Imerys Sa Ord

Good day and thank you for standing by. Welcome to the eMARIS first quarter 2024 results conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be the question and answer session. To ask a question during the session, you will need to press star 11 on your telephone keypad. You will then hear an automatic message advising your hand is raised. To withdraw a question, please press star 11 again. Please be advised that this conference is being recorded. I would now like to hand the conference over to our first speaker today, Alessandro Dazza, Chief Executive Officer. Please go ahead.

Thank you, and good evening to all of you. Thank you for joining us today to review Imerys Q1 2024 results. Next to me, as usual, Sébastien Rouge, our CFO. And as usual, let me start by giving you some highlights for the quarter we have just closed. I'd say first, very important topic, I believe we have turned the corner, and overall, business is growing again. Revenues close to 930 million euro, higher than Q4, but also higher than Q3 of last year. On the back, fundamentally, of stronger, higher volumes. Some end markets still remain weak, and we will go in detail. Typically or notably, I would say industrial in Europe and residential construction both in Europe and the U.S. But all geographies, all markets pointing in the right direction. Versus last year, 3%. Last year, high comparable. March was the best month of the year. Also, prices slightly down, about 1.9%, again, against high comparables. Last year, Q1, we raised prices by 11% versus the previous year. So, this is partly the effect of the end of surcharges compared to last year. On the profitability side, I would say excellent work, good commercial actions, strong saving measures, and I will come back on this. strong performance of our JVs. All of these contributed to a good profitability and an increase compared to last year. We posted adjusted EBITDA of $188 million, up 9% versus last year, representing a solid margin of above 20%. We continue to execute on our strategic roadmap with three important actions in the quarter. We reorganized to create a new business area around energy transition, and I will come back on this one specifically on the next slide. Second, we entered into an agreement to potentially divest our assets serving the paper market, a deal with the American group FLEX. We moved again on the M&A side. We entered exclusive negotiation with Canviron, a subsidiary of Calgon Carbon, to buy their perlite and diatomite businesses in Europe, specifically in France and in Italy, representing approximately 50 million in yearly revenue. Typical bolt-on acquisition for Imerys. It will deliver important synergies. It will broaden our portfolio in growing markets, like natural solution for consumer goods. So all in all, I think we demonstrated to be agile in this economic environment, our resilience, and fundamentally the validity of our business model. If we look at this new business area, we announced earlier on in April, it's called Solutions for Energy Transition. Why? These businesses, the critical minerals represents more and more an important pillar in our business, and they deliver a fast-growing contribution to the group performance. It includes two businesses, Emery Graphite and Carbon. and our 50% share in the joint venture, the Quartz Corporation, producing high-purity silica for solar and semiconductor industries. Both these activities do represent a key driver of our future growth, and they highlight the major role that Imerys will play, or maybe is playing, in the energy transition. On these slides, I wanted to point out again the rebound, finally, that we see in markets. As I mentioned at the very beginning, growing again compared to Q4, 4%, but also Q3, 1%. As I said before, all geographies, all businesses are posting an increase, and it's really a volume growth. I remind you, prices are slightly down. A fix of foreign exchange rates did not help, and there are slightly negative perimeter effects. So the growth is entirely volume-based. If we look now what is coming from all the specifically on the end markets, let's start with construction. I'll show you a mixed picture. Infrastructure and non-residential remain solid on the back of different governmental investment plans. Residential remains largely subdued, and email is mostly exposed to this part or this sector of the industry. Europe weak. Residential is down 2.5%. North America weak. and especially we see finally a rebound. New housing permits have grown in Q1. So business typically you get a permit and then you build. So business should improve as we move on and we count on this. China, Asia benefiting from infrastructure and I would say overall recovery. Consumption all in all remains healthy, good in the U.S., on the back of robust job market, a bit more flattish in Europe, persistent inflation, Asia and China in particular, coming back and solid. On the next slide, automotive, I would say today probably the most worrying sector. You see Europe, 7% decline, difficult markets, U.S. more stable. Asia, China going well, maybe partly upset by a weak Japan. But China doing very well, fueled by exports. And that is partly the reason why Europe is suffering, as we read every day in the newspapers. Energy. Again, depending on the region, Europe down on the back of slow economic activity, better in the U.S., strong in Asia. Electronics coming back strongly after a poor 23. And if we do look specifically at electrovehicles, overall the trend remains positive worldwide, 20% growth. It will continue. Although we do see different geographies with China really running fast on the back of exports, 40% growth, Europe, the U.S. slower in the adoption and in the production of electric vehicles. The last slide on the markets, industrial, again, is a consequence of what I just said. Weaker in Europe, the U.S. more resilient, more dynamic, and probably coming out more rapidly from the recent slow quarters and Asia finally picking up which China especially ramping up in general. Capra, strong beginning of the year. I remind you last year on the back of very heavy de-stocking was a bad year for this industry. And it's good to see that everywhere is showing stabilization or even a good recovery. Narrow steel again, depends largely on construction and equipment. and therefore weak in Austria, okay in the US and preparing for a rebound and remain strong or solid in the rest of Asia. And last slide to show the work we've been doing, especially on costs. When volumes were down, you might remember last year we announced the 3.3% cost savings program that delivered over 120 million. Well, it is continuing to deliver, which shows that it is a structural improvement. We have 3.9% savings in Q1 on costs. Really, all area, it's overheads, it's fixed costs, it's discretionary spending, it's capacity adjustments, it's efficiencies, it's around energy. Yes, we have been helped by a, let's say, improvement in freight, in logistics, and in energy, but a lot of it is self-made, and it does deliver. Sébastien, I hand over to you to go in more details on figures.

