Imerys Sa Ord

Good morning. Good morning to all of you. Thank you for joining us today to review Imerys Q4 and full year 2024 annual results. With me this morning, Sébastien Rouge, our CFO. Let me start as usual by giving you some highlights for the year we just closed. In 2024, Imerys delivered a solid performance posting organic growth and increased EBITDA and increased margin driven by volume recovery. Revenues landed at 3.6 billion euro with a 1% organic growth. In Q4, organic growth amounted to 3.5% and this was the third consecutive quarter of improvement. This achievement reflects continued volume recovery driven by additional industrial capacities, new product launches, commercial action and pricing turning positive in the second half of the year. Imerys posted and adjusted EBITDA for the full year at 675 million euros, an 11.4% increase over the prior year, like for like, and in line with our guidance. Noteworthy, the strong Q4 performance at plus 14%, like for like, compared to 2023. The group generated a free operating cash flow in the year of €209 million before strategic APEX 136 reported. Imerys financial structure is sound and its investment grade rating is confirmed. Another important topic, Imerys continues to offer shareholders an attractive remuneration. At the shareholders general meeting on May 13 this year, the board of directors will propose an ordinary cash dividend of 1.45 Euro per share, a 7.4 increase versus last year. On this slide, I would like to focus a bit more on Imerys sales performance. Q4 revenue was strong with a 3.5% organic growth versus last year. This is, as said, the third consecutive quarter of continuous organic growth. The solid performance was fueled in particular by the excellent work of our performance minerals teams, both in the U.S. and in EMEA APAC. Prices in Q4 confirmed the recovery already started in Q3 and are now solidly in positive territory. For the full year, prices are fast flat versus last year. The volume recovery Imerys enjoyed in 24 amid, in general, a weak underlying market situation, was driven by additional industrial capacities, new products, commercial actions, and we will elaborate a bit more on this in the presentation. Let's now comment on Imerys EBITDA, our performance for the full year 24. The graph on the left side highlights the significant improvement of Imerys adjusted EBITDA margin, reaching 18.7, up 110 BPS basis points versus last year. It is driven by, yes, volume recovery, but price discipline, cost savings, and the higher contribution from joint ventures. In absolute terms, the adjusted EBITDA progressed as well by more than 11%, like for like, versus last year. If we focus on the evolution of prices and costs for Q4 and for the full year, the graph on the right side illustrates Emery's ability to adjust its selling prices to cost inflation. During the first nine months of 24, the price-cost balance was positive despite some price concessions to customers, as we could benefit, as you see, from a deflationary environment. In Q4, as the situation on the cost side was less favorable, we were able to pass on price increases. This is clearly one of Emery's core strengths. Finally, I think important to point out on the cost saving programs, these generated 111 million of gross savings, so before inflation, since the beginning of the year, representing approximately 3% of total costs. On this side, an update on the markets we serve, especially after the divestment of the assets serving the paper market. Imerys main exposure remains construction with close to 40%, followed by consumer goods. New energies, small but still gaining relevance year on year. And if we now look briefly to each end market and the recent trends, some comments, construction. Throughout the year, we have seen weakness in Europe in general, U.S. a bit better, though mainly thanks to infrastructure, no residential, whereas residential, which is Emery's main exposure, still subdue. Interest rates are expected to continue dropping, especially in Europe, so we may expect a recovery of the markets on the back of a large deficit in housing, really in all geographies. This should trigger demand for our mineral solutions. Consumer goods, always a good market, holding well in the US, thanks to robust job market. It grows, but slowly in Europe, although inflation is dropping. China was okay, a bit hampered by increased household saving levels and a bit of low confidence. But we have seen a positive trend since Q4, which should carry on in 2025. On this slide, automotive. To start with, definitely the biggest source of concerns today, excluding China, all markets show weakness, and this is expected to continue in the coming months. In Europe especially, the situation has further deteriorated. Expectations were revised downwards during Q4, painting, frankly, a gloomy picture for the industry and a negative outlook also well into 2025. North America, we expect current softness to be prolonged into 2025, and there