Imcd Group Nv U/Adr

Hello, welcome to the IMTD Half-Year 2025 Results Conference Call hosted by Marcus Jordan, CEO, and Hans Goijmans, CFO. For the first part of this call, all participants will be in listen-only mode. And afterwards, there will be a question and answer session. If you wish to ask a question, please press key pound five on your telephone keypad. I would now like to give the floor to Marcus Jordan. Mr. Jordan, please go ahead.

Thank you very much, Alba. Good morning to you all, and a warm welcome to our 2025 half-year result analyst call. I'm Marcus Jordan, and I'm here today with our CFO, Hans Coymans, for the 2025 half-year results, which we published in a press release earlier this morning. The first half of 2025 was generally characterized by global economic uncertainty and tariff discussions across all regions, which had a significant impact on customer behavior. When looking at our numbers in the first half of 2025, they can be summarized as this having a good start to the year, as you saw in the Q1 numbers. And after this, we saw demand generally softening in the second quarter. You will find a summary of our financial results on slide four. Gross profit is up to 634 million euros, plus 7% on a constant currency basis. EBITR is up to 275 million euros, up 4% on a constant currency basis. Our free cash flow of 173 million euros was lower compared with the first half of 2024, which was mainly due to higher inventory levels. These higher inventory levels are a result of the ongoing uncertainty in the market, and as I mentioned before, customer demand generally softening during the second quarter. This has resulted in the inventory levels we currently see being too high, and we are actively working to reduce these. Our CFO, Hans Coymans, will discuss working capital in more detail later in this call. Moving on to M&A. After mentioning a healthy M&A pipeline in the Q1 call, I'm pleased to share that we announced four acquisitions in the second quarter of this year. These acquisitions were well diversified across all three regions and business groups. To start with, two acquisitions in Spain in the food and nutrition market with Ferrer and Taycom. Our presence in Spain in the food and nutrition ingredients market was previously relatively small. and we're therefore very happy with these two complementary acquisitions. We also announced the acquisition of Apus Chimica to strengthen our offering to the advanced materials industry in Chile and the acquisition of Trichem to accelerate our growth in the pharmaceutical market in India. In addition to these M&A announcements, we were pleased to also close the acquisition of Daikin in food and nutraceutical ingredients in China, and YCAM in personal care and pharmaceuticals in Korea. Both were already signed and announced in December 2024. We further exercised the call options to acquire the remaining 30% of Sunrise in China and Megasetia in Indonesia. Having defined our six strategic growth pillars, which we presented during our investor day in Milan last year, I'm pleased to share some highlights of our progress in these areas. We are particularly proud of the further rollout of the sales assistant product recommendation tool to empower our people to easily identify the right solutions for our customers. This tool is now rolled out internally for all business groups and in a couple of our business groups externally via My IMCD. As is a core strength of IMCD, we also continue to develop new business with a number of supplier wins and expansions during the first half of the year. And after successfully developing our APAC region over the last three years, we recently announced the appointment of Andreas Eagle as president EMEA and head of our industrial business groups. We have created this new position to further drive best practices and growth across the region and industrial markets. To summarize, under challenging and unpredictable macroeconomic market conditions, I am assured by the resilience of our asset-light business model that we have been able to achieve growth during the first half of the year, and thankful to our teams for their hard work and continued focus. Whilst these challenging conditions remain, we are well positioned for the future through our leading specialty-focused portfolio, diverse geographic and market coverage, and advanced digital and supply chain capabilities. I would now like to hand over to our CFO, Hans Coymans, who will give you an update on the numbers.

