IMCD N.V.

Hello and welcome to IMCD's 2026 half-year results conference call, hosted by Marcus Jordan, CEO, and Hans Kooijmans, 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 Kooijmans, for the 2026 half-year results which we published in a press release earlier this morning. We had a positive first half of the year with both gross profit and EBITR organic growth and a strong cash conversion. When looking at the overall business during the first half of the year, I'm proud of how our teams navigated the dynamic environment which included the majority of our suppliers implementing price increases. The magnitude of these price increases varied significantly with the larger specialty part of the portfolio generally receiving much lower percentage increases and showing less volatility than our smaller semi-specialty component. We as IMCD have been particularly careful and responsible when passing on price increases as we maintain our focus on long-term partnerships with our customers and suppliers. If we now move on to the business from a demand perspective, As Hans and I highlighted on our last call, we did not see any significant pre-buying in Q1, but we did see some at the beginning of the second quarter. Although I must say that the amount appears to have been relatively limited, as we believe customers learned valuable lessons from post-COVID when they overstocked and ended up with high-priced inventory. Later in the quarter, demand was more stable, and we have not to date seen any significant reduction. Looking across our various markets, our pharmaceutical and signet business in India, as we anticipated, has returned back to its normal order pattern during the first half of the year. Food and nutrition continues to perform well and in beauty and personal care, we generally see stable demand versus last year. This is an area that we continue to focus on as there are good opportunities with the technical capabilities and lab infrastructure we have. On the industrial side, the best way to describe our business in the first half of the year is positive, with some nice bright pockets in areas such as medical plastics, wire and cable, and the lubricant market. This business was also supported by some nice supplier wins. Looking a bit forward, it is still early in the third quarter, but I can say that we have had a promising start in what are still dynamic market conditions and, as always, we have confidence in our specialty-focused and diverse business model. Moving on to the 2026 half-year numbers, you will find a summary of our financial results on slide 4, where we reported gross profit of €658 million, up 7% on a constant currency basis. EBITR was up to €285 million, which is plus 8% on a constant currency basis. and I'm happy to report that we increased our free cash flow to €222 million, leading to a cash conversion margin of 76.2%, which illustrates our close attention to work and capital management and at the same time ensuring that we have the right inventory in place to service our customers on a just-in-time basis. If we now look at M&A, you can see on slide 5 that we have made three acquisitions during the first half of the year. Firstly, Don Young FT in South Korea, a company active in beauty and personal care. The second acquisition was Willow's Ingredients in the UK and Ireland, a company active in human and animal nutrition. And the third acquisition we announced at the end of June is Merit Solutions, which will strengthen our position as a solution provider for the plastics and compounding market in Thailand. Moving on to the next slide for some updates on our strategic pillars. where you will see that we continue to expand the use of AI to support our commercial organization through a number of initiatives including further development of our sales assistant tool and more recently a fully automated pre-visit summary for our sales people which summarizes all major topics that they should cover when visiting or calling their customer. On the people pillar, with people being our greatest asset, we are pleased to add a global people director to IMCD's Executive Committee, and we look forward to working closely together to continue to further enhance our ability to attract, develop, and internally promote top talent within our organization. You will have seen some examples of this at managing director level during the first half of this year. And last year, we announced our commitment to setting SBTI near-term targets, and we will shortly submit our targets for validation. To summarize and to end my part of the introduction, I believe we have executed well in the first half of the year and I see good traction on the commercial, operational, and digital excellence initiatives we have been focused on, including supply development and expansion. In these unpredictable times, it is even more important that we have the highest level of sales activity, that