Imerys Sa Ord

Good day and thank you for standing by. Welcome to the IMMERYS half year 2026 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 and 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question you can press star 1 and 1 again. Please be advised, today's conference is being recorded. I would now like to hand the conference over to your speakers today, Alessandro Dazza, Chief Executive Officer, and Pierre Lebreuil, Chief Financial Officer. Please go ahead.

Thank you, and good evening to all of you. Thank you for joining us, as usual, to review Imerys H1 2026 results. Next to me, Pierre Lebreuil, our CFO. Let me start by giving you some highlights of the first semester of 2026. Strong Q2, which led to a very solid first half performance with higher sales, higher volumes, firm pricing, costs under control, and consequently, a material expansion of EBITDA and EBITDA margins. Second quarter results further accelerated the positive momentum which we presented already at the end of Q1. We can be, I would say, proud given the current general environment around us. So revenue, to go a bit more in detail, revenue was above 1.7 billion euros, up 1.8% versus last year at constant FX. driven by volume growth and firm pricing. Sales volume were up 0.5%, reflecting the contribution of recent capacity expansions and the strong performance of our commercial teams, offsetting the impact of some subdued demands in certain markets, weakness in Europe, and a little bit the Middle East following the conflict. Specific at the Middle East, limited impact. You might recall in April, we mentioned that we had almost no sales in the area or from the area. In March, situation has improved with, I would say overall, more limited impact than expected on revenues for the group. Fundamentally, the group, together with our local partners, we found alternative routes to import or exports to and from the region. Pricing remained firm, increased in average 1% versus prior year. You remember it was significantly lower in Q1, so a step up in Q2. Foreign exchange rates had an average impact of 2.7% on sales. It's almost 50 million, mainly relating to the US dollar depreciation, and it was Fundamentally concentrated in the first quarter of the year. Adjusted EBITDA for the period amounted to 290 million, up 10% at constant FX, driven by higher sales volumes, price increases, good, strict cost management, and improved contribution from joint venture. It's important to highlight, as we will see a bit later on, that at constant exchange rates, all our businesses improved the profitability in H126 versus H125. Strategic roadmap progressing well. Project Horizon is on track. And I have a specific slide right after on the topic. Two bolt-on acquisitions, they were announced before we closed. The first one, Great Lakes in the US, it will increase our presence in this very dynamic market. Closed on the 1st of June, so for the one month of little, let's say, contribution to our perimeter. The second one in Brazil, SB Mineração, closed on the 1st of July. Calcium carbonates for the local market, we will see the effects in H2 26. Last, but just as important, EON of Belgium and Imerys Graphite and Carbon in Belgium inaugurated a state-of-the-art energy recovery plant at Imerys production site in Wilbreuq, in Belgium, where we produce our carbon black for batteries on July 2nd, so recently, and this will significantly reduce the group CO2 footprint. And we will use exhaust gases to produce electricity for the equivalent of 40,000 A slide here to give you an update on the Horizon Project, our performance improvement program launched or announced late in October. In a nutshell, I think it's important to note this program, which aims at really reaching our target profitability and especially strengthen our competitive position, is on track. All activities are on time. Social processes are launched and progressing as planned. Our targets of the reaching 50 to 60 million euro annual run rate savings versus our 2025 cost base already step up. 70 million have been achieved by the end of June. I would say well balanced between fixed cost and overheads. This confirms what we said before that the group is on track to realize over 50 percent of the expected benefits in 2026 already with the full run rate impact expected to be achieved in 2027 onwards. On June 30 a provision of 30 million have been booked as restructuring costs for the For the industrial footprints ongoing, what is called right sizing of production capacity is being implemented, has been announced where needed, when needed, and I would say specifically in Europe, but not only. Common ERP systems worldwide is now almost finalized. We have more than 85, almost 90% of all of Imerys under one ERP. Massive effort over five years. These will also have help accelerate AI implementation, share services, and certainly fuel productivity gains. Let's take a look at our main underlying end markets and the trends during the second quarter. I would say construction activity, I would say a bit subdue all geographies, Excluding, of course, infrastructure and data centers. But, you know, Imerys is less exposed to this specific sector of the construction market. Maybe a bit better in Europe. Definitely remains very soft since several quarters in the U.S. We know the need of housing. So for me, it's a matter of time before this market returns to a healthy growth. Consumer goods, no issue. Resilient in all geographies. So far, automotive was down, lower production levels, basically no geographies. China was holding the world up recently. Even China had a drop in Q2. Maybe on the positive side, production of electric vehicles continues on a strong path, and you will see in more details later on the good impact on Emery's business, especially around our solution for energy transition business. Finally, general industrial activity typically follows the overall economy, so a BIT soft in Europe is holding better and even improving in the US, and especially for Imerys, very robust in Asia and in China. So if you look at BIT's sales performance by geography in the first half of the year, Asia, you see on the right, very strong, even stronger than Q1, which was good. Growth in all businesses certainly with a specific excellence in conductive additives. China performing very well is becoming one of the most important markets for the group with good sales, good profitability, and good growth.