is for sure an additional risk today of supply potential, supply disruptions linked to the ongoing trade tariffs discussions. Finally, China, good Q4, so positive for the full year. 2025 will be more contrasted, we believe, as positive internal demand might be compensated by an expected slowdown in exports. Energy remains weak in Europe and the U.S., while China continues to grow, and in particular on solar and photovoltaics. Electronics, goods rebound since the end of 23. And on the electrovehicles markets, I would say slow with uncertainties in Europe, less incentives, we know well, and in the U.S. On the contrary, production, sales, domestic sales, and export still booming in China. Moving to the last slides of end markets, industrial activity in Europe continued to decrease. And frankly, we do not expect a rebound before the second part of 2025. Better in the U.S., probably slowing towards the end of the year and maybe into first, second quarter of 2025. But then we do expect a good rebound for the end of the year. Holding well in China. driven, as we know well, mostly by exports, to be seen for 2025. Iron and steel, it's a market that remains under pressure. The industry is definitely not doing well in Europe. The long-awaited announced rebound in the second half of 2024 did not materialize. Now the recovery is rather delayed, pushed back into the second part of 2025. U.S. is holding better. It's a more protected market, and we do expect to see growth in 2025. China, we know there is an issue with overcapacity and oversupply. Exports partly helped as they increased, but we also know that China is facing more and more restrictions abroad, so production is expected to slightly decrease in the following years. Let's now look or focus on a few strategic highlights of the year 24. We've closed the year with the acquisition of the European diatomite-amperlite business of Canviron. It's a nice extension and nice complement to our diatomite-amperlite footprint. It broadens our filtration and life sciences product portfolio. to better serve our customers in food, in beverage, filtration and pharmaceutical markets, all posting healthy growth. On the talk side, the US litigation, we achieved an important step on January 5th, 2025. This year, more than 90% of voting claimants have accepted the plan of reorganization. So we can now progress towards a definitive conclusion of this topic. A few steps still remain before the North American talc entities can conclude the Chapter 11 process, and I think this is clearly explained in this slide. On the lithium side, on our projects, they are proceeding according to plan. In France, Emily, we completed the PFS, the Pre-Feasibility Study. We're now starting to work on the next step, the DFS, the Definitive Feasibility Study, basically the engineering of the commercial plant. while we are finalizing the necessary steps for the construction of the industrial pilot plant. In the UK, where as you know we are a bit behind time-wise, we acquired the remaining 20% interest we did not own and we continue to work on the characterization of the deposit and on the pre-feasibility study work. Award on sustainability, I will come back also later on, good performance in term of CO2 emission with the reduction of scope one and scope two greenhouse gases by 28% in absolute term, so in thousand tons of CO2 versus base year 21. Well on track towards our SBTI validated target of minus 42% by 2030. In terms of ESG ratings, I think we just received, we were just awarded the A rating by the CDP. It's a great honor and reaching this top score, I think reflects the group's dedication to mitigating emissions of greenhouse gases. But in general, the group improved all its scores in the year 24 and we are systematically rated above industrial average. On this slide and the one right after, I would like to highlight the results of some of our recent efforts to outperform our end markets. Here is a snapshot of our recent investments in new product lines, all recently commissioned, but already contributing approximately 50 million euro of the group sales in 2024. Jade is our greenfield plant in China, producing mineral solutions for lightweighting of polymers, in particular for the growing automotive sector in China. In Wilbroek, in Belgium, where we produce conductive additives for lithium-ion batteries, Line 3 was commissioned at the end of 2023, started delivering and serving the markets in 2024, whereas Line 4 was commissioned in December of last year. So we now have enough capacity to accompany the expected growth of this industry for a few years. In Vizag, in India, where we produce aluminate binders serving the growing local refractory and construction markets also ramping up very successfully. All these new capacities have room to grow and will guarantee a flow of new sales going forward. Second lever of growth, for sure, innovation. I will not enter into too many details of the different products, but here are just some examples of innovative