Imerys Sa Ord

Good day and thank you for standing by. Welcome to the EMIRIS 2024 first nine months and third quarter results. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please advise that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Alessandro Dazzaf, CEO. Please go ahead.

Good evening to all of you. Sorry for my low voice, impacted by the weather in Paris. Thank you for joining us tonight to review Imerys Q3 and first nine months 2024 results. Next to me, this evening, as usual, Sébastien Rouge, our CFO. And as usual, please let me start with some highlights of the quarter we just closed. I would say a strong quarter for Emeris. Demand for our specialty minerals was up, thanks also to good market share gains, resulting in volumes and revenue growth compared to last year. Net of perimeter effect, and I remind you, That's the beginning of July. We divested our assets serving the paper market. So net of this effect, volumes were up 3.8% versus last year after a Q2, which was also up 2.7%. So two quarters in a row with a strong performance, certainly outpacing the market. On the nine years, thanks to these two strong quarters, on over the nine months, we are in positive territory volume-wise again. Positive news also with regard to pricing. We announced, if you remember, three months ago, that the trend of prices would reverse, and it has reversed in Q3. Prices are up 0.3% versus last year. And year-to-date, still slightly negative on the back of the Q1, which was still positive. impacted by returning some surcharges to customers. On the profitability side, our adjusted EBITDA for the quarter was $148 million, reflecting the perimeter effect, the disposal of the assets serving the paper market in July, and the lower contribution of joint ventures versus last year. It was announced and expected, and Sebastian will give you more details in this regard later on. The rest of the business, our performance minerals business in particular, delivered a very strong performance, driven by strong volume recovery and a positive price-cost balance, and I will come back on this. For the first nine months accumulated, we posted and adjusted EBITDA of 533 million, up 3% versus last year, and representing a solid 19.2% margin, 150 BPs higher than last year. Group overall generated nine months – in the first nine months, 214 million of current net income. Group share up 11.3 percent versus last year. Again, underlying a robust year-to-date performance. At the end, in an economic, microeconomic, and geopolitical environment, which remains challenging and uncertain. So even more, I think, important is performance. Based on all this, we confirm our guidance with an adjusted EBITDA for the full year 2024 between 670 and 690 million euro. On these following slides, we deep dive a little bit more on our sales performance, and you see the impact of perimeter highlighted here. Q3 revenue, solids, as I said, 4.1% organic growth following 2.1% last quarter versus last year, of course. Good performance coming from the U.S., which is holding up well. European activities, we've enjoyed also a light rebound, especially around consumer goods. And Asia also doing okay. Weakness in, I would say, automotive and industrial markets really increased. in Europe, which are lagging behind past performances. Prices reverted, as I said, to a positive trend in the third quarter, as we have announced. Year-to-date, we are back in positive territory volume-wise, and just a slightly negative on pricing, but overall, Imerys is growing organically again. If we now look at EBITDA performance, the graph on the left side highlights the significant improvement of Imerys EBITDA and adjusted EBITDA margin in the first nine months of the year, reaching 19.2%, as I said, up 140 BPs versus last year. What are the drivers? Stronger operating leverage and an improved year-to-date joint venture contribution, more than offsetting what we lost in terms of perimeter with our recent diversity check. On the right, if we focus on the evolution of prices and costs compared to last year, this graph illustrates, I think, very well our ability to adjust selling prices to cost inflation. In H1, when we had to give back some prices after the very high increases of last year, we could more than compensate with Strong savings on the variable cost side. Now that variable costs are catching up, our sales prices are catching up as well, as we maintain in all quarters a positive price-cost contribution. I think this is clearly a strength of this group. Finally, I will say on the note on the right, I think it's remarkable to note the impact of our cost savings programs that generated 93 million euro of gross savings or gross gains since the beginning of the year, which is a 3.5% improvement in our cost base. If we deep dive a bit on our end markets rapidly and recent trends in Q3 construction, It remains subdued, and if you go a bit in detail, Q3 is in line of what we saw for the rest of the year. Weakness in Europe, in general, U.S. holding in terms of statistics, but thanks to infrastructure and no residential, which remains strong, whereas residential, which is our main market, even its larger exposure, still subdued. Similar trends in Asia, with China partially recovering. thanks to these government stimulus programs, but fundamentally residential areas still lagging behind. Interest states have started dropping, but we do expect a recovery of these end markets on the back of a large deficit in housing in all our main markets, being Europe, being the U.S. This should, I would say, trigger the solid demand for our mineral solutions in the quarters to come. Consumer goods holding well in the U.S., helped by a robust job market that continues. A bit flattish in Europe, despite lower inflation. I think people are still saving in this uncertain economic environment. Growth in China also limited because of increased household savings and low confidence, but should still, we believe, still be positive overall for the year. If you move to automotive, certainly the biggest source of worries today, excluding China, all other markets show clear weakness. And unfortunately, this is expected to continue in the coming months. And recent announcement for all the big car makers, I think, reflect this high incertitude for the months ahead. Europe posted probably a bit of a stronger drop and a negative outlook for the rest of the year. The same for Japan. North America is destocking. China is really the only one moving up, driven both by domestic demand and booming exports. Everybody expects H2 to be a bit lower, but still growing. energy going well positive trend overall china investing massive in solar a bit of high industrial activity worldwide so overall we look positively to this market electronics that experience strong growth during covet and then a negative catch-up is finally going back in the right direction so good progress an electric vehicle contrasted decreasing europe and the us not only The expected growth is not there. The recent months showed a decrease compared to last year. We believe it's temporary, but it's a fact. More than compensated by a strong Chinese market, production, domestic sales, and export booming. Last slide on the markets. I would say industrial activity in general. It remains weak in Europe, and we don't see short-term significant rebound. It held well in the U.S. It is slowing down towards the end of the year, as economists tell us, but it remains still a good level. And it's okay in China. This program from the government are starting to show an impact, and exports remain very strong. Iron and steel, it's a market that remains under pressure. Europe, you see a plus for the quarter, but it's really because the very, very low comparison of last year. I think iron and steel makers are not particularly happy in Europe with current level of demand. U.S. is low holding, a bit more protected. In China, that has been exporting a lot, comes also under pressure, both on the export side, but also a weak construction market that is the big user of steel. And we expect this trend to remain in China for the coming quarters. I hand over to Sébastien for more details on our financial performance of the quarter and the nine months.