Europe still negative in Q1.

impacted mainly by residential construction, which is really slowly but very slowly picking up, and in general low industrial activity. Okay in consumers, and I think we did better than the market with share gains. North America, solid rebound in Q2, 3% up after a bit softer Q1. Housing markets, as I said before, remains weak. but we had strong sales infiltration in industrial application in consumer goods in general and prices remain firm. South America was good in light with Q1. I would say at constant exchange rates up especially around consumers, a bit weaker in construction. If we now look a bit more in detail our three business units or business segments starting with performance minerals. Revenue of approximately 1 billion is around 60% of the group sales. Overall the group remains very resilient considering especially market circumstances and there you have APAC and therefore EMEA, APAC and therefore the Middle East impact. Positive organic growth, stronger in America and in APAC, a bit weaker as I said before in Europe. For Performance Minerals America, Flatish volumes, construction offset by strong consumers, strong filtration business, and definitely shear gains in polymer business. EMEA APAC volumes down, impacted especially in ceramics in Europe. High energy costs following the Middle East conflict caused a reduction in production volumes at our customers. Rebounded in June, so I have hopes that this was a temporary stop to react at high energy prices. But we gained market share in polymers and definitely in filtration. Price is up, partly to pass through higher energy costs to our customers, classic energy surcharges. Adjusted EBITDA strong. Up 8.1% at constant exchange rates, supported by a positive price-cost balance, but also very strict cost management. If I look at our business solutions for refractory abrasives and construction, revenue reached 571 million in H126, up 1.6% at constant FX. versus last year. Volumes were up 1.7%, strong performance in abrasive, strong performance in advanced ceramics, getting better in construction, strong in China. I think refractory and construction, some market share gains in this, especially in Europe, in these weaker markets. Cost saving efforts allowed the group Flexibility, flexibility on prices. Prices were down in average for this business, but that led to win back market shares in H1. And still, we increased our profitability. Demonstration is on the right. EBITDA, adjusted EBITDA for the business was up 11.5% at constant exchange rates. If we complete our segment review with solutions for energy transition, we start with graphene and carbon, strong, strong growth, almost 14% year-on-year at constant exchange rates, confirming the impressive growth from an already high comparison base of plus 20% in H1 of last year. Revenue, 137 million, as I said, driven by robust markets, typical electric vehicles, energy storage, Avenue of Growth, Static Polymers, but also market share gains with new product launches. H126 adjusted EBITDA increased also by 16.4% at constant exchange rates versus last year. TQC, good results as you see on the table, revenue rose 6% versus last year, but our Business in Q2 was helped by some one-offs that led to higher sales and higher profitability. Pierre will give you a bit more details on our financial results.

