Akzo Nobel Nv Ord New

Hello, and welcome to the Axel Nobel Q1 Results 2026 Earnings Call. My name is Alex. I'll be coordinating today's call. If you'd like to ask a question at the end of the presentation, you may press star, third by one, your telephone keypad. I'll now hand it over to Jan Willem to begin. Please go ahead.

Good morning, and welcome to Axel Nobel's Investor Update for the first quarter of 2026. I'm Jan Willem Enhuis, Head of Investor Relations. Today, our CEO, Greg Puglione, and CFO, Martin DeVries, will take you through our results. We'll refer to the presentation, which you can follow by webcast or download from our website at oxenobel.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 a forward-looking statements disclaimer on slide two. Please note, this also applies to the conference call and answers to your questions. I'll now hand over to Greg, who will start on slide three of the presentation.

Thanks, Jan-Willem.

Good morning to everyone on the call. In Q1, we delivered a clear beat with EBITDA of €345 million coming in 7% ahead of the €323 million consensus. Organic sales were 1% lower year-on-year with a 1% pricing gain offset by 1% declines in both mix and volumes. Profitability improved meaningfully. Adjusted EBITDA was up 7% at comparable scope, while adjusted EBITDA margin rose to 14.5%, up 80 basis points. This marks the fourth quarter of margin expansion year-on-year, driven by disciplined pricing and strong execution on our cost actions in soft-end markets. Operationally, our industrial transformation will be completed by year-end. We closed the further three sites in Q1, bringing the total to 15 since the program's inception. We've done all of this without business interruption. We also delivered a key milestone to our ongoing portfolio review in DECO Asia, signing the sale of our business in Pakistan at 14 times EBITDA for an enterprise value of about 15 million euros. Closes expected in the second half of the year. It's not a very large transaction, but it's another proof point after India that DECO assets are valuable, particularly to the right owners. On financing, we issued a 1.1 billion euro bond dual trench in March, extending our maturity profile and reinforcing liquidity ahead of the proposed Excelsior merger, which is on schedule. We enter the rest of the year from a position of strength, well equipped to navigate the raw material headwinds ahead. Turning to slide four. In Q1, volumes were down 1% year on year, reflecting a mixed regional picture. we saw strong growth across Asia and South America, while North America and Europe remained slow. In coatings, volumes declined 2% in Q1, against the backdrop of continued macroeconomic uncertainties. Powder, specifically, powder demand improved in both architectural and automotive industries, and the strong momentum in Asia continued. Marine protective delivered a lower quarter, driven by project phasing and tougher comps in marine, while protective continued to grow, particularly in Asia. Automotive and specialty remained sequentially flat. Aerospace is a clear growth engine, while refinished grew in Asia and stayed at trough levels in North America as expected. Industrial coatings declined low single digit, with growth in coil more than offset by lower volumes in packaging. Moving to DECO, Q1 was a solid quarter. Volumes grew strongly across Asia and South America, offset by lower volumes in Europe, Middle East, and Africa, where the season started more slowly but accelerated through March and is also doing well in April. Latin America volumes were low single-digit up, driven by Brazil's return to growth together with Colombia. In Asia, growth accelerated sequentially with continued outperformance in China and Vietnam, while Indonesia is showing signs of recovery. I'd add as a comment in reaction to some of the questions we got this morning and some of the headlines that we saw that we don't see a whole lot of evidence of pre-buying in either DECO or COTINGS. I mean, they're very different businesses, but once again, there's no evidence of significant pre-buying in any part of our business at this point.