Thanks for the introduction, Marcus, and good morning, ladies and gentlemen. I would like to start on page eight of the presentation, where you will find a summary of the key figures taken from the first half-year press release that we issued earlier today. And as you can see, Forex suggested revenue increased 6 percent, which is a combination of 2 percent organic growth and 4 percent resulting from the impact of the first-time inclusion of acquisitions. The Forex adjusted growth profit increase was slightly higher than the revenue increase with 7% compared to the same period of last year. This increase was a combination of 4% as a result of the first time inclusion of acquisitions and 3% organic growth. As Marcus mentioned, we started the year strong with 6% organic growth in the first quarter followed by modest organic growth in the second quarter. We saw demand softening in the course of this year due to ongoing tariff discussions and related uncertainty, which had a significant impact on the customer demand. And further, the weakening of currencies like the US dollar did not help and resulted in a negative impact on the absolute amount of revenue and gross margins. All in all, given the general market conditions, we are happy to report organic growth profit growth in this first half of 2025. If you look at the growth profit in percentage of revenue, that improved by 0.2 percent point to 25.6 percent, and this increase in the percentage was a combination of product mix, acquisition effects, changes in local market circumstances, and a continuous internal gross margin improvement process. The Forex suggested operating EBITDA on the next line increased 4%. This increase was a combination of modest organic growth and a positive contribution of acquisitions of close to 4%. Operating EBITDA in percentage of revenue decreased to 11.1% in the first half of 25. The conversion margin was 43.4%, a decrease of 1.1% point compared to the same period of last year. This decrease in the conversion margin is the result of higher gross profit being a bit more than offset by inflation-driven organic on-cost growth. And talking about cost on the bottom of the slide, you can see that IMCD employs about 5,300 full-time employees. And compared to the end of June last year, we added 263 new colleagues, which is the result of acquisitions done in the last 12 months. As mentioned in previous calls, we have been, and still are, very prudent in filling vacancies or adding new people. On the next page, page 9, you will find a bit more color on the year-on-year development of gross profit, EBITDA, and conversion margin per operating segment, whereby the differences, as you can see, are split on organic acquisition and currency impact. EMEA in the first column reported 3% Forex-adjusted gross profit growth, which was not enough to compensate for the on-cost growth in this segment. And then as a consequence, operating EBITDA and EBITDA-related ratios all slightly decreased compared to the same period of last year. Market conditions were difficult, and demand was soft across this segment. Despite these challenging conditions, we were able to keep our gross margin percentage in EMEA at 27.5%, and this 27.5% is still way above the average of the group. In the Americas, we had a strong first quarter with double-digit organic growth, and then gross profit and EBITDA growth, followed by a much softer second quarter. weakening of the US dollar and other currencies in the region combined with softer demand due to macroeconomic uncertainties played an important negative role in this second quarter. Organic growth, profit growth combined with strict cost control resulted in higher EBITDA and conversion margins. In Asia Pacific, a bit of a similar picture whereby a solid first quarter was followed by a softer second quarter. And same as in the Americas, weakening of the U.S. dollar and other currencies in the region combined with softer demand played an important negative role in this quarter. As a positive, we are happy to report that we were able to further improve cross-margin percentage and EBITDA margin in this region. Holding costs in the last column were slightly lower than last year at 0.7% of revenue compared to the 0.8% last year. I mentioned the impact of currencies now a few times, and for a reason. Currencies have been volatile in the second quarter, whereby we see the impact of this volatility on various places in our numbers. As you can imagine, there is a currency impact when translating assets on the balance sheet held in foreign currencies to euros, and that currency impact is then reported in the net finance cost and OCI. I will come back on the finance cost a bit later. Then there is also an operational impact on revenue and gross profit as a result of a weakening of, for instance, the US dollar. In various countries it is, as you know, quite common to quote and price your products in dollars and then invoice in local currency. The weakening of the dollar versus the local currency then often leads to a lower absolute amount of gross profit, as you get less local currency margin for the same US dollar amount. This impact is, of course, less visible. It's also difficult to put a number on it, but certainly negative and not neglectable in this second quarter. What is more visible is the impact of translating foreign currency results into the euro. In the first quarter of 2025, this translation impact was neglectable. However, if you look at the second quarter, we lost about 4% of our revenue in EBITDA due to the translation of Forex result into the Euro. This currency translation impact means that we lost about 50 million of revenue and 6 million Euro of EBITDA only in the second quarter. Weakening of the US dollar and the Indian rupee during the second quarter were the most important drivers. I assume that you, as an analyst, already made an estimate of our expected currency translation loss and impact on the remainder of this year to update your forecast. And I realize that nobody can predict the exchange rates going forward, and neither our EBITDA for the second half of this year. However, to get a feel for a number, I could imagine and see that just as an indication of a translation loss for the second