Imerys Sa Ord

Good morning. This is the conference operator. Welcome and thank you for joining the eMERIS 2025 Annual Results Conference Call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Alessandro Dazza, Chief Executive Officer, and Pierre Nepareil, Chief Financial Officer of Imerys. Please go ahead.

Good morning to all of you. Thank you for joining us today to review Imerys Q4 and full year 2025 results. I think the first word is dedicated to Pierre Lebreu, our CFO next to me, our new CFO. Pierre is not new to Imerys. He has been with us for more than 20 years, new in his role. I'm very proud of this promotion because Pierre will bring strong leadership to the team, experience, and will guarantee continuity in this business. Pierre, welcome. And as usual, let me start by giving you some highlights of the year we just closed. 2025 revenue amounted to 3.385 billion euro, broadly in line with last year. Q4 at 800 million, also broadly in line with last year, both on a like-for-like basis, reflecting, I would say, solid pricing in a market with subdued industrial activity and construction demand in North America and Europe still lacking. Full year 2025 adjusted EBITDA landed at €546 million within our guidance, despite currency headwinds, impacting EBITDA for the full year for €22 million. And this was particularly evident in Q4, given the devaluation of the U.S. dollar. Year-on-year performance, EBITDA-wise, was also broadly in line with last year at minus 0.4% at constant exchange rates and excluding, of course, perimeter and joint venture effects. So, all in all, very resilient for our core business, supported by disciplined pricing and ongoing continuous cost management. Q425, also very similar to the rest of the year. The group generated free operating cash flow for the year of 127 million euro before strategic capex and expenses and around 80 million as reported. Strategic capex in 2025 were relating only to our lithium projects and I will return on the topic a bit later. Image structure remains sound, investment grade confirmed. Current income was 146 million euro and the board of directors will propose an ordinary cash dividend of 75 cents per share at the shareholders meeting on May 12th of this year. The payout ratio is consistent with all last previous years. Last important topic, the group did a non-cash goodwill impairment of the solution for refractory abrasive and construction business for an amount of 467 million euro. will return on this this impairment has no impact on the group cash position or financing capacity it purely reflects an accounting adjustment necessitated by changed mark market conditions and assumptions do not call into question the soundness of this business and i will further elaborate on this here we see a little bit our sales performance by geography for the full year and q4 europe main markets posted a light recovery in Q4, which gives us good hope for 2026, improving construction and improving industrial activity. Positive sign for the future. For the full year, however, as we see here, the business is still behind 2024, fundamentally due to low construction, industrial and automotive activity, partly only compensated by good and solid performance in consumer markets. North America, we had a very different shaded picture throughout the year, solid first parts and a weaker Q3 and Q4, the trend that we have seen already in the last six months, fundamentally impacted by weak industrial construction. Should be noted that a further impact on this activity is the devaluation of the U.S. dollar, which is affecting sales in euro, as we report, at the level of 5% compared to last year, so very significant. Asia, sales continue to grow nicely, not only in India, but also in China, which remains quite dynamic, especially around new technology, electric vehicles, and I would say strong exports. South America, after a strong first half, slowed down a bit in the second part of the year, partly in relation to U.S. tariffs on Brazilian products. Let's now look rapidly at our main underlying markets and their trends, which, of course, partly reflect already what I just described. But overall, I would say Q4 in line with Q3 in terms of trends, maybe with some signs of recovery in Europe and continuous strong growth of electric vehicles and energy storage. Construction was not a great year, especially in the U.S., In Europe, where we see, however, a reverse of this negative trend, so positive signs for the future, consumers remain very resilient in all geographies. Automotive, poor in Europe, a bit more stable in the U.S., and a very strong China, very strong EVs as well. And industrial activity normally follows the other markets, so I would say in line with the average of the others. Imerys does not only rely on underlying markets. We proactively target growth. And in order to give you an idea of some solid avenues of future growth, you see on this slide some of the recent business developments of the group. We start, of course, with our conductive additives business. It's continuing to grow thanks to capacity expansion. You remember in the last three years in Belgium as well as in Switzerland. Same for our investments in China in automotive, lightweighting on polymers in India for refractories and construction. And last example, which we have not discussed. publicized a lot, but also because it is still ongoing, a capacity increase for our high-purity diatomite filter aid called CellPure, which is used widely in the pharma business with strong growth, which we will accompany with new CapEx. Together, they are contributing more than 30 million revenue in 2025 with further growth ahead as we ramp up sales. Similarly, on innovation, launching new products takes time. That's why it's important to have a pipeline, but it is the basis for future growth. I will not enter into the many details. Here are