Thanks, Greg, and good morning, everybody. At group level, organic sales declined by 1%. Volumes were down 1%, while 1% price was offset by negative mix impact of 1%. The divestment of India had a negative 3% impact on revenue. Finally, FX translation reduced revenue by 5%. resulting in a reported revenue decline of 9%. Coatings were impacted by geopolitical uncertainty, with volumes down 2%. Growth in Asia and South America was more than offset by lower volumes in North America and Europe. DECO delivered strong price mix of 2% on flat volumes. Group adjusted EBITDA was €345 million, representing a 7% increase at comparable scope, excluding our India disposal and in constant currencies. The EBITDA margin improved to 14.5%, up 80 bps year-on-year. This improvement was driven by a 300 bps margin expansion in DECO on strong pricing and structural cost savings. In coatings, softer volumes and negative mix weight on profitability. Next slide. We delivered another quarter of free cash flow improvement by 39 million euro at minus 144 million euro versus minus 183 million euro in Q1 last year. The first quarter is seasonal quarter with inventory built and related outflows. Working capital also improved, ending the quarter at 16.8%, 120 bps below prior year. Notably, this was achieved while we closed three sites as part of our industrial transformation program, which requires inventory build-up to support volume redistribution. Return on investment rose to 13.6%, up from 13.1% last year. And finally, supported by the improved gas generation, we maintained our leverage ratio at around two times. Now, handing back to Greg. Thanks, Martin.

Moving to slide seven, I think. Tensions in the Middle East have pushed oil prices higher and caused significant disruption across the chemical value chain, driving expected high-teens raw material inflation for the remainder of the year. In response, we move decisively to protect margins and have announced price increases ranging from the mid-single digits to the low teens. The announced price increases will fully offset raw material and logistics inflation based on current market conditions. We'll execute further pricing actions if conditions worsen. So, once again, these price increases have been announced. They've been discussed with customers. They're being implemented. The last cycle demonstrated the strength of our ability to pass through inflation. If you think back to that time, 21-22, 2.3 billion euros of cumulative pricing to fully offset the 2 billion euros of raw material inflation, although pricing took time to catch up. This time around, we're building on that experience, and we've acted faster, bringing pricing and inflation into closer alignment in the early stages of the cycle. We're not executing at pace with the P&L impact of our pricing actions ramping up in Q2 and the full effect visible in Q3. Beyond pricing, we're actively managing input cost inflation. Contractual terms and competitive sourcing are limiting cost increases from suppliers, while our regional-for-regional sourcing model keeps supply continuity intact and provides resilience to against further disruption. In short, we've navigated this before, our response is in motion, and we believe we have the track record to back our confidence. Turning now to our outlook on page 8, looking ahead, our 2026 adjusted EBITDA target of at or above €1.7 billion remains unchanged. The 100 million euro step-up continues to be driven by what we control, 90 million of net savings from our industrial program, with SG&A carryover and productivity offsetting inflation. We remain firmly focused on completing the industrial program by year-end, while maintaining strict cost discipline. Although the Middle East conflict has limited impact in the first quarter, raw material and logistics costs will ramp up throughout the year, The exact impact is still evolving, but additional pricing has been announced, as I said, and will fully offset this inflation we see. And therefore, we believe that the actions that we have in place have neutralized that impact, and we'll take further actions if needed. For Q2, we expect adjusted EBITDA of around 400 million euros. Volumes are forecasted to be broadly flat against comps that are less challenging than in Q1. And pricing will build progressively throughout the quarter, offsetting raw material inflation, while OPEC savings will be delivered as per plan. Moving to slide nine, the merger preparations with Accelta are progressing as planned, with three critical work streams running in parallel. On integration, the management office is up and running with strong cooperation between the teams. Focus is on day one readiness and accelerating synergy capture. The shareholder preparations continue to advance. The PCAOB audit is complete. The confidential F4 filing was submitted end of March, and the EGM is expected to be held in early July. Separately, the regulatory process is underway, with active dialogue across many jurisdictions, including the U.S., the EU, and the U.K. We remain firmly on course to close by the end of the year or early next year. I'll now hand over to Yann Villem, who will close with information about upcoming events, and then we'll start the Q&A session.

