Solvay Sa Act

Good afternoon, everyone, and welcome to Solvay's third quarter and first nine months of 2025 earnings call. I'm Geoffrey Loutremont, head of investor relations, and I'm joined here today on the call by our CEO, Philippe Queren, our CFO, Alex Bloom, and our COO, Lani Duval. This call is being recorded and will be accessible for replay on the investor relations section of Solvay's website later today. I would like to remind you that the presentation includes forward-looking statements that are subject to risks and uncertainties. The slides presented in today's call are also available on our website. We'll first discuss our third quarter earnings, then give an update on the operational excellence program and come back also on some recent development survey before taking your questions. Philippe, please go ahead.

Thank you very much, Geoffroy, and hello, everyone. As usual, I will start with a word on safety. While the number of injuries is stabilizing at low rates since the beginning of the year, the few accidents we saw in our operations remind us that we need to continue to work hard on the transformation of our safety culture. Changing the mindset and the behaviors is our main focus. Safety will always remain our number one priority. Slide six, please. So Alex will go through the earnings in detail, but I would like to give you a few messages first. So first, the overall environment remains difficult. We didn't see any improvement in the general macroeconomic indicators and the geopolitical and trade environment remains volatile. Our Coatis business continues to see very difficult market conditions related to the direct and indirect impacts of the increased tariffs for Brazilian imports to the US. Our Sodash business also continues to be under pressure, specifically in our seaborne export markets due to Chinese overcapacity. Our analysis of the situation is confirmed by the recent anti-involution regulation announced by the Chinese government and its intention to restructure industries where there is overcapacity. If and when they will target the older synthetic soda industry in China, we estimate that the market will rebalance and rapidly improve. But as long as demand remains subdued and supply remains as such, we expect to see continued price pressure in the Southeast Asian region. We continue to think that this situation is unsustainable for the region, with many players seemingly selling below their cash costs. In this context, we have reduced the quantities produced in our European soda ash exporting plants. The upside to this downside is we were able to save some CO2 emission rights consumption. And since we've been building our CO2 emission rights portfolio for quite some time at Solvay, and as our coal phase-out is more and more secured, we decided to sell part of our CO2 emission rights inventory in Q3, and that generated 40 million euros EBITDA and 50 million euro cash gain. So, allow me to be very clear about this. This is definitely not a one-off. but it is a business decision that we may repeat in the future should these market conditions persist. Now, before we move to financial, I would also like to spend a few minutes on the good work that we've done related to our transformation. Slide eight, please. So earlier this year, we shared with you our essential for generation strategy to establish Solvay as the leader in essential chemistry. Operational excellence is the first lever of this strategy and will allow us to accelerate the transformation of the company. We've been updating you regularly on the progress of our cost savings program with a commitment to generate 350 million euros of cost savings by 2028. Today, we have invited Lanny Duval, our Chief Operations Officer, to this call to give you a deeper understanding on what we do and how we achieve real results on the ground. Lanny, the floor is yours.

