear. What else am I forgetting? The industrial coating businesses, you know, packaging and coil, it's – Probably something to keep an eye on as we look at GDP development around the world. But the point I'm trying to make is that 40% of XO is decorative, and decorative is really local consumer confidence-driven. And if you take the other 60%, quite a few of these businesses have some level of – Volume protection, you know, whether you're calling kind of customer backlogs for marine or sell some element of local demand that I illustrated talking about the other segments. So we're not immune to global demand by any stretch of imagination, but we don't see signs of lower trading at this point. And as Martin said, it's too early to conclude either way. And it'll be a debate between volumes and costs, essentially. And we're more than ready for that debate because we're already pushing hard in improving that trade-off. Georgina, I hope that answers.

That does. Thank you so much for the details.

Thanks.

As a reminder, for any further questions, please press star 1 on your telephone keypad. Our next question is from Peter Clark at Bernstein Society General Group. Please go ahead.

Yes, good morning, everyone. Sorry, I had tech issues, so I came in on the Q&A session. But I know you were pointing at marine and protective normalising. I heard that comment. And I'm just wondering, particularly on the protective side in North America, because I think the oil and gas business is a very profitable niche for you there. You're obviously seeing nothing yet, but just your expectation on that sort of business as you see it today – And then going back to the Deco business in the second quarter of last year, of course, you took this awful bump in Western Europe with the weather and the UK trade, I think, wasn't great. And a lot of the high margin trade wasn't great. I'm assuming in Deco, whatever happens, particularly help with the cost cutting, given that bump you took last year, you're pretty optimistic you can drive that business ahead in the second quarter. Thank you.

Maybe you start, Peter, with your first question on MPY. I do want to confirm your point that indeed we see an unhealthy positive trend in protective on the back of new projects and investments in oil and gas. So, yes, that is a confirmation. On DECO in May, I mean, let's not try to predict the weather here for the second quarter. But overall, so far, as Greg also mentioned, so far so good. The Q2 is always a very important quarter from a seasonality perspective. And so far, trends are in line with last year, as we mentioned earlier.

And maybe, Peter, to build on what Martin said, because your comment on protective is oil and gas is important. is a profitable niche for us, and if we can call it a niche. And Axo has a strong position. So I guess you're asking, with oil prices falling, will that mean that we're expecting a slowdown in protective? And I think for the oil and gas segments, if lower prices persist, then you're probably looking at lower investments. But If you look at last year, our performance in the U.S. in protective was – we underperformed in the U.S. last year. So we're rebounding from that perspective, and therefore there's probably a negative for the market but a positive in terms of our momentum. I don't know whether they balance out, but at least there is some sort of balancing effect. And then the further point I would make is that Axel historically has – I mean, in the last decade, EXO had made the choice of focusing in protective, particularly on oil and gas, at the expense at times of infrastructure issues. We rebalanced that. In the last two years, we invested heavily in upgrading our product range in passive fire protection. Essentially, all the All the more infra-driven elements of Protective, and that is leading to rebalancing of the segment. So, yes, oil and gas is still important, but we're no longer an oil and gas robust shop in Protective. So I agree with you that this is something to keep an eye on, with probably a positive on infra and a negative on oil and gas. But given these various effects that I've mentioned, it's not something that we're nervous about at this point.

Got it. Thanks for the detail. And just to check, EMA Deco was really thumped in June, wasn't it? It was the end of the second quarter last year.

Yeah, I think it was that. It was about the second half of the second quarter where in the high season it rained a lot and volumes were sluggish overall. That's correct. It's a sunny week in Amsterdam, so we're feeling good right now. Our ability to predict the weather probably doesn't extend far beyond looking out the window right now, but in Amsterdam at least I feel good. Got it. Thank you. Thank you.

Our next question is from Stefano Tofano at ABN AMRO and OdoBHF. Please go ahead.

Just good morning, everybody. Two questions remaining from my side. I hope I don't ask them again. I had some technical issues as well. The first one is I might have missed it, but can you quantify the impact of the restructuring efforts in Q1, just from my understanding? And the second one, I know it might be a little bit too early to quantify the impact on the oil price, but if you can give us a little bit of an indication if oil prices would remain as on the levels that they are now, what will that mean for H2? Thank you.