products. In 24, these products alone on this slide generated more than 40 million revenues, and it will be more in the future. It's important to remind that new ideas and new applications are generated every year. thanks to the incredible properties of our minerals. And at Imerys, we have the widest portfolio in this regard. Let's now focus a bit on group sustainability and our roadmap. We set objectives, you may remember, a three-year program till 2025 around three pillars, people, customers, and planet. On this slide is an intermediate picture, 2024, To make it simple, we are well on track to achieve our targets for most of them. And if we want to focus a bit more specifically on CO2 and climate change in general, we can look at the next slide. We had committed to reduce our greenhouse gases emissions, scope one and two, by 42%, in line with the 1.5 degrees trajectory, and by 25%, scope three, by 2030, using 2021 as a base year, and of course in absolute terms. Over the last three years, we have managed to reduce emissions by 28%, so more than the linear requirement to reach the target. using some levers. First, energy efficiency. We have a dedicated program called Energize, aiming to increase the energy efficiency at our sites. Progressing well, adopts the newest technologies and more to come. Secondly, fuel conversion. So reducing fossil fuel use, switching typically to biomass or electrification. A nice example is the conversion from coal in the U.S., in our plant in Georgia, from coal to a mix of biomass and natural gas to fire six kilons. Third lever, purchase. Purchase of low-carbon electricity, not only from our suppliers, but also internally. We have commissioned three solar plants under our power purchase agreements, and much more is in the pipeline for the future. A 42% reduction in CO2 emission is an ambitious target, but I'm confident we will achieve our goal. As a conclusion on sustainability, here is a snapshot on how the leading rating agencies in terms of ESG rate Imerys. Definitely, our strong and constant commitment to sustainability is highly recognized by all of them. I now hand over to Sébastien for a more detailed analysis of our financial results.

Thank you, Alessandro. We will go through the key aspects of our financial performance. Before we start with revenue, a short reminder about the disposal of the assets serving the paper market. This was closed in July. It's important to make sure that this disposal, which is the main contributor of the perimeter effect, minus 182 million, that it does not overshadow the good performance of Imerys' underlying business. So with positive volumes and prices almost flat, Imerys had a full year 24 with organic growth of 0.09% and our full year sales reached 3.6 billion. If we look at Q4 alone, Imerys organic growth is plus 3.5% and we can note positive volumes for the third quarter in a row. Prices continue in an upward trend. You remember they were negative in Q1, they were slightly negative in Q2, flat in Q3 and plus 1.4% in Q4. If we look now into more details at our three business segments, we start with performance minerals. This business generated 2.2 billion of sales in 24, and it represents more than 60% of the sales of the group. Overall, an organic growth of 2.4% as compared to last year. Revenue in Americas were the most dynamic, up 6.2% at constant scope and exchange rate. Sales were supported by volumes, up 4.5%, mainly driven by consumer goods and also solid pricing. In the fourth quarter of 24, revenue reached 219 million, plus 9.4% like for like versus prior year, confirming the good business momentum. Revenues in Europe, Middle East, Africa, and Asia Pacific grew by 0.8% at constant scope and exchange rate. Following a low start of the year, we have seen a progressive volume recovery since Q2, especially in paints and plastic markets. New capacity in China for lightweighting of polymers supported the fourth quarter good performance. Prices were maintaining a positive dynamic, which led to a 2.2% organic growth in Q4. The adjusted EBITDA of this segment increased by 4.6% in 2024 as compared to prior year, and that in spite of perimeter changes. And this was supported by demand recovery and significant cost savings. Now looking at our solutions for refractory, abrasive, and construction business. This segment recorded sales of 1.2 billion in 2024, out of which 286 million in the first quarter, well in line with 2023 levels. It benefited from an overall good level of activity in the US, but still suffering in the European industrial and construction markets. Thanks to price increase and stable volumes, this segment has had a positive growth in Q4. Adjusted EBITDA in absolute value and as a percentage of sales has improved significantly, supported by a positive price-cost balance and cost savings actions throughout the year. Now, let's complete this segment review with the solutions for energy transition. Graphite and carbon first posted a 3.5% revenue decrease in 2024 