half of this year, you could recalculate the second half last year EBITDA at the exchange rates prevailing at the end of June this year. Based on this data, these data points that we gave you, you would arrive at a currency translation impact on our second half year EBITDA somewhere between 12 to 15 million Euro negative. And this would then come on top of the 6 million already reported in the first half of this year. So currencies more and more play a significant role in this international and volatile environment. On the next page, page 10, a summary of the P&L lines between operating EBITDA and net result for the period. Net result is 11 million or 7% lower compared with the same period of last year and mainly as a result of higher net finance costs. Before I explain this cost increase, a few general remarks about the other lines. Amortization of intangible assets, non-cash costs related to the amortization of supplier relations, distribution rights, and other intangibles, and this increase is mainly the result of acquisitions made. Then there is $7 million of what we in the past called one-off costs, and that could be split more or less 50-50 between acquisition-related costs and one-off adjustments to the organization. Now on the next page, page 11, a breakdown of the net finance cost. And as you can see, changes in deferred considerations and currency exchange results are the main drivers of the reported increase. Overall interest costs slightly decreased. Currency results are the negative result of translating monetary assets and weakening foreign currencies into the Euro, and further it includes an IFRS hyperinflation adjustment related to Turkey. The changes in deferred considerations that relates on the one end to a negative fair value adjustment of 12 million for Blue Mosque in Chile and Value Tree in India, and a 4 million positive adjustment related to Sunrise. China. Then on page 12, a high-level summary of the IMCD balance sheet. Property, plant and equipment, $134 million. It's always a combination of, in this case, $41 million of fixed assets and $93 million of right-of-use assets, of the stuff that we lease and need to put on the balance sheet. And the fixed assets are Of course, they're relatively low compared to the size of our business, given the asset-light business model. Then you see the combination of intangible assets and the related deferred tax liabilities of about $2.4 billion in total, and these are the result of acquisitions done since our listing in July 2014, and our history as a private equity-owned company. Then on the financing side, there is $1.5 billion of debt, and I will come back on that in a minute, and $2 billion of equity. And this substantial equity position covers about 56% of our capital employed, as you can see. The next page, a summary of reported working capital, and Mark has already referred to that. Total working capital At the end of June was 963 million compared to 907 December last year and 843 in June last year. And the overall increase is a combination of the, first of all, the impact of working capital as a result of acquisitions done. Then there is a bit of tailwind here from the currency impact and we had some negative, what I would call operational developments. And when translating the absolute amount of working capital in days of revenue, we reported 69 days end of June this year compared to 63 days end of June 2024. And this increase is not something to be proud about. And when you look at the bottom of this slide, you could see that we improved on the debtor days. And that came down from 64 last year June to 60 days end of June this year. The other thing you can see is that the main driver of the increase of working capital days are a combination of increased stock days combined with slightly lower creditor days. Most important, the increase in the stock days is partly market related and partly created by ourselves. And when I talk about market related, I refer to increased stock days as a result of customers delaying their delivery days of already agreed orders. I've referred to that already a couple of times in previous calls about the trend that we see more and more customers that take the opportunity to get a later delivery date than earlier planned. And another aspect that became more and more important is the increased time that stock is on the water, mainly as a result of the situation in the Red Sea area. And also internally, I think it's fair to say we should have been faster and more alert when buying stock to adapt to changing market conditions. Marcus and myself have taken corrective measures to actively reduce working capital levels, and as Marcus indicated, to get back to a bit more normal levels there. Then on the next slide, a summary of our net debt position, leverage ratios and maturity profile. And as you can see, net debt increased in the first six months with about 260 million to 1.5 billion. And this increase is amongst others influenced by a dividend payment of 127 millions, which we did shortly after the AGM. And considerations paid for acquired businesses of 239 million. The 1.5 billion of debt includes about 1.3 billion of bonds. The leverage ratio end of June based on IFRS and on our loan documentation was 2.6 times EBITDA and this level was well below the maximum set on our loan documentation. And then on the right side of this page you could see a healthy maturity profile of our debt position. Then I would like to finish the short summary with a cash flow overview on page 15. Free cash flow was $173 million, a decrease of $48 million compared to the same period of last year. And the main driver, as mentioned before, is the increase in the higher working capital investment. And this was, as mentioned before, mainly due to higher stock days. Capital expenditure of about $5 million, largely in line with last year's spendings, and primarily directed towards IT investments, a bit of office improvement and lab equipment. And then on page 17, you will find the outlook for this year, and I assume everybody has already read the text in the press release, and therefore I won't repeat it aloud. And I would like to hand over back to the operator to open the lines for Q&A. So Elba, the floor is yours.