only a few examples. There is a lot more. Some are already generating commercial sales. Some are under qualification and will be the engine of future growth. The fact that specialty minerals have unique and varied properties, this creates new ideas, new applications every year on a continuous basis. And we know, as you know, Imerys has the widest portfolio of specialty minerals in the world. If you look at the development of EBITDA in this slide, you see the robustness of our business model. On the left side, you can see the evolution of the full year adjusted EBITDA year on year. We do have a significant impact of perimeter coming from the divestiture, as you remember, of our assets serving the paper market in July 24th. joint ventures, which did an exceptional year in 24, especially the first part of 24, and exchange rates, a fix. If you remove these, let's say, external factors, what is most important, the core activity of Imerys delivered a very resilient EBITDA, basically in line with last year, despite what we all know was a challenging context in 2025. On the right side, you see the balance between price and costs, which highlights the good and continuous work done by the group, especially on cost reductions, first and foremost, but also on agility to react to market changes in terms of pricing when situations change. This remains and will continue to be a key factor for future success and profitability of this company. An important topic we mentioned today, and we go in more detail, we already announced in October with our Q3 results an improvement program. So here, finally, more details on it. We are launching a cost and performance improvement program named Project Horizon. which aims at restoring our targeted profitability, will consolidate the group's competitive edge, so our competitiveness, will drive efficiencies, and facilitate the agility needed in this ever-changing environment. It focuses on simplifying and streamlining the organization of the group structurally. Structurally is important because the savings are here to stay. Structurally lowering our cost base, adjusting our industrial footprint, and rationalizing our capacity worldwide when possible. The program is ongoing. It is subject, of course, to the completion of the required social and legal processes. On the financial side, on the right, Project Horizon targets annual cost savings of at least 50 to 60 million euros. run rate per year versus starting point 2025 cost base and we do expect to have benefits of at least 50% of the program already in 2026 with the rest on coming in 2027. We expect the cash cost of implementing such a program at approximately one year of saving which makes it particularly attractive. Let me now give you a short update on the two key topics for the group. Lithium, first. Announcements have preceded this call, so you are aware. On Emily, on February 11, we announced that the French state has acquired the minority stake in the project. It is a key milestone for the future of the project. It's an investment of €15 million in the equity of the company, which will support and finance the Emily project in finalizing the definitive feasibility study. until the end of 26 and probably in early 27. As far as our second project, Imerys British Lithium, is concerned, the scoping study, which is the step before a pre-feasibility study, was concluded and finalized in early 26, confirming at the end a high value and a strategic relevance of this project. However, the group has decided to place the project on maintenance and care, and consequently there will be no further investments in this project in the nearby future. With regards to the Chapter 11 process of the North American talk entities, another milestone, the confirmation hearing as planned started on February 2nd and was concluded on time on February 6th at the Court of Bankruptcy in Delaware. We anticipate the court to issue its ruling in the following weeks. The potential confirmation, if positive, will then need to be subject to an appeal, will need to be reviewed and affirmed by the U.S. Federal District Court. We remain confident in a positive outcome of this process. Moving to our sustainability performance, I'm pleased to share that we have successfully completed our 2325 Sustainability Roadmap you see here. some indicators. Of course, I will not read them all, but 14 out of 16 have been overachieved. This demonstrates how deeply we have integrated sustainability in the core industrial strategy of this group. And knowing that is a topic of particular interest, if we focus a bit more specifically on CO2 emissions and climate change, we can look at the next slide. Our Scope 1 and 2 emissions amounted in 2025 to 1.8 million tonnes of CO2 equivalent. This is a 28% reduction versus 2021, the starting point, which puts us well ahead of the pace required to reach 42% reduction by 2030. On Scope 3, we have already achieved 22% reduction against 2021 baseline, nearing our 2025 target for 2030. This performance is great and derives fundamentally from actions and investments in several areas, in particular energy efficiency, heat recovery, switching to low carbon energy. This achievement also confirms that we have met our sustainability performance target for our 2021 sustainability linked bond with a positive effect on the interest rate. We've done well in the past. We move on to the future. And we are launching our third roadmap to building on the experience of the last eight years and this continuous progress. We've taken the opportunity to strengthen and simplify our mid-term objectives and focus really on what stakeholders expect, while being, of course, fully aligned with the latest CSRD guidelines. I will not go through the list, but I assure you that our targets are both ambitious but also reachable. I now hand over to Pierre for a detailed analysis of our financial results.

