Imerys Sa Ord

Ladies and gentlemen, thank you for standing by and welcome to Vimerys Q1 2023 results conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question, you will need to press star 1 1 on your telephone. I would now like to end the conference over the CEO of Vimerys, Alessandro Dazza. Please go ahead.

Thank you and good evening to all of you. Thanks for joining us today, this evening, to review Imerys Q1 results. With me on the call, as usual, Sébastien Rouge, our CFO. Let me start by giving you some highlights of the quarter. A tough quarter. We saw these challenging market conditions already developing in Q4 and certainly continued in Q1. Even in this volatile market, Imerys delivered robust results and succeeded to reach a billion euro in sales, basically in line with last year at historically high levels. Volumes were down, impacted by different reasons. Paper markets, first of all, a general weakness in industrial markets, and you will see in the market trends that triggered a continued destocking also in Q1, and the construction markets, which suffered both in the US and in Europe, low activity on the back of rising interest rates and tightening credit. Nevertheless, we demonstrated the resilience of this business and posted a current EBITDA above 15%, higher than Q4, so the trend goes in the right direction. thanks especially to solid pricing and good cost management. I would say another proof of this resilience is the double-digit increase in current operating income, 15% increase at €105 million compared to last year, and also in net current income from continuing operations up 12% versus last year. As said, all of this was possible thanks to solid pricing actions that more than offset variable and fixed cost inflation, inflation that remains, as we all know, quite persistent. If we now move on to the next slide, we deep dive on different markets. Let's start with the most important for the group. As you recall, around 40% of our exposure, construction markets. You see here the numbers on the top part of the slides. Slowdown, both in Europe and North America. A bit less in the remaining part of the world. What I find impressive is really the U.S. Two consecutive quarters negative and 10% down this quarter alone. These are really impressive numbers in the negative way. It said Asia was better and China seems to be restarting thanks to some policies of public support to the construction industry. Good news from consumption and consumer goods. Private consumption remains sustained basically in all geographies and we see a strong momentum in China after many quarters of COVID lockdowns. Going forward, we expect the U.S. to remain quite solid. Whereas Europe could eventually suffer from a higher and more persistent inflation ahead of us. On the next page, I would say one of the strongest markets in the quarter, automotive. Bright spots, picking up strong rebounds. As you can see from the numbers, very nice. We are still way below 2019 levels or 2018 levels. So I believe there is more positive news to come. But we enjoy still a good level of activity. Asia, especially Asia down or not much as up. Drag down certainly from China. The subsidies incentivizing electric vehicles expired in December 22. So there was a rush to purchase new cars at the end of the year with a consequent slowdown in Q1. and the same impact you see on the second part of the tables on what we call energy and electronics. Clearly, mobile energy down into one because of this Chinese effect. I remind you China is by far the largest EV market in the world. Also inflation has caused the slowdown of the electronic markets, entertaining market. On the next page, industrial production. impacted differently according to the region, certainly soft activity in the U.S. and in Europe, caused by rising interest rates, low corporate investments. Asia, well-oriented or better-oriented, strong in India, and China finally restarting, and we do expect more to come after the end of the COVID lockdowns in the second part of the year. Last, a word on the bottom part, a word on paper. Terrible quarter, Q1, with very low production and activity on the back of energy prices and mills shut down, but also iron and steel. As expected, especially in Europe, I would say general slowdown of activity and, again, high energy prices having a negative impact on activity. Sebastian, I hand over to you to give more answers. on the financial results.

Thank you, Alessandro. Good evening, everyone. We will walk through some of the key aspects of our financial performance and start with revenues. TES reached 997 million in the first quarter, a slight 1.6% decrease versus prior year. mostly driven by a flattish organic growth at minus 0.9%. As we have seen already in 2022, the contribution of price has been significant throughout the quarter, also decreasing in Q1 as compared to Q4 last year. It was above 18% in Q4 and offsetting a big part of the volume shortfall. The perimeter and currency effects were limited, reflecting small divestiture in hydro-scaroline business last year and the strengthening of the USD versus euro as compared again to the first quarter of 2022. If we look now into more detail at our two business segments and their respective markets, we start with performance minerals, The segment generates 68% of the group's turnover, with sales of $677 million in the first quarter of 2023. Geographies saw different trends, with like-for-like revenues up 4.4% versus 22% overall. If we look at the market, on one end, the mobile energy market was weak due to the end of subsidies in China, and the construction industry was impacted by rising interest rates, and that was true both in Europe and in the U.S. On the positive side, the consumer goods sector all do well. We have noted as well a significant rebound of the automotive market, but we are still not reaching the levels of 2019. If we look now at our refractory, abrasive, and construction business, our second segment recorded sales of 320 million in Q1, representing 32% of Imerys' consolidated revenue. The revenue was still impacted by a low level of industrial activity and customer stocking, in particular in Europe. The business benefited from building an infrastructure resilient performance, but activity in Asia remained supportive with a strong momentum in India. The rebound in China post-COVID restriction is just starting. Now, how does it look like for the group profitability as a whole? Current EBITDA for Q1 reached 151 million, down 3.4% year-on-year, so very close to last year's Q1 level. The evolution reflects a decrease in volume contribution for 57 million. We have a positive continued price contribution of 111 million, which compensates for the 50 million net increase of variable costs. That is the consequence of continued input cost still at a high level especially when we compare to Q1 2022. And we have to note that our price contribution also more than offsets the increase of 16 million of fixed costs and overhead, which is impacted by inflation. As a percentage of sales, the margin is very slightly down as compared to last year, but increased from 14.8% in Q4-22 to 15.1% of sales in Q1 this year, proof of the group's resilience, even with lower level of industrial activities. If we look now at the other elements of our income statement, In absolute terms, the current operating income variance is better than the one of EBITDA, thanks to positive development of non-cash items, depreciation, and contribution of joint venture and associates in particular. Current operating income thus reached 105 million euros in Q1 this year. Net financial result was negative 12 million impacted by some FX variations. Income tax of 25 million corresponds to an effective tax rate of 27% in line with last year. Current net income from continuing operation does increase by 12.2% to 68 million in the quarter. we note a positive contribution of discontinued operation and the booking of the final disposal of our HTS transaction. All in all, net income was at $101 million, above the figure posted last year of $73 million. On this fast summary, I end it back to Alessandro for the conclusion and outlook.