we quickly adapt to changing market conditions, and that we remain a reliable partner for both customers and suppliers. We focus on the things that we can control and are committed to delivering long term growth for our partners and stakeholders in the years ahead. I would now like to hand over to our CFO, Hans Kooijmans, 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 as usual on page 8 of the presentation where you will find a summary of the key figures taken from the press release with our 2026 first half year results. As you can see, Forex adjusted revenue increased 11%, which is a combination of 3% organic growth and 7% resulting from the impact of the first-time inclusion of acquisitions. Forex adjusted growth profit increase was 7% compared to the same period of last year, a combination of 5% resulting from acquisitions and 2% organic. We started the year, as you know, with a minus 4% organic growth in the first quarter, followed by a positive 7% organic growth in the second quarter. And in this second quarter, all regions reported organic gross profit growth. Gross profit in percentage of revenue was 24.9%, which is about 0.7% point lower than last year. It is important to mention that more than half of this decrease in percentage was the result of recently acquired companies, mainly in EMEA, with on average lower cost-profit margins than the legacy IMCD business. We further had the usual impact of changes in product mix, local market circumstances, price and currency fluctuations. Then Forex suggested operating EBITDA increased 8%, and this increase was a combination of modest organic growth and a positive contribution of acquisitions of 7%. Like gross profit, we started the year with minus 9% organic growth in the first quarter, followed by a positive 11% organic growth in the second quarter. And in this second quarter, all regions reported organic EBITDA growth. As explained to you in our Q1 call, we had quite some currency headwind in the first half of the year, both operational and when translating local currencies into the euro. The minus 4% currency translation impact on EBITDA in the first half of the year was in absolute numbers a minus 12 million euros. Operating EBITDA in percentage of revenue of 10.8 and a conversion margin of 43.3%, were both just slightly lower than the same period of last year. On the bottom of this slide, you see that IMCD has about 5,200 full-time employees. Compared to the end of June last year, we welcomed about 150 new colleagues as a result of acquisitions. We further invested in the quality of our sales and digital teams, and we rationalized the back office when needed to the back office structure and that lead to a net saving of about 200 employees. We exercised prudence in filling vacancies and maintained strict cost control resulting in no organic increase in our own cost compared to last year. Then Forex suggested net result and earnings per share all increased with double-digit percentages and Marcus already referred to the healthy cash flow. And I will come back on cash flow later in the presentation. Page 9, 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 see, are split in organic acquisition and currency impact. In EMEA in the first column was by far the best performing segment in the first half year. The organic growth profit growth in the first quarter was flat, followed by 11% growth in the second quarter, resulting in the reported 5%. The drop in growth profit margin in this segment from 27.5 to 26.7 this year was pure M&A related. When normalizing for the impact of recent acquisitions, The average growth profit margin would have been slightly higher than last year. Similar pattern for organic EBITDA growth in EMEA. A minus 4% in Q1 was followed by a very strong 20% organic growth in the second quarter, resulting in 7% organic growth in the first six months. The EBITDA margin was stable at 11.7% and conversion margin slightly improved to 43.6. In the Americas we had, as you might remember, a soft start of the year with substantial negative organic gross profit and EBITDA growth in the first quarter. Although still modest, we are happy to see that the second quarter improved. but by reported low single-digit organic growth profit and EBITDA growth. The organic growth in the second quarter was not enough to compensate the decrease in Q1, resulting in negative organic growth in the first half of this year and a decrease of EBITDA and conversion margin. In Asia-Pacific, after a low single-digit organic decrease in growth profit and EBITDA in Q1, we saw a much healthier second quarter, with positive mid-single-digit organic growth. Operating EBITDA and conversion margin were more or less similar as last year and still the best performing segment in the group. Holding costs in the last column were lower than last year at 0.6% of revenue compared to 0.7% last year. This decrease is partly due