Thank you very much, Philippe. My job is to translate this strategic commitment into hard numbers across the company. Today I will zoom in on our industrial sites and describe how we approach the sustained improvements. Our savings targets are the results of two main programs. First, we may be a 163-year-old company, but we are becoming a digital-first company. Over the last 18 months, we've invested significantly in both infrastructure and in capability. We've created a world-class data structure where all key operational data resides, and we can leverage our scale to quickly deploy across the organization. Second, we're implementing what we call our Star Factory program, where all plans have a roadmap for improvement, in really all dimensions needed to operate our plants. All the examples that we are going to discuss are or will be implemented across all regions and all plants. Slide 10, please. Our maintenance strategy is important for our fixed cost and the reliability of our assets. This transformation in our operational performance comes from moving away from a time-based maintenance to condition-based monitoring, or what we call CBM. We utilize real-time data analysis to predict equipment failure and determine the optimal moment for intervention. By utilizing sensors to measure an asset status, CBM enables the collection of critical data, such as temperature, vibration, or sound, This data allows us to spot trends, predict potential failures, and determine the remaining lifetime of the equipment. This allows us to reduce the cost of the repair and plan for the intervention. This shifts our entire operation from being reactive to being proactive. This isn't a hypothetical pilot. We've deployed this on a global scale. We've gone from a couple of hundred sensors in 2023 to over 4,500 sensors today and 9,000 by 2027, creating a more resilient, reliable, and cost-effective industrial footprint. This is a good example of the value we are creating with our digital and data strategy and demonstrates our ability to quickly scale across the company in all regions. Vibration monitoring is not new or novel, but the deployment strategy at scale is a best-in-class practice. As an example, at the Dumball site, CBM helped to detect abnormal vibration on a fan and a malfunctioning of a lubrication valve. Thanks to the alerts generated by the IoT sensors, this could be quickly corrected and we saved a potential €100,000 repair cost. These examples highlight the effectiveness of the CBM in preventing failures before they escalate into more serious and costly issues. Again, the secret is how we have invested on our data platform and we are now perfectly set up for using advanced AI tools to further our impact. Another example, we are redefining how we manage material and energy performance across our industrial operations. This isn't just about efficiency. It's about unlocking 37 million in potential plant variable costs by 2027. which represents roughly 2% reduction compared to 2023. It's about building a smarter, safer, and more sustainable future. At the heart of this transformation is digitization. We are rolling out standard real-time dashboards, giving operations and engineers instant access to the metrics that they need. The helicopter view, as we call it, which is the standard in all of our control rooms, includes everything our employees need, such as safety indicators to ensure our people and processes are protected, real-time production levels to track throughput and performance, or material and energy consumption metrics to drive efficiency. This is not a technical upgrade. This is a cultural shift. It's about embedding performance thinking into every layer of the organization starting with the shop floor. It's about making sustainability and efficiency inseparable from operational excellence. Next slide, please. Continuously optimizing our industrial footprint is a core part of our strategy to enhance performance. Let me give you three examples. First, we've aligned our regional footprint with demand. In our peroxides business, we've taken decisive action in Pavoa in Portugal and Warrington in the UK and reduced our capacity in the European merchant market. Second, we recently announced different majors in our special chem operations in Germany to secure our long-term competitiveness. In practice, this means we will consolidate our special chem German production sites to improve efficiency. By relocating the Nakalok Tech Center and production operations from Garbson to Bad Wimpin, we will consolidate expertise into one location. We will establish Bad Wimpin as the global hub for production, innovation, and customer applications, reinforcing Solvay's position as a worldwide leader in automotive brazing. Third, our energy transition, which is a which is key to our long-term competitiveness. At our Torlavega soda ash plant in Spain, we could not ensure competitive production costs after a full coal phase-out. Hence, we will supply Latin American customers from our Green River plant with a very cost-efficient alternative. We decided to decrease the Torlavega production by one-third. This will allow for reduced fixed costs and capex at the site while making the energy transition project possible for the remaining capacity. Indeed, earlier this year, we announced moving forward with a biomass cogeneration unit that will reduce the CO2 emissions by half in 2027. These actions are taken to ensure our operations are lean, competitive, and ready for the future. The last example, our spend review challenge. This is a five-step process that brings together a multidisciplinary team to challenge traditional ways of working and create value. The team analyzes spending at a site level and covers all the site-related purchasing categories. Operations, procurement, and leadership all need to work closely together to create value for each site. This is an ongoing process. We started with the industrial categories and we've expanded to include facilities, R&D services and goods, onsite logistics and packaging. The SRC has the potential to return 15 to 20 million euros annually, primarily in fixed costs. In 2025, we have challenged €330 million in spending across 21 sites and identified €11.3 million in savings opportunities. But we're not stopping there. We plan to complete nine additional sites until the end of the year, aiming for a 5% savings on the addressable spend. An interesting case from our Qingdao site in China, where we redesigned the plastic pallets. to reduce the rate by 18% and allowing for 230,000 euros in annual savings. So this change is better for our bottom line, more efficient for us and our customers' operations, and better for the environment. We are currently investigating how to scale this initiative to other sites. Slide 12, please. We feel confident we will deliver the $350 million in gross annual savings by 2028, because we have invested in our digital transformation, have an execution at scale strategy, all while improving safety performance and providing a platform that is future-proof. The early results are speaking for themselves. We achieved $110 million in 2024, and are on our way to exceed 200 million by the end of 2025. At the core of our transformation is digitization. By embedding digital tools and building a common data infrastructure, we are ensuring that our operations are future-proof and AI-ready. We are already rolling out machine learning and exploring options for GenAI and agentic AI in operations. To conclude, I want to leave you with this. We are not just cutting costs. We are fundamentally improving how Solvay operates for the next generation. And this is how we contribute to the long-term financial resilience of Solvay. With that, I'll hand it over to Alex to walk us through the Q3 results.

