Imerys Sa Ord

Good morning to all of you. Thank you for joining us today to review Imerys H1 2024 results. With me this morning, Sébastien Rouge, our CFO. As usual, let me start by giving you some highlights for the semester we have just closed and in particular on the second quarter. And I have to say it was a good one, very solid performance. Demand was strong for Emery's specialty minerals, resulting in volume and revenue growth compared to last year. It's now the third quarter in a row of continuous growth. The good performance is mainly coming from the U.S. market, holding up well. And also, finally, our European activities recovering gradually, particularly in consumer goods and, which is good news, industrial and markets as well. Asia performing also okay. H1 prices were slightly down, approximately 1.2% on the first six months with a high comparable basis, I'd like to remember from last year, but stabilizing in Q2 with just a minus 0.6% difference to last year. Second important highlights, Imerys posted an adjusted EBITDA for the first semester, 2024, of 384 million, up 11% versus last year, representing a solid 20% margin in line with Q1 24 performance. positive price-cost balance, significant cost savings, and a positive contribution of our JVs, all of these contributed to this solid performance and increased H1 profitability. Looking specifically at Q2 EBITDA, this was up almost 14% versus last year, thanks in particular to an increased contribution of our more traditional historical performance minerals and refractory minerals businesses. From the cash point of view, the group generated 120 million euro of operational cash flow before strategic capex. Net debt remained stable at approximately 1.2 billion euro, representing a net financial debt to adjusted EBITDA ratio of approximately 1.7 times. Finally, on a more strategic side, the group continued to execute on its roadmap. On the M&A side, we announced on July 5th the completion of the disposal of the assets serving the paper market. On the sustainability side, we disclosed our climate transition plan, demonstrating our engagement to address climate change. Furthermore, Imerys renewed the scientific partnership with the National Museum of Natural History, reaffirming Imerys' commitment to biodiversity protection. So all in all, A strong performance in Q2 and in H1 in an economic environment which still remains overall uncertain. So as I just mentioned, Q2, IMA is confirmed in sales recovery. This slide shows the rebound in revenue. Sales were up compared to the last three quarters and sequentially 7% plus versus Q1 and 1% plus versus Q2 of last year. This rebound is entirely driven by volumes, as prices have been slightly declining. Exchange rates has had a negative impact, and perimetra as well, a negative impact, even if minor. On the next slide, this graph shows, highlights the significant improvement of Imerys EBITDA margin in H1-24, reaching 20%. What are the main drivers of this improvement? For sure, volume recovery, a positive price-cost balance, cost savings, and an increase in contribution of joint ventures. If Q1 benefited from an exceptional contribution of our JVs, as we reviewed three months ago, mainly thanks to our high purity quartz business, Q2 showed a strong contribution of our traditional activities. Confirming that the wide range of solutions Imerys can offer is a key element of the group success. Let's look now a bit more in detail to Imerys and markets and their recent trends. Construction, the biggest, the most important exposure for the group. I would say a mixed picture. In general, infrastructure and no residential remains solid. where a residential, which represents Emery's largest exposure by far, remains a bit subdued, even if, finally, showing signs of improvement. From a geographical perspective, the situation could be summarized as follows. Europe, finally, first signs of recovery as interest rates start to decrease. Residential sector still low level, but I think the worst behind us. North America, good momentum, for sure non-residential. Residential still weak, but also clearly improving. China, I would say in general, positive trend confirmed, benefiting from public programs in all sectors. Consumer goods, holding well in the U.S., always helped by a robust job market. flat or flattish in Europe as a consequence of steel persistent inflation and growth in China hampered by increased household savings, low stock exchange, low inflation. Automotive, I would say a bit the worry at the moment. If we exclude China, markets remain fundamentally soft, as already mentioned during our Q1 results call, and this is expected to continue for the rest of the year. In Europe, we observe an even stronger decrease than expected and a negative outlook for the rest of the year. Recent publication by carmakers confirmed this trend. North America should be a bit more resilient, and China doing well. Increased production by 8% in Q2 versus last year, fueled by government incentives and really booming exports. H2 is expected to be a bit slower, but still on a positive trend. For the energy sector, slight rebound thanks to industrial recovery, and we expect farther improvements in H2. Chinese industry is about to post another year of robust growth, and industrial production picking up, including solar activity, and we'll be back to this. Electronics pursuing its catch-up after a slow 23, and electric vehicles overall good up 18% versus Q2-23, but with a very contrasted performance in terms of geography. China production still booming, 25% up in Q2. U.S., to a lesser extent, still up 15% in Q2, but from a very low base. While Europe is definitely struggling, minus 3% in Q2-23, versus 23, sorry. notably due to Chinese imports and cuts in subsidies in certain European countries. Moving to the last slide on our end markets, industry and equipment. Finally, I would say industrial production in Europe is starting to show some recovery, driven by rising consumer incomes and energy prices falling from past record highs. Activity in North America is expected to increase in H2, mainly driven by overall construction. In China, it tells up reasonably well, considering the overall weak economic fundamentals, but strong export activity. Steel production also contrasted by geography. still persistent difficulties, high energy prices still impacting the competitive landscape, and weak construction markets also impacting production. North America benefiting from this infrastructure overall good activity. Asia, China, I would say kind of stable. I now hand over to Sebastian for more details on Imerys H1 financial performance.