to lower cost and partly the result of a higher cost recharge to the operating segments. Then on page 10, a summary of the P&L lines between operating EBITDA and net result for the period. You can see net result is 12 million or 10% higher compared with the same period of last year. Higher income tax expenses were compensated by lower finance costs. Amortization of intangible assets increased as a result of acquisitions done and These are, as you know, non-cash costs related to the amortization of supplier relations, distribution rights, and other intangibles. Then the one-off costs are $6 million lower than last year. On this line, we reported a gain of $4 million on the sale of a warehouse as a profit and slightly lower costs related to acquisitions and one-off adjustments to the organization. On page 11, a specification of the net finance cost, and as you can see, lower changes in deferred considerations as a negative and lower currency exchange results as a positive are the main drivers of the reported decrease. Currency exchange results are, as you know, realized and unrealized results of translating the monetary assets that we have in foreign currencies into local currencies. and the IFRS hyperinflation adjustment relates to IMCD Turkey. Page 12, summary of the IMCD balance sheet and on most lines little changes compared to the year-end 2025 numbers. Property, plant and equipment, so the real fixed asset that we own, are still relatively low as a result of the asset-light business model. The combination of intangible assets and related deferred tax liabilities of about 2.5 billion in total are a result of acquisitions done since July 2014 and our history as a private equity-owned company. On the financing side, there is 1.6 billion of debt, and I will come back on that in a minute, and 2.1 billion of equity. This substantial equity position covers 58% of our capital employed. Page 13, a summary of reported working capital. Total working capital at the end of June was just over a billion, which is about 10% more than December 2025. 66 million more than June last year. The overall increase, that is a combination of the impact of working capital as a result of acquisitions done, yet some currency impact and some operational developments. The increase compared to December is the usual cycle during the year and mainly the result of higher debtor positions as a result of higher sales in the month of June compared to the month of December. When translating the amount of working capital in days of revenue, we reported 70 days end of June this year compared to the 69 days end of June 2025. And on the bottom of this slide, you could see the development of the days for the three most important working capital components. The increase depth of days from 60 last year to 68 this year is mainly driven by much higher sales in the second quarter this year compared to last year. Last year June, I explained to you that 54 days of stock was relatively high. You might remember at that time I spoke about external and internal factors having a negative impact and we discussed last year items like the Red Sea issue, customers postponing delivery dates due to changing market conditions like tariffs and corrective measures that we took to bring down stock levels in various segments. This year, the relatively high stock days number is more positive. As Marcus mentioned, we had a promising start of Q3, whereby current stock levels are needed to cover demand of our customers. On the next slide, a summary of our net debt position, leverage ratios, and the maturity profile of our debt. Net debt in the first six months was more or less stable at 1.6 billion. And in the first six months, we spent about 50 million on acquisitions. We paid a dividend of 107 million. and generated healthy cash flow. The leverage ratio end of June based on IFRS and our loan documentation was 2.8 times EBITDA. This level was well below the maximum set on our loan documentation. And as you know, we are historically cash generative in the second half of the year. So dependent upon our acquisition activity, expect our leverage to come down. On the right side of this slide you will find our debt maturity profile. I would like to finish this short summary with a cash flow overview on page 15. Free cash flow was 222 million, an increase of 49 million compared to the same period of last year. The main driver of this increase are higher operating EBITDA combined with lower working capital investments. CAPEX of approximately 3 million were lower than last year's spending and primarily directed towards IT investments, bit of office improvements and lab equipment. Last but not least, on page 17, you will find the outlook for this year. I assume everybody has already read the text in our press release, and therefore I won't repeat it aloud. I would like to hand over back to Elba, the operator, to open the lines for Q&A.