Thank you, Alessandro. Good afternoon, everyone. Let's go through some of the key aspects of our financial performance, and we'll start with revenue. Sales reached 926 million in the first quarter of 2024 with soft volumes that represents a 7% decrease year on year. It includes a negative currency effect of 15 million mainly due to the level of USD and Japanese Yen versus the Euro. Prices impact is negative 2%. You remember that in Q1 of 23, prices were still high, at high levels, and they were just recovering from the 2022 inflation spike. If volumes are lower than those of Q1 21, it was mentioned earlier, both sales and volume are above Q3 and Q4 of last year. which is a good sign of the beginning of our end-market recovery. If we look now into more details at our three business segments, Performance Minerals generates 63% of the group's turnover, with sales at 579 million in Q1 of this year. Revenue generated by performance minerals was down 5.6% like for like in the first quarter of 2024. Sales in the Americas were impacted by a slowdown in demand of the construction industry and of filtration markets. Revenue in EMEA and Asia-Pacific decreased by 7.5% as compared to a still strong first quarter in 2023. Dynamic sales of plastics have partly compensated for weak ceramics demand. Compared to Q3 and Q4 of 2023, both performance mineral segments have increased their activity. If we look now at our solutions for refractory, abrasive, and construction business, the segment recorded sales of 300 million in the first quarter, representing 32% of Imerys' consolidated revenue. The volumes in construction and industrial end markets in Europe were soft, but the refractory business, particularly in the U.S., showed some signs of volume recovery. The business as a whole posted growth as compared to Q3 and Q4 of 2023. Now let's talk about our new business area, Solutions for Energy Transition. Please remember it includes graphite and carbon activity and the contribution of our joint venture, the Quartz Corporation. We will deep dive on this one in July when H1 figures are disclosed. In Q1 of 2024, graphite and carbon recorded sales of 49 million, representing 5% of Imerys' consolidated revenue. This business posted a 10% decrease in revenue as compared to Q1 2023, reflecting persistent destocking in the entire electric vehicle value chain, while conductive polymer applications have started to rebound. If we look now at the group profitability, adjusted EBITDA for the first quarter of 24 reached 188 million, up 9.2% versus last year. In spite of soft volume and a decrease of volume contribution of 17 million, this evolution reflects a base business which took advantage of positive price-cost balance fueled by a decrease in costs of 31 million euros. This includes fixed costs and overhead well contained below 2023 levels. It also reflects an increased contribution from our joint ventures and associates. As a result, profitability levels increased versus last year. If we look now at the other elements of our income statement, current operating income landed at 123 million euros. That represents 13.3% of sales. Income tax expenses of 24 million correspond to an effective current tax rate of 22%. The bigger contribution of net profit from joint ventures, not taxed at our level, supported this rate decrease. Net operating expenses represented 14 million euros impacted by non-recurring costs related to restructuring and asset disposals. As far as the paper asset disposal is concerned, I invite you to refer to the press release for the planned recycling of translation reserves that will occur at the closing of this transaction in the P&L. This entry will be non-cash and will not impact shareholder equity, but as the amount is material, it's better to have this in mind. All in all, net income from continuing operation landed at 69 million, up 10% versus last year, and that's in line with the adjusted EBITDA increase. We have this year no contribution from discontinued operation, as they were linked to the divestiture of HDS that happened in January 23. Now back to Alessandro for the outlook.