Thank you, Lenny, and good morning, good afternoon, everyone. Moving to the financial, I remind you that my comments are based on organic evolution, meaning at constant scope and currency, unless otherwise stated. Moving to slide 14. In the context of subdued demand, underlying net sales in Q3 2025 reached 1 billion 40 million euros, down minus 7% versus Q3 2020. Volumes were down minus 4% year on year, mainly driven by weaker performance in the Coatis business and in the Sodash Seaborn market, while volumes for peroxide, bicar, silica, and special chem were steady year on year. Pricing was overall resilient, although we continue to see strong pressure on the Seaborn-Sodash market and in our Coatis business, as already highlighted by Phil. Slide 15, please. Underlying EVDA amounted to €232 million in Q3 2025, down minus 7% compared to last year. However, EVDA margin remained solid at 22%. Volume and mix was up thanks to the positive impact of the optimization of our portfolio of CO2 emission rights. Excluding this one off, of course, the volume and mix was down, mainly due to soda ash export volume. Net pricing decreased year-on-year, again primarily driven by the seabourn slash market and gratis. Net pricing in the other businesses remained very resilient. With regard to fixed cost, the year-on-year variation this quarter was negative 9 million. But this is exclusively coming from the 10 million tonne per hour east credit cost related to the separation from science school as our saving program continued to exceed inflation. Looking sequentially, we have stabilized our manufacturing cost base, and despite still low production, we have been able to keep our maintenance cost below Q2 level. Moving to the segment review, starting with basic information. Sales in the sodash and derivatives business unit were lower for the quarter by 8%. Sodash reviews were done mostly from the seabed market where unsustainable pricing pressure persists due to the overcapacities built in China. On the other hand, the bicarbonate volumes are steady year on year. Peroxide remains resilient with stable volumes in the market and benefiting from the growing demand in the electronic grade H2O2 for the semiconductor industry. The segment was down minus 15% compared to Q3 2024, while the ABDA margin remained only slightly decreased to 23%, still a very healthy figure in such a challenging environment. Performance chemical, moving to slide 17. Silicon sales remain more or less stable, with some slight volume slowdown in the tire market. In line with last quarter, Coatis saw the largest decline with sales down minus 26%. Volumes were down in all 10 markets, impacted by strong competition from Asian players. and the overall weak demand further aggravated by the U.S. tariff on Brazilian imports currently reaching 50% or more. Special chem sales for the quarter were flat, with slightly higher volumes in autocat and rare earths and electronics, offsetting lower fluorine demand. As explained earlier by Lenny, This drove us to take strategic decisions in Germany to ensure the long-term competitiveness of the fuel line business line. The segment EBDA was down minus 21% due to the negative volume of the different business units and negative net pricing of quantities. The EBDA margin decreased year-on-year to 15%. Slide 18, component segment results. The EBDA contribution of the corporate segment in the third quarter was a positive contribution of €22 million. As explained by Philippe, this includes the €40 million gain from optimizing our portfolio of CO2 emission rates. Generally speaking, to manage our EUA deficit, we use a mix of CO2 emission rates, free allowances, EUA inventory, energy transition projects, and financial hedging instruments. Thanks to the progress made on the energy transition project and given the current low production level in Europe, we've decided to optimize our portfolio of CO2 emission rights in Q3 by setting part of our inventory without changing our overall risk profile. As a consequence, minus 40 and minus 50 million, which is equivalent to the previous guidance of minus 80 to 90 million euros, excluding the positive 40 million I just mentioned. This brings us to the free cash flow to shareholders from continuing operation. We generated 117 million euros of free cash flow in the South Quarter. bringing the total for the first nine months to 214 million euros. This result was supported by a contribution of 50 million from the optimization of the portfolio of CO2 emission rates. CAPEX reached 81 million euros for the quarter and 214 million for the first nine months of the year. This is well in line with our objective to stay within 300 million euros. The cash flow The cash outflow year to date from provision are in line with expectation and include 37 million related to the energy transition project in total. So to wrap up the financial, I would like to end with a word on net debt. Net debt has come down a bit since the end of June, and this is in line with our expectation of approximately 1.7 billion euros at the end of the year. Our leverage ratio remains healthy at 1.8 times. And with that, Philippe, back to you for the recent development and the outlook.