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

Hi, good morning. Thank you for taking my questions. A couple from me, please. On 2Q, a very healthy improvement. Is it possible to give some color on pricing versus volume trends? Would you say that most of the growth was pricing-led, or did you also see volume improvement? And within this, you had indicated some pre-buy at the beginning of the quarter. Is it possible to quantify that? Is it something that benefited maybe EMEA growth in particular? And then the last one, please. You've indicated a promising start to 3Q. Would you say the trends are probably broadly similar to the second quarter at the beginning of 3Q or any variances by region? Thank you.

Good morning. Thank you for the questions. If we look at the second quarter and the pricing versus the volume impact, I think there's a variety of different components that really drove the organic growth that you saw in the second quarter. There were definitely some tailwinds from pricing, but as I mentioned in my previous commentary, I would say the bigger impacts on pricing with the greater percentages was very much focused on the smaller, let's say semi-specialty, semi-commodity component of the portfolio. On our largest specialty component, the percentages were much, much less single digit percentages. So whilst there was an impact there, it was just one component. The volume side, I think it's fair to say that we did gain some market share on the more semi-specialty, semi-commodity part, where availability from Asia Pacific in some of the more remote locations, I would say, became less. But two other, I would say, just as important components was, firstly, I feel that our teams are executing particularly well. and also I feel that we've got very good levels of commercial activity. As Hans and I mentioned on I think the last couple of calls, we've quite significantly strengthened the commercial teams during Q4 last year and the beginning of this year. And we're very pleased, I would say, with the increased level of commercial activity that we see. And then linking to that, as I also mentioned in the commentary, Some nice supplier wins which have begun to come through.

Got it, thank you. And then all the promising side, Mark?

Yes. The promising side, yeah, for Q3. I think that's as much as we can say at this stage. I mean, we're still in very dynamic market conditions. We're very focused on the things that we can control. Let's wait and see how the quarter develops, but as I said, we've had a promising start.

Thank you very much. Sorry, just to rephrase that EMEA bit alone, because the strength in EMEA was exceptionally strong compared to other regions. Would you say that that's an underlying strength, or is it more one-off in nature linked to the geopolitical conflict, I think? It's something that would help us understand how trade should evolve in second half of the year. Thank you.

Yeah, I think it's fair to say that EMEA is the more stable market that we see. You could also read into a bit the supplier win component that I mentioned where I would say for the three regions, that's probably the greatest impact there. Also, if we look from a From the other side, if you look at the North America, I think that that is also a market that's been more insulated and isolated from things like the price increases. So you've also got a variance there where you see a little bit more, I would say, tailwind from pricing in EMEA and less from a North America perspective.

Thank you very much. The following question comes from Anil Shenoy from Barclays. Please go ahead.

Yeah, hi. Good morning, Marcus. Good morning, Hans. Thank you for taking my questions. Just two, please. The first one is on your cost development. Now, I mean, this quarter was the first time after four quarters that we've seen positive operating leverage. EBIT A organic growth exceeding gross profit organic growth. Now you said in your 2Q25 call that you had built up some costs in the system because you were anticipating like 4% to 5% kind of gross profit growth which did not materialize and that is why we have been seeing the negative leverage for the last four quarters. So I'm just trying to understand, has the business now reached a scale where these prior cost investments are now completely leveraged? And can we expect this positive operating leverage to continue into H2? So that's my first question. And the second question is on Americas. In your Q1 call, you highlighted that there was a substantial organic decline in Americas due to a volatile business mix. Given that now we've reported 2% organic growth in both gross profit and EBIT-A, maybe you could provide some color on whether the American business has stabilized and what is the outlook for this for America for the rest of the year, please?

Perhaps I should answer the cost question. What we report in today's figures is that the cost structure is more or less flat compared to last year. What we did is, on the one hand, we strengthened the sales organization, as what Marcus mentioned, because it's very important to be active in the field and have the right people on the road to further develop businesses and also to deal with the new suppliers that we onboarded. At the same time, over the years, we developed a lot of digital tools to support the salespeople, and it also means that we can make our back office infrastructure much more efficient. And that net-net resulted in a slightly lower number of people, but also a change in the mix of people. At the same time, I hope to report at year-end a little bit of a cost increase because we have to pay higher bonuses because people reach the target. You might remember that over the last two years we had difficulties with the results. That also resulted in savings on the bonus side. And I hope to report at year end to say, unfortunately, my costs increased a bit, but it has to do with the fact that we had a fantastic year and paid a bit more bonuses. But so far, we have a structure that can cope with more sales than what we have today. Thanks to all the digital developments and thanks to the additional salespeople that we got on board in the first six months.

