IMCD N.V.

Hello and welcome to the IMCD Q1 2025 Analyst Call. Please note, this conference is being recorded and for the duration of the call, your lines will be listened 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 question. If you require assistance at any point, please press star 0 and you will be connected to an operator. I will now hand you over to your host, Marcus Jordan, CEO, to begin today's conference. Please go ahead, sir.

Thank you, Adip. Good morning to you all, and a warm welcome to our Q1 2025 analyst call. I'm Marcus Jordan, and I'm very pleased to be here today with our CFO, Hans Koymans, for the Q1 2025 trading update, which we published in a press release earlier this morning, and our Head of Investor Relations, Tosca Hopeland, who will help us from a time management perspective as we have a hard stop at 10 a.m. Dutch time as we have our AGM later this morning. As you saw this week, we announced that IMCD and Valerie D. Lebrun have agreed that Valerie will step down as CEO and a member of the management board for personal reasons. I would like to thank Valerie for her contribution to the company and for our time working together, both in her role as a member of the supervisory board and member of the management board. I and everybody at IMCD wish her all the very success for the future. On a personal note, I'm very excited that as of yesterday, I took over the role of CEO. As many of you know, I've been with the company for over 26 years in a variety of roles, most recently leading the development of the Americas region for almost seven years, and then a COO and member of the management board for the last three years. I very much look forward to continuing the successful growth story of IMCD and driving forward the successful growth strategy which we have created together. Now over to Q1, a quarter generally characterised by global economic uncertainty and tariff discussions. Despite this global economic uncertainty, we've had a good start to the year, with gross profit up 10% to €325 million and EBITR up by 12% to €142 million. Our free cash flow was 102 million euros, leading to a cash earnings per share of one euro 55, an increase of 10%. As already mentioned, the introduction and implementation of tariffs was a big topic in Q1 and has continued in the first month of Q2. What we see is that there is a lot of uncertainty around tariffs, both in terms of timing and impact. A big benefit that we at IMCD have when dealing with these tariffs is our fully integrated global IT or ERP system, which allows us to quickly identify all the products which are impacted by these tariffs, and when needed, adjust prices immediately and accordingly. We are also in an advantageous position through our asset-light business model, ability to adapt quickly when needed, combined with our wide geographical spread and diverse product portfolio which is manufactured throughout the world. We therefore do not expect tariffs to have a significant impact on our business at this time. Tariffs could, however, have an indirect impact by increasing inflation and affecting final consumer demand. The impact on demand is something that is impossible to predict at this time, especially as things can change at very short notice. If we look at the US specifically, Most of our U.S. sales is local for local, and only a small percentage comes from imported products, and some products are excluded from tariffs. In terms of general market development, we continue to see volatility across all regions and business lines with limited forward visibility, and more than normal movements of orders and volumes from month to month. We can also say that we have not seen significant pre-buying. Whilst geographical and macroeconomic conditions continue to often be challenging, we are confident that our diversified business, advanced digital and asset-light supply chain model provides strong and resilient foundation for the future. So I can now hand over to our CFO, Hans Koymans, who will give you an update on the numbers.

Thank you, Marcus, and good morning, ladies and gentlemen. I'm happy to give you a short summary of the first quarter trading update that we issued earlier this morning, but I will start on page six of the analyst call presentation. As Mark had mentioned already, we are happy to report a solid start of the year. As you can see, Forex adjusted, revenue increased 9% and gross profit increased 10% in the first quarter of this year compared to the same period of last year. This growth profit increase was a combination of 6% organic growth and 5% as a result of the first time inclusion of companies acquired in 2024. Growth profit in percentage of revenue improved by 0.4% to 25.8%. And this increase in percentage was a combination of, as usual, of product mix and acquisition effects, changes in local market circumstances, and internal gross margin improvement initiatives. Then Forex suggested operating EBITDA increased 12% to 142 million and the organic EBITDA growth in this first quarter was 7%. The operating EBITDA margin increased by 0.4% to 11.3%. The conversion margin calculated as operating EBITDA in percentage of gross profit, was 43.7%, which is 0.8% point above the first quarter of last year. And the net result also increased 14% to 69 million. The free cash flow. Compared to Q1 last year, free cash flow was healthy, although slightly lower than last year. And this small decrease was a combination of, on the one hand, increased operating EBITDA being offset by higher investments in net working capital. If you translate net working capital in days of revenue, then the outcome in the first quarter was 65 days. And that 65 was well below the 69 that we reported end of December last year. Cash conversion margin at the 70% that we report is reasonable for a first quarter. Year-to-date cash earnings per share were €1.55, an increase of 10% compared to the same period of last year. And on the last line of this page, you could see a 4% increase in our number of employees. And this increase is a combination of the first-time inclusion of acquisitions, and these acquisitions added around about 450 people, which is about 9%. And this 9% acquisition growth means that the number of people end of March, when comparing like for like with last year, indicates an organic decrease of 5%, which is about 240 people compared to March last year. Then I move to the next slide, slide seven. You will find that gross profit EBITDA conversion margin per operating segment. On this slide you will find again rounded percentages for organic and acquisition growth, but as promised last year, we added an annex to the press release with the same percentages with one number behind the dot. Then looking at the numbers. EMEA reported 2% Forex-adjusted gross profit growth. This was unfortunately not enough to compensate for inflation-driven own-cost growth. As a consequence, operating EBITDA and EBITDA-related ratios all slightly decreased compared to the same period of last year. In the Americas, we saw the opposite. We had a very strong start of the year. We report double-digit organic growth, both on gross profit and on operating EBITDA. It's nice to see that we saw operating result increase both in North and South America and in more or less all countries where we are active in. As a consequence of this EBITDA growth, we report a substantial improvement of the EBITDA margin and the conversion ratio. Asia Pacific, the third column, there we report 14% growth, profit growth and 16% operating EBITDA growth on a constant currency basis and For both lines, about 7% of this growth is organic, and the remainder relates to acquisitions done in 2024. Strict cost management in the region combined with healthy organic margin growth resulted in increased EBITDA margin and slightly higher conversion ratio. And then in the last column, the cost of holding companies, which were more or less stable. And as you know, this includes all non-operating companies, including the head office in Rotterdam and our regional support offices in Singapore and Miami. On page 8, a short summary of IMCD's free cash flow. As mentioned before, the free cash flow in Q1 this year of 102 million was rather close to the outcome of last year. The adjusted operating EBITDA increased with 150 million, which is in line with the reported operating EBITDA growth. CAPEX about 2 million lower, followed by a 21 million higher working capital investment. And all in all, it results in a 70% cash conversion ratio. This is a reasonable outcome for a first quarter. when looking at top line growth and the typical working capital cycle during the year. Page nine, a short update on net debt and leverage. Reported leverage ratios and leverage based on definitions in the loan documentation were more or less similar compared to 2024 year end numbers. We came out at 2.1, two times last 12 months EBITDA. And as mentioned in our 2024 integrated report in March this year, we redeemed one of the 300 million bond loans that we had on the balance sheet. And then before I go back to the operator laws, but not least on page 11, you will find our outlook for 2025, in which we mention our confidence that our strong commercial teams, digital and logistic infrastructure, and the resilience of our business model will continue to contribute value to our stakeholders and sustain our growth trajectory. So far, this short summary of our financials, and Marcus and myself are happy to answer your questions, so I go back to the operator, Adib.