Thank you very much. Ladies and gentlemen, we are now ready to take your questions. If you wish to ask a question, please press key pound five on your telephone keypad. Our first question comes from Suhasini Varanasi from Goldman Sachs. Please go ahead.

Hi, good morning. Thank you for taking my question. I have two, please. Can you maybe discuss the trends across verticals and by regions and what exactly slowed materially for you in the second quarter versus the first quarter? Was it industrials, for example, the case segment that was the weakest segment? Was life sciences a little more resilient, for example? And how do you see the recent news flow on tariff deals affecting customer decision making going into second half of the year? Would the incremental clarity basically help? Thank you.

Thank you for the questions. Firstly, on the trends across the various verticals, maybe if we begin from a market segment perspective. If we start with, I would say, the strongest market. Following a soft year last year, the pharmaceutical market for us has shown resilience and growth across both of the quarters. followed by food and nutrition, which again we see as being relatively stable. I think if you look at food and nutrition, there are some trends specifically that we see. If you look at things like affordability, which has been a topic already for quite some years across the LATAM and the APAC region, we're seeing that focus on affordability, particularly now entering the European and the U.S. market. combined with also a focus on health, especially from a North America and European perspective. And with the US, of course, a lot of people talk about these GLP-1 type drugs. So looking at the supplements and the nutritionally enhanced products is very important. So I think on those topics related to the food and nutrition, we see quite a lot of opportunity also from a formulatory expertise perspective, we're getting a lot of requests there through our labs. If you continue through the life science segment, I would say that the segment which has been the softest for us following a very strong year last year is the beauty personal care. And what we see there is a lot of consumers trading down. I think that we all hear a lot about the impact of influencers and the contract manufacturers. and basically the big hit that's being seen from a premium beauty perspective. I think, again, positively for us, these influencers and the contract manufacturers, they're more reliant on external parties such as IMCD to help them from a formulatory perspective. But as with all of these reformulations, it does take time. Moving on to the industrial segments, I think in general it can be characterized by generally having soft demand during the second quarter. If you look at things like the coatings in construction, particularly from a domestic perspective, things like the plastics industry, I think we all read about the automotive industry struggling, flexible packaging down. There are some bright spots. I think that if you look again at that plastics market, things like the medical, market continues to be quite robust, as does the wire and cable, I think, as technology and IT demands continue to grow. So hopefully that gives you a good impression from, let's say, a market perspective. I think if we then look from a geographical perspective, if we start with the Americas where we saw, I would say, a very nice, strong start to the year in Q1, Although it is important to note that the comparison, the comp for Q1 versus Q2, Q1 was a much easier comp. But we did see a bit of a softness and slowdown across the region. I think for the reasons that Hans mentioned related to obviously the ongoing general market uncertainty. And that word uncertainty we hear a lot from customers where they're basically, I think, really nervous. to kind of forecast for the future, make any kind of commitments, particularly from their own perspective, looking at investments. So that uncertainty we saw across the whole region, driven by tariffs and, of course, currency also having quite an impact. In Europe, similarly, as APAC, I mean, all three regions uncertainty, but Europe, we saw quite a mixed bag. We saw some countries performing quite well and others performing quite soft. And I think that that really plays to the diversity that we have as a company where we're not heavily reliant on a particular country or market. And then moving to APAC, I would say the standouts there was, I would say, you know, better than expected performance outside of beauty personal care in China. And India, whilst remaining a very interesting and important country for us, a little bit of growth slowed down, and as Hans mentioned, it impacted there from a currency perspective. Does that answer your question?