Great. Thank you, Hans. And if we move on to the question for the Americas, I think just as a reminder, we, of course, had a very tough comp for Q1, where Q1 2025, we showed organic growth of 21%. As I mentioned before, if we look at the U.S., the North America dynamics are a little bit different to what we saw elsewhere in the second quarter, where let's say the pricing impact was somewhat delayed and muted. So we saw relative to the other regions, I think, a little less pre-buying also. and as you know also and we've mentioned before in the US particularly we've got a larger industrial component particularly on the coatings and construction side and we still see quite a weak market within the US on that space. As you say we have seen a better Q2 performance but we're still not at the level that we want to be and we have recently strengthened quite a lot of the management team within the region to ensure basically that we fully capture the opportunities that are definitely available to us. So we see a lot of opportunities still for the region. Again, we're focused on the things that we can control, and I feel that we're on a better track to deliver the kind of growth numbers that we expect going forward.

Thank you so much. That's very helpful.

The following question comes from Annelies Vermeulen from Morgan Stanley. Please go ahead.

Good morning, Marcus. Good morning, Hans. I have two questions, please. So firstly, you commented in one of the previous answers, I think, that you saw some less availability in Asia-Pac and saw some market share gains, particularly, I think, on the semi-specialty side, you said, as a result of that. So could you expand on that a little bit in terms of Are you seeing supply issues anywhere else? Any sort of constraints in supply from the Middle East and how that has driven any market share gains anywhere else in the portfolio and how that's developing so far in Q3? And then secondly, just on the balance sheet, I think previously you said you'd expect to see a working capital improvement through the year. But given the improvement in growth that we've seen and assuming that continues and the inventory that you need to cover the demand, How would you expect working capital to develop through the second half now? Thank you.

Good morning, Anneliese. On the availability side, in general, I would say we haven't suffered tremendously from availability issues so far. It's fair to say that we have seen pockets, though, and it's really I would say that it's quite widespread. So it's not that I would say that it's One region or another that we've been particularly impacted. But again, I would say that the impact is not so material in the second quarter, but with some pockets. And Hans, on the working capital?

Yeah, on the balance in the working capital, Annelies. But basically, I don't expect big changes in the number of days, is what I would call for the different components. So it will hover a bit what will happen with the revenue. So if the revenue goes up, my debt deposition goes up. And during the year, we have the typical cycle that Q2, Q3 are always the highest points in the cycle. because we have the biggest revenues always in Q2 and Q3. And towards year end, we typically see a drop in the working capital amounts. And I don't expect that that trend will change during this year.

But I hope to come back to you that we invested a lot in debtors because of high sales.

It's a bit similar to the bonus thing. That is the result of additional activities. And I'm happy to report that to you if that happens.

Here's hoping. Thank you both. Just to follow up on the first part, Marcus, you said you're not seeing it, it's not been material in the second quarter, that availability piece, but do you see anything changing through Q3 perhaps as later impacts from some of the issues in the Middle East start to come through on the supplier side or at the moment is it stable?

At the moment, I would say that it's stable. So coming into the third quarter, no difference really than we saw in Q2. Of course, as I mentioned before, it's dynamic market conditions. So let's wait and see what happens. But yeah, I would say it's stable so far.

Yeah, great. Thank you. I appreciate the moving target. Thank you.

Thanks.

The following question comes from David from Jefferies. Please go ahead.

Good morning, gentlemen. Two questions from my side, please. First of all, on the pricing tailwinds that you highlighted, would you say those were strongest in the second quarter, or will you see a continuing impact in the second half of the year, and will inflation remain elevated for longer? I think Marcus, you indicated the delayed impact from that inflation in the Americas. And also, on the inflation, the impact was largest on the semi-commodity side. Besides the higher prices, is that also A reflection of easing competition from Chinese suppliers in markets such as Brazil and Southeast Asia. Then the second question is on the M&A. You highlighted three acquisitions. I think you spent 50 million. That seems the lowest level since 2020. How do you see the market for M&A at the current moment? Thank you very much.