Yann Villem? Thank you, Greg. 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 tomorrow, April 23rd. The ex-dividend date on our 2025 final dividend is April 27th, and the record date is April 28th, followed by payment on May 6th. This concludes the formal presentation, and we'll 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 others can participate. Operator, please start the Q&A session.

Thank you. As a reminder, if you'd like to ask a question, you may press star 5 by 1 on your telephone keypad. Our first question for today comes from Thomas Rigglesworth of Morgan Stanley. Your line is now open. Please go ahead.

Good morning, everybody. Thanks very much for the presentation. Two questions, if I may. Firstly, around the volume outlook that you have, I mean, clearly an evolving picture, but obviously you've kept the volume picture flat and you're pushing through pricing. Are you expecting to see some demand erosion, or do you think that – is too early to tell, or there are mitigating factors within there that mean that that shouldn't arrive this time around. And secondly, you did very successfully pass through pricing in the previous cycle, but one of the issues we found was in the coatings industry, less so AXO, was kind of unique components that were missing or became short. Just in terms of your total inventory picture, How does that vary by region? How many weeks, how many days of inventory do you have in terms of visibility and in terms of lead time to enable you to get prices up? Thank you. Thanks, Thomas.

I'll take the first question. Martin will take the second. From a volume perspective, we've kept the outlook flat. When we So when we look under the hood, we're not really seeing, we didn't see any pre-buying of any significance. We are not seeing a slowdown either. We're essentially seeing a trend that seems to be fairly stable. So if we stay in a world of higher inflation because that Roman inflation creates price inflation and creates inflation overall, Would that have an impact on demand overall? I mean, I think economic theory would tell you it would. But one, it's not visible today. Two, it's too early to tell. Three, we're playing against easier comps starting in Q2. You have to remember you had Liberation Day last year and all sorts of things that made our life exciting. So, you know, I'd say so far so good. And March was healthy. April was healthy, too. We announced price increases that we discussed with our customers without seeing them ramp up their orders or, you know, I think there's a view in the market that there's potentially a resolution on the horizon. But whether that's correct or not, we're not seeing anything that would lead us to change our volume outlook for the time being. Martin, you want to take the second question?

Yeah, on the pricing dynamics, maybe a few points to make. First of all, this is really a very abrupt price increase. But, of course, there is a different picture per region. and also per business or per business segment. So we use differentiated pricing, of course, in that context. And I know your question on lead time, but you see in general that in Asia, and particularly in China, supply chains are significantly shorter compared to, for instance, Europe. So that's why in Asia with a shorter supply chain, but also a more material increase, you see also there a faster reaction to compensate.

It's really interesting, by the way, because Asia structurally has a higher impact from what's happening in the Middle East and the Strait of Hormuz, just because of where these oil and some of these refined products go. And as Martin said, it's a forest supply chain. So you should say, well, there's going to be more of an impact in Asia and that impact will be felt earlier. But actually in Q1, what's really pulled up performance is Asia. So it's holding up well at this point in terms of demand. Once again, to link Martin's answer on the second question to the first question.

Thomas, did we cover your question? That was very impressive. Thank you. Both impressive and very helpful. Thank you.

Thank you.

Thank you. Our next question comes from Lauren Faber of BNP Paribas. Your lines are open. Please go ahead.

Yeah, thanks and good morning. Greg, how much of the pricing that you're targeting for the rest of the year is underlying pricing rather than surcharges, which I guess is a way of trying to understand how much carryover we get into 2027 as things are now? And then the second question is on the Asia disposals in DECO. So you did Pakistan, and obviously that's a good validation, but I guess the process there started before the war. So I'm wondering to what extent you think the current Middle East situation is just going to push back all your, well, I guess, expectations around announcing more deals. either from a valuation standpoint or just because there's too much uncertainty and people don't want to come to capital now.

