IMCD N.V.

Hello, welcome to the IMCD 2025 First 9 Months Results Conference Call, hosted by Marcus Jordan, CEO, and Hans Kooimans, 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 pound key 5 on your telephone keypad. I would now like to give the floor to Marcus Jordan. Mr. Jordan, please go ahead.

Thank you very much, Elba. Good morning to you all and a warm welcome. I'm Marcus Jordan, and I'm here today with our CFO, Hans Kooimans, for the 2025 first nine months results, which we published in a press release earlier this morning. The first nine months of 2025 were generally characterized by challenging market conditions as a result of continued macroeconomic uncertainty particularly around tariffs across all regions. This resulted in softer demand across a number of markets, limited order visibility, and just-in-time deliveries. Moving on to the first nine months' numbers, you will find a summary of our financial results on slide four, whereby, considering these continued challenging macroeconomic conditions, I am pleased with our gross profit growth in the first nine months, which is up 5% on a constant currency basis to 927 million euros. This increase is driven by a combination of organic performance, successful acquisitions, and resilient gross profit margins. EBITR also increased by 1% on a constant currency basis to 394 million euros, and our cash flow of 284 million euros was a bit lower compared with the first nine months of 2024. driven by a combination of a slightly lower EBITR and a modest increase in working capital investments. As we mentioned in the half-year call, we are actively working on reducing our inventory amount back to historical levels. But I also want to stress how important it is that during these uncertain times, we have inventory in place to fulfill the demands of our customers. If we now look at M&A, We announced four acquisitions in the first half of 2025, and in Q3, we were very happy to add another two. In August, we announced the acquisition of Tillmans in Italy, which operates across a broad range of markets, including coatings and construction, food and nutrition, and water treatment. Tillmans have 78 people and had a revenue of 143 million euros in 2024. I'm very proud of this acquisition as we've become a real powerhouse for our partners, teams, and suppliers in Italy. In October, we also announced the acquisition of Dongyang FT in South Korea, a company active in beauty and personal care. With 14 people and 34 million euros in revenue, we strengthened our position in South Korea, which as you know, is one of the most innovative and largest beauty and personal care markets in the world. On a full year basis, these six acquisitions will add around €340 million of revenue and 185 employees based on their last full year numbers before acquisition. Looking at our business segments, we have seen pharmaceuticals, food and nutrition having the most solid performance in the first nine months, and our beauty and personal care and industrial segments being generally soft in demand across the three regions. Related to demand, we get a lot of questions around Chinese competition in our various markets. And during this year, it is fair to say that we have seen more competition from China. And whilst we are somewhat protected from this due to our specialty-focused portfolio, we have seen some pricing pressure, primarily on the semi-specialty components of our portfolio, and especially in the APAC and LATAM countries. It is important to highlight that competition from China is nothing new to us. And as we have done throughout the history of IMCD, we regularly review the portfolio we have in all countries and markets to ensure we are for the longer term competitive and where necessary, adapt our portfolio accordingly. Again, with the long-term growth of the company in mind. To summarize, despite the ongoing uncertainties in global trade and tariffs, our business model has shown resilience during the first nine months of the year. We are further intensifying our efforts to drive cost effectiveness and commercial excellence throughout the company and ensuring that we have the right people in the right positions for the future. We are in the process of further strengthening our sales organization, both those on the road and the inside sales specialists. At the same time, we're taking advantage of our digital initiatives to optimize other areas of the business. Overall, this will result in a reduction in the number of FTEs going forward. We are well positioned for the future through our adaptable specialty focused portfolio, geographic and market diversity, combined with advanced digital and supply chain capabilities. And we remain confident in the strength and long term outlook of our asset light business model. I would now like to hand over to our CFO, Hans Coymans, who will give you an update on the numbers.