Good morning, David. The pricing tailwinds, I mean, yeah, I would say that we saw during Q2 the number of increases, I would say, was particularly high at the beginning of the quarter, and then I would say somewhat eased. I would say that it's still a dynamic pricing market at the moment, very much related to what's happening within the conflict. but I think it's fair to say that generally it's become a bit quieter as we kind of progress through the latter part of Q2. Easing competition from China, I think it's fair to say that in some of the more remote countries like Brazil, it's fair to say that during the second quarter we did see less competition on the semi-specialty, semi-commodity side but also maybe in Brazil In the latter part of the quarter, maybe some of that Chinese competition was more focused also into the Asia-Pacific market. So again, it's quite dynamic on that side. And again, it's really a case of the commercial teams being very focused and adjusting as fast as they can and they need to. On the M&A side, Very pleased with the three very important acquisitions that we made in the first half of the year, albeit they were quite small. As you know, we don't set a target in terms of either the value or the amount that we spend on acquisitions or the number. I feel that that's incredibly important because we need to remain, as we've always been, very laser focused on only acquiring those companies that are a good strategic fit that we have confidence that will accelerate our organic growth. We still have a healthy pipeline, but it is fair to say that the discussions on the acquisition side are taking longer during these dynamic market conditions. We are definitely not being impatient, and it's a case of us also gaining confidence that we're paying the right price for the acquisition.

Very clear. Thank you, Marcus.

Thank you.

The following question comes from David Simmons from BNP Paribas. Please go ahead.

Thank you very much. A couple of questions from me, please. Firstly, can I ask on Cygnet, how that progressed in the second quarter? I remember you said there were some green shoots there. I know the comps get easier for Cygnet in the second half of the year, but I'm just curious as to whether we are And then secondly, you mentioned obviously the pricing was concentrated in the semi-specialty part of the business. So just to understand from a different lens, the dynamics in the second quarter, were the specialty earnings higher year on year, do you think, or was it just a semi-specialty contribution? Thank you.

Good morning. Firstly, as I mentioned at the beginning, we've seen in general the pharmaceutical market. If you recall, we went through a fairly exceptional stage in Q4 of last year, and we did anticipate for the normal, let's say, ordering pattern and performance to come back in the first half, and we have seen that. And the Signet business, I would say, has followed pretty much the same trend. So nothing exceptional there. On the pricing side, David, I think it's important to kind of reiterate that what I was trying to say is that the semi-specialties, also because they're lower priced products typically, the percentage increases were greater than the specialties. That's not to say that we didn't receive price increases on the specialty component of the portfolio. but as a percentage, it was quite a bit lower. Yeah, so does that answer your question there?

It does, yeah, yeah. Thank you very much. Thank you.

The next question comes from Nicole Manuel from UBS.

Please go ahead.

Good morning. Thanks for taking my question. Can you talk a bit more about the supplier wins, please, on the industrial side of the business and maybe what you're seeing in general across the group in terms of winning these new mandates? Has the pickup here been anything opportunistic to do with the environment or would you say it's more of a reflection of longer term efforts to engage some of these new suppliers? Thanks.

Yeah, I don't want to go into specifics, but I think what I find most encouraging is it's not focused on one particular market. I feel that as an organization over let's say the 12 plus months we've really strengthened the spotlight on what we're doing from a commercial excellence perspective. We strengthened the team as Hans and I mentioned commercially at the end of last year coming through the beginning of this. And the reputation and delivering what we promised goes a long way. So I believe that you know we've always had a very strong reputation within the market. I feel that with suppliers almost our doubling down during a difficult economic climate on the sales organization and infrastructure that we have has been received particularly well. I think also that suppliers in general are having a pretty tough time and so They're also more critically looking at their own organizations to say what sales organization do they need on a fixed cost basis and what percentage of their business do they then outsource. So I've mentioned on a couple of calls prior to this that we've been having, I would say, more and more positive discussions. I think this is the first time that we've spoken proactively about the wins. So it's with great pleasure and a credit to the whole team that we've really been able to, I would say, convert those.

Or some of those.

That's very helpful. Thank you.

Thank you.

The following question comes from Luc van Beek from De Groof Biedekwam. Please go ahead.

