IMCD N.V.

Ladies and gentlemen, thank you for holding, and welcome to the Q3 2021 analyst call of IMCD. During the presentation, all participants are in listen-only mode, and later we will conduct a question-and-answer session. I would like to hand over the conference to Mr. Piet van der Stikke. Go ahead, Peter.

Yes, thank you. Welcome, everybody. As usual, I'm here with Hans Cormans, our CFO, and together we will answer your questions on our results over the first nine months. The message of strong demand that we spoke about at the half year results continued in the third quarter. The acquired businesses last year and this year performed fully to expectations and this resulted in an outstanding result in this quarter and year to date. Operating EBIT grew with 51% over the full first 9 months and on a constant currency base even did 54%. Cash earnings per share increased with 44%. All regions contributed to the growth and this growth was in a strong way organic and of course also the result of acquisitions and was also the result of volume and price increase. As you know, the markets are highly volatile and we experience, like everybody else, supply chain and availability issues. Prices of many of the products we deal with increased as did logistic costs. However, we coped quite well with these difficulties. We were most of the time able to serve our customers and price increases could be passed on to the market. We will continue to do strategic acquisitions in order to enter new markets and to strengthen our product offering. ICD advanced IT and digital infrastructure has been a key factor in our success as a company and has of course been crucial during these exceptional times. It enables us to reach out to our customers in various ways and continue to help the formulation of their products. ICD has this year been the first to organize virtual exhibitions in all our business segments And we were able to, in this way, connect with many thousands of customers, discussing trends in the market and product advice. We will continue to invest in IT and digital capability. We need to see how long the international market circumstances will continue, but it looks like well into next year. Markets can change, but we keep relying on our strong business model and are confident that we can keep on growing through cycles. So in this way, we look very optimistically to the next period. And now Hans will take us through the numbers. Thank you, Piet. Good morning, ladies and gentlemen, and as usual, I will briefly summarize IMCD's first nine-month results before we go to the Q&A session. I would like to start on page 9 of the presentation. As you can see, Forex adjusted revenue increased 24% compared to last year and growth profit increased by 30%. And this 30% growth profit increase is a combination of 19% organic growth and 11% increase as the result of the first time inclusion of acquired businesses. Growth profit in percentage of revenue increased 1.2% to 24.5%. This increase is the result of gross margin improvement initiatives inside Binance CD, changes in local market circumstances, the impact of newly acquired business and the usual fluctuations in our product mix. Forex adjusted operating EBITDA increased 54% to $286 million, an increase of close to $100 million compared to the same period of last year. This increase was a combination of substantial organic growth and a first-time inclusion of acquisitions. The conversion margin, calculated as you know by IMCB as operating EBITDA on percentage of growth profits, was 46.1% in the first 9 months of 2021, a substantial improvement compared to the 39.1% in the same period of last year. The same positive trend we saw for the net result before amortization and non-recurring items, where we report an increase of more than 50% to $202 million. Free cash flow of $205 million was healthy, whereby we report an increase of $36 million compared to last year. In the first nine months, we report $82 million of working capital investment. an investment that is more than logic considering 14% organic revenue growth. And so this working capital investment is mainly due to increased debt deposition as a consequence of increased business activities at the end of this quarter. Cash conversion margin of 71% was lower than the same period last year, again because of substantial organic growth of RCD business activities. Year-to-date cash earnings per share were €3.54, a forex-adjusted increase of 47% compared to last year. And on the large line of this space you will notice a 16% increase of our number of full-time employees, and most of this increase is the result of new employees as a result of the acquisitions done. Then on the next slide, slide 10, you will find gross profit operating EBITDA margin and conversion margin per operating segment. EMEA in the first column reported 21% Forex adjusted gross profit growth and 37% operating EBITDA growth. Q3 was another strong quarter for EMEA whereby most of the reported growth in EMEA was organic. Further, operating EBITDA and percentage of revenue improved from 9.9 to 11.3%, and the conversion ratio in EMEA increased to 43.8%. In the second column, the Americas, where we report 22% Forex-adjusted growth, profit growth, and 27% operating EBITDA growth. Also in the Americas, most of this growth was organic. Operating EBITDA margin and conversion margin both improved. Asia Pacific in the third quarter reported 80% gross profit growth and 148% operating EBITDA growth at constant currencies. Operating EBITDA in percentage of revenue and conversion margin both improved substantially compared to the same period last year. due to a combination of very strong organic growth and the impact of acquisitions done in this region like Cygnet in India. And then in the last column you will find the cost of the holding companies. On page 11, a summary of IMCD's free cash flow. And free cash flow was 36 million higher than last year, with a conversion ratio a bit lower than last year. And I explained the logic of this higher working capital investment due to strong organic business growth earlier in this call. CAPEX was low, in line with our asset-light business model. On page 12, a short update on net debt and leverage. And compared to the end of December last year, net debt increased a bit. And this increase was a combination of, on the one hand, healthy operating cash flows, and on the other hand, cash outflows as a result of acquisitions made and a dividend payment of about 58 million. Reported leverage, defined as net debt divided by operating EBITDA, including the four-year impact of acquisitions made, was two times EBITDA at the end of September. And leverage based on the definitions in our loan documentation was one and a half times either graph. And then last but not least, on page 14, you will find our outlook for 2021. You could read that we expect operating either that graph in this year. That was a very short summary of our year-to-date financials. And Peter and myself are happy to answer any questions that you may have. So back to the operator. Yeah.

Thank you, sir. Ladies and gentlemen, we will start the question and answer session now. To be registered for questions, please press star 1 on your telephone. So that's star 1 for your questions. Go ahead, please. And the first question is from Mr. Matthew Yates, Bank of America. Go ahead, please, sir.