Yeah, thanks Laurent. I'll take your questions in reverse order. You're right, Pakistan, we started discussions before the war in Iran. But the war in Iran did not lead to a value erosion of that process or a fragilization of that process. So there was no time when potential buyers tried to use that as a reason to either take down the price or push things back. And if you look at what we have in mind for the rest of Asia, it's really interesting. I mean, you know, we're in this world where people... WhatsApp you stuff all the time. And while we were getting ready for this call, I got a WhatsApp from a senior executive of a well-known company that asked me about the availability of one of our Deco businesses in Asia. So this is like real-time stuff. So what that tells you is that people look through the crisis. These are really good businesses. Um, nobody is trying to figure out, uh, whether, uh, what's the impact for three to six months. They're, uh, they're buying for the longterm. And, uh, and these are franchises, you know, these are, uh, these are well-known brands within trans positions in countries. And, uh, You know, I don't want to be cynical that things, you know, this too shall pass, but that's not how buyers look at assets. And once again, a few data points, no change on Pakistan despite events, and people actively knocking on our door pretty much in real time for anything else that we might have in mind in decadent Asia. Your question on the price versus surcharges, I think it's a really good one, and we've explained in the past that about 25% of our revenue is based on formula, you know, indexes. So take Axel overall, there's about 25% of our revenue where prices adjust based on a formula. In industrial coatings, for example, that's a significant part of it, but there's other places too. Those formulas, you know, they're not very effective for small variations, but they're really effective and really impactful for big variations. And we're in big variation land. So, essentially, I was touching base with the industrial coatings business, and essentially they told me yesterday that these formulas have already been agreed to, the impact, and it's already being passed on. So, that's great. being rolled out in invoices in April, in May. I think the tail end of that is things that go in on the 1st of June, and no later than that. So it's kind of actually spread out between 1st of April, 1st of May, 1st of June. So that's about 25% of our revenue base. And everywhere else, in some cases, we have longer-term contracts, but... A lot of it is spot, essentially. And there you have the option of going with price increases or surcharges. Our preference is to go for price increases because the surcharge stuff is, you're right, it's less picky, but it has an advantage, though, that usually you can implement it faster. So overall, we've done proportionally more for price increases, but there are certain areas of the business where we've gone for surcharges, usually in areas where that's the acceptable or accepted practice. But once again, that's not our preference, but that's something we do when that's the market practice and when we believe that speed is of the essence.

Okay.

Lauren, did I answer your question?

Yeah, absolutely. Thank you.

Thank you. Thank you. Our next question comes from Matthew Yates of Bank of America. Your line is now open. Please go ahead. Hey, good morning, everyone. A couple of questions. The first one just around cash flow and working capital management. If I think back to... prior cycle you ended up consuming the best part of a billion euros in additional working capital can you talk about sort of how you're thinking about the impact this time around and any lessons learned I think with the benefit of hindsight I think you yourselves were prioritizing security of supply that then led to you know quite a prolonged effort to unwork in that how are you engaging with your raw material suppliers at the moment and to balance what you need versus, you know, not buying too much at perhaps what is the top of the market. And the second question, let's follow up on what Lauren was asking around the process for Asia. And I'm a bit confused as to what the strategy here. I was under the impression that you were reviewing positions where you did not have a pathway to being a market leader and Based on recent press reports, it suggests that you're taking a more holistic look at whether keeping any Asian business would be worthwhile if it has a lack of scale. I'm just curious how you're thinking about this process. Is it going to be piecemeal or are you looking at a total exit of your Asian Deco franchise? Thank you.