Yes, good morning. I have two questions. First, about the... Low stock levels of customers and the requirements for just-in-time delivery. Does that imply any changes on your end in a sense of stock levels or logistics or any other changes that you need to make? And my second question is about the volume impact of the price increases and in general the cost inflation that we see globally. Do you see any indication that customers are becoming more cautious on the volumes because of this global cost inflation?

Good morning, Luke. On the just-in-time side, I think that we've spoken pretty much on every call for the last two years around the customer behavior is such that because of the volatile or the dynamic market conditions that this just-in-time delivery has become, I would say, more of a norm. So I wouldn't say that we've seen dramatic changes from an order pattern perspective, but As a distribution company, and we keep reiterating this, it is absolutely our job to have inventory in place to be able to service those customers, but to also take advantage of, let's say, the market conditions whereby with the uncertainty where we are a backup from an inventory perspective for them. And on the volume impact on the price increases, As I mentioned in my preamble, we've been very careful when we pass on the level of price increase, also working in hand with our suppliers to make sure that we don't destroy the demand for the longer term. So it could have been that through this uncertain time that we push through very large excessive price increases. That's not the case. As a company, we really look at the long-term future, the relationship that we've got with the customers and suppliers, and being very cautious together with our suppliers in terms of minimizing as much as possible the price increase that we pass through.

Okay, that's good. Thank you.

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

Good morning, Marcus and Hans. Thanks for taking my questions. I also had a question on the Americas, where organic sales growth seemed a bit more modest in Q2 compared to the other divisions. I would assume that Latin America has likely performed relatively well, both pricing and volume-wise, in light of its skew towards semi-specialty, as well as given less Asian competition that you highlight in the region. which does imply somewhat negative volumes in North America. And then another question, to what extent are you now seeing some customers potentially return in general, so in general in your portfolio, that were potentially less willing to buy when prices immediately started to peak back in March and April and at some point simply have to return? And then last question, I was wondering if you could also talk us through What you're roughly expecting in terms of cash out later this year and next year for previously announced M&A, including, for example, earnouts? Thank you.

Thank you for your questions, Eric. If we look at the Americas, please don't underestimate the scale of the coastings and construction market. We're within that space. I would say what we're really waiting for there is unfortunately interest rates to come down so that there's more of a dynamic move from the housing space. So I would say yes, as I mentioned before, it is fair to say that we've picked up additional business on the semi-specialty side, but we also shouldn't overestimate what the percentage of that is across the region as a whole. So in pockets, we do have a greater percentage. Brazil is the country that I've spoken about before. And it is fair to say that we did pick up some market share during the second quarter. On the negative volumes in North America, I don't think we've seen that. I think what we have seen from a North America perspective is a little bit of a delay, but also a much more muted from a price increase perspective. So both in terms of the number of increases that we've seen but certainly the percentage increase amount. And from a customers returning now perspective, we did see some pre-buy at the beginning of the quarter as I mentioned. I don't think that that was significant. I think most of that would have been worked through. during the second quarter. And again, you can read into that with the promising start to Q3 that there's not a lot of, I would say, volatility from a month-to-month perspective that we've seen so far.

Can I say something about the considerations, Marcus? Yes, please. I think what we reported is at the end of last year, we had about 40 million on our balance sheet as deferred considerations. In the press release that we issued, you could see that from that 40, we paid about 18, and we added about five to the deferred consideration as a result of recent acquisitions. And so the balance in my total debt position is relatively small at the moment. I hope that helped. And the details you can find on page 23 in the press release.

Very helpful, both answers. Thank you.

The next question comes from Perijn Mulder from ING. Please go ahead.

Yeah, good morning. I would limit myself to two questions. Hans, we discussed last year the supplier streamlining coast to coast. Is that process going on and had it some impact on the second quarter in your view in the U.S.? And the second is about the tariffs. So one year in the tariffs, is there anything to say specific about the impact of the tariffs in the second quarter and also Something maybe about repayments or something like that. Is that possible that you get some repayments from the government because of the change in the policy there?

