Orbia Advance Corp Sab

Good morning and welcome to Orbea's first quarter 2025 earnings conference call. As we turn to slide one all participants will be in listen-only mode. Should you need assistance please signal a conference specialist by pressing the star key followed by zero. After today's presentation there will be an opportunity to ask questions. To ask questions you may press star then one on your touchtone phone. To withdraw your question please press star then two. Please note this event is being recorded. I will now like to turn the conference over to Diego Echave, Orbea's Vice President of Investor Relations. Please go ahead.

Thank you operator. Good morning and welcome to Orbea's first quarter 2025 earnings call. We appreciate your time and participation. Joining me today are Samir Bharadwaj CEO and Jim Kelly CFO. Before we continue a friendly reminder that some of our comments today will contain forward-looking statements based on our current view of our business and actual future results may differ materially. Today's call should be considered in conjunction with cautionary statements contained in our earnings release and in our most recent Bolsa Mexicana de Valores report. The company disclaims any obligation to update or revise any such forward-looking statements. Now I would like to turn the conference over to Samir.

Thank you Diego and good morning everyone. As you will hear over the course of this call we have continued to demonstrate how resilient we are as a company through the current challenging market conditions. I want to start by recognizing our employees around the world for their dedication to serving our customers and bringing innovative solutions as we continue driving value for our shareholders over the long term. Now moving on to slide 3. I would like to share a high-level overview of our first quarter 2025 results. For the quarter revenues of 1.8 billion dollars decreased 3% and EBITDA of 198 million decreased 21% compared to the previous year's quarter. First quarter adjusted EBITDA was 260 million dollars an increase of 3% compared to last year. Adjusted EBITDA includes items that have a limited number of occurrences are clearly identifiable and are not reflective of ongoing business performance. These items include legal and restructuring costs as well as the impact of a raw material supply disruption in a polymer solutions business. It is important to note that this disruption has now been resolved. Our first quarter results demonstrate the resilience of our businesses across market cycles. Adjusted EBITDA for the quarter improved compared to the same period last year. Overall our end markets were reasonably stable. While we experienced softness in some markets, stability and improvements in others largely offset this. We remain focused on managing what we can control while exercising strong financial discipline in the current market environment. We continue to strengthen our leading market positions, make significant progress in cost optimization and non-core asset divestments and improve our balance sheet. All to achieve our long-term strategic objectives which I will detail later in the presentation. I will now turn the call over to Jim to go over our financial performance in further detail.

