Mersen Ord

in two parts. First, a presentation by the Mersenne Management Team, represented by Luc Temelin, Group CEO, Salvador Llamas, Group CEO, and Thomas Baumgartner, Group CFO. After all, there will be a Q&A session during which you may have questions in or by clicking the green hand button on the player to ask your question orally. I will now end the call to Luc Temelin to begin today's call. Please go ahead.

Thank you. I am happy to introduce this presentation for the last time. As you know, I will hand over to Salvador in less than one month. But about the quarter one, we have a positive set of results to share. It actually marks a return to quarterly organic growth with a plus 3.1% All in all reported Q1 2026 sales of 296 million euros with two main highlights Reverse to growth in the electrical power segment with organic growth of just 8.7%. Electrical power is increasingly acting as a key growth engine for the group, supported by strong structural demand around electrification, grid efficiency and data centers. Positive momentum in North America with 8.2% organic growth for the period. As far as exchange rates are concerned, we have a negative impact of 17 million euros, mainly linked to the depreciation of the US dollar and the R&D. I remind you that this does not impact our competitiveness, it is purely a commercial effect. I will now turn over to Salvador and Thomas for more details.

Thank you Luc and hello everyone. So the organic growth to that 3.1% for the quarter including around 2% of price increases. If we look at our performance by geography, here are the key highlights. and being with North America, the largest area in terms of revenue with 42% of the total. So North America reported strong growth of 8.2%. This is a very solid performance driven especially by growth for data centers and growth in aeronautics. Europe reported a slight decrease. This reflects two things. Low deliveries in chemicals compared with a very strong quarter in 2025 and on the other hand, growth in other markets which underlines the resilience of our business in the region. Excluding chemicals, organic growth would have been close to plus 3%. Eventually, Asia is back to positive organic growth at 1.9%. This reflects growth in India and South Korea driven especially by rail markets and energy storage solutions. On the other hand, China reported a decrease heavily impacted by the solar market and weak deliveries in chemicals. If we look now at our performance by segment, what we see first is strong growth in electrical power driven by projects in great quality and driven as well by a solid sales momentum for data centers. and on the other hand a slight decrease in advanced materials we saw a lower level of activity in solar and chemicals which was largely offset by growth in the rail markets, in aeronautics and semiconductors, both SIC and SI. So overall, this segment reflects a mixed trend with short-term headwinds in a few markets, but solid momentum in structural growing areas. So now I will turn now to Salvador.

Thank you Thomas. Hello everyone. I would like first to briefly comment on a few business successes achieved during the first quarter. As already mentioned by Luke and Thomas, we recorded a high level of sales in electrical distribution in the United States, with double-digit growth compared to the previous year. This is driven by grid quality and data center demand. In terms of new markets, we have made progress in our collaboration with Terra Innovatum, Terra is developing a micromodular reactor that is scalable, affordable and deployable anywhere, with a power of 1 MW at a time. Mersenne will supply nuclear-grade graphite, and today the first-of-a-kind prototype has been manufactured. Terra will now enter into a more industrial phase, which will continue to support the ecosystem. On the EV side, specifically concerning the battery, we disclosed last week the signing of a contract with Vulcan Energy. This is an interesting company that is developing the first integrated lithium and energy business with a carbon neutral footprint. We will supply to Vulcan Energy a specific synthesis unit in graphite, called in our ranges, EcoFlex. This is a quite unique solution that will support the conversion of lithium chloride into lithium hydroxide and on top of that it will also enable to recover the energy released during the process which would be reused in the customer processing contributing to make this project carbon neutral. Finally, energy storage continues to be an important market We are active in South Korea with customers such as Samsung SDI delivering features to fully protect the battery storage system. All these achievements illustrate very clearly our position in long-term markets with long-term growth trends, particularly electrification, energy transition, and sustainable mobility. Now, looking ahead, we remain confident in our ability to deliver our full-year objectives. We are well positioned on structurally attractive end markets such as electrification, energy transition, clean mobility, grid reinforcement, and advanced technologies. At the same time, we remain focused on excellent execution while maintaining a strict cost discipline in the company. As a reminder, in 2026, the group is aiming for organic sales growth between 2% and 6%, with stronger growth in the second half of the year versus H1 of this year, Anivisa margin before non-recruiting items of 16% plus minus 50 basis points Operating margin before non-recruiting items of 8.5% plus minus 58 points Reflecting a further significant rise in amortization And capital expenditure between 90 million and 100 million which is representing a significant decrease compared to previous year 2025 As a reminder, our guidance considers a significant increase in raw material costs, particularly copper and silver, which we expect to offset through price adjustment, with an impact that will be more visible in the second half of the year. With this, let's move to open questions.