Absolutely. Thank you very much, Alex. But before we move to the outlook, I'd like to remind you of some recent developments at Solvay. You might have seen the expansion of capacity of our electronic grade H202 in China. The announcement on our willingness to accelerate the development of circular silica. and the changes we announced in Germany, as explained earlier by Lenny. While we stay focused on the transformation of the company through structural adjustments, we were also able to ensure the future long-term value creation of our businesses through disciplined investments in high-growth areas. Rare Earths is another example. Earlier in the year, we inaugurated our rare earth production line for permanent magnets at La Rochelle in France. And given the recent developments around this industry, we will take the opportunity of this call to provide a bit more details about Solvay's current activities and the future prospects in the rare earth industry. At Solvay, we've been rare earth experts for quite some time. Our La Rochelle site has been processing them since its opening in 1948, so right after World War II. Today, our position and value chain is focused on separation, purification, and formulation. High-value chemical rare earth oxides are formulated in three industrial units. So in addition to La Rochelle in France, we have one site in Japan, And another site in China, and they're all serving several advanced applications, such as emission controlling cars, chemical polishing for semiconductors and precision optics, green energy or medical contrast agents in MRI procedures or scintillators for PET scans. This global footprint and the modularity of our three plants allow us to ensure business continuity for our customers in these different industries, even at times of supply chain disruptions, as it has happened earlier this year. So let's now have a look at our project in La Rochelle and the new high potential opportunities in rare earth separation and purification that we want to capture. Next slide, please. So we proudly inaugurated our new production line in La Rochelle in April this year. And since April, we've been producing NDPR oxides, so that's neodymium and praseodymium oxides, for the permanent magnets and market. This is what we call the light rare earths for permanent magnets. And I'm excited to share that we've made the decision to start separation and purification of three more rare earth elements. Samarium has already started in the second half of 2025. And DYTV, so dysprosium and terbium, which we call the habits. This will be done by 2026. And they are all essential for permanent magnets as well. And Solvay will be the first in Europe to do that. Moving forward, we have the ambition to grow this capacity as the demand for permanent magnets is expected to increase significantly in the next few years, especially thanks to growing needs related to energy transition, as you can see on the slide. When looking at the production of magnets in Europe, today it's very limited. But it could represent up to 40,000 tonnes by 2030, which is equivalent to 15,000 tonnes of light and heavy rare earth oxide needs. And we can capture up to 30% of that European market with our existing assets in La Rochelle quite easily. We will need to invest to reach that level and we can do this in different stages. And thanks to our process innovation and our operational leadership, our team is continuously improving the project cost and the value creation. And the total investment to bring these assets at full capacity is now expected to be between 50 and 100 million euros versus the more than 100 we announced earlier. But to do this, we are first aligning all stakeholders of the value chain. We are discussing with potential partners and customers in Europe, but also in other regions, including North America. Regarding sourcing, we are partnering with recyclers and miners for the development of a secure and sustainable supply chain that would not need to rely solely on Chinese materials. This is concrete, this is happening now. Additionally, and beyond permanent magnets, we're considering also supplying other essential rare earths, like gadolinium or yttrium, which are critical for aeronautics, medical, and other high-end applications. To conclude on this, we can say that our solution offers the greatest potential within the rare earth value chain. We already operate as Europe's largest rare earth producer for the automotive, catalyst and electronics industry and our strength lies in our proven ability and unique expertise to separate, purify and formulate every main rare earth element. I'm confident that based on the current geopolitical situation that these supply chains will be developed and we're the obvious partner to do it. Now, Moving to the outlook now. As shared at the beginning of this call, the environment remains difficult and we do not see any short-term improvement. However, the overall stabilization of activity levels that we've seen in Q3 and the positive impact of the actions that we've taken support our results. This is why we confirm our full year guidance for 2025. we expect the underlying EBITDA to be between 880 million euros and 930 million euros. And we confirm that the free cash flow from continuing operations to solve the shareholders is expected to be around 300 million euros, with capex at maximum 300 million euros. And this will more than cover the dividend payment. This, I think, concludes our introduction, which was quite extensive. And thank you very much. And back to you, Geoffroy, for the Q&A session.