Thank you Samir and good morning everyone. I'll start by discussing our overall first quarter results. Turning to slide four on a consolidated basis, net revenues of 1.8 billion dollars were down 3% year over year. Polymer Solutions revenues declined driven by lower prices and the impact from an operational disruption at one of our key suppliers. The building infrastructure segment was weak in parts of continental Europe and in Mexico, partly offset by strength in Brazil and the UK and contribution from its new manufacturing plant in Indonesia. These decreases were partially offset by increases in floor and energy materials and precision agriculture. I will provide a more comprehensive description of these factors in the business by business section. EBITDA of 198 million dollars for the quarter decreased 21% year over year, driven primarily by the non-recurring costs described previously and lower revenues in the polymer solutions and building infrastructure segments. Adjusted EBITDA for the quarter was 260 million dollars, representing an increase of 3% year over year. Adjusted EBITDA margin was .4% for the quarter. Operating cash outflow of 22 million dollars improved by 28 million dollars compared to the prior year quarter. The improvement was mainly due to effective working capital management and positive currency fluctuations, partly offset by the lower EBITDA. Free cash flow was negative 155 million dollars, an improvement of 46 million dollars year over year. Both cash flow measures reflect normal seasonal increases in working capital for Orbia. Typically, working capital increases consuming cash in the first half of the year and subsequently declines generating cash in the second half. The working capital increase of 169 million dollars in the first quarter of 2025 is 24 million dollars less than the increase in the same quarter of 2024, reflecting the strong working capital management efforts. Free cash flow benefited from lower capital spending year over year with spending of 105 million dollars in the quarter, which was 27 million dollars lower than the prior year quarter. Net debt to EBITDA increased from 3.3 times to 3.67 times compared to the year-end 2024. The increase in the ratio was driven by a decrease in cash of 149 million dollars, an increase in total debt of 60 million dollars, and a decrease in the last 12 months EBITDA of 55 million dollars. On an adjusted basis, net debt to EBITDA increased from 3.04 times to 3.23 times during the quarter. The increase in the ratio is reflective of the seasonal nature of Orbia's cash flows and the company expects the ratio to begin declining in the second half of the year, with the target being a -over-year reduction by the end of 2025, assuming stable market conditions. On April 11, 2025, Orbia issued approximately 300 million dollars of notes in the Mexican debt market with maturities of three and ten years, split approximately even between the two periods. The proceeds of the issuance will be allocated to financing the previous Orbia 22L issuance and repaying other obligations. Turning to slide five, I'll go through our performance by business group. In Polymer Solutions, first quarter revenue was 600 million dollars, a decrease of 9% -over-year, largely driven by persistent weak pricing environment and the operational disruption at one of the company's key raw material suppliers. First quarter EBITDA was 57 million dollars, a decrease of 34% -over-year with an EBITDA margin of 9.5%, which was 359 basis points lower than the year-ago period. This was driven by lower revenue and higher input costs, partly offset by benefits from cost reduction initiatives. Excluding the impact of the raw material supply disruption, adjusted EBITDA for the quarter was 70 million dollars, representing a decrease of 19%. Adjusted EBITDA margin was .7% for the quarter. In building infrastructure, first quarter revenues were 586 million dollars, a decline of 6% -over-year. The lower revenues were driven primarily by weakness in parts of continental Europe and in Mexico, partly offset by strength in Brazil and the UK and contribution from the business's new manufacturing plant in Indonesia. First quarter EBITDA was 37 million dollars, a decrease of 43% -over-year with an EBITDA margin of 6.3%, which declined 415 basis points versus the prior year. The decline in EBITDA was largely driven by restructuring costs and lower revenue, partly offset by operational cost savings. Adjusted EBITDA for the quarter was 64 million dollars, representing a decrease of 2%. Adjusted EBITDA margin was .9% for the quarter. Moving on to precision agriculture, first quarter revenues were 271 million dollars, an increase of 6%, driven primarily by Brazil and Peru, partially offset by declines in Mexico and in northern Europe. First quarter EBITDA was 33 million dollars, an increase of 16% -over-year. An EBITDA margin increased 110 basis points to .3% versus the prior year period. The EBITDA margin improvement was driven by higher revenues and cost saving efforts. Adjusted EBITDA for the quarter was 37 million dollars, representing an increase of 28%. Adjusted EBITDA margin was .6% for the quarter. In fluorine energy materials, first quarter revenues were 216 million dollars, an increase of 14% -over-year. Revenue growth was driven primarily by higher refrigerant volumes and stable prices across the upstream minerals portfolio. First quarter EBITDA was 64 million dollars, an increase of 18% -over-year, with an EBITDA margin of 29.5%, an increase of 93 basis points versus the prior year period. The improved EBITDA results for the quarter were driven by higher revenue and a reduction in fixed costs, partly offset by higher raw material costs. Finally, in connectivity solutions, first quarter revenue was 194 million dollars, a decline of 1% -over-year. The decrease in revenues in the quarter was driven by lower prices, partially offset by higher volumes. First quarter EBITDA increased 12% to 26 million dollars, with an EBITDA margin of 13.6%, an increase of 167 basis points -over-year. EBITDA performance was driven by the increase in volumes as well as from cost reductions. With that, I'll now turn the call back over to Mr.