Thank you, Marcus, and good morning, ladies and gentlemen. I will, as usual, briefly summarize IMCD's results for the first nine months before we go to Q&A, and I would like to start on page seven of the presentation. On this page, you can see Forex adjusted revenue and growth profit both increased with respectively 6% and 5% compared to last year. Despite the challenging conditions Marcus just mentioned, we still achieved a modest level of organic gross profit growth, along with a 4% increase as a result of the first-time inclusion of acquired businesses. Gross profit in percentage of revenue slightly decreased to 25.2%, and about half of this 0.2% decrease is the result of the negative impact from acquisitions, acquisitions with on average a lower gross profit margin than group average. Furthermore, we saw the usual fluctuations in our product mix, currency impacts, and changes in local market conditions. Then Forex adjusted operating EBITDA, which increased 1% to 394 million, and this increase resulted from an organic decline of 3% that was more than compensated by the positive impact of the first-time inclusion of the acquisitions. The reported EBITDA and conversion margin both decreased, and this is mainly the result of gross profit growth that could not fully compensate inflation-driven own-cost growth. When you look at the own-cost growth, the year-to-date organic own-cost growth came down to just below 4%. And compared to September 2024, the number of full-time employees normalized for the impact of acquisitions slightly decreased. Forex adjusted net result on the next line that decreased 9%. In our trading updates, we usually don't break down this difference in detail. However, it's fair to assume the main factors are similar to what you saw in our half-year results. Lower reported EBITDA and higher finance costs as the main drivers. These higher finance costs in year-to-date 2025 are mainly the result of a bit more forex losses and lower gains from fair value adjustments of deferred considerations. Further, we reported and will report additional costs related to one of adjustments to the organization. And these additional cost items are partly compensated by lower tax costs. At year end, you could expect higher than usual additional costs related to one-off adjustments to the organizations. You know, and we told you before, that we are always cost-conscious and prudent with our cost structure. However, as indicated also by market, current market conditions, but also opportunities as a result of our digital investments, allow us to reduce our fixed cost base and adjust the organization to changes in market conditions. Then of free cash flow, we report a cash conversion margin of 71%, which is slightly lower than the same period of last year. As mentioned in our previous call, we took additional measures to reduce our working capital investment, whereby we are careful to carry sufficient stock to fulfill our customer requirements. In our previous call, when we discussed the end of June figures, We reported that our working capital days were six days higher than the same period of last year. End of September, we were able to reduce this gap to three days, and we feel confident that we will report at year end a cash conversion ratio somewhere around a high 80 or a low 90% number. Then on the next page, slide eight, you will find a summary of a few key figures split into the various regional operating segments. When looking at top line and gross profit, we were able to grow organic, as you can see, in all three regions, despite these difficult market conditions. We also had quite some currency headwind when translating local results into the Euro, most significant in APEC and the Americas. This currency translation impact is easy to quantify and report it as a separate line, but more complicated is calculating the operational impact of these currency fluctuations. It's obvious that these currency fluctuations had a negative impact in regions where it's common to quote in dollars and invoice in local currency. Therefore, it's fair to assume that these currency fluctuations this year negatively impacted our results in LATAM, APEC, and a few OMA countries. Then on the bottom of this slide, you will find EBITDA margin, conversion margin per segment, and we report a negative development in three of the four segments. The only positive exception is holdings, where the cost and percentage of revenue ratio slightly improved due to lower holding cost. EMEA reports the biggest EBITDA and conversion margin deviation compared to last year. As mentioned in previous call, you should keep in mind that the majority of the global business group costs are reported in the EMEA region. This then automatically leads to, in general, higher cost base. The biggest swings in results during the year were reported in the Americas and Asia Pacific. The America and APEC reported, respectively, a positive 21.7% organic EBITDA growth in the first quarter, which turned into a minus 4% and minus 3% year-to-date September. Marcus gave you already a bit of color on the background. On page nine, a summary of IMCD's free cash flow. The absolute amount of free cash flow was $16 million lower than last year, and the cash conversion ratio was 71%. Lower EBITDA, slightly higher working capital investment were the main drivers of the difference compared to last year. As mentioned before, we are confident that we will report at year end a cash conversion ratio somewhere around a high 80 or low 90% number. Page 10, update on net debt and leverage. Net debt at the end of September was close to 1.5 billion, slightly lower than end of September last year and 228 million higher than the end of December. The year-to-date increase of our net debt position was, amongst others, impacted by a combination of positive operating cash flows combined with cash outflows of $281 million as a result of acquisitions and $127 million dividend payments. Our reported leverage ratio, including the full year impact of acquisitions done, was 2.6 times EBITDA, which is similar to the leverage based on the definitions in our loan documentation. And then last but not least, on page 12, you will find our outlook for 2025, and I assume everybody has already read the text in the press release. Therefore, I don't want to repeat it again loud. And I would like to hand over to Alba, the operator, to open the lines for Q&A.