Pierre. Thank you, Alessandro. Good evening, everyone. Thank you for joining us tonight. So let me recap some of the key aspects of our financial performance, starting with revenue, as just detailed by Alessandro. Group sales amounted to 1.74 billion euros. This represents 1.5% organic growth year over year, driven by a positive 0.5% volume effect. Prices rose by 1%, accelerating mainly in Q2, driven by the pass-through of higher energy and logistic costs to customers. Organic Growth reached therefore 2.3% in Q2, so accelerating versus Q1. Currencies had a negative effect of 47 million euros, mainly in Q1. So as a reminder, USD was at a strong 1.05 USD per euro level in the first quarter of 2025, whereas it is now around 1.14 as you know. Lastly, the 5 million euro perimeter effect in Q2 is mostly related to Great Lakes mineral acquisition. If we now look at the group profitability, as you can see, for the first semester, adjusted EBITDA reached 290 million euros, corresponding to a 16.6% margin. Looking at IMERY's direct operational performance, which as usual is highlighted in the box in gray color, you can see that adjusted EBITDA has significantly improved with a 10% year-on-year growth driven by positive sales volume, disciplined pricing, strict cost management, and as well the higher contribution from joint ventures. Then if we just look on a reported basis, EBDA increased by 3% in comparison to the first semester of 2025 and this is a consequence of a massively unfavorable exchange rate effect of 17 million which as you remember was mostly recorded in Q1. So just one additional comment about the strong Q2 2026 performance. So just in Q2 adjusted EBDA amounted 172 million euros showing a solid 14.5% year-on-year increase at constant exchange rates. So if we now deep dive a little bit on the way we manage our costs in the inflationary environment we faced in H1 2026 and especially in Q2. So keep in mind that the energy and transportation costs surged on March 1st, after the start of the war in Iran, impacting our H1 2026 cost by around 15 million euros net of net of edges. So how was this offset in our performance? So first, by maintaining firm pricing, notably starting April 1st, 2026, as we pass through energy and freight prices to our customers, especially in Europe. Secondly, by managing our costs for multiple initiatives related to the Horizon project, are ongoing to optimize our overheads and our fixed costs, including some production capacity adjustments in Europe. So at June's end, 2026, 17 million euros savings have already been booked related to this plan in our financials. and in parallel and in addition to this Horizon Plan, we have pursued our iQube Industrial Excellence Program delivering as well additional savings at June 2026. If we now move to the bottom part of the P&L, as you can see, the current financial result was negative at 46 million euros in the first half of 2026, This includes a 10 million increase due to interest rate and as well as 7 million non-cash mark-to-market revaluation of our two virtual power purchase agreements. Other operating expenses are negative by 17 million year-to-date. Those 17 million include a 30 million euro charge for restructuring costs related to Project Horizon. and this is partly offset by a non-cash revaluation gain on the MED Lithium project now accounted for under equity method. So as a consequence of all this, Nelkin Chrome group share is positive at 49 million euros. So if we now look at the cash flow generation, current free operating cash flow amounted to 109 million euros So as you can see, largely above last year. So in addition to the improved adjusted EBDA, this is due to three main factors. First, here as well as you can see, reduced operating working capital requirements, and this despite the sales growth we just reported. Multiple initiatives are ongoing to reduce working capital, and some of them already delivered meaningful benefits in this first half of the year. Second, dividend received from GVs in the first semester increased, as you can see in comparison with last year. This especially includes a $10 million dividend received from our TQC joint venture, whereas we had not received any dividend from them in 2025. Finally, FOCF improved free operating cash flow improvement was as well driven by lower capex paid. So out of the 10 million strategic capital expenditures reported in this slide, 7 million were invested in the Émilie Lithium project before the switch to equity method consolidation on April 1st. So as a reminder, those 7 million euros were fully covered by the fund received from Banque des Territoires, so they do not represent any net cash out for Imerys. So to conclude this financial review, let's now look at the net debt. As of June 30th, 2026, net financial debt amounted 1.47 billion. So this means a 77 million increase as compared with December 31st, 2025. This increase takes into account the acquisition of Great Lakes minerals early June, and as well a large non Cash Adjustment for New Lease, basically the lease of our new head office. Excluding those two one-shot components, net debt at June 30th, 2026 was slightly decreasing in comparison with December's end. So it is as well important to mention that the net debt to EBITDA ratio at 2.6 was roughly stable in comparison with December 2025. As a reminder, Imerys' investment grade rating was confirmed both by S&P and Moody's in the second semester of 2020. So on this positive note, I will now hand back to Alessandro for the outlook.