Aamir. Thank you, Jim. Turning to slide six, I'd like to provide an update on our progress in improving earnings and strengthening our balance sheet as outlined at the October business update. First, our cost reduction program is on track to deliver cumulative annual savings of 160 million dollars by the end of 2025, achieving 70% of our target to reach a savings level of 250 million dollars per year by 2027. Second, we are focused on ramping up revenues from recently completed and soon to be completed organic growth investments in 2025. These include the new product launches and the Indonesia investment in building an infrastructure and the completed capacity expansion in North America in connectivity solutions, among others. Finally, we have signed agreements that will generate proceeds of over 25 million dollars from non-core asset divestments as of the end of the first quarter of 2025. We anticipate reaching at least 75 million dollars in proceeds by the end of the year and are on track to achieve the 150 million target by the end of 2026. Turning to slide seven, I will now provide an update to our outlook for the coming year. In light of the current business environment, the company anticipates that 2025 adjusted EBITDA will be approximately 1.1 to 1.2 billion dollars. Considering market conditions, capital expenditures for 2025 will be actively managed to approximately 400 million dollars or less with a primary focus on investments to ensure safety and operational integrity, completing growth projects under execution that are close to revenue and being extremely selective on any new growth investments. Now looking ahead in each of our business segments for the coming quarter and the beginning with polymer solutions, challenging market dynamics driven by excess supply and lower export prices out of China and the US are expected to continue. This is somewhat mitigated by the fact that our primary markets are in Europe and Latin America, where market dynamics are more favorable. In this environment, we remain focused on capturing the benefits of footprint and cost optimization efforts while maintaining strict discipline around fixed costs, working capital and capital investments. These actions are aimed at improving both profitability and cash generation. In building an infrastructure, we expect stable to improving fundamental performance despite challenging market conditions in parts of Europe and Mexico, driven by focus on cost optimization efforts and incremental profitability from new product branches and geographic expansions. In precision agriculture, market conditions are expected to remain stable. We anticipate growth through deeper penetration and extensive crops, mainly in Brazil, India and the US. The business will also continue focusing on growth initiatives from its new digital farming platform and new products while delivering operational efficiencies. In the core and energy materials, the markets for our fluorine value chain remain fundamentally solid, supported by consistent demand and pricing. We will continue with tight cost control measures to support margins and growth investments will be focused on low carbon refrigerants, medical propellants and battery materials. And finally, in connectivity solutions, we expect volumes to grow through the year as network investment activity returns to more normalized levels. Profitability growth will be driven by increased demand as well as benefits from cost reductions and higher utilization of manufacturing facilities. While the tariff situation is dynamic, most of Orbia's exports to the US are protected by rules for USMCA compliant products, thereby limiting potential impact on Orbia. In closing, as we move forward in the year, we remain focused on operational, commercial and financial discipline. Thank you for joining us today and for your continued interest in Orbia. Operator, we are ready to take questions at this time.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question will come from Alejandra Aburgan with Morgan Stanley. Please go ahead.

Hi, good morning, Samuel, Jim, Diego. Thank you for taking my questions. The first one is on your strategic review. Samuel, you did mention what you're expecting for the year, but I know it's been only five months since you announced it, but perhaps if you can elaborate a little bit on whether it has played out in line -a-vis your expectations so far and what's missing for the rest of the year, like where are you more constructive -a-vis what you've announced and so on. And the second one is perhaps on the balance sheet front. I was hoping to hear how comfortable you feel for, I mean, your liquidity position for the short term in the year, especially with all the cyclical headwinds that we know and we understand are there, but just in the context of your financial stability for the short term obligations, how comfortable are you there? Those are my two questions. Thank you.