I'll take the second one, and Martin will take the first one. The second one on oil prices, about half of our raw material basket is correlated to oil prices, so lower oil prices means lower raw material costs to us. As I said earlier, I alluded to earlier in this conversation, it's not a Q2 effect and largely not even a Q3 effect because we lock up prices ahead of time and we have longer supply chains. five months in Europe. So if lower oil prices persist, you'll see a comparatively favorable impact on raw materials in Q4. But Q4 is a smaller quarter for us, and Q2 is already spoken for, and as is Q2 to some extent, Q3 to some extent. So it is an effect, but it's not an effect that you'll see in our numbers tomorrow.

Martin, you want to take the Q1 restructuring? So I assume you are asking for the impact from restructuring in terms of P&L and cash. Our identified items in the first quarter was 72 million, if I have it right. And from a cash out, it was 51 million. We have clearly commented, and that's more important, that for the full year it is a total of identified items of 220 million and also a cash-out of 220 million, of which, from a cash-out perspective, it will be more phased in the first half. because of our SG&A actions, which we talked about earlier, are very much front-end loaded in the year as we execute the FTE reductions, which are mostly done by mid-ish year. I hope this helps.

Yes, thank you.

Our next question is from Jaideep Pandya from On-Field Investment Research. Please go ahead.

Thank you. Two questions. Firstly, on the sort of M&A landscape, but just stepping a bit outside the paint and coating basket, Greg, you know, given your background, you know, is not like a, you know, old school traditional coating guy, you came to AXO in relatively recent years. Do you see opportunity on the more lighter side, building and constructions industry? for AXA to venture into maybe adhesive sealants or any alternative technology which could be bolted on to the distribution network that you guys have, especially in the U.S. or maybe even in Europe? That's my first question. The second question is around the industrial footprint plan. Could you give us some indication of what is the current utilization of your big factories in Europe? And on paper, if volumes don't go up, what would that look like once you rejig the factory footprint? And also tied to this, how has the service levels improved? Because I remember in the past there were some issues with fulfilling customer orders. So has that KPI improved meaningfully in recent quarters?

Thanks a lot. Thanks a lot. Good questions. I'll take the second one and I'll move back to the first one. The second one is, Yes, our service levels are very good now, and our capacity utilization is progressing in the direction that we targeted. So let me try to be more specific here. In DECO Europe, about two years ago, our capacity utilization was around, it was in the mid-50s, call it 55%, mid-50s. And we said that we'd be closing some factories, we'd be rationalizing our footprint, and our ambition was to run our deco europe assets in the mid to high 70s in terms of capacity utilization we don't aim to be higher because deco is a seasonal business and it's not a high uh it's not a high fixed manufacturing cost business so essentially if you try to uh operate at much higher capacity utilization essentially you're saving a little bit of fixed manufacturing cost at the expense of a lot of working capital costs, because you have to build inventories ahead of the season to compensate for the fact that you don't have additional capacity. So kind of mid to high 70s in terms of capacity utilization for Deco Europe is where we need to be. And the plan that we're executing gets us there. And and it's going well. So so we're confident that we'll be at the levels that we aim to be at as we complete the plan at the end of at the end of next year. And if anything happened in the market that made us need to do more, we know how to do it because we're in the process of doing this now. energetically, and you can imagine that that always gives you additional ideas. So far, so good from that perspective. And the service levels, once again, they're in the 90s, which is pretty much more than what we need for businesses that sometimes have distribution in the value chain. So we also have the channels that are holding stocks. So we don't need to be at a higher level of service. It'd be expensive and it wouldn't pay off dividends in terms of performance. We're exactly where we need to be. And that's what we fixed in the last two years. And we've been operating at a high level since the summer of last year. If you remember, we had a Q2 miss last year where the market slowed down and we were still adding costs, operating costs, because we were in the process of fixing these service level issues. And as we fixed them, we started taking people out and taking costs out. And this is what you're continuing to see and you'll continue to see throughout this year. So, yeah. All good on that front, and once again, if we need to do more for market-related reasons, we know how to, and we already have ideas. Your M&A question, Martin already answered to a large extent. We're focusing on our portfolio rationalization, South Asia. We're focusing on our self-help measures becoming increasingly more cost competitive. We're not focusing on anything else, and particularly not focusing into getting into segments that we're not already present in. So adhesives and sealants, they do make sense for coating companies, for paint and coating companies. But we're not going to be making acquisitions in these areas. And you could always do something through a partnership where you're, I don't know, using Axos distribution to commercialize somebody else's adhesives and sealants or vice versa. But we're not going to do it by acquisitions. That's not what our focus is right now. Hopefully that answers your questions. Thank you. Thank you.