Thank you, Pierre. So let me conclude. A few words on the current situation and what to expect going forward. I think, as you have seen and heard, strong performance in the first half of 2026. This gives us confidence in delivering a solid, full year results in progress and progress compared to last year. We remain, however, watchful and careful about the broader macroeconomic and geopolitical uncertainty. Specifically, there is a risk of prolonged high energy costs, which could and would probably drive inflation and potentially lead to higher interest rates to be seen. and the situation varies really daily. As a consequence, the group targets an adjusted EBITDA in the range of 550 to 580 million euro for the year 2026, assuming no catastrophe and no material deterioration of the current macroeconomic geopolitical environment. What can we control? That's what we focus on. Serving our customers, managing our costs, cash discipline, Thank you for your attention and I hand over to you for Q&A.

Thank you. If you would like to ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced and to withdraw your question, please press star 1 and 1 again. And we will now take our first question. and this is from Sven Edelfelt from Oddo. Please go ahead.

Yes, hello, good evening, gentlemen, and congratulations for this release.

I had actually two questions.

The first one is on the guidance, because I'm not sure I understand. The guidance seems a bit cautious, so I just wanted to, if you maybe could elaborate a bit what are your main hypotheses behind it. if I look at the guidance at the midpoint it means an increase in H2 of the EBITDA of 1.5% it has been like 3% up in H1 and if I look at Q2 it's almost 12% up so I would like a bit of a clarification here so that's the first one, on the second one I was looking at the trajectory on the net debt. Of course, it's going up in H1 due to the seasonal nature of the construction activity. But if you could provide a little bit of an update, where do you believe the net debt to EBITDA will land at year end? That would be helpful. Thank you very much.

Thank you, Sven. I'll try to answer your first question and Pierre will comment on the quality of debt and ratios. The part of this on the basis of our guidance is our current view of the business and the markets. This must take into consideration the uncertainty, especially around the geopolitical situation. Last week when we were drafting our press release, our presentation, and preparing our discommunication, the war in the Middle East flamed up again. Oil went above 100. Gas in Europe, $105 per barrel. The Brent gas in Europe reached almost 65 euro per megawatt hour. If this would be the case, It's bad for the economy. It's bad for the economy. We have seen when it happened in April, most of our ceramics business customers shut down their kilns. Gas is one of the main costs. So everything which is tiles, tableware, sanitary ware, everything stopped. So the business in the Middle East, India, dropped significantly. So something like this could have consequences and today we cannot exclude it. There was a kind of ceasefire a week later. Price dropped to $80 per barrel and the gas went down to $50. Today we're back to $90, although there is no message, no news. So very difficult today to be firm on the outlook of markets. Not only is energy itself and the cost, and you've seen we can pass it through because everybody does, but this level of cost increase could cause inflation. And if you recall two, three weeks ago, both Europe and the US started talking on a potential rate increase. It didn't happen. Now they called it back. But the rate increase means uncertainty. It means no construction, no renovation, no new cars. So it's We have to be prudent and we have factored this in in our guidance. Then all your numbers will affect, so your analysis is very adequate. Please don't keep also in mind when you look at absolute terms that we had a very strong FX impact on Q1, reduced significantly in Q2. That helps when you look at absolute numbers. What will be the dollar in Q3 and Q4? I have no idea. At this level, it means basically no FX impact for the group for the second half of the year, which you've seen Pierre's bridge, 17 million of EBITDA loss only in translating dollar to euro. If this is zero, our EBITDA is better by 17. Am I calculating it? Yes, with a safety factor. So there are too many uncertainties and too much volatility in today's world not to be prudent. And you know the group. That's what we do. We believe Q2 was solid. With all these negatives, our volumes are up. All our businesses are up. All our costs are under control. Project Horizon is delivering. So I am confident the group will deliver good results. But it will not only depend on us. We need the markets to stabilize, to be a bit more stable. We don't ask for anything else. The rest we can manage, we can do. I think we are winning market shares. I think our commercial actions, our new products, new capacity, UC Graffit and Carbon growing double digit again. We see our business in India, double digit growth. Business in China, high single digit growth. All new capacity we have put in and they're ramping up. It's not done. So I think we have good prospects. We need a little bit of stability in the overall market.