OK, Alejandra. Let me take your first question and then Jim can answer your second question very well. In terms of our strategic review, what we outlined back in October, we are actually very well on track with the things we said. We talked about an effort to reduce our costs, whether it's manufacturing, SG&A, optimizing footprint and deliver $250 million of savings by 2027. And we are solidly on track and we can see that in the numbers and I think we said earlier that we are looking at savings of cumulative savings of $160 million per year by the end of 2025. And even if we look at our numbers for Q1 year to date, 2025 versus 2024, SG&A and manufacturing costs without depreciation and one-offs, we are down $48 million versus previous year. So we can see the cost benefits coming through. We are being very disciplined in terms of optimizing both global costs as well as costs in the businesses and continue to work on our footprint optimization efforts. And you might have seen many of the plant consolidation announcements that have been made out there. On the growth opportunities, we have either completed or are close to completing the capital investments for growth investments that we had initiated a couple of years ago and are now close to completion and close to revenue. These are some of the new product launches in the building and infrastructure business, such as our Tegra below ground product, the push fit fittings, G5 HEP2O fittings in the UK, the BIAX investments, as well as the investment in Indonesia. And these are either complete or close to completion and will ramp up contributing to revenue as we go along. The investments in connectivity solutions in Canada and Salt Lake City have also been completed and are running at quite high utilizations as well and contributing to the performance of the connectivity solutions business. So we'll share more details. The growth projects are longer term. And so we'll share more details on that later in the year in terms of the impact. But as of now, I can say they are on track. And then, of course, we talked about non-core asset sales. These are sales of, you know, these are small assets, whether it's real estate or buildings or non-core businesses. And then also some of them are a result of restructuring actions. And those are on track as well. You know, we are solidly on track to deliver the 75 million dollars from non-core asset sales in 2025. And I think you had a question for Jim on short term financial obligations on the balance sheet. Jim, do you want to take that question?

Sure, I'd be happy to address it. So first and foremost, you know, let me reaffirm that we remain committed to doing everything within our control to maintain our investment grade rating. As it relates to short term liquidity, you know, we have a significant amount of cash, so 860 million dollars on the balance sheet. And we continue also to have our 1.4 billion committed revolving credit facility available to us. There is nothing drawn down on that. And then on top of that, you know, I would say overall that ensuring adequate liquidity and de-risking of any near term debt maturities is an integral part of ensuring that we maintain the investment grade rating. So we've been active in that front. So as you saw, we refinanced the December maturities of the subaurs on April 11th for about 300 million dollars as we spoke of. And then you are probably aware that there are some maturities coming up in 26 and 27. For those, you know, those are being considered as well as part of our liquidity plan and ensuring that we're de-risking our balance sheet, but no specific plan has been announced on that refinancing at this point in time, but it is under consideration.

Gotcha. That was very clear. Thank you very much.

Thank you, Alejandro.

Our next question will come from Leonardo Marconis with Bank of America. Please go ahead.

Hi, everyone. Thanks for picking my questions. I have a tune from my side here. The first one is related to the sale of non-core assets. You guys already mentioned that you expect to reach 150 million of divestments right over the next two years, but I would like to know if you could provide some more color on which segment should these investments be from and what are their ABDA contribution nowadays? The second question is related to the bonds as well. I mean, in my understanding, correct if I'm wrong, you will probably have to issue more debt in order to refinance the short-term maturities, right? So my question is, what are the expectations in terms of timing and interest rates for those new issuances? Thank you.

Okay. So let me take the first part of your question on the non-core assets, which segments and their current ABDA contribution. And then Jim can address your question on the bonds. So on the non-core assets, a large majority of the non-core asset sales are related to the building and infrastructure segment. And as you're aware, we are undertaking a very significant optimization of the footprint and building and infrastructure where we are potentially optimizing the European footprint in a very significant way. And this optimization results in assets, whether it's plant buildings, infrastructure that come up for sale. And ABDA contribution at this point of time is very low. And so in terms of impact on Orbia, we are able to generate cash from the sale of these plant infrastructure and buildings, but with very little impact on loss of ABDA. And there are a few others in some of the other segments where we have done some optimization in the polymer solutions business, and that's going to have some impact as well. And then we've had some assets, or let's call it land and buildings that are underutilized or not utilized in various parts of the world that we are now monetizing as part of the non-core asset sales. Jim, do you want to take the second part of the question?

Sure. Thanks for the question. Again, going back to what I was speaking of in terms of maintaining the investment grade rating and doing everything we can to de-risk the balance sheet. So again, reinforcing that we did already refinance the suboros that weren't going to come due until December. We wanted to get ahead of that while markets were still open in Mexico. So we feel we had a successful refinancing initiative there as it relates to the international bonds that will be maturing in the upcoming years. So as I mentioned just a minute ago, we have not announced anything formally there, but we are considering what we will be doing as it relates to that refinancing. You may be aware that the 2026s have a May 2026 maturity, so those will begin to show as current debt in the near future. So that's something that we will want to begin to consider, I would say, in the shorter term. I would expect that we could be international markets most likely to refinance that. We did ask about rates. In today's environment, it's very difficult to say exactly what rates would be. They've been quite changeable, as I'm sure you are aware. And the ultimate rates of the offering will be dependent upon what prevalent market conditions are at the time of the offering. Again, reference rates, US Treasuries, etc. have been increasing over time. But I would say that as far as what the anticipated rates for our offering would be, they would be relative to that reference rate. The spreads would be typical for what an industrial investment grade company's spreads would look like. So I would say you use the reference rate at a typical investment grade spread, and that should get you to approximately what our offering rate should be.