Thank you, Philippe, Landy, and Alex. We move now to the Q&A session. We have until 2.55 so that you can join the next call after. And Gaia, please, you can now open the line for questions.

Yeah. Good afternoon, ladies and gentlemen. If you wish to ask a question, please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The first question comes from Wynne Hoster from KDC Security. Your line is now open. Please go ahead.

Yes, good afternoon. I have a couple of questions around soda ash, if I can. Can you maybe elaborate on the production footprints? How fast do you intend to ramp up the Green River capacity expansion, and to what extent will that then reduce the European capacities? I think there was an example from the Spanish plan, but I would like to have a bit more guarantee on the whole European footprint in soda ash. And then also, can you maybe elaborate on how much of the current European production is exported outside of Europe to give an idea of that? And then any thoughts on, that's the last question, any thoughts on the pricing for 2026 contracts given the state of the soda ash market? That would also be interesting. Thank you.

Thank you very much for your question. So first, the production footprint. Clearly today, as we said, there is enough capacity, so we don't plan to, in the very short term, obviously, to increase our production. So what we will do is, as you said, arbitrate in order to use the most competitive assets to supply the different markets. And this is also one of the reasons why we can adjust our portfolio of steel to instruments. Because indeed, and we mentioned several times Latin America, it is today more competitive to supply Latin America from the U.S. than from Europe, and this is freeing up a little bit of CO2 quotas that we can valorize on the market. So you see that this is really very much related to the business. You see, when we say a sale of CO2 is not a one-off, this is the perfect illustration. It's the way we manage our industrial footprint. Then how much of the production is still exported? We are still exporting. so the ash from Europe to the seabourn market and in particular to the Southeast Asian market and this is also where and then that's done mainly from Bulgaria you know so we use our asset in Bulgaria to export to Middle East, to Africa, and to Southeast Asia. And today, given the situation on the Southeast Asian market, and the volumes that are sold, and the level of the margins in this area, we decided to reduce our production in Bulgaria. And this is also why we can revisit our portfolio strategy on our CO2 instruments. 2026, I think it's too early to say very clearly. The dynamic is still the same. Keep in mind that we see a certain good resilience in Europe and in North America, and more volatility on the seaborne market still, and in particular in Southeast Asia. Volatility and low level of margins. Okay, thank you.

The next question comes from Anna Harms from BNP Paribas. Your line is now open. Please go ahead.

Good afternoon, and thank you for taking my question. I was wondering more broadly if you're expecting any improvement in the underlying trends through 2026, and if not, what additional levers can you pull to ensure that you're able to cover the dividend for next year as well?

So I think, again, I think it's early to talk about 2026 from the business standpoint. We don't see any big changes, but we continue to work on what we control. We will continue to deliver the cost savings. We will continue to have, you know, the payback of the different restructuring actions that we take both on our industrial footprint and on the operating model. of the group and beyond that we will also have, I think, a lower level of cash out next year from the provisions because this year we had a high level. This is, I would say, what we can say at this point.

Great, thank you.

The next question comes from Katie Richards from Barclays. Your line is open, please go ahead.