Ladies and gentlemen, if you wish to ask a question, you may do so in one of the two ways. Once again, by clicking the green hand button on the player to ask a question orally. Or, once you activated your line, you will see a message to unmute your microphone. Please make sure to do so before you speak. Or, by submitting a written question in the box below the player. The first question comes from Thomas Reynaud of Keper Chevreux. Please go ahead. Thomas, I see your microphone is muted. Yes, go ahead.

Yes, hello, can you hear me? Can you hear me? Okay, two questions for my side. Can you split the Q1 price contribution by hand market, if possible? This is my first question. And the second one is related to the SIC business. It appears to be recovering a bit faster than expected. Is it true or not? And what are the main drivers there? Is it the end of the stocking phase, new order intake? I don't know for data centers or maybe recovering the EV market. So could you elaborate a bit on that point too?

Thank you. Okay, maybe I can answer to the first question. What we can say that we have more price impact in North America and a little bit more in electrical power, but this is not linked with the specific market, I would say. It's easier in North America compared to other regions in the world.

Yes, there is a slight jump. It's not a big difference compared to last quarter. We cannot say that there is a recovery such as the question of maybe a sequence. We don't know for sure.

Yeah, we had, it's in line with the expectation, we had a compensation, not a big one, but a few millions, a few small millions. with the renovation of the last contract with one customer and in fact I can say we have 17 million euros of SIC cents and last quarter was 15 so it's not a big chunk Ok, very clear, thank you

The next question comes from Jean-Francois Brangon from OdoBHF, please go ahead. Jean-Francois, we cannot hear you. Could you unmute?

Sorry, I wasn't muted. Three questions from my side. concern the U.S. distribution so as we see a huge improvement a positive trend for this quarter so if I remember this business is quite well has some well margin in the past so do you expect to see a strong growth coming from the U.S. distribution higher margin and are you more confident regarding your guidance for the full year the second question you mentioned and the question is strong growth coming from data center so this should have an impact on the US distribution so I think you have good ideas on what the business made with the data center so could you give us more precisely or quantify the percentage made with the data center business for all the group and the last questions concern the solar business so you do not expect any infection improvement for the short term What is your scenario for the medium term for this business? Do you expect more growth not this year but next year? What about the storage, etc.? Thank you.

I will answer to the first question. Typically, we have a strong business distribution. Part of it also is driven by price increase. And as you know, price increase is compensated partially or totally increase in silver cost. So it doesn't increase the margin. So that's why today we just continue to say that our guidance, we maintain our guidance in terms of quantity.

We have a second question, I will take it. So, yes, data centers is an activity that we are following, of course, much more closer. Today we can say that the Q1 result is around 10 million euro, okay, which represents two times what was expected, what was the result in Q1 2025. So the activity that is going and we are well positioned on this part of the application. I'm going to do for infection the question will be done the city we do not expect inflation this year we are fighting fashion during 2027 at this time we still don't see this email that will trigger this infection will come from the restructuring of the Okay, thank you

As a reminder, if you wish to ask a question, please either click on the green end button in the player to ask your question or submit a written question using the form below the player. The next question comes from Julien Honignon from Marex.

Please go ahead. Hi, good afternoon. So I have several questions. First, one technical question. It seems that you have changed some of the company from division going from a power to the fight. Can you explain that? Because when you get the number of last year, it seems to have changed. Second question, I would like to come back more fundamentally on some points of question on your different contracts that recently signed. First on Vulcan, you mentioned that it is a multi-year contract of million euros. What does it mean? Is it 10 million, 20 million euros? What type of let's say, of revenue we can expect from this contract to come. Starting is something you expect in 7.6 or it's something that will come later on in 7.7 for Vulcan. Same question for Terra. You have not mentioned any numbers here, but I understand that there is now a new phase with Terra. Which type of revenue you can expect from Terra coming? Is it something here we're expecting more in 2029 and nothing really in the short term? But just to know if any revenue are expecting for Terra. Another contract we are not mentioning, but it's something which you already mentioned during the annual results, which is the contract with the U.S. defense DLA for providing some graphite for new rockets. considering that the U.S. has consumed a lot of rockets recently. We had in mind something like 10 million euros potentially. Are you expecting now something much bigger coming on stream? And it will be, you know, again, if you have some numbers, are you expecting how much you expect for this year and maybe for next year on this contract? And finally, still on the contract, talking about Korea, You mentioned in your presentation, effectively, the battery energy storage contracts. I was not aware how much we are talking about, specifically, again, €10 million. Thank you.