Matthew, I'll take the second question. I'll start with that, and then Martin will take the first one. To clarify, our strategy hasn't changed. We love our DECO businesses. We believe that our capital is better allocated to leadership positions. And if you take DECO specifically, the part of the world where we don't always have a leadership position is actually Asia. So hence the fact that in September, I think, 2024, we announced – a review of our DecoAsia positions. So it's not coatings at all. It's just DecoAsia. We sold India. India was a great business with 5% market share. We sold Pakistan. And we're looking at some of these other positions. And to your question of is that wholesale or retail, you know, are we looking at potentially selling as a package or are we looking at assets individually? You know, right now we're just having discussions in general. We haven't decided on anything. but we've been clear that if we're not the leader and we don't have a path to leadership, we will consider options. And these are the options that we're talking about. By the way, that discussion does not include China. China is a really good business that is recovering ahead of the market that we're excited about for the years to come. But it's the scope that we are looking at from a strategic perspective is essentially the rest of Asia, which once you've taken out India and Pakistan is about 300 million euros of business at a profitability which is a little bit higher than the DECO average. So, Hopefully that answers the question, but I don't have anything else to communicate on this at this point beyond the fact that we're continuing with the exact same strategy, taking a critical look at these assets, and we are having a bunch of conversations because it's not like we've been discreet about it, so people are calling up, or to allude to my answer to Laurent's question, people are WhatsAppping me. We're very modern. Martin, you want to take the first question? Yeah.

Yeah, Matthew, it's a very good point. And obviously, we have taken the lessons learned from the previous cycle. We are operating at the moment end of Q1 at an inventory level, which is just about 100 days and is in line with last year Q1. By the way, despite the massive transformation we are doing as part of our industrial footprint, Clearly we are and we will manage our inventories at a tight level, because it doesn't make sense to start to buy when prices of raw material have spiked already, because the spike is already there in terms of raw material prices. So we manage it tightly, not buying at the highest level to make sure that we manage our working capital in a proper way. And as you know, yes, in value, inventory goes up, but payables will also go up. So that compensates each other and that underpins kind of the trajectory we see for working capital throughout the year.

But Matthew, you're correct. You know, last time around in 21-22, we did really well in terms of pricing to mitigate the impact. We did really badly in terms of... anticipating, uh, raw material prices and availability. And we, uh, had a tendency to hoard. And, uh, when, uh, when the situation started normalizing, we had, uh, we had two or three quarters of relative underperformance because we were still working down higher priced, um, inventories. So, uh, in terms of lessons learned, that's the lesson learned, which is, uh, You know, we're going to keep a very close eye on days of inventory. And we haven't given our people relief. We haven't told them, you know, that target of getting under 100 days of VIO is suspended. You know, let's go out and buy whatever we can. That's absolutely not what we're doing. It's business as usual, but it's business as usual in a more dynamic way. because the market is a little bit stretched. Thank you.

Thank you. Our next question comes from Katie Richards of Barclays. Your lines are open. Please go ahead.

Hi, good morning. Two questions for me, please. But first, I just want to understand to what extent the positive margin momentum in the depot side was driven by the higher inventory battle you've been describing. Because you were talking about ahead of site closures, you were building inventories ahead of that. And certainly, you mentioned earlier that now the market has a view that there's a resolution on the horizon. So, I'd just be interested to understand whether you're finding it more difficult to push through price increases now that the news headlines are focused on a ceasefire.

Thanks. Thanks, Katie. The second question is... I'm not trying to be a geopolitical commentator. I was explaining why... I was giving a reason or an explanation of why we're not seeing a lot of pre-buying. People are fairly calm in the value chain. But I think we all understand that even if there's resolution tomorrow, oil prices will remain at a higher level for... for the quarters to come, and the chemical value chain will take some time to resorb. You know, the moment you open the Strait of Hormuz, in all likelihood, the ships that will be given priority are the VLCs, you know, the very large food carriers. And all the stuff that has chemicals on them will be at the back of the cube. So I think we all understand that whatever happens, this impact is going to be carried for the rest of the year. There's no magic wand to go back to pre-Iran quickly. So, no, whatever is happening is not impacting our price discussions. And also, I think people have gotten used to the fact that those discussions are a roller coaster. So, no specific impact from that perspective. Your point on DECO margins, you know, we saw that our margins were up 300 basis points in Q1. And actually, your question is a really good question because you're essentially, if I phrase it differently, you're asking whether that performance is supported by positive inventory revaluations. And the answer is that it's not. The inventory revaluations have not impacted Q1. And therefore, that performance was achieved the old-fashioned way. And the old-fashioned way has been specifically this, you know, this industrial transformation that we undertook. We're closing a lot of factories. We're streamlining the business. We're taking out some of the overheads. over time it pays off. And what you're seeing is those actions paying off. You're not seeing any kind of weird one-off accounting impact of run ads go up and therefore we do an inventory revaluation that's positive that underpins the Q1 performance. That's not the case. I can confirm that. Do I answer your question?

