Azelis Group Nv

Good day and welcome to Azalis' first half 2026 earnings presentation. Today we have Anna Bertona, Group CEO, who will give an update on our operating progress year-to-date. Boris Cambon-Lalanne, Group CFO, will present the financial results and then Anna will say a few words on the outlook. After their presentations, we will open the call for Q&A, but until then, you will be on listen-only mode. As a reminder, this presentation may contain forward-looking statements that are subject to risk. We will make a recording of this call available on our website later today. I will now hand you over to Anna.

Thanks, Pam, and good day to everyone. Thank you for dialing in today. We realize it is a very busy day for corporate earnings, and many of you are probably one report away from your summer holidays, so we will be sharp and efficient and start right away. As usual, I will kick off with the most important messages based on our performance in the first half of the year. And let me start by saying that we are proud to have delivered positive group organic revenue growth for the first time in more than a year. The 4% organic growth achieved in the second quarter reversed the decline in Q1, resulting in stable organic revenue for the first half of 26. These results demonstrate our agility in capturing growth in a volatile environment, building on our strong reputation with our customers and principals. The stable margins achieved during the first half of the year are another accomplishment and a testament to our team's commitment to balancing the need of all our stakeholders. Delivering this outcome while navigating raw material volatility, mixed demand patterns and ongoing supply chain challenges requires both discipline and execution excellence. This consistent and disciplined approach has translated into strong earnings growth with Q2 EBITDA increasing by 12% versus prior year and 23% sequentially. We are pleased with this performance, which reflects both the quality of our business model and the dedication of our employees across the group. Now let's have a look at the drivers of these results on the next slide. In the first half of the year, we generated revenue of 2.2 billion, more than 3% higher than prior year in constant currency. This was driven by 3% contribution from acquisitions supported by stable organic revenue growth. We achieved adjusted EBITDA of 233 million and generated cash of 122 million, even as we invested a bit more in working capital to support the growth in the business, especially in the second quarter. and let me walk you now through the drivers of our organic revenue. Momentum varied across regions with APEC and Americas delivering strong performance while EMEA remained challenging also due to the tougher comps. The impact of broad-based price increases vary across end markets and across regions. As said APEC, Growth substantially and remained the largest driver of our positive organic revenue performance, accelerating from 4% in Q1 to 13% in Q2. And while the region benefited from some pre-buying in the beginning of the quarter, we believe that the strong performance was also the result of our team's commercial focus and strengthening of our position. Second, the green shoots that we saw in Life Sciences in the Americas in Q1 are taking root. with continued recovery in personal care and sustained solid performance in food. In EMEA, we are starting to see a recovering case, both in terms of volume and price, supporting the industrial chemicals performance in that region. While we are building on this positive momentum, we still face challenges in some markets. In EMEA, demand in general remains soft, especially in life sciences, although the pressure is somewhat easing. We saw a smaller year-on-year organic rate of decline of 5% in Q2 compared to the 9% decline in Q1. In the region, we continue to see competitive pressure in flavors and fragrance. And in addition, our agribusiness was impacted by the exceptionally dry weather. In the US, we recorded weak volumes in case, only somewhat offset by positive pricing. And the weak volumes were partly due to supply constraints and some key principles during the period. And lastly, the weak macroeconomic situation in Brazil and Mexico is reflected in overall weakness in our business there. In summary, we are continuously strengthening our position, building on the momentum in markets with positive dynamics and focusing on improving performance in more challenging markets. I will now hand you over to Boris to take you through our financial performance in more detail.