Perfect. Thank you both for the very clear answers. Thank you.

Our next question will come from Victor Moganis with UBS. Please go ahead.

Hi. Thank you for taking my questions. I have two on my side here. First of all, despite of lower EDTA guidance, the capex guidance of $400 million remain unchanged. So my question is, if market conditions remain challenging and even deteriorate, would there be flexibility to cut capex further in order to preserve cash flow generation and maintain leverage under control? And is this level of capex sustainable or next year would require higher investments to offset lower ones in 2024? And my second question is, UBS seems partially shielded from the terrorist discussion, given its diversified operations and sales geography, as well as the USMCA compliant production, as you mentioned during the call. However, the trade war could lead to some level of demand and pricing deterioration for the markets where you operate. So my question here is how much of this uncertainty is incorporated into your guided estimates for the year? And is there any downside to that coming from potentially lower economic activity? Thank you.

Very good, Victor. And thank you for your questions.

And

in terms of capex guidance, if you might pick up on a change, we said $400 million or less. And so very clearly, we will be quite dynamic with respect to responding to any change in market conditions and adjust our spending accordingly. Our maintenance capital spending is roughly in the order of -$260 million per year. And whatever growth investments we have this year is actually just completion of projects we had started a couple of years ago. And it makes sense to complete them and bring them closer to revenue as soon as possible. And that's the reason why the capital investment is in the range. It is this year. And as we also said, we will be extremely selective about any new growth capital investments and take into account the current market conditions before we embark on any new growth capital. So hopefully that addresses your question on capex guidance. Now, as far as tariffs are concerned, you are indeed right. We have been relatively shielded given the USMCA, well, at least for the 90 days deferral. And hopefully there's a reasonable agreement between the United States and Mexico or a reasonable negotiation of the USMCA where that situation continues. We are also seeing, if we do see a decoupling or deglobalization happen, particularly with China, I do believe, we do believe here that there will be a case for increased regionalization where the United States, Canada, Mexico, and the economies will be more interdependent than they have been in the past. And so that should help as well. Now, your question was on the guidance. Now, our guidance reflects the only impact that we are concerned about from tariffs at this point, if the USMCA exclusion holds, is a overall slow down in economic activity from a prolonged trade war. And if the US economy and other economies go into a recession, and that of course has an impact on demand and pricing. And that's why the range that we gave takes into account some of that. Now, if all things go well, and we don't see any broader economic downturn, we'd hope to be somewhere in the middle or higher end of that range. But the range was intended to take into account the market uncertainty we see at this time. Now, of course, nobody can predict if things get a lot worse. And so we've only reflected what we see at this time.

Hopefully that answers your question.

Our next question will come from Pablo Monsive with Barclays. Please go ahead.

Hi, good morning. Thanks for taking my question, Sanit, Jim, and Diego. Just one quick question on your read through of the CAPEX for AI that we have seen on the boom of data centers and now they are pulling back the growth expectations. What is the read through on the connectivity solution business? Thank you.

So Pablo, do you mind repeating the question? We weren't able to hear very clearly.

My question was, what is the read through on the connectivity solution from the data centers and the CAPEX for AI that has been decreased over the last few months? What do you think that is the read through for your segment?