Thank you. Our next question is from Ranulf Orr at Citigroup. Please go ahead.

Hi, good morning. Just one left from me. I think you probably just answered it mostly in the last question, but I was just thinking in relation to the tariffs. Are you sort of re-evaluating any of your plant closures or any sort of risk that these are delayed or cancelled? And then maybe just a bit more broadly, any additional details on the plans you might be making to respond to this new tariff world order would be very helpful. Thank you.

We're not re-evaluating any of our plant closures. They will all happen. And You know, we've made a conscious effort to localize, and we've actually accelerated localization in the last few years. We've also made a conscious effort to de-risk our procurement flows. So we're in a pretty good spot at this point from that perspective, and all of the plans that we're closing are plans that we can function without, and therefore there isn't any – logic for us to hold back a plan to say, for example, well, we're closing a plant in this market and there's a tariff wall and therefore we might need to have local production and therefore we shouldn't close. There's really none of that. That plan is going to be executed as is. And the question is not of doing less. It's a question of doing more. And that will be dictated by market conditions. Was there anything else that we need to answer in that question? Did I miss any part of your question or did I answer it?

No, no, that's great.

Thank you.

Thank you. The next question is from Chetan Udashi at J.P. Morgan. Please go ahead.

Yeah, hi. Thanks and morning all. I was just wondering, and maybe apologies if this was covered, but can you give us a sense of how much of your 170 million cost savings already came through in Q1? And apologies again if this was taken already. The second question was, just looking at price mix, you know, it was up 2%. You know, we've had debate on Axo over the last few years, myself included, you know, where we've been more, let's say, you know, circumspect on the pricing power in the business. And I remember a Greg, at some point in Q1, you talked about typically your pricing increases come through in Q2, but it seems some of that has already come through in Q1. Just curious in terms of how you see the pricing in the business across divisions, anything that we should be aware about as we look about or think about second quarter? Yeah, that's it. Thank you.

Just on the first question, so, I mean, we are executing per plan, and that is also visible in Q1. As we've said, $170 million is our gross savings, and the net is $70 million. But the great thing is that on the SG&A plan, you've seen the reductions, and you've also seen that we have – basically in Q1 fully offset the 8% wage inflation. And we also start to see savings coming in from the industrial excellence plan. In that respect, we are in line with the plan. And as we earlier said as well, the savings are ramping up throughout the year because we've always said that it will be more back-end loaded as we are implementing these actions.

Thank you. At this time, we have no further questions on the line, and I will hand back to Greg for closing remarks.

Yeah, I think it's been an hour or so. You guys are busy, so we'll close this call. Look, a solid Q1. The points I would make is that the world's an uncertain place, but our model is de-risked. So once again, we can deliver products and we can control our costs. And we can do that in an effective manner, as you saw in this presentation, even before we take pricing measures. So I think from that perspective, Axel is a fairly resilient model in this current environment. The part that we can't protect ourselves against is impacts on global demand, which, you know, once again, the rising or the lowering tide will impact everybody. But we are engaged in an overall direction or exercise of cost efficiency. And if we have to step up those efforts, we will step up those efforts. And then beyond that, we report in euros, and the euro has gotten stronger, so there's an FX translation. But once again, it's translation, it's not transaction, because that model is naturally hedged and de-risked in local. So those are the parameters that we point to. And beyond that, we thank you for your time today and look forward to speaking to you soon again. Thank you.