Yes, that's very clear. Thank you. Yes, it is very helpful. But if you think about the forward looking going into second half, now that we've seen some news flow around tariff deals, have you seen any improvement on clarity, certainty from your customers? Thank you.

I think it's a little bit early yet to really comment on that. But again, coming back to my earlier comment where when we speak to customers, the biggest concern has been uncertainty. particularly around tariffs. So we've seen, obviously, particularly over the last few days, hopefully some certainty coming in. So let's hope and be positive that that will have a positive impact. But I think a little bit early for us to be specific yet.

Understand. Thank you very much.

The next question comes from Annalise Ramola, Morgan Stanley. Please go ahead.

Good morning, Marcus. Good morning, Hans. I have two questions, please. So firstly, I think when we've spoken earlier in the year, we've talked about pricing largely stabilizing, partly on that volume starting to come back and showing some resilience. Given the weaker volumes you've seen through Q2 and so far it seems a relatively volatile earnings season on the supplier side, could you comment on pricing through Q2 and into Q3 if you've seen any material pricing deterioration so far? And then secondly, given again that weaker growth and operating profit through Q2, I appreciate the volume piece is difficult to predict, but perhaps you could comment on the cost base. Are you planning any adjustments for the second half in case of that volume weakness persisting? Thank you.

No, great. Thank you, Annelies. I would say from a pricing perspective, I'm quite positive here in that we see more general market type of conditions returning where It really depends on a product by product basis, but we see some products having price increases, and then some products also more on the semi-specialty, semi-commodity side, having more pricing pressure. As you know, we're roughly 85% specialty, so we're not so impacted on that pricing pressure side. But I think in general, I think that we see more normal pricing market conditions, I would say, in play. From a cost-based perspective, as Hans mentioned, we're being very prudent and careful on replacement of people when they retire and looking at things like exhibition costs, travel costs, et cetera. So I think in general across the business, really raising that awareness of cost consciousness. I think it's also important that we continue to invest. If you look at the digitalization and the IT investments that we make, for example, of which I mentioned things like the sales assistant in my pre-speech, we believe that these are real differentiators. We believe it's important that being able to offer that true omnichannel way of working with the customer base and with our principals It really brings the stickiness, and we believe that it's a differentiator and something that's very important for our long-term growth. We do have the lever, of course, from a bonus perspective. That is something that we continue to look at and to evaluate on a country-by-country basis.

Very clear. Thank you. The next question comes from David Gerson from Jefferies. Please go ahead.

Good morning, gentlemen. I have two questions, please. First of all, you highlighted the momentum in Asia Pacific turned in the second quarter, maybe partly against a tougher comparison, but also relatively weaker than the other regions. Is that in line with what you're seeing in the overall market? Or are you also seeing increasing competition increasingly from local Chinese distributors? Then the second question is related to the M&A spend. Hans, you highlighted of $239 million in the first half. That looks relatively high in relation to the acquired revenues of $200 million, but you also highlighted the exercise of the call options for Megaceta and Sunrise. Can you quantify that effect, and what would the multiple be excluding those call options? Thanks very much.

Perhaps, David, I should first take the second one, and then Marcus is digesting the first one, because I'm not sure if we understand the question totally. If you look at the call option that we exercised for the two acquisitions that we did, basically this was already a debt position in my net debt schedule, short-term debt, and we more or less paid for it. Coming back on your question for the multiples that we paid, basically always in the range that we shared with you before, so somewhere between 7 and 11 times EBITDA, so no specific uptake or outlay. I think the only thing that we mentioned when issuing a press release, we don't disclose the profit level of the companies that we buy. We often say to you that if there is no news in the press release about specifics on the financial side, you should assume somewhere between 8 and 10 percent EBITDA margin. And we only made an exception there when we announced the Tricam Pharma acquisition in India that we said the revenue was $16 million and about one-third of that revenue is commission income. And that indicates that there is a profit level that is much higher than the on average 8% to 10% of EBITDA. A bit of a long answer, perhaps still vague. but nothing special on the multiples.