Very clear. So let me talk about connectivity solutions. The connectivity solutions business, we are seeing month over month improvement in demand as the traditional telecom spending resumes. If you look at the connectivity in the United States, fiber connectivity is still 50% penetration and has ways to go to get to -85% before it is saturated. That is expected to happen over the next several years. The pace of that activity, we are seeing month over month improvement and we have a pretty strong order book for the second quarter as well. So we are seeing that happen. Now, in terms of the AI and data center market, which I would separate from traditional telecom market that we are in, we in fact did a pretty exhaustive study of the opportunity potential for the AI data center market. And also there is a third segment which is very relevant, the power grid market, which we produce stick pipe or polyethylene pipe for that is expected to see significant growth over the next decade. And we already have presence in that space. Now, we are seeing significant activity from the hyperscalers. And so while there is still noise about data center spending slowing down, keep in mind that the data center business is a small part of the business right now, maybe about 5 or 6%. And we have significant activity actually ramping up with most of the hyperscalers. And so we haven't quite seen the impact of any slowdown in data center activity yet. But keep in mind it is a small portion of our business and you won't see the impact in the full results even if there was a brief slowdown for a period of time. But no, we haven't seen it on our end.

Okay, very clear. Thank you, Samir.

Yeah.

Our next question will come from Andreas Cardona with Citi. Please go ahead.

Good morning, Samir, Jim. I have two questions. The first one is if we should expect to see some more restructuring expenses in the second quarter in the year. And the second one is, we're looking at the last year's strategy update. You said the plan has $250, $110 million of cash available to reduce net debt coming from the, let's say, operation of the business. But as you are using 2025 guidance, should we expect a reduction in that level of cash available to reduce the net leverage? Thank you.

Very good. So look, let me, Jim, actually you can take both of these questions. Yes, go ahead.

So thanks for the questions, Andreas. So as it relates to the restructuring costs, we took the vast majority of the anticipated restructuring costs in the first quarter here as we came to a conclusion with some of the local unions and works councils, etc. on the terms of some of the plant closures. So the vast majority was taken in Q1. We do expect some small remaining severance costs to be recorded over the remainder of the calendar year. But at this point in time, what we see is relatively small increments of that restructuring cost as compared to what we saw in the first quarter. So bottom line is I would expect there to be some, but they should be relatively immaterial numbers. And then in terms of the second question, as I understood it, it's, are we still on track in terms of the deleveraging plan? Did I correctly understand? And where we expect to be toward the end of the year and into 2026? Can you just confirm that that was what you're asking there?

Yes, certainly. You said the business will generate some $250-400 million between 2025-26 to the leverage of the company, right? And as you are reducing the guidance to 25, I was wondering if this level of cost generation should be expected to be impacted in a similar amount. Okay. Yeah. Go

ahead, Jim.

As Samir outlined, there were really three primary elements to the deleveraging plan. And Samir has gone into quite a bit of detail on all three, but the $250 million of cost reduction, the $150 million of EBITDA from recently completed and or about to be completed growth projects, and then $150 million in cash to be generated from sale of non-core assets. That then supplemented by restricting our capital expenditures, not paying any dividends, and not having any share repurchases. Those are all the elements of the deleveraging plan that we've outlined. As Samir spoke of, we are on track for all of the things that are within our control within that plan. Our expectation, therefore, is still to be generating positive cash and to be reducing the leverage. I would say that at least as it relates to this year, given, as you mentioned, the slightly lower guidance, that it may get us to a slightly higher leverage rate by the end of this year than we had originally expected. But I still would expect right now that that would be below the level of three, and that for next year, we would still be on track to have a leverage level below 2.5, which is what we stated back in October.

Yeah. And Andres, you're right, but the situation is so dynamic, and there are so many factors, both positive and negative, that can change. We are still in early days with respect to the end of 2026. At a high level, we still want to achieve those leverage reduction targets in terms of absolute debt reduction. We might use different levers to get there. The operating levers, we might exercise harder on the operating levers in terms of driving top line, managing costs, reducing working capital to get to the same outcome.

Okay. Thank you, Samir and Jim. Thank you, Andres.

Again, if you have a question, please press star, then one. Our next question will come from Pablo Ricalde with the Tao. Please go ahead.

Hi, good morning, Samir. Good morning, Jim. I have a more strategic question towards 2026. Like we all know 2025 will be challenging, high leverage. But thinking of 2026, which segments do you think have more, like the most growing potential in 2026? That's my question. Okay.