Thank you, Alessandro. Good morning, everyone. It is a pleasure to be there with you today for the first time. So let me recap some of the key aspects of our financial performance, starting with revenue. Group sales were 3.4 billion euros for the full year 2025. This represents a 0.7% decrease at constant exchange rates and perimeter compared to last year, with volume slightly down and prices holding well. As a reminder, the perimeter effect includes a negative impact of €165 million from the disposal of our assets serving the paper market in July 24. It is partly offset by the 50 million euros of sales generated by the Chen Viron business acquired at the beginning of 2025. Currency had a negative effect of 82 million euros, mostly coming from a drop of the USD versus Euro from the second quarter onwards. You can see Imerys' performance for the fourth quarter at the bottom of the chart. Trends in sales volume and prices were similar to what we saw for the full year. The currency impact was, however, much more negative. It represented 4.2% of sales and was driven by impact of the weak USD. Let's now have a look more in detail at our three business segments. Beginning with performance minerals, this business generated 2 billion euros of revenue in 2025, representing 60% of Imerys group sales. Overall, the business remains very resilient given market circumstances, showing just a slightly negative organic growth compared to last year at minus 1.3%. Full-year 2025 revenue in the Americas was down by 1.3% at constant scope at exchange rates versus last year and stood at 841 million euros. Sales were impacted by a weak residential market in the US, suffering from high interest rates, unsold housing inventory and by a soft consumer market. Prices held well. Full-year 2025 revenue in the Europe, Middle East, Africa and Asia-Pacific region decreased by 1.7% at constant scope and exchange rates compared to last year. Volume were down by 2.8%, driven by muted construction and automotive markets. This decline was partly compensated by a good level of activity in the consumer market. In Q4, the performance was in line with previous quarters. Despite lower volume, performance minerals adjusted EBITDA is above last year by 4% like for like, a strong achievement driven by price discipline and cost management. The EBITDA margin was resilient at 17.8%. It is worth noting that performance on the Canviron, the diatomite and perlite business acquired in January 25, was ahead of expectation thanks to quick synergies implementation. Let's now look at our solution for refractory, abrasive and construction business. Full year sales to the refractory market were impacted by the low industrial activity in Europe and in Asia, while the US market resisted better. Pricing remains steady. It is worth flagging that organic growth was positive both in third and fourth quarter of 2025, driven by commercial actions and strong sales of advanced ceramic products. Full year 2025 adjusted EBITDA declined by 9.8% at constant scope and exchange rates due to lower volumes, which were partly offset by a positive price-cost balance and cost-savings initiatives. Let's now have a look at solutions for energy transition to complete this segment review. Starting with graphite and carbon, full year 2025 revenue increased by 11% like for like, driven by solid and market, primarily electric vehicles, along with new product launches and robust conductive polymers business. Fourth quarter revenue was stable as some external and temporary factors delayed sales by a few million euros. Full year 2025 adjusted EBITDA increased by 41.2% over the previous year. This substantial improvement is primarily attributable to significant volume increase. Adjusted EBITDA margin reached 25%, again of 5.5 percentage points. Let's now focus on TQC results. As a reminder, TQC is our 50% joint venture in high purity quartz business. Full year 2025 revenue amounted to 167 million euros, a significant drop from a record-breaking previous year. Performance was affected by disrupted solar value chain, even if inventories are now at healthier levels. Revenue improved in H225 at 85 million euros, outperforming both H1 2025 and H224. Full year 2025 net income dropped to 35 million. TQC delivered for the full year a