And then, David, related to your question, when I was speaking about the easier comp, I was speaking about the Americas region. But I think related to your question in terms of do we see increasing competition from China? I mean, China, of course, has always been, I would say, a fierce competitor. I think what the tariffs have done in some cases is change maybe the location that we're seeing that competition. And some of the more remote countries, such as Brazil, as an example, I would say, again, more on the semi-specialty, semi-commodity products, we are seeing more Chinese competition. But our portfolio largely is protected again through that specialty focus and that need for the reformulatory approval. So it's not that products can be easily interchanged. Does that answer your question?

Yeah, just maybe one quick follow-up on the $239 million. So to be totally clear, that's excluding the call options for the increased stakes that you exercised in... No, include.

Sorry, David.

But the amount was limited.

Yeah, to be brutally honest, I don't know the exact amount out of the top of my head, but it was part of the short-term deferred consideration net debt position at the end of last year. but I don't want to guess a number in the call. I have a number in mind, but I'm not sure if that is the total number of the two.

Thank you very much, gentlemen. Thank you.

The next question comes from Carl Rainsford from Berenberg. Please go ahead.

Good morning, Hans. Good morning, Marcus.

three from me if i may um the first one just listen to your comments on stock days and delivery delays does this suggest that those delayed orders are delayed rather than cancelled and therefore you'll see the benefits in later quarters on the revenue side um if that is the case is that a material impact and so do you view growth as lumpy throughout the year in terms of quarter by quarter um the second just to go back to apac again if i can please but um Maybe you could clarify the sort of weaker and stronger end markets there in Q2 that were hit by customer demand. I guess I'm just trying to tie together the sort of negative organic gross profit level and the strong farmer growth you've alluded to. And lastly, in the Americas, just really sort of high level that you can point to or give any color on the performance of Latin America and the U.S.

as part of that larger region would be very helpful. Thank you.

Carl, your first question about the impact on stock for customers delaying the delivery date of their orders. So we talk about committed orders by customers. We always give customers the flexibility to either break an order in two or to basically change the delivery date. And what we see in a period of uncertainty is that customers more and more use that opportunity and then in very more and more frequent cases I have to say is that people then just delay one or two days or two weeks even their delivery dates and you can imagine then we are the one carrying the stock for these customers and that has an impact on the absolute amount of stock that we carry on the balance sheet so it's stock where we don't run an economic risk And we only need to finance it. If you have customers that do that on a frequent basis, of course, when you set your prices to customers, you price that in. So we hope to get paid for that. We hope also that it helps to build that healthy and strong customer intimacy and relationship with that customer to offer them that flexibility. But every now and then, for me, as a finance guy, it's annoying that it happens.

And then, Carl, related to your questions related to APAC and the Americas, maybe if we begin with the Americas, I don't want to go specifically into individual countries, but I think it's fair to say that you can imagine that with the tariffs, the US and Canada, I would say, were particularly hit with consumers not knowing what the pricing of their products were going to be pretty much the next day or next week. I would say that those comments around consumer confidence is particularly applicable to the U.S. and Canada. Latin America, it was pretty much a mixture there where we saw some countries performing well during the second quarter, but quite some softness in Brazil as an example. But again, nothing really specific to note there. And with APAC related to the gross margin percentage, again, nothing specific to particularly note, more related to product mix. I mean, you mentioned there the pharmaceutical market, but also I did mention beauty personal care as an example being quite soft, and you could imagine that the gross profit percentage of beauty personal care could be quite high.

That's very helpful. Nothing specific to that. Yeah, perfect. Thanks, Walter.

The next question comes from Luc van Beek from De Groof Beterkamp. Please go ahead.

Yes, good morning. I have a question about the cost versus the revenues on an organic basis. If you look at Q2, then revenues were organically flat while the operational EBIT-A declined. So I was wondering, cost grows... organically despite flat revenues. Was it due to seasonal fluctuations or any temporary effects? Or are you seeing in general that it's quite difficult to offset the cost inflation with rising revenues and gross margins?