Yes, thank you.

I'm not even sure that was your question, but that's my answer.

Thank you. Thank you.

Thanks. Thank you. Thank you. Our next question comes from Tony James of Rothschild & Co. Your line is now open. Please go ahead.

Good morning, gentlemen, and thanks for taking my questions. I've got two. On site closures, you... I've reported you've taken out three in this quarter, and I think you said that's 15 in total. Could you remind us what the target is for this calendar year and how that might split by division and region, if that's possible? And also, what are the criteria now with, you know, we're at the end of April, you have the Excelsior merger hopefully on track for the next six to 12 months. Is that also starting to take effect? And then in terms of divestment, sort of circling back to early questions, how much of the divestment strategy, particularly Asia, is now starting to also consider the combined footprint with Excelsa, or is that just not relevant at this point? Thank you. Thanks, Tony.

The cyclosure question, we said we've done 15. We never gave an overall target, but if you go back to where we were last year, we were at 12%. And we said that we'd done six for the year, and we said there were at least as many in 2026 as in 2025. So at least as many, it means above 18. I'm sorry to be coy, but you understand these things are sensitive. But, you know, roughly 18 plus, and all of those are going to happen, and none of that is – None of that is changed by the impending Exaltor merger. These are all things that we believe make sense, regardless of whether we merge with somebody else or the market environment. So we're going ahead with those. And that was a divestment question, I think, Martin?

Yeah, that was a divestment question. And again, we are going ahead, as we mentioned earlier. And there is no relationship to the Axalfa merger, also not related to the footprint. We are executing our standalone strategy, and we are focusing on this this year. And the merger will come from early next year onwards.

And I think it may add something to what Morten said. It ties to a question we've been asked multiple times by investors, which is, The merger, there's really good investor support, but if they have one gripe, it's this pushes returns out into the future, because a lot of people look at this and go like, well, you're going to be busy with regulatory until closing, so that takes care of 2026, and in 2027, you're going to spend $600 million to generate $600 million of synergies. So that means that the earlier I can start seeing returns is 2028. But the reality, if you read the merger agreement, is that we've maintained the right to monetize some of our assets in DECO Asia. And as you can tell from what we're saying, we're continuing, which means that some of those returns are being brought forward by whatever we do with those assets specifically. And once again, no change, no change because of Excelsa and no change because of the market. If anything, those processes are generating quite a bit of interest.

That's great. Thank you very much, gentlemen.

Thank you. Thank you. Our next question comes from Chetan Udashi of JP Morgan. Your line is now open. Please go ahead.

Hi, thanks for taking my question. The first question I had was, Greg, you mentioned the local sourcing for local region strategy, but correct me if I'm wrong, I sort of remember in Europe about quarter to 30% of your raw material requirement is actually typically imported from China. And I'm just curious, is this going to change how you look at importing from China in the future. Of course, the prices from China tends to be much lower, but then if you have these sort of supply shocks like COVID, wars, does that make sense or does it make sense in your view to double down on local sourcing in Europe or rest of Asia, even if that means you have to pay higher prices to local suppliers? the second question just going back to the pricing it seems to me at least that these are the price increases that you are pushing through can you give us any color on how the acceptance has been you know so far from your customers are they do they understand are they pushing back you know is it a tug of war because We all take the price increases on the face value, but of course what matters is how much will stick.