versus prior year, as the activity suffered at the beginning of the year from a long destocking period in Asia. Let's note that the trend reversed at the end of 2024, with Q4 sales up 16% versus Q4 of 2023. Same trend for adjusted EBITDA, which reached 42 million for the full year, slightly lower than in 23, but picking up in the second part of the year. H2 24 EBITDA is better than H1 and very close to the H2 of 2023. Now to the Quartz Corporation. Our joint venture posted an increase in revenue over the year of 1% compared to 23. A very strong H1 performance, fueled by exceptional sales, contrasted with H2 suffering from very high inventory in the global photovoltaic value chain, which is the main market of TQC. TQC serves also two other end markets, semiconductor and optical fiber. Both of them held well in 2024. The net income for the full year reached 196 million, half of it is reported in our financials, and that's a 22% increase as compared to the prior year. If we look now at the group profitability as a whole, For the full year of 24, adjusted EBITDA reached 675 million in line with our guidance announced in July, and that's an increase of 1.2% versus prior year on a reported basis. The adjusted EBDA margin reached 18.7%, showing a significant improvement of 110 basis points as compared to 2023. Riven by stronger operating leverage, we have volume up and cost way lower than in 2023, and a higher contribution from our joint ventures. If we exclude the perimeter and change effect, the adjusted EBDA increased by 11.4% over the full year compared to 2023. And if we look at the fourth quarter alone, adjusted EBITDA reached €143 million. The decrease versus last year is only due to the perimeter effect. The Q4 adjusted EBITDA on a comparable basis increased by 13.9% thanks to revenue growth and cost saving actions. If we look now at the other elements of our income statement for 24. Current operating income improves by 8%, reaching 394 million, which is 10.9% of sales. That is driven by the adjusted EBITDA improvement and also lower depreciation and operational provision than last year. With tax expenses close to 23 and higher financial expenses reflecting mostly interest rate increase, the current net income from continuing operation landed at 262 million, up 8.2% versus prior year. Net other operating expenses represented 357 million, mostly originating from the translation reserves associated with the assets serving paper that we divested in July. This is a remainder. We discussed about that with the Q3 release where this impact was already booked. This translation reserve has been a recycle to the income statement at closing of the transaction in accordance with applicable IFRS standard. It is important to remember that this accounting entry of 302 million does not have any cash impact and even if it drives down the net income, it does not have any impact on the group shareholders' equity. If we look now at the cash flow generation, the free operating cash flow figure includes 364 million in paid capital expenditures, out of which 73 are labeled strategic capex. These correspond to the graphite and carbon expansion capacities, and they came to an end in 2024. And also inside this 73 million, we have the expenditure for lithium projects. The operating working capital remained stable, well contained in absolute value in spite of the recovery inactivity. The dividends received from joint venture amounted to 75 million, a 20 million increase as compared to prior year. All in all, we reported a current free operating cash flow of $136 million in 2024 or $209 million if we look at that before strategic capex. With this level of strategic investment, the recovery of our business and the LC dividend, net debt of the group increased slightly. On top of the FX impact, 36 million, which is mostly attributable to the increase of our US dollar denominated debt, I want to highlight the proactive management of our pension plans. With a 52 million contribution to our UK and US pension, we have reduced to zero the deficit of all our funded pension plans and could de-risk the assets, which gives a positive impact on our balance sheet today and less risk for the coming years. All in all as well, our investment grade rating was confirmed. The net debt represents 1.9 times the adjusted EBITDA, reflecting the solid financial structure of the group. Now back to Alessandro for the outlook.

Thank you, Sébastien. Let me now wrap up this presentation with a few key takeaways. Even in an overall economic environment, which is still uncertain, because that's what we're living in, the Group expects to continue on its growth path in 2025. We need to remain focused on costs and on cash, but combining these efforts with our commercial initiatives, our innovative product offerings, and our recent investments in additional production capacities, we are confident to continue delivering a strong financial performance. Thank you very much. I now open the floor to your questions.