Thank you for the questions, Karijn. The supplier streamlining across the US, that is an ongoing process. I would say nothing really to report exceptional in Q2. And on the tariffs, I would say, yeah, I mean, it's an ongoing topic, but again, nothing material in Q2. And on the repayments, that's something that we're in the process of getting back and then being able to pass that back to the customers. But just to remind you that by far the majority of our business in the U.S. is on a local for local basis. So the amount of tariff, let's say refund, is actually quite small.

And we also give it back to customers.

Okay, thank you.

The following question comes from Tristan Lamot from GoToBank. Please go ahead.

Hi, thanks for taking my questions. The first one is, could you talk a bit about the pipeline and level of innovation activity? I think some of your producers have talked about an increase in innovation. So I'm wondering what trends you're seeing and is it translating through to organic growth yet? And then second question is, I'm somewhat concerned that quite a lot of this improvement is temporary given the size of the swing that we're seeing in organic growth from Q1 to Q2 and in conversion margin. Specifically on conversion margin, you increased from 41.6% in Q1 to 44.9% in Q2. Could you maybe talk through the kind of elements that you see as temporary versus more permanent there? Thank you.

Great, thank you. On the pipeline and innovation trend, I think I've mentioned on the last couple of calls how busy the labs are that we have. So we're really focused on making sure that the projects that we're working on generate gross profit. We definitely see quite a lot of traction in terms of both the number of projects that we've got coming through the lab but also from a conversion perspective and you know that's one of the real values and pillars that we as IMCD have and I believe the reputation is strong whereby that formulatory expertise where customers come to us not looking for individual ingredients but also from a formulatory guidance perspective so yes I would say that is and remains an extremely important pillar and I would say gross profit growth contributor for the future. Your question on the temporary change, I think, Tristan, it's a case again of we don't know what the future holds. I believe that we've executed well in the first half of the year. Thank you very much. But again, But again, we have had a promising start to Q3, so let's see.

Great, thank you.

The final question comes from Chetan Udashi from JP Morgan. Please go ahead.

Yeah, hi, morning. Thanks for taking my questions. Maybe first one to Hans, I was looking at the cash flow statement and it seems your cash taxes in H1 were are quite low compared to last year and also what I had in the models. I was just wondering is there some structural change or is it just phasing between H1, H2 which may have resulted in a much lower cash tax payments. The second question, just going back to your comment Marcus about very limited pre-buying and I'm just trying to tied that up with the fact that your gross profit in second quarter is up almost, I think, 12% or so versus Q1. I mean, there's a bit of seasonality between Q1 to Q2 that Q2 tends to go up generally, but not to the extent that we've seen in Q2. So, I mean, if you've not seen as much pre-buying, how do you square that sharper increase in second quarter? Because it doesn't feel like end demand. In general, has seen any real improvement overall?

Cheetah, on the tax side, basically we pay the tax when the tax is due in the countries where we make profits and need to pay taxes. And I also saw that in the first six months, I think the tax burden in the P&L was higher than last year, in line with increased results. and the tax cash out was I think about 10 or 12 million lower than last year in the same period. It's just a timing situation. When do you pay what and when? And that is not in our own control. It depends on the timing of the local tax authorities. Definitely the tax that we accrue and that you see flowing through the P&L at a certain moment, we need to pay it. With more time.

And on the pre-buy and the gross profit growth, we don't know exactly what the customers buy and how much they have in stock. But we haven't really seen an abnormal, I would say, order book. And as I said, quite some stability from a month-to-month perspective. And that brings us to the belief that there wasn't a lot of pre-buy. and then you know in terms of the gross profit growth as I mentioned before I think it's a combination of from the pricing tailwind you know there's a component there but also bringing in the execution that I believe that we've done well and also the supplier wins so it's really a combination of those factors and it's difficult to really quantify exactly what from where But I'm comforted again by the fact that we haven't seen big variations from a month-to-month perspective.

Got it. Thank you. Thank you.

I will now hand the word back over to Mr. Jordan for any closing remarks.

Thank you, Alba, and to everybody for joining the call this morning and for your questions. And we wish you all a very good remainder of the summer. Thank you all.