Let me take the first question on regional or local sourcing. In fact, what happened post-COVID, we have focused more and more on local sourcing. And if you look at specifically Europe, And our local sourcing versus what we source from Asia, particularly China, that is in fact a very low piece. So it is significantly lower versus what you are mentioning. Currently we are more or less at a 10% level. So our model has more change to regional slash local sourcing.

Which, by the way, we talked about, I think, maybe 18 months ago or two years ago, because the question was, are we taking advantage of the exceptionally low prices in China? At a time, if you remember, it was when Europe was passing on tariffs on Chinese TIO2, you know, anti-dumping tariffs. And what we said at the time is that we had de-risked our flows. We realized that there's a geopolitical risk associated to having too many eggs in the same basket and that we were willing to absorb a little bit more cost to have more certainty. So it's exactly what Martin said. And if you kind of go back to what we said at the time, you'll see that it's very consistent. The second question, Martin?

So the price increases and customer acceptance. Customer acceptance. Customer acceptance.

I go back to my answer to Laurent's question. There's about 25% of the revenue which is formula-based, and then that takes away a lot of the emotion. On the B2B side, so the other coating businesses, it's been – The industry reaction has been fairly kind of consistent across the board. If you look at the announcements that came out from different players, we're all pretty much saying the same thing. And our customers are also B2B players. So they're also looking to see how they pass on. So those discussions have been constructive. On the Deco side, it really depends. In some Deco markets, we are still... on the tail end of discussions for the annual price increase for 2026, you know, because these things have, they have a tendency to be settled at the beginning of the high season, and the beginning of the high season is essentially now. So, it puts a lot of things on the table at the same time, but, you know, everybody understands that this phenomenon is something that has to be mitigated. And actually, a lot of our customers have already increased their prices in DECO. And any discussion that they have with us is more about margin extension for them than it is about whether there's a logic to the price increases. But I'd say so far, so good, Chetan.

That's great. Anything else? Thank you very much.

Thanks. Thank you. Our next question comes from Georgina Fraser of Golden Sights. Your line is now open. Please go ahead.

Good morning, Greg. Good morning, Martin. I wanted to just ask a bigger picture question, just revisiting the strategy to shrink DECO and consolidate and get bigger in the coatings business. Are there actually any dis-synergies to owning both of these businesses? Or how do you present the value creation strategy behind this idea to shareholders? Or is the disposal strategy in DECO just about the fact that you haven't been able to delever organically? Looking at the balance sheet, it's, you know, we're kind of just stuck and have been for some time. Thank you.

Thanks, Georgina. It really is not about the balance sheet at all. Our cash flow generation was really solid last year. We are delivering at a higher level also in Q1. We've been actively managing working capital. We're not worried about our ability to generate cash, and we're certainly not worried about the balance sheet. And it's not at all about wanting to shrink DECO. It's about wanting to make sure that we are fighting battles that we can win, meaning that we want to focus in DECO on businesses, on countries where we have a leadership position because DECO is a local game and it's a relative market share game. You know, we're very strong in Latin America. We're the market leader in Colombia. We're the market leader in Argentina. The impact of having Colombia on Argentina is pretty much zero and vice versa. These are not different brands. The products don't travel from one country to the next. Production is local. So the way you win in Deco is by having the strongest brand and the best distribution. So it's a relative market share game. So once again, if you look at the profitability of our businesses in Q1, I mean, Deco is at like 17.3%. It's 400 basis points higher than CodeThings almost. Now, it's a moment in time. You know, CodeThings is more impacted than Deco by what's happening in the world. But these businesses are really good businesses. But once again, we want to be in the countries where we have a winning hand. And we've also demonstrated with India and Pakistan that in countries where we're not necessarily the leader, these businesses are way more valuable to people other than us. So I don't know that any investor will look at me strangely if I sell a business where we have 5% market share and the market leader has 50% and we sell that business at 24 times EBITDA, which is exactly the situation in India. So, you know, once again, not about the balance sheets. It's about focus. It's about making sure that we are not spread too thin. And to your question of are there the synergies to owning both, not really. I mean, I think there's complexity, which is that it makes – it forces investors to – have conversations ranging from the weather in the UK to aerospace travel to whether people are crashing their cars in North America. So it makes the story a little bit more complex. And from a management perspective, we're essentially, with an axle, we're running a B2B business, and then we're running a smaller version of Unilever. You know, DECO is essentially an FMCG business, although... The F is a small f, but it's very similar to those businesses, which means that you manage them and you allocate capital to them in a very different way as you would for the coding businesses. So that's all it is. It's pretty straightforward, not about balance sheets. a little bit about complexity, and a lot about capital allocation and value. Did I answer your question for you?