On the depth, Pierre, you want to comment? Pierre Lebreuil So on the depth, to comment, maybe allow me first to come back again on the H1 performance. In our view, our level of net depth is definitely quite a strong performance. Maybe to comment a bit further on the specific effect in H1 lead adjustment. As you know, so this is additional IFRS 16 leases that, as you know, have to be accounted in our net debt, especially, as I briefly mentioned, the fact that we signed a new long-term lease for our new head office in Paris. But then those additional or those new leases do not correspond to an immediate cash out. This will be faced over several years. Then the other effect, obviously, effect of our acquisition. So in H1, this was a Great Lake Minerals. So, well, here as well, yes, additional net debt, but as well, additional EBITDA. then and that's the reason why we had a chart if you look at our net depth net depth waterfall we had a point in the middle if you restate those two effects actually in comparison with our net depth situation at end of last year we had a decrease in net depth despite the fact that as you mentioned seasonality play a bit against us both because q2 is a stronger than a then Q4 traditionally which is obviously leading to purely mechanically to an increase in working capital and then as well linked to the fact that we are paying in Q2 the dividend and despite this restated from non-recurring effect we had a drop in net debt. Then as regard H2, as you know we do not provide any guidance on net debt so I will not I will not give you any clear figure, but I can still share. You might expect, and we hope first, to have a cash-out related to our TALC Chapter 11 process in the US. Then this would have an impact on NetDebt. I am sure we will come back to it in another question. The other impact, non-recurring impact you might anticipate is the acquisitions we closed on the 1st of July. Then here as well, if we disregard those two specific effects, we are absolutely convinced that our net debt will remain under control in H2. For sure, we will benefit in H2 from the seasonality. We do not believe, we do not have any specific concern at our net debt level at the end of the year.

I think the commitment of the group to remain investment-grade historically is only confirmed.

Thank you.

Thank you, Sven.

Thank you. We will now take our next question. And this is from Ebrahim Homani from CIC. Please go ahead.

Hello Alessandro, hello Pierre. Thanks for taking my questions. I have three. If I may, the first one is about the price effect. It has been positive. Is it the case in all your businesses and maybe in which business Should we anticipate a catch-up in H2? And my second question is on TechQC. The results have improved significantly in Q2. Should we consider the same contribution in the next quarters or higher contribution? And maybe how is the business doing in terms of pricing and volumes on TechQC?

You said three questions or is that it, Ibrahim?

No, that's it. Only two. Thank you.

Okay. Price effects. Yes, you're correct. It changes from business to business and partly reflects energy surcharges. So I give an example. Gas in the U.S. did not change at all. Thank you very much. on the impact of energy. Then if I look specifically at the businesses as we write in the press release, I think our rack business has done some price adjustment downwards. This was possible thanks to, as we said last year, a strong restructuring and cost savings program that gave them more competitiveness. They are benefiting by being more aggressive in the market and we see volumes going up in the market iron and steel which is definitely going down so that's why really it's business to business but it's healthy everywhere that's important and the price cost balance even if we don't disclose by single business is positive in all businesses so that's for me key TQC, I would say no, do not extrapolate the goods part, the good first half of the year, because they were on June 30, we could enforce certain contractual clauses that generated a bit either artificial sales or anticipated sales. So we will not have them in the second part of the year with an immediate Recognition in profit, which again will not happen in the second part of the year. So extrapolating H1 to make H2, I would say is not adequate. I think TQC, as we keep saying now for two quarters, is doing better, but it's very slow. Semiconductor is good. It's solid. It remains the smaller part of the business. Solar remains a bit still ups and downs. We know that this year installation of photovoltaics are at best flat, especially because China canceled all the subsidies. So we will experience a year of less installations. The rest of the world is growing, but China is by far the largest consumer of solar panels. So I think on the demand side is a flat year before we go back to healthy growth. Production is normalizing as we have been saying, so I think we progress, but I would say look more at last year and there's more progression rather than H1 this year only and extrapolating. It would be too optimistic.