Pablo, it's a very good question. And quite frankly, it involves trying to figure out when the markets would recover. And what I can say is, if I go through each of the businesses in polymer solutions, PVC pricing is as low as it gets. Anything lower and nobody makes any money. So, we are seeing some softening in ethane prices, which helps reduce our cost and makes things better. Now, again, things can change dynamically. And the expectation is, also over the next four or five years, as building and construction activity recovers and demand recovers, the PVC supply and demand should tighten. And so, one would expect in the normal course of events for the markets to start tightening 26, 27, 28, 29. So, that's for the polymer solutions business. In the Alpha Gary business, it is benefiting quite strongly from the growth in the data center market. And in Alpha Gary, in the wire and cable segment, we are inside the building and inside the data center. And that's seeing significant growth. And so, we are enjoying that, particularly in the US. We've also developed a leadership position in the medical segment in our polymer solutions Alpha Gary business. And so, that's going to help us. And our India business is doing exceptionally well. So, that's one of the things we are quite excited about in 2025, as well as in 2026. In building an infrastructure, the level of optimization we have done and streamlining we have done for the business and we have reorganized to be far more nimble and far more agile. And the teams are doing an outstanding job in very challenging market environments. And any improvement, let's say in the European conditions, the war in Ukraine, between Russia and Ukraine comes to an end. And the fact that there's a change of government in Germany and they have announced $500 billion of infrastructure spending, all of those should help with the recovery of building and construction activity in Europe. And I would like to wait and see how that pans out next year. So, that's one of the things I'd be looking out for, any recovery in the European markets, particularly for the building and infrastructure business. Connectivity solutions, I've already spoken about. The continued investment of the large telecom carriers to increase fiber penetration to the premises is expected to continue at a pretty strong place beginning 26 and 27. So, that should allow us not only to capture the volumes but also lead to better spreads or margins and help us in the connectivity solutions business. And so, that's something I would look out for. I don't want to say what the precise timing would be, but that's something we expect to see happen over the next two or three years. And then in precision agriculture, despite weak market conditions, particularly in the US and Turkey, in our traditional heavy wall markets, the team's done a fantastic job of growing in extensive crops and in other geographic areas of the world, particularly Brazil, Mexico, India, China, and parts of Africa. And we are really focused on driving top line and, once again, realizing operating efficiencies, whether it's from cost reductions or footprint optimizations. And we hope that trend continues in the precision agriculture business. So, hopefully that gives you

a little bit of a sense of what's going on in the market. And that was very useful. Thanks. Thank you,

Pablo.

Our next question will come from George Ardonis with Bank of America. Please go ahead.

Good morning and thanks for taking the question. Just a follow-up question. If I look at your cost base on roughly how much of that is related to ethane, and so just trying to back into if we do see ethane softening, like what that means for you margin-wise and free cash flow-wise?

Yeah, so I don't want to give a number off the top of my head, but that's a great question. We are watching it very closely because as we've gone through January, February, March, we have seen ethane prices come down, and as you know, that directly impacts our cracker. And one of the other things we are waiting and watching is the impact of the tariff force. So, you may be aware that a significant portion of ethane goes on ships to China and is used in the petrochemical industry for polyethylene production. And if China is imposing similar tariffs on ethane, that should result in a decrease in ethane exports and further downward pressure on ethane prices. But I would say it's tens of millions of dollars of impact, and so I don't want to give a specific number off the top of my head, but it's quite material. And we can potentially come up with something offline and have Diego sync up with all investors and analysts.

That's great. I look forward to that. Thank you.

With no further questions, this will conclude our question and answer session. I would like to turn the conference back over to Samir Bhardwaj for any closing remarks.

Thank you very much, Vyatt. I would like to thank everybody for joining the call and for thoughtful questions. What I would like to leave you with is we are doing our best in very turbulent times, and hopefully you can see the resilience of Orbea and the impact of all of the operating discipline on the results that is flowing through. And I look forward to seeing you at the end of next quarter as we continue our journey to simplify, to focus, and to delever. Thank you.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.