solid 36% EBITDA margin. Now let's look at the group's profitability. For the full year, adjusted EBITDA reached €546 million, corresponding to a 16.1% margin. Looking at Imerys' direct operational performance, highlighted in the box in grey color, you can see that EBITDA was very resilient, with just a slight decrease of 0.7%, a great achievement given the economic context and supported by price discipline and cost management. On a reported basis, EBITDA decreased 19% in comparison to 2024. This reflects the lower contribution of joint ventures by 74 million euros, perimeter changes for 30 million euros and an unfavorable exchange rate effect of 22 million euros. The picture is similar for the fourth quarter, where adjusted EBITDA matched prior year levels, once adjusted for currency fluctuation, changes in perimeter and joint venture performance. Let's now move to the bottom of the P&L. Net income, group share, is a negative 409 million euros. As detailed on this slide, it is impacted by other operating income and expenses amounting to 555 million euros. These 555 million euros are mostly related to two items. The first one is a non-cash goodwill impairment charge of 467 million euros related to the solutions for refractory, abrasive and construction business. This impairment reflects a lower performance of the business plan than anticipated one year ago, and the fact that anti-dumping measures on fused minerals imported from China, finally implemented by the European Union, are less protective than initially anticipated. It is important to flag that markets have eventually stabilized and we do expect a progressive recovery of this business from 2026 onwards, as already noted in Q3 and Q4-25, when RAC posted positive organic growth. Savings expected from the project horizon should further support recovery. The second items are non-cash write-offs related to Project Horizon for 41 million euros and to the decision to place Imerys British Lithium on maintenance and care for 31 million euros. Let's now have a look at the cash flow generation. Current free operating cash flow amounted to 78 million in 2025 or 127 million before strategic capex. In comparison with 2024 year, free cash flow generation is primarily impacted by a decrease in dividends received from joint ventures with no dividend received from TQC in comparison with approximately 70 million euros received in 2024. You will note as well the €26 million increase in working capital, primarily driven by higher inventory in the RAC business area, where we had anticipated a stronger impact on sales of anti-dumping measures in Europe, which finally did not materialise. Inventory and more generally working capital will definitely be an area of continued focus in 2026. Lastly, paid capital expenditures amounted 317 million euros. New CAPEX booked in 2025 amounted to 297 million, including 47 million euros related to our strategic investment in the lithium projects. The remaining 250 million euros recurring capex were well below historical level of more than 300 million and below our estimate provided in H1 2025. We do expect that capital expenditures in 2026 will continue to be limited and in the 200 to 270 million euros range. This should allow us to achieve a robust cash generation in 2026. To conclude this financial review, let's now look at net debt. It slightly increased in 2025 as a result of strategic capex spend and dividend paid. I will highlight a couple of additional points. First, net financial debt went down in H2 2025, confirming the positive trajectory of our net cash generation. Second, we do not expect any significant strategic capex in 2026, as the financing of the definitive feasibility study for the Emilie Lithium project will benefit from the contribution of our partner in the project. I would also like to remind you that we successfully placed a €600 million senior unsecured note last November. The average maturity of our bonds is consequently extended to 4.3 years from 3.4 years at June 2025. Lastly, Imerys investment grade was confirmed both by S&P and Moody's in second semester 2025. Net debt represents 2.5 times the adjusted EBITDA, reflecting the solid financial structure of the group. On this positive note, I will now hand back to Alessandro for the outlook.