Look, what you see in our cost structure, it's mainly people. And that is the sales infrastructure that we have and the related support people. As mentioned by Marcus, we have been pretty consistent in being careful filling vacancies there, but we need to keep the sales structure in place. And what you then see is that if you have a sales force, basically what I could say is that we have a sales force that could do more at the moment than what they did in the second quarter. And then, yeah, you don't, you see inflation coming in, you have your annual salary increases and these type of things, and to cover these costs, that will stay there during the year, you need to grow your top line and you need to grow your margin. And in a quarter where you have not sufficient organic growth, then you see a decrease on your ratios. And let's hope that the second, maybe the third and the fourth quarter, that we will see organic growth again to compensate for these costs there. And there is a bit of flexibility, as Mark has indicated, on the bonus lines that could could kick in in the second half of the year. But let's see how that develops. I hope we need the full bonus amount that people make the target.

I think maybe, Luke, just to add, I think maybe to add as well, if you look at the consolidation of the industry in general and the trends that we see with suppliers, we're very focused on long-term growth. and really making sure that we've got the right organization in place, not only for today, but to attract suppliers for the future. So it is a balance that we really take very seriously from a cost control perspective, but also not looking specifically at it quarter by quarter. But what do we need for that long-term growth? And again, attraction that suppliers want to work with us going forward.

Okay, thank you.

The next question comes from Eric Wilmer from . Please go ahead.

Good morning. Good morning, Hans and Marcus. I've got a few questions. One of the bigger recent acquisitions you've done has been Spanish Ferrer Alimentacion. I think judging from the portfolio, this primarily appears to be a dairy-based business, which does not appear to be a core area of your expertise. So could you perhaps highlight your rationale for this deal besides growing in Spain and perhaps your future margin profile in the region? And what are your expectations for M&A in H2, especially given somewhat depressed valuations at the moment? And maybe lastly, to what extent are you sensing perhaps unsustainable under investment by your industrial customers, or is it really soft demand that's primarily driving Yeah, that's primarily driven by week overall and consumer demand. So to what extent is it the consumer or perhaps unsustainable vendor investment by your customers? Thank you.

Good morning, Eric. Thank you very much for the questions. Beginning with Ferrer, I think that we were particularly happy with the acquisition of Ferrer because in general, our food and nutrition business in Spain was quite small. You're quite right. Dairy on a global basis for us is not one of our larger, let's say line of business twos or sub segments within the food and nutrition space. But at the same time, we find it a very interesting sub market. So I think this was a good example of an acquisition where we achieved a couple of main objectives. The first one was really strengthening our team in Spain. giving us a very solid footprint to be able to then organically accelerate growing the food and nutrition space there. But also, from a global perspective, learning from Ferrer what they do from a dairy perspective, being able to understand that, and then hopefully cross-fertilize that knowledge base much broader. Also, don't be misjudged by what you may see on their product portfolio. There's a lot of specialties within that product portfolio, which would be very exciting to expand further from a geographical perspective. Looking at H2 from an acquisition perspective, the pipeline that we have remains healthy. I would say, in general, We're as active as we've ever been, certainly in terms of speaking with potential sellers, building those relationships for the long term. It is fair to say that in some cases, those discussions are taking longer because the valuation, as you can imagine from our side, is a bit more difficult. As you have seen, we have been using earn-out mechanisms more and more, which we feel protects us but also gives the seller the incentive still to potentially sell, and hopefully when the business then increases, they get the upside. But yeah, in general, the pipeline remains healthy. And in terms of the industrial underinvestment versus demand, I think that it's really difficult to say at this stage because, again, speaking to various customers, it's just been such an uncertain period because of the tariffs. that people have been nervous to invest. I think that we read that a lot in the press. Hopefully, as we spoke about earlier in the call, as tariffs become much clearer, more solidified, we'll get better visibility in terms of what investments will be made where.

That's very helpful. Thanks, Mark. Thank you.

The next question comes from Chetan Urushi from JP Morgan. Please go ahead.