Thank you, Alessandro. Good morning, everyone. Let's go through some of the key aspects of our financial performance, and we start with revenue. Sales reached $1.9 billion in the first semester with progressive recovery of volumes. Prices are normalizing after two years of high inflation and include some market-driven adjustments when needed. Looking at Q2, you see a positive volume effect compared to Q2-23, driving a year-on-year improvement in revenues. This reflects an improvement of European and markets, especially consumer goods and industrial applications, while maintaining a good momentum and market share gains in the U.S. If we look now into more details at our three segments. First semester 24 revenue generated by Performance Minerals reached 1.2 billion in line with last year. Revenue in Americas was up 3% at constant scope and exchange rate, reaching 543 million in H124. Sales were supported by volumes, up 1.4%, mainly driven by consumer goods and U.S. construction, with solid pricing. In the second quarter of 2024, revenue reached $284 million, plus 7.1% like for like, confirming the good business momentum and benefiting from some market share gains. Revenue in Europe, Middle East, Africa, and Asia Pacific decreased by 1.7% at constant scope and exchange rates in H124 as compared to last year. After a weak first quarter, this business area improved in Q2, driven by dynamic sales into plastics, paint, and filtration activities, with volumes up and prices stable, driving like-for-like variation of plus 4.5% versus Q2 of 23. Adjusted EBDA of performance minerals activity increased by 19% in H124 compared to prior year, supported by the recovery of the activity and significant cost savings. Looking now at our solutions for refractory, abrasives, and construction business. This segment recorded sales of 620 million in H1, of which 320 million in the second quarter of 24, in line with last year levels. It benefited from a rebound in refractory business worldwide and an overall good level of activity in the U.S. Prices have decreased by 2% as energy surcharges were discontinued at the beginning of 24. Adjusted EBDA in absolute value and in percentage of sales has improved significantly, supported by a positive price-cost balance and cost savings actions. Now we complete this segment review with the newly created solutions for energy transition. The graphite and carbon business posted a 13% revenue decrease in H1. Nevertheless, carbon black revenue is progressively recovering as demand rebounds in Asia after a long destocking period. Adjusted EBITDA for the first semester reached 20 million, a decrease of 29% versus last year, impacted by declining volumes and some price concessions, partially offset by cost savings. The Quartz Corporation posted an increase in revenue of 64% compared to the first semester of 23. Very robust H1 performance was supported by well-oriented underlying end markets. However, Photovoltaic overproduction and consequent high inventory in the value chain is currently heavily affecting TQC sales. Now, if we look at the group profitability as a whole, adjusted EBDA for the first half of 2024 reached €384 million, up 11% versus last year. This evolution reflects volumes impact almost neutral, reflecting the progressive demand recovery. Base business, which took advantage of positive price-cost balance, fueled by a decrease in cost of 57 million euros. The evolution also includes fixed cost and overhead increase of 21 million in line with the increase of the activity. In H1, Emeris enjoyed an increased contribution from our joint ventures and associates. As a result, first semester 24 adjusted EBDA margin increased significantly. If we look at Q2 only, you notice 197 million of adjusted EBDA, better than Q1, with positive volume contribution and acceleration of cost reductions. Looking now at the other elements of our income statement for the first semester of 24. Driven by the increase of EBITDA, current operating income improves at 253 million or 13.3 percent of sales. Income tax expenses of 50 million correspond to an effective current tax rate of 22%, the bigger contribution of net profit from JVs, not taxed at our level, supported this rate decrease. Current net income from continuing operation thus landed at 173 million, up 25% versus last year. Net other operating expenses represented 31 million euro, impacted by non-recurring costs, mostly related to asset disposals, and also some restructuring, all in all, in line with last year. Net income group share at 142 million is at the same level of last year, which still had a 44 million contribution from discontinued operation related to the HTS solutions, which we disposed of in January 2020. If we look now at the cash flow generation, Imerys reported a current free operating cash flow of 88 million in line with last year. The free operating cash flow figure includes 171 million in paid capital expenditures, out of which 32 million are strategic capex. I remind you the strategic capexes correspond to graphite and carbon expansion capacities. They will come to an end by the end of the year. And the lithium projects. A positive element is the good development of the operating working capital, inventory in particular, which only slightly higher figures than in December in spite of the recovery of activity. The line other adjustments correspond mainly to the difference between John Venture's share in net income and the dividends we effectively received in H1. This dividend received amounted to 49 million euros in H1-24. How do these different elements translate into eMERI's balance sheet? Thanks to the generation of 88 million net current free operating cash flow in the first semester and small proceeds from disposal, we maintain the debt close to June and December 23 levels. At the end of June 24, the ratio of net financial debt to current EBITDA was stable at 1.7 times adjusted EBITDA, reflecting the solid financial structure of the group. On this good note, I now hand over back to Alessandro for the outlook.

Thank you, Sébastien. Before we discuss the outlook for the second part of the year, let's have a look at the end markets we serve and the impact of the disposal of the assets serving the paper markets, which impact it will have on our exposures. the sale of these assets have completely eliminated Imerys exposure to graphic paper, leaving within the group only a small packaging and board business, which serves consumers, applications, and it has been added to our consumers business. Other activities will proportionally grow in importance mechanically, such as construction that moves from 37 to 39. So now on the right, this slide you have image exposure to end markets which as we said in the past should be our long-term reference we believe we are now positions on growing and markets with solutions that help the ecological transition and therefore we grow above underlying markets in the long term to conclude let me wrap up with the outlook for the coming months The group expects to continue benefiting from positive business momentum in H224, supported by our well-diversified geographical footprint, broad application portfolio, and overall improved economic conditions. Assuming that there will be no material change in the current macroeconomic environment, and we have assumed a significantly lower contribution of joint ventures in the second half, And I will answer your questions later on. We target a full year 2024 adjusted EBITDA in the range of 670 to 690 million. This compares to 668 of last year. But I remind you, the last year included the 100% of our paper business, which has been divested now in July 24. So with a streamlined portfolio, Imerys continues to progress on a strategic roadmap, serving end markets with significant potential for growth. Thank you very much. We can now open to questions.