Hi, thank you for taking my questions. I think my question would just be why now? My understanding is that these CO2 certificates have the potential to rise sharply going forward. So why have you chosen to monetize these certificates now? Was it purely just for cash optimization or are you confident that your future needs will be structurally lower? And also, just a question on your priorities on sort of growth capex versus protecting the dividend. So, you mentioned that La Rochelle needs another potentially 100 million capex to scale up further. Would you be willing to sell more CO2 certificates, for example, in order to fund further expansion of this site?

Thank you. I mean, if we sell CO2 credits not to fund anything, it's because it is the result of the assessment of our portfolio at this moment. Maybe I will let Alex explain a little bit why now, and that's, I think, a good question. And then I will probably give you the answer regarding the priorities in terms of capital allocation.

Thank you, Philippe. Yeah, it's a good question. What you have to keep in mind is, again, as we said, we have several instruments. We have the energy transition project. We have the EUA forward. We have the EUA stock and so on. And there are plenty of parameters. You have the regulation. You have the level of production. So why now is because we are we are de-risking and we are progressing on our coal phase-out in Europe. We've mentioned that we have no exceeded coal in Germany, which is a quite large plant of Sudash. And we've talked several times about our Dombal project, for which we had to record, as you may remember, a provision last year. But we are no less than one year from start-up, so this part is quite de-risked. So it means we are confident to be able to exceed coal from France next year. So when you have the conjunction of less demand for EUAs and at the same time a production level which is slightly lower, yes, we are to take the positive part of the negative of the business downside. So that's why we decided, but again, we would do that only if we think we are fairly covered until 2013.

And on your question regarding the prioritization of capex, I mean, let me just first remind you how we see the capital allocation main principles. First, we will dedicate between 250 and 300 million euros for our essential capex. This is, I would say, number one, obviously, and we're working Lani can testify as hard as we can to optimize this bucket. And this year, even if we have also a little bit of discretionary topics, we will be at a maximum of 300 million. Number two, payment of the dividend. So that's 250, 60 million euros more or less. That's the number two allocation of capital. Number three is discretionary allocation of capital to create additional value. First comment is obviously in the current market environment, we don't need big investments in a new solar ash plant, in a new downside plant and so on. So this question is addressed. But we want to continue to invest in small targeted investments in markets that are growing fast. And I mentioned that. You know, it's electronic grade H202 because artificial intelligence requires a lot of processors and this requires more EG electronic grade H202. I mentioned circular silica. And we also talked a little bit about rare earths. Those are investments that are, I think, important because we have a real differentiation in these different businesses. But they are not big ticket items, right? And we will do these investments only if we have secured offtake of the products that will be produced through these investments. So we will do them. We will do them if the conditions are here to get the right level of comfort and the profitability.

Thank you. The next question is coming from Matthew Yates from Bank of America. Your line is open, please go ahead.

Hi, afternoon. I had a question relating to the carbon trading you did in the quarter. I acknowledge this trading is possible to the extent you've got excess permits relative to the lower rates of production. And Philip was pretty clear in the introduction there that this is definitely not a one-off. But it is made incredibly difficult for us from the outside to understand the size and recurring nature of this when the level of disclosure from the company is so limited around its carbon position. So Maybe it's for Alex. Alex, what can you tell us today to help us better understand what that CO2 position of the group looks like as it stands? And in light of sort of the proposed changes in regulatory phase, your decarbonization projects and potential production shutdowns, how do you think that evolves over the coming years so we can think a bit more intelligently about such trading opportunities going forward?

Thank you. I think what we meant by saying it's not one-off, I mean, it's just significant. You will not get 40 million every quarter. What we meant is that it cannot be looked in isolation from the rest of the business situation. That's really what we meant. If the plant were saturated, everything was running high, we wouldn't have this flexibility. Then, okay. from disclosure, I cannot give you a lot of detail. What I can tell you, and again, there are many parameters, what will be the benchmark, what will be the volume of function, but when we look at the overall picture, even if we do this transaction, we consider we are fairly hedged, we are fairly covered until 2030, so it means Whatever, we are no longer exposed to variation of the price of the CO2 in Europe. That's the main element I can give you. And it's true, the quicker we do our, the best protection we have, our energy transition project, because when you move from coal to biomass or to recycle waste, then I mean you significantly reduce your exposure and you have the opportunity to release some CO2.

