IMCD N.V.

Hello and welcome to the IMCD NV Analyst Call Quarter 3. Results. My name is Caroline. I will be your coordinator for today's event. Please note this call is being recorded. For the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star 1 on your telephone keypad to register your questions. If you require assistance at any point, please press star zero and you'll be connected to an operator. I will now hand over the call to your host, Mr. Pete Wende, the CEO, to begin today's conference. Thank you.

Yeah, thank you very much, Caroline, and good morning, everyone. I'm here as tradition is with Hans Corriman, CFO. We will run you through the Q3 financial results, after which we will be happy to answer your questions. First nine months have produced excellent results in all regions under increasingly difficult macroeconomic circumstances. We spoke in our last call about increasing inflation and supply chain constraints. And I don't need to mention the geopolitical difficulties that we are in. Notwithstanding this, we have been able to show strong organic growth and furthermore we have been able to continue to do strategic acquisitions. Our resilient business model which operates across regions and markets will help us to navigate the challenging environment. As of now, we expect the current business momentum to continue in Q4. And with these few remarks, I would like to give over to Hans for leading you through the Q3 numbers.

Hans. Thank you, Peter. Good morning, ladies and gentlemen. And I will briefly summarize IMCD's first nine-month result before we go to Q4. And I would like to start on page nine of the presentation. And as you can see, Forex adjusted revenue increased 31% compared to last year, and gross profit increased with 35%. And this 35% is a combination of 29% organic growth and 6% as the result of the first time inclusion of acquired businesses. Gross profit in percentage of revenue increased 0.6% from 24.5% to 25.1%. This increase is the result of changes in local market circumstances combined with various local cross-margin improvement initiatives. Further, currency exchange rate developments and the usual fluctuations in the product mix play the role. adjusted operating EBITDA increased 51% to $443 million, an increase of $164 million compared to the same period of last year. For sure, there was a bit of acquisition impact. However, the vast majority of this increase was substantial organic growth. The conversion margin calculated as operating EBITDA in percentage of gross profit increased to 50.2%. which is a substantial improvement compared to the 45% in the same period of last year. An even bigger increase for our net result, where we report a growth of more than 74% to 264 million. On free cash flow, we report an increase of 48 million compared to last year, and a cash conversion margin of 55%, which was lower than the same period of last year. Substantial organic growth of IMCD's business activities not only resulted in higher results, but also in higher working capital positions. Organic working capital increase was 197 million, and this means a 31% increase, which is more or less a similar percentage as the organic revenue growth before currency adjustment. And this working capital investment is mainly due to increased debtor and stock positions. a larger consequences of the increased business activities. Year-to-date cash earnings per share were €5.34, an increase of 57% compared to the same period of last year. And on the last line of this page, you will notice a 17% increase in our number of full-time employees, and most of this increase is the result of new employees as a result of the acquisitions done. On the next page, slide 10, you will find gross profit, operating EBITDA, EBITDA margin and conversion margin per operating segment. EMEA in the first column reported 34% Forex adjusted gross profit growth and 50% operating EBITDA growth. Q3 was another strong quarter for EMEA, whereby most of this growth was organic. Further, operating EBITDA in percentage of revenue improved from 11.3% to 12.9%, and the conversion ratio increased to 48.7%. In the second column, the Americas, where we report 39% Forex-suggested growth, profit growth, and 57% operating EBITDA growth. Also in the Americas, most of this growth was organic. Operating EBITDA margin and conversion margin both improved with 2.2 and 6% respectively. Asia Pacific in the third column reported 34% growth, profit growth and 36% operating EBITDA growth at constant currencies. Operating EBITDA in percentage of revenue was more or less flat at a high 15 plus percent number. And conversion margin improved slightly compared to the same period of last year. And then in the last column, you will find the cost of the holding companies. And this includes all known operating companies, including head office in Rotterdam and the regional support offices in Singapore and the US. Page 11, summary of IMCD free cash flow. As mentioned before, free cash flow was 48 million higher than last year with a cash conversion ratio lower than last year. And I explained the logic reason of the higher working capital investment due to strong organic business growth earlier in this call. And CAPEX was low as usual in line with our asset-light business model. Slide 12, a short update on net debt and leverage. Compared to the end of December last year, net debt increased with about $180 million, and this increase was a combination of positive operating cash flows combined with cash outflows as a result of acquisitions done and the $92 million of dividend that we paid in the first half of this year. The reported leverage ratio, defined as net debt divided by operating EBITDA, including the full year impact of acquisitions, was 1.9 times EBITDA at the end of September. And leverage based on the definitions of our loan documentations was 1.4 times EBITDA. And then last but not least on page 14, you will find our outlook for 2022, where you could read that we expect operating EBITDA growth in this year. And that was a short summary of our year to date financials. And Pieter and myself are happy to answer your questions. So back to the operator to open the lines for Q&A.