Thank you, Alessandro. Good evening, everyone. We will go through some of the key aspects of our financial performance. You will see for the first time in our results the full effect of the disposal of the assets serving the paper market. An important aspect of the release is to make sure that this perimeter effect does not overshadow the good performance of Imerys' underlying business. If we start by revenue on the third quarter, the perimeter effect we mentioned, minus 83 million in Q3, is mostly related to the assets serving paper. You will note a continuing recovery of volumes, up 3.8% on the quarter, and they are now positive year-to-date. The price also continued to normalize after two years of high inflation. Even with market-driven adjustments, as expected and as announced, prices were positive in Q3 as compared to last year. All in all, for the nine months, sales reached 2.8 billion and showed positive organic growth for the first nine months of the year, and I would say for the first time of the year as well. If we look now into more details at our three business segments and the different business dynamics, beginning with our biggest segment, performance minerals. In Americas, The business was up 11.6% organically in the third quarter. It benefits from strong volumes, especially in consumer goods, and market share gains, all coupled with positive prices. In EMEA and APAC, sales reached 308 million euros in Q3, also an organic growth of 5.7% as compared to last year. Plastics perform well, as we also manage to gain some market shares. The segment also benefited from the ramp-up of our new plant in China, dedicated to lightweighting solutions for automotive polymers. Filtrations and life science improved as well. Pricing is back to a positive trend. If we look at the global picture, the perfumin activity shows a solid performance with 8.2% organic growth in the third quarter, and it drives a 2% organic growth for the first nine months of the year, where also we see the increased dynamic in the Americas. If we look now at our solutions for refractory, abrasive, and construction. The segment recorded sales of 284 million in Q3, a slight decrease like for like as compared to last year. Volumes were impacted by the weakness of the automotive sector, directly impacting our abrasive activity. European industrial activity, as mentioned by Alison Rowe, was low in the last three months, whereas the U.S. demand was actually more solid. In the same period, prices were almost stable, a good achievement in a deflationary environment. Since the beginning of 24, we have generated more than 900 million euros of sales with an organic variation of minus 1.6%. Now we complete the segment review with the solutions for the energy transition. Our graphite and carbon business posted a 1% negative variation in Q3 versus last year, but the good news is that it improved sequentially, plus 7%, as compared to Q2 of 2024. The business was supported by the lithium ion battery market improvement, as destocking in the value chain is almost over. It is partially offset by some price adjustment, highlighting the competitiveness of this market. Just one word about the quartz corporation, our high purity quartz joint venture. We observed only limited disruptions after the Hurricane Helen hit the U.S. operation. The production is gradually coming back to normal in the U.S. and we have no supply interruption to our customers. We still expect a strong growth of the overall photovoltaic market, even if on the short term, the value chain is impacted by high inventories. Let's look now at the group profitability as a whole. In the third quarter first, Adjusted EBITDA reached 148 million down versus last year, principally due to a perimeter effect of minus 17 million following the disposal of our assets serving paper. We also, as we announced, had a lower contribution of our joint ventures in Q3, a variation also of minus 17 million as compared to Q3 23. It means that the adjusted EBITDA of overall our underlying business increased in Q3 by 10 million, thanks in particular to the good performance of our perfuming business. If we now look at the profitability for the first nine months of 24, adjusted EBDA reached 532 million, an increase of 3% versus last year. It represents a 19.2% margin on sales, which has to be compared with 17.8 in 23. It is worth mentioning the positive evolution of variable cost that you see on the graph. lower than last year and also more predictable. Forward prices for freight and energy give us a better visibility to the input cost and enable our businesses to normalize the contractual relationship with their customers. If we look now at the other elements of our income statement for the first nine months of 2024, Driven by the increase of EBITDA, the current operating income improves by 9.8%, reaching 330 million, or 11.9% of sales. With tax expenses and financial expenses very close to last year, the current net income from continuing operation landed at 214 million, up 11 versus last year. The really exceptional elements of our P&L are the net operating expenses that represented $357 million, mostly coming from the translation reserve associated with the assets serving the paper market that we invested in July. The translation reserve, we already spoke about that, is largely related to the historic devaluation of Brazilian real since the acquisition of these assets decades ago. As a reminder, and we announced that already, at closing this translation reserve has been recycled to the income statement as other income and expenses in accordance with applicable IFRS standard. Remind you that this is a non-cash loss of €302 million, and even if it drives down the net income, it does not have any impact on the group shareholders' equity, and then no impact on the solidity of our balance sheet. I now hand over to Alessandro for the outlook and the questions.