Okay, but when I think about your level of disclosure compared to other carbon intensive businesses, whether that's a Yara and fertilizers or utility company, it still seems to be on the rather limited side. So why are you not able to be more forthcoming in quantifying the position of the group?

I think we can probably check this, but we have, you know, we publish in our annual report a certain number of elements, I guess, such as, you know, the inventory and the hedges and so on. Our energy transition projects are public. I will communicate on them. And every time I think we say how many thousands of... tons of CO2 emission reduction we expect. So I think there is nothing, you know, given in what we say. Our level of production, our level of emission, our energy transition projects, what we have in inventory, what we take in terms of forward hedges, everything is more or less defined. And as Alex said, the guiding principle for us is really to be covered until 2030. I mean, obviously, we are currently discussing what could be the post-2030, but it's really to be covered by 2030.

And we can follow up on investor relations if there are certain questions that you think we could answer there. Overall, we don't think until 2030 you will have a big change in regulation. We consider ETS will still apply, the benchmark, the free allowance will progressively reduce, and this is why we need to have these stock and forward, and this is why we need also to do the energy transition project. We don't foresee by 2030 a big change. Thank you. Is that clear, Mathieu?

Yeah, yeah, we can follow up offline. Thank you.

The next question is coming from Thomas Wigglesworth from Morgan Stanley. Your line is now open. Please go ahead.

Thanks very much. I did have a question on the carbon credits, but I think we're kind of getting there. I mean, it just looks like a very big number, right, because ultimately 40 million euros of profit on selling carbon credits I mean, if I assume that you bought at 30 and you sold at 70, which kind of stacks up with the kind of communication you've made in the past, that's a million tons of CO2, which is equivalent to a million tons of soda ash exports when the Europe exports two million tons a year. So in soda ash export equivalent, you've sold half a year's worth of all exports. the European exports. And that's, I think, why we're getting a bit stuck on the order of magnitude of the size of the credit sale. But I think what you're saying is that there's energy savings as well, not just the soda ash production savings that are going on top of that. So anything to clarify that kind of thought process would be helpful. Second question is just clarification. So if I understood correctly, previously you'd been thinking on the rare earth business that I think you said, and forgive me if my understanding is wrong, that you wouldn't do this project of itself. You know, the economics didn't stack up to compete with China, and you needed to have customers provide long-term offtake agreements to deliver China. you know, to approve the project. Have you now got those long-term off-take agreements, if that's what's changed between the first half and now, such that you're now willing to commit the capital? Thank you.

Okay, so first question on the order of magnitude. So clearly, I mean, as Alex said, we will not have this type of impact every quarter. This represents, I would say, more or less, a yearly impact, right? And I think the numbers that you mentioned are way overestimated, because if you look at the... The CO2 price that we have today on the market, you don't come with this type of quantities. Now, that being said, I mean, we are the only soda ash exporter in Europe, I think, today. So it's true that we are impacting significantly. If we decide to cut the exports from Europe to Southeast Asia, it has a significant impact because we are the only one to do it, right? So that's, I think, the element. I don't know if I missed anything, Alex.

No, no, you're right. It's the combination of ETP. Again, we are releasing also some quantity from energy production.

Production, you're right, Alex, is one element of the equation that we take into account when we asset our portfolio. And the other important element is the progress that we make on the coal phase-out in Europe. Now, on rare earths, just to avoid any misunderstanding, we don't say that we will invest today between 50 and 100 million euros. What we're saying is that what we did this year, you know, investing a few millions to start production of NDPR, so the light rare earths magnets, we will do the same for the heavies. So we're talking about a few million of investment. It's nothing big. It's just to show we know how to do it. We can do it super fast. And we want to work with the customers to check that it works. Now, if you ask me today, do you have uptake contracts to move to the real stuff, so to the big investment of 50 to 100 million euros, I say not yet. We are progressing. It's true that the current context is supporting this type of discussions, but we are not ready today to move to the big investments. What has changed, I would say, over the past days and weeks is that it seems to move forward in the US. There are some potential mechanisms that are implemented with floor prices, and we could envisage to contribute to this mechanism, even from La Rochelle, we can produce. So this is the only thing that has changed. But we continue to discuss with the different potential customers and with the policymakers, both in Europe and in North America.