Yeah, hi. Thanks for taking my questions. You know, Marcus and Hans, this is a bit more strategic question, which is not just relevant for IMCD, but also some of your peers, I think. If I look at your earnings development, we've seen earnings organic EBITDA decline last year. We saw organic EBITDA decline the year before, so 23, 24. It looks like given what you've shown us in Q2, perhaps this could be a year of another year of decline in earnings perhaps. I'm just curious, do you think the structural trends in this industry has changed because I suppose when you're spending so much money on OPEX growth organically, your aim is to grow the business through the cycle, not just when things are booming, but also when things aren't great. That should be the aim, but we don't seem to be seeing that, at least not in the last three years consistently. So I'm just curious if you think industry structure has changed. You alluded to more competition from China and some pockets of your business. If that is that structural change, how are you evolving your business in that respect?

Good morning, Haytham. Thank you for the question. No, I certainly don't see in general that the industry structure has changed significantly. If you look at the distribution landscape in general, there continues to be the consolidation. But I think maybe even more importantly, the consolidation from a supplier perspective, whereby both from a percentage of business that they're outsourcing typically is increasing, but also wanting to work with the larger players such as IMCD and moving away from, let's say, the small family-run businesses because they can't keep up with the digitalization topics, the sustainability topics, et cetera. I don't see a big structural change. I think that the momentum is still very much with us. Of course, you're quite right in terms of the decline 23-24. Let's hope that's not the case in 25. But when you look at the reasons before that, it's been very different reasons, and I would say exceptional reasons. So let's hope that we don't continue to have exceptional circumstances. But I think the business model very much remains robust and in place. I think the trends which we've seen for many years continues to build. I think that we're very well positioned for the future. And we just need, I would say, more generally stable macroeconomic conditions. Thank you. Does that answer your question? Yeah. Thank you.

Our last question comes from Nicole from UBS. Please go ahead.

Good morning. Thanks for taking my question. Just one follow-up, please, on the cost base. I know that you've obviously been clear that you remain very careful around the headcount piece. I just wondered if you can give us any sense of how your own voluntary attrition has been evolving year to date, just given the wider backdrop. Thank you.

I mean, it's very difficult to predict retirements and when people want to leave us, unfortunately. But look, as I said, this is something that we look at very carefully. I would say that we take every opportunity that we can and something that we, as we move forward, will continue to pay particular attention to. So we're aware of the importance of the cost base, being prudent there, but again, balancing that with also, as I mentioned before, making sure that we're really well positioned for the long-term future and not just on a quarter-by-quarter base.

Nicole and Hans say we don't believe in what I would call crash measures now to stop investing in the digital infrastructure for the sake of showing a nice cost reduction short term. Because in the end of the day, this is really the license for our future operations, the We need to put that omni-channel in the market. I think we are pretty advanced there, very successful. You might have seen what we showed in Milan as this is what is in the pipeline. It's now up and running. We open up now at certain market segments already also for customers, and we get quite some positive feedback there. And we all hope that that will translate in increased cost cross-selling ratio, so that we sell more products to the same customer, and that the organic growth come back quicker than the market growth. We need to keep developing here.

Did that answer your question, Nicole? Yeah, it did. Thanks.

Thank you. It seems that we have one last question from Anil Shenoy from Barclays. Please go ahead.

Yeah. Good morning, everyone. And thanks for taking my questions. Just one, please. I mean, I know you don't like to comment on the monthly trends in your business. I was wondering, and this is because many of the industrial companies have been talking about a really weak June. So have you seen a slowdown, especially in June, or has it been like the slowdown in Q2 has been consistent throughout April, May, and June? I mean, the reason I'm asking this is obviously because if there was a slowdown specifically in June, if it continues in H2, then that would probably imply that H2 there's a possibility that H2 could be weaker than Q2. So any color on the monthly trend would be really helpful. Thank you.

Thank you for the question, Anil. If we look at the Q2 performance, we saw pretty fairly steady performance on a month-by-month basis throughout the second quarter. So I think to give you a bit of comfort there, we didn't see a dramatic decline in June. It was very consistent between the three months.

Great. Thank you. That's really comforting. Thank you.

Thank you. With that, I will now like to turn the call back over to Mr. Jordan for any closing remarks.

Well, thank you all very much for joining our call this morning and for the questions. And yeah, on behalf of Hans and I would like to wish you a good remainder of the day.