I will maybe start with the first question. So we are talking about a small business product line which is linked with transportation. In fact the system, it was a system to connect to the ground, the rail system. In fact it was manufactured in electrical power. and it uses also graphite in it and so it was better in order to maximize the synergies to put them in the same same segment which is advanced material and in fact it represents something like 20 million euro of sales per year okay thank you

No, regarding the second question on the contract with having two sons, It is a several million euro contract, as we explained. We will not release the full amount. It's a multi-year contract. The expectation would be starting invoicing this contract late 2026, but mainly 2027 and a little bit in 2028. What we can say is the respect on this contract, in the life of the contract, a little bit less than 10 million euro contract. Okay, just to give you some figures. The third one regards...

I'm so sorry, I didn't hear. I mean, brought me around 10 million, so I may be... Less than 10 million. Less than, okay. Less than 10 million. Okay.

Okay. Now, regarding TERRA. TERRA, we submitted the prototype, as I mentioned, in 2026. We do expect the digitalization phase to run not before 2028, because it takes time to put in place everything that is needed. Now, DLA. DLA, as you know, is the Defense Logistics Agency of North America. %uh if you look at the five-way the use of the the graphite it was for the purposes and the it the the the the the the the the the the the the the the the the the the the the the the the the the the the the the the the the the is a recurring customer for us, so there's contracts awarded systematically every other year regarding new platforms. I can give you a number, roughly, you can expect about this contract, several million euros per year of sales on Fuso.

Thank you very much.

Thank you. There are no further oral questions at this time, so I will now return the conference to the speaker for the written questions. Please go ahead.

Yes, thank you. So a number of questions have already been answered, but there's one around small modular reactors. So the question is, can you quantify the consumption of tons of graphite by small modular reactors?

the consumption in I don't know what you mean by consumption in fact when you build the small modular reactor you have to fill the reactor with around 100 tons of graphite and it stays at least 15 years during the usage of the reactor before being replaced that means each time they will sell a smaller reactor we have to supply 100 tons of graphite

Okay, now move to question around organic growth. So since you printed an organic growth of 3.1 already in Q1 and you expect stronger growth in H2, is it fair to assume that you will end in the upper end of the range provided

in the guidance so we keep our guidance why because last year we had a very strong Q2 impact linked with some you know contract renewal decision so at the end of it but that's why we don't we are comfortable with the guidance we gave but we have no more indication to keep

Second question is from Giovanni. What kind of growth did you have in Q1 for Semicon, both silicon and silicon carbide?

In fact, in C-Coin Carbide, it's really important because it was very low in the first quarter last year. It was around 10 million euros. And as I said, it's 17 today. And on the other side, it's a double digit growth. So a good start.

So, just a clarification, I ask on the tons of graphite for small SMR, small modular reactors. So, can you verify that you said, Luc, that's for you. So, 100 tons of graphite are sold to each modular reactor. What tonnage of graphite did Merson sell in 2025?

then I have a question from Jeremy so what is the anticipated pricing impact for the year and maybe together with the second question

Why not tighten the organic growth guidance toward the upper end of the range after the Q1 performance, especially given that organic growth is expected to be stronger at H2?

Today, I already said and don't forget that there is a war in IR and can have impact, not direct impact as we said, but indirect impact. So I think it's not the time to give a very precise range of assets. Now, the pricing impact. We have today a 2% pricing impact compared to last year. This is the full year impact. The 2% will disappear. Because we increased last year the price gradually. So it will go back to zero. I don't know if I am clear. But the 2% will disappear. And then we will add other price increases. will be we will see them in the end of this quarter the second quarter and in H2 especially to cover or to compensate for the increase in raw material namely silver and copper and that's why yes maybe it will be higher than 2% but don't forget that it's not in addition to 2%

Okay, now we have a question on the context. So can you share some information regarding the situation in the Middle East and possible impact for Mersenne?

Yes, I will take this one. So, effectively, the group is closely monitoring what is happening in the Middle East, that's for sure. At this stage, we know that we have not seen any significant direct impact on our activities. Of course, this is lasting long, or longer than expected for a lot of people, and yes, we could have some repercussions in the global economy. so yeah we're watching it at this stage no significant direct impact we may have some indirect impacts like transportation cost increasing that we are seeing and these will consider that we can most of it compensated by price increases in during the year thank you so I don't have other question

so if you may we still have time if you want to send a question or ask by I think Thomas wants to ask more questions we have a follow up from Thomas Renaud from Coperchevreux please go ahead just to clarify on the Middle East question so you are not expecting any questions

and put the net on your own station or some raw materials or for the formulation of graphite or something like that?

No, no, no, no impact. No, they are not impacted directly.

Okay, okay, thank you.

So no more questions here.

No, me neither. We don't have any more questions now.

Okay, so if we have no more questions, we look forward to updating you on our progress on July 30th for the healthier results. Thank you. Goodbye. Goodbye.

Thank you.

Thank you everyone for connecting to this call. The call is now over. You may now disconnect. Thank you.