Just to follow up on that, Philippe, what do you think is the hesitation? Is it that customers are trying to figure out if this is a one-year problem or a ten-year problem and you kind of need – let's say a multi-year offtake agreement and they're trying to figure out, well, do I want to commit to your multi-year offtake and commit to this? Whereas on the other hand, we don't, it's very difficult to understand any of this trade development and how it's going to pay out. And therefore, we don't know if rare earth is a one-year problem or a 10-year problem, right, in terms of supply chains. Do you think that's what the customers are struggling with?

Well, it is. It's true that when you have a problem and then it's solved, you have a tendency to think that you don't need anymore to move into long-term agreements. But I think fundamentally, both in Europe and in North America, customers, they want to de-risk their sourcing. So they're just trying to figure out how is the best way to do it. And they're probably also waiting for some indications from the policymakers.

Thank you.

Thank you very much.

Gaia, we will take two more questions, please.

Okay. The next question is coming from Mr. Udeshi from JP Morgan. Your line is now open. Please go ahead.

Hi. Thanks for taking my question. The first one was a bit weird one. I recently, or actually it was this week, Element Solutions bought a fluorocarbon gases company, ESC, for 12 times habitat. I think you are the ones who are supplying to them the fluorine-based gases and chemicals used in the semiconductor market. I'm just curious. If somebody is buying a distributor of your business for 12 times EBITDA, why would you not consider monetizing this business within Solvay? It doesn't seem most of us care about this business anyway. So what is stopping you from monetizing this business? And the second question is, you know, in your performance chemicals business, what exactly happened in Q3? Because your EBITDA seems to have collapsed. from 100 to 60. I understand there was a 20 million one-off, but even then, it seems like a big collapse, even when the sales aren't really that different from Q2 to Q3. So can you help us understand what happened in that business? Thank you.

Thank you very much, Chetan. I will probably let Alex comment on the evolution of the performance chemicals between Q2 and Q3. I think that's your question. On fluoride, you notice that we're in a process of really restructuring this business and making sure that we concentrate our resources, efforts, capital on what will make the future of this business. So this is why basically we stopped our production in France. We also stopped our production of HF and organic fluorine in Germany. And we will concentrate on the aluminum brazing. And also we will continue to produce some fluorine gas, as this is indeed still a good business today. Then, I mean, again, there is absolutely no, nothing is excluded at this point, but we're really focused on making sure that we have a sound and profitable business, and then we'll see. Alex, I don't know if you wanted to take the bridge on performance chemicals.

So, nothing major in Q3, just to remind that what we've mentioned in the past, we've mentioned that in Q1, we have successfully ended a litigation with one company that helped us to get paid and invoice YLTs for the past. We had the termination close of the contract in Q2. And in general, this segment is probably the one which has the most variability from quarter to quarter. There was nothing really special in Q3. It's true that all business tend to be a little bit soft. I mean, you see the entire market, what we said about Coatis. And in terms of fluorine, I mean, we are taking measures to improve the profitability of the business, but you don't see it yet. So nothing major to signal, and we are taking measures to improve the sequence. Thanks.

The next question and the final question comes from Tristan Lamont from Deutsche Bank. Your line is now open. Please go ahead.

Hi, just one last please. I'm just wondering in the existing rare earth business, what are the actual rare earths that you're using in that and how does that differ to the new ones that you'll be using with the new business if you develop that? Thanks.

Well, today on the autocatalysis business, on the electronics business and medical applications, we're not using the NDPR and DYTB. So the neodymium, praseodymium, dysprosium, terbium are really specific for the permanent magnet business. So we're not using them in our current businesses. It's more based on Serium and all this type of material that we're working. And Antenum as well.

Thanks very much.

Thank you.

Thank you.

Thank you, Tristan. Thank you, Gaia. And thank you all for your participation today. So if you have any further questions, please feel free to reach out to the investor relations team. We have a few events planned in November and December. They are available in the financial calendar on our website. And we'll publish our Q4 and full year earnings on February the 24th. Thank you very much.

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