I think so. Thank you.

I hope so. If not, please send me a follow-up.

Thank you. Our next question comes from Sebastian Bray from Barenburg. Your line is now open. Please go ahead.

Hello, good morning, and thank you for taking my questions. They're on the refinish business, please. Can you give an idea of the geographic distribution of sales at AxaMobile within refinish? Any comments on both the underlying market development, given the volumes have been weaker in recent quarters, and the relative performance of Axa's own business would be welcome. Thank you.

I don't think we've ever given the geographical split of the refinish business. What I would say is that we're top four in the U.S. and in Europe. We have a stronger position in Asia. Our refinish business in Asia did very well in Q1. The refinish in the U.S., as you know, was... was impacted by that sort of tension between higher insurance premiums and lower disposable income, and that stabilized at a trough, but it hasn't picked up yet. And Europe was less impacted, but is not rebounding yet. So if you run a refinish, if you own a refinish business these days, what you have is growth in emerging markets. You're stabilized at a trough in... in Europe and the U.S., but with an impending rebound that the bigger guys, you know, PPG and Exalta, were forecasting for the second half of the year, which might shift a little bit if gas is $4 per gallon of the pump in the U.S. You know, maybe that has an impact on driving season. But it's a business that continues to have significant pricing power because it's a business that differentiates on technology. You know, for the body shops, the cost of the paint is not a big cost item. what makes the body shop profitable or not is essentially throughput and labor costs. So if you offer a product that achieves a better result in less time, you're going to make good money and you're going to have pricing power. Hopefully I've answered the – I didn't give you percentages, but hopefully I gave you some color. Did that help?

Yes, that's helpful. Thank you.

Thank you. Thank you. At this time, we currently have no further questions, so I'll hand it back to Greg for any further remarks.

Thank you. Well, look, it's strong Q1 in a market that is a little bit distracted by what's happening in the world. The market was soft in the first place. That is always a source of concern, but as we look at how our business is January, February, small months. March was actually a good month. April is looking pretty good too. There doesn't seem to be any signs of panic or significant disruption in the market. No significant pre-buying. No changes in consumer patterns that we can see at this point. You know, once again, we're keeping a close eye on that for the rest of the year, but keep in mind that we're forecasting flat and our comps get easier. Our cost structure is really under control. We continue to take costs out, and it continues to have a positive impact, as you can see from the performance of Deco in Q1 as just one data point. And then we were pricing up before Iran, and we've – We've stepped up one level because of the raw material impact, you know, once again, in the high teens in our basket for the rest of the year, but mitigated by already announced price actions that we believe will neutralize the effect. So that gives us some level of comfort for the rest of the year. You know, once again, volumes are always the question mark, but so far so good. We expect EBITDA to be about $400 million in Q2. And once again, you'll see progressively, you'll see the raw material impact materializing in our P&L, but you'll also see the corresponding price increases making their way through our P&L at the same time. And our aim is not to capitalize to expand margins. Our aim is really to price to neutralize the impact. Merger is making good progress, and we thank you for your time and your attention today. Thanks.

This concludes today's conference call. Thank you all for joining. You may now disconnect your lines.