Thank you Anna and good morning everyone. As Anna mentioned during the business update, Zelis delivered an improved performance in the first half 26 with a return to organic growth while maintaining strong costs discipline. Let me take you through the Group P&L before we move to the regional performance. Please note that as I guide you through the P&L and the regional performances over the next two slides, I will be referring to prior year or sequential comparisons in constant currency. We clearly provide the impact of FX alongside organic and M&A in the headline growth table on slide 10. In the first half year, Azelis delivered a revenue of 2.2 billion euros, representing year-on-year growth of 3.2%. Growth was broad-based across both life sciences and industrial chemicals, with life sciences growing at 3.8% and industrial chemicals at 2.1%. Gross profit in the first half year was 524 million, up 4.3%, and corresponds to a margin of 24.2%. The 28 basis point margin improvement reflects positive pricing momentum across some end markets, supported by a favorable inventory position, partially offset by the negative mixed effect from higher growth contribution from APAC. Adjusted EBITDA in the first half year was 233 million euros, An increase of 2.6% versus the prior year, supporting a broadly stable adjusted EBITDA margin of 10.7%. As I indicated during our Q1 earnings call back in April, the 2025 performance included some favorable one-off items, such as the provisions for the variable remuneration that had to be adjusted, especially in Q2 last year, while the company faced adverse performance. The impact of the improving trends in 2026 is therefore reflected in the change in provisions versus prior year as highlighted in the chart. Normalized from these one-off items and the FX, the H1 2026 EBITDA growth would then be plus 12% versus same period last year. This performance was derived from organic gross profit growth as well as from the full benefit of the cost-saving actions announced in April 2025 representing a plus 11 million euro improvement and well aligned with the 20 million euro planned run rate. M&A contributed another 10 million versus H1 2025 and the conversion margin remained at a healthy 44.4%, showing a sequential improvement from 42.4% in Q1 26. Let's now move to the overview of the regional performance on the next slide. In EMEA, which accounts for 46% of the group, revenue in the first half year was 990 million, representing a year-on-year growth of 1.7%, driven by a growth contribution from acquisition of 6.3%, offsetting organic decline of 4.6%. Growth profit was 257 million, implying a growth profit margin of 25.9%. This 52 basis point gross margin expansion reflects the positive pricing environment offsetting continued volume softness. Adjusted EBITDA of 127 million resulted in an alleged EBITDA margin of 12.9% and a 31 basis point margin expansion during the period. Turning to the Americas, first half revenue grew 2.3% to 748 million euros. The region, which accounts for 34% of group revenue, delivered entirely organic growth led by 3.4% increase in life sciences, while industrial chemicals grew 0.9%. Gross profit in the region increased by 3.9% to €182 million, corresponding to a gross profit margin of 24.3%, which represents a 40 bps expansion. These reflects broadly positive pricing momentum in industrial chemicals in North America and improved performance in Latin America. Adjusted EBITDA decreased by 1.1% to 83 million euros, resulting in EBITDA margin of 11.1%. This slight adjusted EBITDA margin contraction was largely driven by a higher change in provisions, reflecting the improving business performance. In Asia-Pacific, which represent 20% of the group, Revenue in the first half year increased by 8.2% compared to the prior year of €428 million, also entirely driven by organic growth. The organic revenue increased by 8.2% in life science and 8.0% increase in industrial chemicals versus prior year. Gross profit in the region increased by 7% to €86 million, corresponding to a gross profit margin of 20%. The 24 bps contraction reflects the continued weakness in Australia and New Zealand, partially mitigated by volume growth as well as a positive pricing in most of N markets in the rest of the region. Adjusted EBITDA increased by 8.2% to 43 million euros with adjusted EBITDA margin stable at 10.1%. The strong cost discipline resulted in a solid conversion margin of 50.4%. Overall, FX remained a significant headwind, particularly in Americas and APAC, with stop-line impacted respectively by negative 3.9% and negative 6.2% versus prior year on revenue. Across the group, the FX headwind drove gross profit down by negative 2.6% and EBIT down by minus 3.4%. I will leave you to review this slide at your convenience. We provide this table to give you the detailed gross breakdown of the key metrics between organic M&A and FX. And let me now take you through the net profit on the next slide. In line with the EBITDA development during the first half, operating profit was €188 million. This compares to €191 million in the prior year. Looking below the operating line, the net financial expense decreased by almost 6% year-on-year to €66 million. This improvement was mainly driven by a significant reduction of interest expense and other financial costs, despite the one-off refinancing costs linked to the bond refinancing executed in Q1 this year. As a result, profit before tax increased slightly to €122 million compared to €121 million in the prior year. Tax expenses for the first half was €36 million, corresponding to an effective tax rate of 29.4%, broadly stable compared with 29.3% in H1 2025, and improving versus the 35.3% at the end of the year 2025. Overall, despite the slightly lower operating profit, the lower financing costs enabled the Group to deliver a slight increase in net profit to €86 million. Moving on to cash. As business returned to growth during the first half, the net working capital, the revenue, increased to 16% at the end of June, compared to 14% at the end of March and also December. But similar level at the same time last year. Comparing with December 2025, DSO and DPO almost equally increased from 38 days to respectively 51 and 50 days, while DIO increased from 51 to 58 days. Inventory remains a strategic asset for Azelis, enabling us to ensure high service levels for both our customers and principals while maintaining a disciplined approach to inventory optimization. In absolute terms, These translated to a change in net working capital of 107 million euros. Deducted from an adjusted EBITDA of 254 million and together with 20 million of lease payments and 5 million of capital expenditure, the free cash flow stood at 122 million euros for the first half. This corresponds to a free cash flow conversion ratio of 52.3%. compared to 63.8% in the prior year, reflecting the temporary investment in working capital to support the return to organic growth. And we expect free cash flow conversion to improve as working capital normalizes over the course of the year. Now, before I hand it back to Anna, let's close on our net debt position. At the end of June 2026, the net debt remained broadly stable at 1.6 billion, resulting in a stabilized leverage ratio of 3.4x. While EBDA growth was more modest, our disciplined capital allocation and continued cash generation enabled us to maintain a stable leverage profile, and we continue to work at bringing down the leverage ratio by the end of the year. Overall, our resilient cash generation and ample liquidity provide us with the financial flexibility to invest in growth and support our long-term strategy. And with that, I'll hand it back to Anna for the closing remarks.