Thank you very much.

Thank you, Amy.

Thank you. We'll now take the next question. This is from Sebastian Bray from Berenberg. Please go ahead.

Hello, good evening and thank you for taking my questions. I would have two please. The first is again on the Quartz Corporation. Can you explain what happened here? So a customer had a force majeure event and then some type of take or play clause was activated that meant Imerys got paid without providing the material? That's my first question. My second is on the H2 cash flow. It was quite nice, the cash flow in H1. What exactly would happen if talc goes according to plan? What would be the cash out that the company would be expecting on a one-off basis in the second half of the year? Any update on the status of the litigation is welcome. Thank you.

I start from the end. I was expecting the question. Unfortunately, we don't have yet the good news. that we are looking for and expecting. Our very detailed and precise judge is still working on the ruling and writing this ruling. We have regular interaction. She said I have no more questions, I need no more information, and I will conclude soon. The soon is the question. There are no mandatory deadlines in this kind of In this phase, so whenever it's done, it's done. I remind you that unfortunately the U.S. goes on vacation in July rather than August, so probably also a vacation-driven delay, but it will come when it comes. We remain very optimistic and positive, and when it comes, we will need to contribute to Not immediately, because it might be delayed until the end of the process, and there are some administrative steps in between. But once it comes, we will have to contribute our part to the plan. Pierre, you want to mention values and provision?

The provision in the book is $117 million.

It is not sufficient to cover the... And the contribution plan is $95 million.

It is a bit lower than $95 million.

So when this closes, Imerys will pay in cash $95 million against the provision which is overestimated, the 117. The question is when. I think it would be the best to spend money because finally it would mean the word end to any past, present, and potentially future liabilities around this Chapter 11. and typically it's been accounted for in all agencies considerations because it's public knowledge and it's known. And back on TQC, I cannot go into much details because it's also a competitive issue, but fundamentally there were contracts coming to a deadline and we could, as per contract, enforce certain sales which cause an increase in profitability In sales itself, it's fundamentally a delay or an anticipation of invoicing. And that's why I said it would be unfair or not adequate to multiply by two the good performance of each one. And more details are unfortunately not possible.

Thank you. Do you have any comments on how Q3 has gotten started? We've had almost all of July now. I appreciate that it can be starting to get quieter towards the end of the month, but is there anything that would give you pause to think about demand in any of the major industries, be it construction or automotive, relative to the first half of the year at this stage?

I would say the trend that we have seen over the last Let's say three months is confirmed. And I'm talking about markets, the poor construction in the US, a bit weak in Europe, picking up automotive. It is what it is. Consumption is solid, which also is reflected, I'd probably say, in Imerys activity. At the moment, I would say it remains healthy. Again, question mark on the Gulf, but Sales have resumed in Q2. Maybe not at the, if you remember, we mentioned five million per month. Typically, we are not there yet, but compared to zero in March and three and four, we are, I would say, almost at 80% or 90% of what our sales would be in a normal situation. So no signs so far of weakness, but rather a confirmation of the current trends. which remain positive for us, I would say.

That's helpful. Thank you for taking my questions.

Thank you.

Thank you. As a reminder, if you would like to ask a question, please press star 1 and 1 on your keypad and wait for your name to be announced. That's star 1 and 1 for any further questions. No further questions at this time.

No further questions. Thank you very much and thank you all for listening, probably for many of you. I wish you good vacations and I look forward to speaking again after the summer. And for sure, if there are news around our Chapter 11 case, it will be promptly communicated to the market. Thank you. Goodbye.

Bye-bye.

Thank you. This concludes today's conference call. Thank you for participating and you may now disconnect. Speakers please stand by.